Remember the days that I showed the underperformance/divergence of RSP (equal-weighted S&P index) and IWM vis-à-vis the S&P and Nasdaq indices?

I thought that was a troublesome signpost, but I was wrong.

Well, what happened is that the senior averages continued to rip absolutely and relatively.

So, what is going on in the last few days? The exact opposite. The Russell Index (in particular) and the RSP (equal weighted S&P index) are trouncing the senior averages:

SPY +0.16%

QQQ -0.08%

RSP +1.05%

IWM +1.46%

Therefore, shouldn't the opposite hold, suggesting that the S&P Index and Nasdaq could correct?

NVDA, PLTR, MSFT and GOOGL are all down by more than 1% while UNH, LLY and DIS are up more than 3% each...

At the epicenter of this year's speculation is BMNR.

The shares are now down on the day and an even $10 off the intraday high.

The panelist I mentioned this week might have top ticked the momentum index with his buys yesterday:

Aug 12, 2025 2:43 PM EDT

Watching in Amazement

I had CNBC's "Halftime Report" on today and I listened to a panelist (praise by individual, criticize by category — so no names!) who confidently added AVGO, NVDA and GS to his portfolio this afternoon.

Please look at the price charts of those companies before you read further!

While I recognize that my market view has been half baked for quite a while and having been mentored at Putnam by one of the great momentum traders in history ("The Chief") — I simply can't fathom the downside versus upside (and the absence of a margin of safety) in these buys.

While my general concerns continue to be realized — most notably: slowing economic growth, prickly inflation (seen in this morning's CPI report) and ever higher valuations — this has obviously not translated into a lower market.

Every day it grows clearer that momentum is a force unto itself.

It is terribly frustrating as I try to operate within the framework of a market that is disinterested in negatives and is continuing to be bought on every dip.

Despite that frustration I will not chase under any condition and compromise my investment process.

I will buy value (as I recently did with UNH and PSKY but I will never abandon the notion of risk/reward.

Nasdaq is now lower on the day and value is in its second or third of a strong rally.

Two days ago, I wrote this: 

Buying Value, Shorting Momentum

I initiated three new investment longs (deep value) late last week — UNH, LLY and DIS. I plan to add on weakness.

More later in the week.

I initiated several trading short rentals of momentum stocks recently — HOOD, NVDA, PLTR (see my Barron's comments) and added to the mother ship of momentum GRNY.

Position: Long UNH VS LLY VS DIS S; Short GRNY VL NVDA VS PLTR VS HOOD VS

If the computer-based AI doesn’t work right, I guess might as well try this? It is all feeling quite dystopian: 

"Inside Silicon Valley's Growing Obsession With Having Smarter Babies," The Wall Street Journal

A good article on AI: "What If AI Doesn't Get Much Better Than This?" The New Yorker

The issue is clearly evident. Not only does it not seem to be scaling, the lack of scaling is happening with incredible amounts of additional capital expense, and power and water consumption. The full system economics, which are already bad (remember a lot of the losses are hidden in the private entities selling a product at a big loss), are getting worse. Thusly, ChatGPT is now going backwards. The much hyped GPT-5 is so bad, folks are going back to GPT-4.

"OpenAI Brings GPT-4o Back After Users Revolt Over GPT-5," ZeroHedge

On a related note, CoreWeave CRWV is losing even more money than the massive losses that were forecast (and, boy, the accounting!). The stock is down 15% today on earnings (oxymoron), which is hard to do because retail doesn’t even know the difference between real and fake accounting. CRWV is at least a window into the full system economics that are being ignored. Customers that use AI and pay for it and find marginal value from it (which is about the best anyone will say) — I suspect if they were forced to pay a price for it where up and down the system the providers (service and infrastructure like CRWV) were all pricing in a way that they were earning a return, the price would be high enough that the AI would no longer be productivity enhancing at all.

Said another way: it would be more expensive, and less good, than humans:

More on AI CAPEX in general:

"AI CAPEX Mania — Tech Titans Outspend the Rest of the Market 2-to-1," ZeroHedge

I continue to short two ETFs: GRNY and JOET — they are my diversified/conservative way of shorting momentum stocks (which seem quite vulnerable at this point).

JOET, in particular, has supersized financial holdings exposure — a sector that this observer feels is also overextended.

I just covered my trading short rental in HOOD at $109.48 (-$4.65 ) for a gain.

S&P 500: CAPE MultipleUnited States: 2015-Present

(ratio)

From Rosie:

As my good pal Peter Boockvar is fond of saying, “valuations don’t matter until they do.” The CAPE (cyclically smoothed) multiple for the S&P 500 has expanded sharply from 32.6x in April to 37.9x in August. Back to 1933, such rapid multiple expansion over a four-month span has only happened twice before. And only two other times has the level been so pricey — in the 1998-2000 tech bubble and again in late 2021, which provided the overvaluation trigger for the 2022 bear market drawdown.

Let’s put these egregious numbers into a historical perspective. The CAPE has been this high or higher just 2% of the time in its history (currently at a 2.4 SD event). The current 5.25-point expansion (or more) over a four-month period has only happened 0.4% of the time in its history (2.8 SD event).

I personally do not invest around 2+ sigma events. Sorry. I prefer to have the wind at my back, not blowing in my face. Nor do I typically follow the masses or adopt a herd mentality, even in the face of the ripping tape.

This rally off the April lows has been a market driven by sentiment, speculative fervor, widespread belief in the dual “Trump” and “Powell” puts, and passive-investing momentum. But I do believe my caution is warranted, especially since equity returns over a one-year, three-year, five-year, and ten-year basis are, on average, negative when the CAPE pierces the 35x threshold. Valuations aside, the issue of ultra-concentration cannot be ignored. We have three stocks (Nvidia, Apple, and Microsoft) representing more than 20% of the entire market capitalization — the top ten now comprise an unheard-of 40% share, and that takes out the 27% peak back in the dotcom craze of 2000.

Bipartisan Congressional Lawmakers Push Trump To Reschedule Marijuana As He Announces It's Under Review - Marijuana Moment

Out of PSKY a $13.20 (+30% in 24 hours).

I just sold half of my Paramount Skydance Corporation (PSKY) taken only a day ago.

The reward v risk has changed - I purchased stock as low as $10.10 the other day.

The shares are at $13.20 (+21% on the day).

Goldman Sachs is saying that the consumer has absorbed only about one fifth of the rising tariff costs to date.

But that percentage will rise to 65% by October.

This certainly suggests that inflation will remain sticky (at best!).

"Big moves start with big moves."

- Steve Strazza

Bonus - here are some great links:

Large Caps Left Behind Bespoke | My Research

SPX, CPI and Bonds SPX, CPI & Bonds - by Frank Cappelleri - CappNotes

Breadth Hits Neutrals Breadth Hits Neutral — Market at Crossroads ⚖️

Technical Tuesdays (1) The Chart Report on X: "Join us at 11am ET to talk charts and more! https://t.co/F9lPhYq29C" / X

The market's extraordinary price momentum continues to draw in investors despite clear evidence of slowing domestic economic growth and sticky inflation.

Investors apparently are even losing interest in budget deficit concerns.

The budget data below is inclusive of tariff revenue.

It will be interesting to what degree the bond market cooperates with economic policy and the equity markets.

What is stunning to me is the current budget deficit is almost back to where it was during Covid, when nobody was working, tax receipts were impaired, and the government was funding everything. It is also a circular reference problem, because the bigger the deficit, the greater the borrowing, the greater the interest expense, the bigger the deficit, more borrowing, and so on. 

* More Problems With GPT- 5: OpenAI Brings GPT-4o Back After Users Revolt Over GPT-5 | ZeroHedge

* CoreWeave Losses Widen as Data Center Demand Surges - Bloomberg

1. Coreweave's Bogus Depreciation: James Chanos on X: 

2. More on Coreweave's "Creative" Accounting: 

* What If A.I. Doesn’t Get Much Better Than This? | The New Yorker

The S&P Short Range Oscillator moved back into a slightly overbought at

0.46% v -1.11%

Doomberg on AI, "Out With the Old". Out With the Old - Doomberg