After the SALP situation was known I stacked Calls. What I did was look at the slope of the sell off and inverted it.

Then because I am pussy I lowered the slope to be safe and just bought calls along that slop from 8/3 out to 8/21. So here is my stack.

And here is how it actually played out.

Typically, a relief rally happens faster than the sell off if the sell off was just because of uncertainty (i.e. a drop in bid pressure) not because of mass panic selling.

As the market moved, i.e. the retracement slope was greater than my target slope, I sold off nearer strike calls and rotated them to higher strike prices.

Because I am always event minded, I closed out everything because of SpaceX’s earnings. AI is still a bubble.

I made 15 trades. All 15 paid out. If I had just traded a 90 degree angle (top curve) some of the options I would have played made 28000%. I do not have a logical reason why I did it this way. It’s just the way that felt most logical to me at the time.

The last three days were a once-in-a-lifetime setup. And the third such once-in-a-lifetime setup this year :)

—AJ

I sold the 8/3 CALLS on Friday for ~150% then bought then back the same day and sold them this morning again for ~140%. As of this writing, the $690 strikes are up more than $2.00 from where I sold them. So I sold them too early. Way too early.

I waited that morning until around 11am because the news was inconsistent and ended up paying up after the market had run considerably. I could have bought the CALLS for 50% less than I did. When it comes to equities you should act first. Think second. There is always time to work your way out of a stock trade. But, with options I tend to hesitate.

To a fault usually.

So I made 150%+140% on one strike. I am still holding a lot of CALLS just no longer any 8/3.

Was I right? Can I pat myself on the back here? In ten years will I post to Twitter something like “I had CALLS on the great SALP bounce? Woo hoo!”

No. Of course not.

You see I could have made 300-500% if I had reacted faster. More if I had held longer - or flipped back in one more time. Far more if I had compounded instead of just buying back the same positional size.

I could have made much more if I had bought CALLS on or or any of the individual stocks that had suffered severely in the SALP book raid instead of just the index. If I had taken the time to slow down and look at SALP’s June 13H filing I could have figured out a better target.

And, I had plenty of time to do this. I had modeled out the likelihood he blew up the night before. So it’s not like I didn’t know what would bounce. I just didn’t think it through very well.

I was right in that a predicted the direction of the market. But, I was wrong on nearly every other important factor. In terms of what I could have made, my actual banked returned kind of sucks.

At best I was a C- student here. Remember, you aren’t competing against anyone else in this game. You are competing only against what you could have done. And I could have done much better.

Just because you make profit doesn’t mean you were right. Just because you make a lot of profit doesn’t mean you were right.

This is sort of like marrying a women who one night cuts your dick off. You did pick the right gender - which that was the simplest thing you had to figure out. No one is going to say you were right in your choice there.

One of (if not the) biggest mistakes market participants make is ignoring the fact that there were many trades that they could have made that would have paid out more. Shorting housing made 4x over three years. How many other trades could have been made with the same information that would have paid out higher? Buying PUTS on Lehman after the crash started certainly would have for one. Buying PUTS on any index would have as well. Buying SWAPS on AA would have made 15-20x.

Another big mistake is people don’t re-evaluate their trades as information changes. AI is a bubble. This is 100% true. It is the simplest factor though.

It is also true we are in a liquidity glut. This requires a little more thought.

It is also true that there is no financial stressor right now for the investor class. Again, less obvious a thing to figure out.

And it is also true that banks are not holding the debt of the AI trade and right now banks are printing revenue because of high interest rates.

Get the picture?

Was sitting in an “AI is a bubble” trade smart after the SALP news came out? The June sell off no longer was about the AI bubble at all but one fund manager getting liquidated.

Was doubling down on that trade the right decision? Or should a person have taken a step back and reconsidered based on new evidence.

If the AI bubble bursts in 2027 can you really claim to have been right the whole time? While losing money for most of the intervening period.

If you don’t learn to cast off the idea of being right or wrong you will miss the obvious easy money because you will already be locked in on whatever conclusion you have come to.

Here is something to consider.

Every year you could make 10,000+%. There is always a string of trades (or just one) that can make that return. GameStop type moves are once in a 100 years. But, there are plenty of trades a year that pay out excessive returns. A few years ago there was an earnings miss that paid out 33,000% in a day.

There really is no upper limit on what you can make up to a certain account size that is. The returns of the market are very skewed. I am sure there is some decision tree that returns 1,000,000% in a year.

How close to that max return do you have to be to actually be right?

This relief rally was obvious. It was obvious once the larger market understood the sell off was not systemic but mechanical due to an idiot being targeted and that the market was going to bounce.

The AI bubble is also obvious. But, unless you make 1000+% on it when it pops you really can’t claim victory over the market.

My advice is to just give up trying to be right. Focus more on what you did wrong.

When people start posting to social media they get locked in. It becomes more about being right than about making money. And shouldn’t it be about making money?

If you accidentally fat finger in a SHORT instead of a LONG and it makes you a billion dollars would you want the money still? Bragging about being right shouldn’t be the goal.

Not working until your 70 should be.

—AJ

DISCLAIMER: DO NOT BASE ANY INVESTMENT DECISION UPON ANY MATERIALS FOUND ON THIS WEBSITE. We are not registered as a securities broker-dealer or an investment adviser either with the U.S. Securities and Exchange Commission (the “SEC”) or with any state securities regulatory authority. We are neither licensed nor qualified to provide investment advice. Our website has been prepared for informational purposes only and is not intended to be used as a complete source of information on any particular company. Past performance is not indicative of future results. The material contained on this page is intended for informational purposes only. GravityAnalytica.com is wholly-owned by Gravity Analytica, LLC. Our website is not an offer nor recommendation to buy or sell any security. We hold no investment licenses and are thus neither licensed nor qualified to provide investment advice. The content of our website and/or newsletter is not provided to any individual with a view toward their individual circumstances. While all information is believed to be reliable, it is not guaranteed by us to be accurate. Individuals should assume that all information contained on our website is not trustworthy unless verified by their own independent research. Also, because events and circumstances frequently do not occur as expected, there will likely be differences between the any predictions and actual results. Always consult a licensed investment professional before making any investment decision. Be extremely careful, investing in securities carries a high degree of risk; you may likely lose some or all of the investment. We reserve the right to buy or sell shares of any company mentioned on our website or in our newsletter at any time. We encourage you to invest carefully and read investment information available at the websites of the SEC at http://www.sec.gov and FINRA at http://www.finra.org.

The company or individuals affiliated may hold positions or may enter into, or exit, positions on any equities at any time. This website and materials found on this website, or in any communication, are meant for individuals of eighteen (18) years of age or older and are not suitable for younger audiences. Materials and information provided on this website and in any communications with or from Gravity Analytica LLC, it’s employees or affiliates, are for personal education use by subscribers and may be not be used in any regard in competition with this website or any other product or service offered by Gravity Analytica LLC. Past results do not predict future returns. IF YOU DO NOT AGREE WITH THE TERMS OF THIS DISCLAIMER, PLEASE EXIT THIS SITE IMMEDIATELY. PLEASE BE ADVISED THAT YOUR CONTINUED USE OF THIS SITE OR THE INFORMATION PROVIDED HEREIN SHALL INDICATE YOUR CONSENT AND AGREEMENT TO THESE TERMS.

“The magic of deep learning is it just works”

- Leopold Aschenbrenner

On July 26, senior US State Department official displayed a map of Africa as part of the presentation “Transforming health assistance: Implementing U.S. government MOUs for sustainable HIV programs.” Given during a pre-conference session at AIDS: 2026 in Brazil.

The State Department requires a comprehension exam to be passed before an applicant is consider for employment called the Foreign Service Officer Test (FSOT) which explicitly features questions on world geography. The FSOT is one of, if not the, hardest of such tests.

If you followed the news this week or if you are just perceptive you know where this is going. Not one of the countries in the presentation was correct. In fact not all of the countries identified are even actually countries. From the BBC article:

“Four of the six African countries highlighted - Nigeria, Mozambique, Ivory Coast and Malawi - are all incorrectly positioned. Uganda is roughly in the right place but is misshapen and Cameroon is mentioned in the key but the name is not linked to a country on the map.”

In the US, 4th graders (average age 9) are given map pages and crayons and are asked to color in countries. Being able to read and color in a map is literally an elementary school skill. So how can an LLM (and I don’t know which LLM created that map) be at a PhD level and fail a 4th grade task?

—AJ

Read more

Korean markets bounced. But, here is the thing. They didn’t bounce for Koreans. A retail trader can’t recapitalize after being liquidated on a Tuesday by Thursday.

The majority of activity was foreign investment returning. This is an old chart but I can’t find the report with a more up-to-date one.

That flow reversed last night with foreign investors running back into the market. KOPSI set a record gaining 18%.

Japanese authorities intervened to stop the Yen from falling leading up to the BOJ decision which was made to hold rates steady. There was a currency intervention in June of 1998 before the tech bubble burst as well. This does not change the time-line.

The 30Yr US Treasury yield is holding above 5% and rising. The 10Yr is following now reaching 4.73%. This isn’t a US problem. This is a global problem.

Investors are selling off the entire Earth. Which makes sense inflation is sticky in Europe more so than here.

And finally, BP laid off 700 workers because of a supply “glut.” The world has too much oil. I dare you to find an economist who said that after the Strait of Hormuz was shut down for four months that there would be too much oil.

There are rumored to be two other funds taking on water in this recent tech rout. If they aren’t leveraged this isn’t a concern but we don’t know. Other hedge funds are of course going to want to help out - by shorting the holdings of those funds and trying to drown them. So expect choppy trading.

There is a lot less uncertainty today. But, there still is uncertainty.

MICRO:

NovoNordisk took out biotechs today after announcing its Phase 3 ZEUS Ziltivekimab failed to meet its primary end point. A trial for heart disease is continuing.

Earnings are August 5th. Might be an arbitrage trade here since earnings should be pretty good following the launch of oral Wegovy.

—AJ

Situational Awareness LP (SALP), the firm running the AI show, ran out of capital and was forced to raise additional funds.

What we don’t know is how that situation played out in the market. Let’s look at the facts as reported by various journalists. As of June 30, SALP was up ~%429 net and was periodically running 4x leverage.

To keep the math simple. Let’s say the fund hat $100 January 1st. By June 30th, before fees, the fund would have had around $600. Running 4x leverage that means Leopold turned $500 into $1000 on the year. An un-levered return of 100%. I built a model to show closer to the reality based on what the firm’s thematic lean is. Long equity with calls on runners, short with puts under performers.

Whenever the exact details come out you can compare. Based on my model the fund is still up YTD.

Then as of July 24th, they had no free capital. This means the account drew down so much that the lenders were requiring margin payments which my model bears out.

Back to the simple math. So the firm had $1000 June 30th but were down to ~$700, 24 days later and had to bring out the tin cup and sad face emojis.

Over the next six days everything collapsed.

Either (A) SALP is the Michael Saylor of AI and is the only reason these stocks were propped up, (B) other traders knew about the liquidity crunch and used it as an opportunity to short - which would mean last nights leak of the information is a signal being sent to the market or (C) SALP was forced to sell positions which is why the market dumped.

As of now, we don’t know.

If (A) is true than the entire AI market is based on that one fund’s ability to stay liquid. We have seen this before with LTCM. If SALP is still liquid and was recapitalized squeeze it is.

If (B) is true then short sharks have had a real taste for meat now and might begin to attract more sharks.

If (C) is true then this should have past and reality should take over.

No matter what happened it means the bullshit has already hit the fan though. The question is - is the fan on?

Going to back away from hedging and rolling PUTS. At least for the day until there is more clarity.

—AJ

Here is an update on the comparisons between today and the two previous market crash events adding in the recent acceleration of KOPSI and Situtional Awareness’ current difficulties.

Event though the Fed did not raise rates this past week the bond market is still selling off so I am inclined to check off the ~9 months line as well.

The parallels between LTCM and SALP are pretty strong. Both firms were run by over confident idiots with absolutely no experience in markets and no respect for other market participants.

—AJ

Now, onto our regularly semi-scheduled programming.

MACRO:

The FOMC did nothing. I don’t have a clue why anyone thought the Fed would raise … in wartime … with a Trump supporter in charge.

Tomorrow, PCE. I had hoped the panel votes would give me a clue where that data will fall (they must already know) but three descents just leaves me confused.

I left the accounts unhedged. I will just react in the morning.

Korean regulators have stepped in to try and stop the bleeding. This is like putting a bandaid on parachutist after they have hit the ground. Because the KOPSI has basically fully retraced this might not be a problem but, in general, when regulators get all handy with markets there are unintended consequences.

MICRO:

The AI dominos are Oracle→META and the second one fell on earnings.

It is very unusual this earnings season in that nearly every company is beating projections. Share repurchases are still ongoing and yet… everyone is cranky about it.

Hedge people.

Amazon and Apple release earnings tomorrow. I don’t expect bid pressure to return until after they report and neither does the code but what happens tomorrow all hinges on PCE in the morning.

—AJ

DISCLAIMER: DO NOT BASE ANY INVESTMENT DECISION UPON ANY MATERIALS FOUND ON THIS WEBSITE. We are not registered as a securities broker-dealer or an investment adviser either with the U.S. Securities and Exchange Commission (the “SEC”) or with any state securities regulatory authority. We are neither licensed nor qualified to provide investment advice. Our website has been prepared for informational purposes only and is not intended to be used as a complete source of information on any particular company. Past performance is not indicative of future results. The material contained on this page is intended for informational purposes only. GravityAnalytica.com is wholly-owned by Gravity Analytica, LLC. Our website is not an offer nor recommendation to buy or sell any security. We hold no investment licenses and are thus neither licensed nor qualified to provide investment advice. The content of our website and/or newsletter is not provided to any individual with a view toward their individual circumstances. While all information is believed to be reliable, it is not guaranteed by us to be accurate. Individuals should assume that all information contained on our website is not trustworthy unless verified by their own independent research. Also, because events and circumstances frequently do not occur as expected, there will likely be differences between the any predictions and actual results. Always consult a licensed investment professional before making any investment decision. Be extremely careful, investing in securities carries a high degree of risk; you may likely lose some or all of the investment. We reserve the right to buy or sell shares of any company mentioned on our website or in our newsletter at any time. We encourage you to invest carefully and read investment information available at the websites of the SEC at http://www.sec.gov and FINRA at http://www.finra.org.

The company or individuals affiliated may hold positions or may enter into, or exit, positions on any equities at any time. This website and materials found on this website, or in any communication, are meant for individuals of eighteen (18) years of age or older and are not suitable for younger audiences. Materials and information provided on this website and in any communications with or from Gravity Analytica LLC, it’s employees or affiliates, are for personal education use by subscribers and may be not be used in any regard in competition with this website or any other product or service offered by Gravity Analytica LLC. Past results do not predict future returns. IF YOU DO NOT AGREE WITH THE TERMS OF THIS DISCLAIMER, PLEASE EXIT THIS SITE IMMEDIATELY. PLEASE BE ADVISED THAT YOUR CONTINUED USE OF THIS SITE OR THE INFORMATION PROVIDED HEREIN SHALL INDICATE YOUR CONSENT AND AGREEMENT TO THESE TERMS.

I haven’t made much progress into ratings. I am slow.

This upcoming week is fraught with hesitation. Besides the obvious FOMC, we have potentially Trump/Netanyahu stupidity (he is flying in for the Graham funeral and you know there will be a press conference and tongues will flap,) Amazon earnings (cash flow negative part deux?) and META is trying to raise capital from the bond market - I wonder who is buying?

Bid pressure is predicted to be very weak until there is some certainty.

So rolling options is my plan on strength as it has been all year. There is a potential arbitrage trade on both the FOMC and Amazon earnings. If the market is under or over reacting to the news I will go the opposite way.

—AJ

DISCLAIMER: DO NOT BASE ANY INVESTMENT DECISION UPON ANY MATERIALS FOUND ON THIS WEBSITE. We are not registered as a securities broker-dealer or an investment adviser either with the U.S. Securities and Exchange Commission (the “SEC”) or with any state securities regulatory authority. We are neither licensed nor qualified to provide investment advice. Our website has been prepared for informational purposes only and is not intended to be used as a complete source of information on any particular company. Past performance is not indicative of future results. The material contained on this page is intended for informational purposes only. GravityAnalytica.com is wholly-owned by Gravity Analytica, LLC. Our website is not an offer nor recommendation to buy or sell any security. We hold no investment licenses and are thus neither licensed nor qualified to provide investment advice. The content of our website and/or newsletter is not provided to any individual with a view toward their individual circumstances. While all information is believed to be reliable, it is not guaranteed by us to be accurate. Individuals should assume that all information contained on our website is not trustworthy unless verified by their own independent research. Also, because events and circumstances frequently do not occur as expected, there will likely be differences between the any predictions and actual results. Always consult a licensed investment professional before making any investment decision. Be extremely careful, investing in securities carries a high degree of risk; you may likely lose some or all of the investment. We reserve the right to buy or sell shares of any company mentioned on our website or in our newsletter at any time. We encourage you to invest carefully and read investment information available at the websites of the SEC at http://www.sec.gov and FINRA at http://www.finra.org.

The company or individuals affiliated may hold positions or may enter into, or exit, positions on any equities at any time. This website and materials found on this website, or in any communication, are meant for individuals of eighteen (18) years of age or older and are not suitable for younger audiences. Materials and information provided on this website and in any communications with or from Gravity Analytica LLC, it’s employees or affiliates, are for personal education use by subscribers and may be not be used in any regard in competition with this website or any other product or service offered by Gravity Analytica LLC. Past results do not predict future returns. IF YOU DO NOT AGREE WITH THE TERMS OF THIS DISCLAIMER, PLEASE EXIT THIS SITE IMMEDIATELY. PLEASE BE ADVISED THAT YOUR CONTINUED USE OF THIS SITE OR THE INFORMATION PROVIDED HEREIN SHALL INDICATE YOUR CONSENT AND AGREEMENT TO THESE TERMS.

This means if a position goes to zero. It goes to zero. In the last decade or so we have held probably 500 different speculative positions and I can only remember three that went to zero. And two of those we still profited on in aggregate. If it moves I sell and then buy more stuff.

But, I think I am going to rebalance. The uncertainty right now is just too high. I was planning on pulling back before the election (after this earnings season actually) but I think I am also going to rebalance a bit.

Often there is nothing for me to do but wait. And I spend most of that time waiting over thinking.

I expect a few positions to move here shortly (hopefully up) and to have quite a lot of cash to deploy. So its time for me to plan what’s next.

This market is so manipulated and uncertain I am growing tired of being both a vol trader and an ETF manager. I consider trading options to dampen volatility frustratingly tedious.

But, there are plays that are less likely to ride the market than others.

Normally, I do evaluation process by hand. But, this time I fired up 400 of our local chat agent and run them over night.

And of course. After 15 hours it crashed. So I had to restart it.

It’s like asking a teenager to clean their room. You tend to find them asleep in the closet.

There are 1200 biotechs listed and tracked in our database. I filtered that list to 400 for review. I break biotechs out into very stages/phases/states. Once I do I think classify companies into plays. What I think is going to happen.

For example, if a company no longer has a viable drug it is EOL - end of life. Depending on the state the company is likely to follow one of a few paths. Liquidation, bankruptcy, in-license i.e. it will acquire a new drug and start over, reverse merger i.e. a private company will use the EOL company to enter the public market, or less frequently something else.

These Phoenix companies tend remain relatively stable until the event transpires regardless of markets.

Late-stage binary trial run-ups is another example play. But, there is a lot of volatility with this strategy, especially if you enter late, and ironically the run-up is highly predictative of upcoming trial failure so these have to be monitored.

For the purpose of this I just asked the agents to classify into EOL, binary, post Phase 1 winners, preclinical/early clinical for simplicity sake.

It’s important to understand BEST/BETTER/GOOD/AVOID is based on what my risk tolerance is. The highest returns I have ever achieved were companies I ranked GOOD. This is because the risk/reward paid out in a few of those cases.

So this is what the agents spit out. Here is a Phoenix (EOL) play.

Vs. an early stage play.

Over the last 5 days FULC is up 0.54%. PRLD is down 8.8%. Preclinical/Early clinical plays have the longest duration and are most prone to ride the market.

We own both of these stocks currently. PRLD we have held since 80 cents. FULC would be BEST in its classification. PRLD would be GOOD in its.

Ignoring market conditions of course.

Now the full sorting into BEST/BETTER/GOOD/AVOID requires another step. Which is going through the market participants to winnow out an toxic actors which if you are a day trader you might not want to do. Toxic actors tend to make stocks do fun things.

I am annoyed with dealing with my teenager (Agent) here so will stop for the day and resume tomorrow.

—AJ

DISCLAIMER: DO NOT BASE ANY INVESTMENT DECISION UPON ANY MATERIALS FOUND ON THIS WEBSITE. We are not registered as a securities broker-dealer or an investment adviser either with the U.S. Securities and Exchange Commission (the “SEC”) or with any state securities regulatory authority. We are neither licensed nor qualified to provide investment advice. Our website has been prepared for informational purposes only and is not intended to be used as a complete source of information on any particular company. Past performance is not indicative of future results. The material contained on this page is intended for informational purposes only. GravityAnalytica.com is wholly-owned by Gravity Analytica, LLC. Our website is not an offer nor recommendation to buy or sell any security. We hold no investment licenses and are thus neither licensed nor qualified to provide investment advice. The content of our website and/or newsletter is not provided to any individual with a view toward their individual circumstances. While all information is believed to be reliable, it is not guaranteed by us to be accurate. Individuals should assume that all information contained on our website is not trustworthy unless verified by their own independent research. Also, because events and circumstances frequently do not occur as expected, there will likely be differences between the any predictions and actual results. Always consult a licensed investment professional before making any investment decision. Be extremely careful, investing in securities carries a high degree of risk; you may likely lose some or all of the investment. We reserve the right to buy or sell shares of any company mentioned on our website or in our newsletter at any time. We encourage you to invest carefully and read investment information available at the websites of the SEC at http://www.sec.gov and FINRA at http://www.finra.org.

The company or individuals affiliated may hold positions or may enter into, or exit, positions on any equities at any time. This website and materials found on this website, or in any communication, are meant for individuals of eighteen (18) years of age or older and are not suitable for younger audiences. Materials and information provided on this website and in any communications with or from Gravity Analytica LLC, it’s employees or affiliates, are for personal education use by subscribers and may be not be used in any regard in competition with this website or any other product or service offered by Gravity Analytica LLC. Past results do not predict future returns. IF YOU DO NOT AGREE WITH THE TERMS OF THIS DISCLAIMER, PLEASE EXIT THIS SITE IMMEDIATELY. PLEASE BE ADVISED THAT YOUR CONTINUED USE OF THIS SITE OR THE INFORMATION PROVIDED HEREIN SHALL INDICATE YOUR CONSENT AND AGREEMENT TO THESE TERMS.

Market participants do not know if oil is coming or going, if tariffs are coming or going, if AI is coming or going, and when there is that much uncertainty people tend to sit on the sidelines a wait. Bid pressure drops. Market falls.

I am still just rolling PUTS and carrying PUTS and some other derivatives as a hedge.

You don’t need to overthink right now.

—AJ

DISCLAIMER: DO NOT BASE ANY INVESTMENT DECISION UPON ANY MATERIALS FOUND ON THIS WEBSITE. We are not registered as a securities broker-dealer or an investment adviser either with the U.S. Securities and Exchange Commission (the “SEC”) or with any state securities regulatory authority. We are neither licensed nor qualified to provide investment advice. Our website has been prepared for informational purposes only and is not intended to be used as a complete source of information on any particular company. Past performance is not indicative of future results. The material contained on this page is intended for informational purposes only. GravityAnalytica.com is wholly-owned by Gravity Analytica, LLC. Our website is not an offer nor recommendation to buy or sell any security. We hold no investment licenses and are thus neither licensed nor qualified to provide investment advice. The content of our website and/or newsletter is not provided to any individual with a view toward their individual circumstances. While all information is believed to be reliable, it is not guaranteed by us to be accurate. Individuals should assume that all information contained on our website is not trustworthy unless verified by their own independent research. Also, because events and circumstances frequently do not occur as expected, there will likely be differences between the any predictions and actual results. Always consult a licensed investment professional before making any investment decision. Be extremely careful, investing in securities carries a high degree of risk; you may likely lose some or all of the investment. We reserve the right to buy or sell shares of any company mentioned on our website or in our newsletter at any time. We encourage you to invest carefully and read investment information available at the websites of the SEC at http://www.sec.gov and FINRA at http://www.finra.org.

The company or individuals affiliated may hold positions or may enter into, or exit, positions on any equities at any time. This website and materials found on this website, or in any communication, are meant for individuals of eighteen (18) years of age or older and are not suitable for younger audiences. Materials and information provided on this website and in any communications with or from Gravity Analytica LLC, it’s employees or affiliates, are for personal education use by subscribers and may be not be used in any regard in competition with this website or any other product or service offered by Gravity Analytica LLC. Past results do not predict future returns. IF YOU DO NOT AGREE WITH THE TERMS OF THIS DISCLAIMER, PLEASE EXIT THIS SITE IMMEDIATELY. PLEASE BE ADVISED THAT YOUR CONTINUED USE OF THIS SITE OR THE INFORMATION PROVIDED HEREIN SHALL INDICATE YOUR CONSENT AND AGREEMENT TO THESE TERMS.

But, what is waving a big warning flag is oil. This time is most likely different. This time (unlike in March/April) US producers are seeing sustained pricing likely and are turning rigs on.

We have now surpassed pre-Iran War levels of activity.

I am sticking to rolling PUTs on QQQ. No reason to change strategy here.

—AJ

DISCLAIMER: DO NOT BASE ANY INVESTMENT DECISION UPON ANY MATERIALS FOUND ON THIS WEBSITE. We are not registered as a securities broker-dealer or an investment adviser either with the U.S. Securities and Exchange Commission (the “SEC”) or with any state securities regulatory authority. We are neither licensed nor qualified to provide investment advice. Our website has been prepared for informational purposes only and is not intended to be used as a complete source of information on any particular company. Past performance is not indicative of future results. The material contained on this page is intended for informational purposes only. GravityAnalytica.com is wholly-owned by Gravity Analytica, LLC. Our website is not an offer nor recommendation to buy or sell any security. We hold no investment licenses and are thus neither licensed nor qualified to provide investment advice. The content of our website and/or newsletter is not provided to any individual with a view toward their individual circumstances. While all information is believed to be reliable, it is not guaranteed by us to be accurate. Individuals should assume that all information contained on our website is not trustworthy unless verified by their own independent research. Also, because events and circumstances frequently do not occur as expected, there will likely be differences between the any predictions and actual results. Always consult a licensed investment professional before making any investment decision. Be extremely careful, investing in securities carries a high degree of risk; you may likely lose some or all of the investment. We reserve the right to buy or sell shares of any company mentioned on our website or in our newsletter at any time. We encourage you to invest carefully and read investment information available at the websites of the SEC at http://www.sec.gov and FINRA at http://www.finra.org.

The company or individuals affiliated may hold positions or may enter into, or exit, positions on any equities at any time. This website and materials found on this website, or in any communication, are meant for individuals of eighteen (18) years of age or older and are not suitable for younger audiences. Materials and information provided on this website and in any communications with or from Gravity Analytica LLC, it’s employees or affiliates, are for personal education use by subscribers and may be not be used in any regard in competition with this website or any other product or service offered by Gravity Analytica LLC. Past results do not predict future returns. IF YOU DO NOT AGREE WITH THE TERMS OF THIS DISCLAIMER, PLEASE EXIT THIS SITE IMMEDIATELY. PLEASE BE ADVISED THAT YOUR CONTINUED USE OF THIS SITE OR THE INFORMATION PROVIDED HEREIN SHALL INDICATE YOUR CONSENT AND AGREEMENT TO THESE TERMS.

I have never looked up the definition of cancer before today. Merriam-Webster lists first cancer as the 4th sign of the zodiac calendar and the constellation between Gemini and Leo.

The definition relevant here is second in the list - a malignant tumor of potentially unlimited growth that expands locally by invasion and systemically by metastasis.

Such is life I guess. Science is always second to faith.

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Who had XBI goes up today on their bingo card?

Japan and China fell over night. Mercifully for Koreans, Korea is on Holiday today. Numerous FOMC voters proclaimed their strong stance on murdering inflation. The 30Yr T is still above 5%.

US Future puked, QQQ was down over 2% within minutes of open and XBI ended up 1.5% anyways.

Miraculous, right?

If you look at XBI over the last year what do you see? The time-frame appears to show two things. (1) XBI is inversely correlated to interest rates and (2) the recent FDA change is good for biotechs.

On the surface this leads to a possible conclusion that interest rate cuts might be a headwind for biotechs. Or that we might be due for a retracement to the market. But, as each FOMC member made comments the XBI just chugged along.

Weird.

Let’s zoom out.

This gives a better view. I have charted since XBI reindexed. Prior to that change you can not really make any comparisons. Repeat you should not compare the XBI before the reindexing to after the reindexing. If you don’t know what I am talking about here ask your friendly LLM or read here.

Biotechs (pharma in general) began to sell off when Trump nominated RFK Jr and the market dragged the sector behind until recently. The recent year’s growth is just an Uma Thurman joke.

Prior to the recent FDA news the XBI, IWM and QQQ were all basically even money again. No one was winning the race

The only thing now standing out is the FDA news. What does this mean going forward considering interest rates really do need to rise unless PCE somehow has fallen off a cliff.

It means I can continue to hedge macroeconomic news without paying the illiquidity premium embedded in XBI options.

— AJ

DISCLAIMER: DO NOT BASE ANY INVESTMENT DECISION UPON ANY MATERIALS FOUND ON THIS WEBSITE. We are not registered as a securities broker-dealer or an investment adviser either with the U.S. Securities and Exchange Commission (the “SEC”) or with any state securities regulatory authority. We are neither licensed nor qualified to provide investment advice. Our website has been prepared for informational purposes only and is not intended to be used as a complete source of information on any particular company. Past performance is not indicative of future results. The material contained on this page is intended for informational purposes only. GravityAnalytica.com is wholly-owned by Gravity Analytica, LLC. Our website is not an offer nor recommendation to buy or sell any security. We hold no investment licenses and are thus neither licensed nor qualified to provide investment advice. The content of our website and/or newsletter is not provided to any individual with a view toward their individual circumstances. While all information is believed to be reliable, it is not guaranteed by us to be accurate. Individuals should assume that all information contained on our website is not trustworthy unless verified by their own independent research. Also, because events and circumstances frequently do not occur as expected, there will likely be differences between the any predictions and actual results. Always consult a licensed investment professional before making any investment decision. Be extremely careful, investing in securities carries a high degree of risk; you may likely lose some or all of the investment. We reserve the right to buy or sell shares of any company mentioned on our website or in our newsletter at any time. We encourage you to invest carefully and read investment information available at the websites of the SEC at http://www.sec.gov and FINRA at http://www.finra.org.

The company or individuals affiliated may hold positions or may enter into, or exit, positions on any equities at any time. This website and materials found on this website, or in any communication, are meant for individuals of eighteen (18) years of age or older and are not suitable for younger audiences. Materials and information provided on this website and in any communications with or from Gravity Analytica LLC, it’s employees or affiliates, are for personal education use by subscribers and may be not be used in any regard in competition with this website or any other product or service offered by Gravity Analytica LLC. Past results do not predict future returns. IF YOU DO NOT AGREE WITH THE TERMS OF THIS DISCLAIMER, PLEASE EXIT THIS SITE IMMEDIATELY. PLEASE BE ADVISED THAT YOUR CONTINUED USE OF THIS SITE OR THE INFORMATION PROVIDED HEREIN SHALL INDICATE YOUR CONSENT AND AGREEMENT TO THESE TERMS.

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Most kids, if they have never seen a soccer ball won’t be able to kick one the first time. But, give them a few weeks and nearly any child will advance at a surprising rate of skill at soccer. That doesn’t mean you, as a parent, should buy a knew house because your kid is going to play professionally.

Unless you, yourself played soccer and have coached soccer, you likely can not gage just how fast your child’s improvement really is. Just because someone else who gets paid to teach kids how to play soccer says your kid is the next Messi, that doesn’t mean they are either.

I am sorry to all the computer programmers out there. Computer programming is no more difficult than learning French. And four year old French kids are wizzes at French. The rate at which languages can be learned is not reflective of whether or not speaking French will make you a billionaire. The problem is as adults we don’t remember how easy it was to learn as a kid. This is because of developmental amnesia.

Shaun and I have been using AI since before OpenAI was founded. Back when it was called machine learning. I was playing with neural networks in the 1990s. Shaun got his graduate degree from Georgia Tech in the subject.

But, you don’t have to believe me.

Just ask this AI generations parent, Yann LeCun. He knows none of today’s AI companies are going pro. He is so confident this current generation of AI is not going anywhere he started a company to try and make the next generation.

Spoiler alert. Even if he succeeds unless patents a ternary architecture or similar that next generation will also be a bubble.

Let’s look at a pretty comprehensive list of “AI” i.e machine learning technologies. Everything from speech recognition to routing is freely available as open source.

Granted spam detection is incredibly helpful. No one likes robocalls. But, does your phone still ring from scam calls? Did this AI “tech” actually solve the problem? Or just slightly outpace it?

And do you explicitly pay any of this? Or is just included in whatever device you buy and you can choose to use it or not. Name the trillion dollar company that allows you to talk to your TV remote.

I will wait.

The fact is, everyone knows AI is a bubble. Everyone knows hyperscalers are wasting money. Everyone knows the SPVs will blow up. Most people in the know don’t care because they get paid not to.

What people don’t yet know is how to extricate themselves and their clients without looking foolish. This is the hard part.

Investment managers can’t say sell. If the market runs another 50% they look stupid. Burry manages his own money and has a herd. He can scream fire anytime he wants and push his trades into the money.

Goldman Sacs can also do this… but most of their money is actually their clients money.

Managers also can’t be seen selling while leaving their clients in tech stocks. This looks dishonest.

What people are slowing beginning to realize is that when this market ends there is no discernible bottom. Look at Micron. At this scale it doesn’t look that bad, right? The average per share cost is -60% below the current share price. A “cheap” entry is about 75% below. That sort of collapse renders most people numb.

Maybe this scale makes the unusual nature of this chart more apparent. That is a right angle almost.

And notice those purple dots. Those are liquidity alerts. I call them BOB because I don’t have a better name. Notice there has not been one during this run? Notice the red dots. That is funds dumping shares.

On this time line the per share cost is -85+% from here. Based on all the institutional buying before the move that is likely more accurate.

Psychologically there is a threshold where the loss seems total (even though it is not) and people just close the brokerage window and stop looking.

For years.

Or worse. Never invest again.

This is where we might end up. This is reality.

Managers and banks have exposed their clients to private and public markets in a way that can not be unwound. Let’s say you have a client that is up 300%. If they sell they will face capital gains.

Then what?

Where would you tell them to put their money? In private equity? In real estate? What part of today’s asset landscape looks cheap to you? What if your clients miss out on the last squeeze? Will they fire you and find another manager to put them back in the market?

Isaac Newton famously sold the South Sea Bubble and then watched the market run over the next few months. So he bought back. And proved why you shouldn’t poke an ice pick into your sinus to see what happens.

I said before I was close to wearing a cape. Well, I am pretty much there now.

This is the last earnings cycle I will ride the market. From here any speculative purchases will have to have a specific temporally focussed narrative for me make a trade.

And, I will continue to ride/flip PUTS until this all implodes. If takes a decade I take little to no risk and honestly do you really think the market is going up?

So the odds are still good for PUTS. Unless everyone is short and there is a magic squeeze event… which seems unlikely. Because of those hookers and blow.

— AJ

MACRO:

I have no idea.

MICRO:

I have no idea.

I went to the Argentina v England Match today.

Try to remember why you are participating in the market. Is it to retire early? Is it pay for college?

Actually, think about it. And revisit the idea every few months/years. Not abstractly say “I want more money.” You want “more money” to do what?

Buffett wanted to be “rich” and then worked everyday until he was 95. Paulson wanted to be feel important and desperately still wants to feel important. Ackman is trying to prove something. To whom, I have no idea. Musk wants to be God. These men never found anything to do with their wealth other than to possess it.

Bezos at least is enjoying himself.

What do you want?

All the time you spend in life, is all the time you will ever get. So don’t waste any of it chasing other people’s dreams and other people’s goals.

Watching, listening and feeling Argentina fans erupt when their team scores a goal is an experience worth more than money.

What a fucking memory.

— AJ

2023 Returns - 73.2%

2024 Returns - 93.2%

2025 Returns - 75.2% (~$788k gain)

2026 Returns (so far as of writing this) - 50% (~$850k gain)

If I hit 70.5% this year, the four consecutive years will have a compounded return was 1000+%.

An account ten bagger.

Nifty.

That was not planned. Or even a goal for this account.

In comparison, RenTech has exceeded 70% (before fees) over a four year period once and only once in its entire history and it employs hundreds of PhDs. And RenTech returned (before fees) around ~45% each year over the same period of 2023-2026 based on what has been published since this chart.

If I had known this I might have set my target higher than 70%. I chose 70% somewhat arbitrarily. It is just what Wikipedia said Ken Griffin made. And both RenTech and Griffin used leverage.

I do not.

Over that stretch RenTech return 1900% which would be a running 111% yearly return. I don’t know if I can do that or not. Last year someone in chat returned 2100% in a single year. So I know the model can produce much higher returns.

Just not sure I can in an account this size.

As far as I know, there is no other documented return of more than 70% for four consecutive years other than RenTech. And neither Gemini or ChatGPT know either. Buffett returned 75% once.

What this means is the competition account is ahead of the test account! That account is up ~650% and I started it in July of 2022 so it had a 6 month head start.

I guess me worrying about monthly reporting goals was a good thing for returns? I am not sure I like that result actually. That means a constraint improved performance which would invalidate an economic theory. Oops.

Actually, it is up more because I hedge in the competition account with options (and I am quite a good hedger) and the test account doesn’t have access to options. But, still I am hedging because I am trying to meet yearly goals.

I still don’t like this result.

— AJ

Peter Lynch is actually a person I don’t have issues with. But, I do want to address one myth about him. And that is that his returns were actually good.

What people don’t understand is that fund managers have access to lots of leverage. And they add capital through fund raising as the fund matures. When people compare Lynch’s returns they ignore these two facts. I have simply modeled out a fund that starts small and adds capital at a modest rate. You can see that just buying a 2x S&P500 ETF during the years under the same circumstances under these minimal aggregate conditions beats his return. And in reality the capital allocated to Magellan increased from $10 million in June of 1977 to $14 billion. Which would equate to 6x the capital

The more capital you add the worse his returns look.

Lynch rode the market with leverage. That is all. The real lesson to learn from studying Peter Lynch is just how bad the other managers were during this very easy market period.

In that, Peter is worthy of admiration. He didn’t crush the market he was just the one person (one of a very few) that didn’t fuck it up royally. And sometimes that is a more important skill.

Next time the US is coming out of a severe recession with inflation at 15%. Just buy a leverage ETF and ride for two decades.

— AJ

Micro Technologies upped its committed investment to $250 billion. That gave the tech sector quite a lift. Congress is happy. They must be share holders.

The KOPSI rolled over but did not plummet over night and squeaked out a modest gain. That bodes well for the health of the dip buyers.

Share repurchases were down this past quarter but still chugging along.

It appears that the world has realized that remaining drones can’t really do much damage to a tanker. It’s like a gnat crashing into an elephant and ships are no longer trembling at the prospect of crossing the Strait as predicted.

Or maybe insurers have realized no one is willing to pay the increased rates?

MICRO

Virax ($VRAX) pulled off an impressive RS and run today on a supply agreement. Micron poured some contract. Virax signed some paper work. Both went way up. This chart was obvious. Just missed it.

I exited Faeth Therapeutics ($FTH) for ~80% in the competition account. Second round here. Rode it from ~$10-$30 twice this year.

Will revisit in the future.

I rotated that capital into Tscan Therapeutics ($TCRX) which sold off after a big move yesterday. That “wait” signal is from January. The company recently released data is is about to start a Phase 3.

This is another stock I think might attract retail during the trial period but I don’t expect much for 12-18 months. But, then again I didn’t expect much from Faeth either and that moved quickly.

So who knows?

Typically, retail interest doesn’t begin to show up until midway through a Phase 3. So we’re looking at 2028 maybe. Go back and look at Sellas and aTyr Pharma’s reddit activity.

My interest in this now is that if (when?) Sellas ($SLS) “vaccine” fails people might start looking for AML drugs and find this one. It’s cheap and it too has a lot of warrants that would benefit from a retail interest surge.

TScan’s drug is another variation of CAR-T but going after the HA-2 antigen. And I like to buy as many as I can that don’t seem like outright scams and play the odds.

MDxHealth is getting retail interest as well. I know nothing about it other than it tripped distribution, hit the channel and then tripped consolidation. If there is a 13-G filed it will have completed a box setup. I had never heard of this company until it tripped a scan.

The code is predicting volatility. Need to check the debt levels here. I tend to avoid Yellow stocks but it might be interesting to some people reading.

Enphase just crossed its per-share-cost line. If you are into support this is how you actually should think in terms of support.

No position in this.

Speaking of energy stocks watch Encore Energy as it approaches $1.00. It recently tripped Acc/Consolidation and is also retail heavy.

I am not carrying any options (hedges or otherwise) as of today. Will wait and see how Korea acts.

When the dip buying stops I will be playing the VIX. But, that might be days, weeks, years away. Just remember. When Koreans start throwing tantrums, VIX go up. Famous saying on Dagobah.

I am just happy the VIX is heading back to 13… hopefully.

— AJ

Event Horizon Tools

DISCLAIMER: DO NOT BASE ANY INVESTMENT DECISION UPON ANY MATERIALS FOUND ON THIS WEBSITE. We are not registered as a securities broker-dealer or an investment adviser either with the U.S. Securities and Exchange Commission (the “SEC”) or with any state securities regulatory authority. We are neither licensed nor qualified to provide investment advice. Our website has been prepared for informational purposes only and is not intended to be used as a complete source of information on any particular company. Past performance is not indicative of future results. The material contained on this page is intended for informational purposes only. GravityAnalytica.com is wholly-owned by Gravity Analytica, LLC. Our website is not an offer nor recommendation to buy or sell any security. We hold no investment licenses and are thus neither licensed nor qualified to provide investment advice. The content of our website and/or newsletter is not provided to any individual with a view toward their individual circumstances. While all information is believed to be reliable, it is not guaranteed by us to be accurate. Individuals should assume that all information contained on our website is not trustworthy unless verified by their own independent research. Also, because events and circumstances frequently do not occur as expected, there will likely be differences between the any predictions and actual results. Always consult a licensed investment professional before making any investment decision. Be extremely careful, investing in securities carries a high degree of risk; you may likely lose some or all of the investment. We reserve the right to buy or sell shares of any company mentioned on our website or in our newsletter at any time. We encourage you to invest carefully and read investment information available at the websites of the SEC at http://www.sec.gov and FINRA at http://www.finra.org.

The company or individuals affiliated may hold positions or may enter into, or exit, positions on any equities at any time. This website and materials found on this website, or in any communication, are meant for individuals of eighteen (18) years of age or older and are not suitable for younger audiences. Materials and information provided on this website and in any communications with or from Gravity Analytica LLC, it’s employees or affiliates, are for personal education use by subscribers and may be not be used in any regard in competition with this website or any other product or service offered by Gravity Analytica LLC. Past results do not predict future returns. IF YOU DO NOT AGREE WITH THE TERMS OF THIS DISCLAIMER, PLEASE EXIT THIS SITE IMMEDIATELY. PLEASE BE ADVISED THAT YOUR CONTINUED USE OF THIS SITE OR THE INFORMATION PROVIDED HEREIN SHALL INDICATE YOUR CONSENT AND AGREEMENT TO THESE TERMS.

What does that tell you?

Last night the KOPSI hit -5%. This is the second day in a row. Any traders playing the YoYo game got whacked in the face.

Ignore everything you have read on finance, economics, etc. If the market you are playing starts acting this erratic what would you do?

Would you increase your participation? Or would you hesitate? The KOPSI is innately more volatile than any US index for a couple of reasons. It’s more concentrated and Koreans just like spicier food that Americans.

But, what you are looking at in that chart is a market unravelling.

The only question that remains is if there will be any sort of sustained rotation. And that is a question I can’t answer. There is no comparable time period.

I can just tell you for the last few months there has been. Here is the rotation chart from March. And from this morning. You can see the trend is weakening for biotechs but that segment is still leading. I don’t have a version of this code to break out micro caps/small caps/etc. I should probably work on that.

-AJ