Animal spirits are still relatively muted.
I spent most of yesterday running around New York City meeting with traders and investors of all kinds.
These days, I live outside the city, with three kids and all. I’m a suburbs guy now.
And I love it.
Listen, I paid my dues. I spent more than a decade in New York and did what I had to do.
Now I get to pop in a couple times a month, and that’s enough for me.
But, when I’m there, I like to maximize my time and meet with as many folks as I can.
There’s usually some good food as well.
New York City is good like that!
No Questions About Crypto
I was having an early dinner with some of the guys, including Michael Batnick, co-host of the Animal Spirits podcast.
Michael is Managing Partner and Director of Research at Ritholtz Wealth Management, the fastest-growing financial advisory firm in the country.
He’s been around a while. He knows when the animal spirits are out. He even named his podcast that.
He told me last night he isn’t getting any phone calls yet about Crypto, from friends or clients.
That likely means we’re still early.
It’s not surprising to hear that, as we see speculators in the futures market currently the most net short they’ve ever been.
Investors are skeptical about Crypto assets hitting new all-time highs.
Good.
Everybody’s Wrong
Earlier in the day, I was told that “Everybody’s Wrong” is the perfect name for our daily note.
I was happy to hear that.
He knows I think about this stuff a lot, and that I’m constantly looking for opportunities where the crowd is thinking one thing but the market is doing something else.
It was good feedback from friends I respect a lot.
They’re Wrong About Biotech Too
Another thing that stands out from all my conversations yesterday is the talk around Biotech stocks.
We’re seeing the highest short interest in years for the SPDR S&P Biotech ETF (XBI):
This looks like a massive top doesn’t it? Well, the short-sellers certainly feel that way.
So I think it’s likely the opposite.
This group has been massively underperforming the S&P 500 since the first quarter of 2021.
In fact, while the S&P 500 is up more than 70% during that time frame, XBI is actually down close to 50%.
I think it’s getting close to when Biotechs have their day.
One more thing I’ll note is there’s a ton of short interest in Small-Caps in general.
Speculators are still net short the Russell 2000 futures, and short interest in the iShares Russell 2000 ETF (IWM) is near new 52-week highs.
What’s inside the Russell 2000? Among other things, a lot of Biotech stocks, like more than 200 of them.
There are a ton of Regional Banks in there too, more than 200 of those in that index as well. And they’re short the heck out of Regional Banks!
Do you think they’ll all be right?
I do not.
It was an interesting day in the city yesterday.
I expected a bit more euphoria, considering stocks all over the world are hitting new highs, the Nasdaq has doubled in a couple of years, and Crypto is pushing past $4 trillion.
But, no, people are still level-headed.
We’re not seeing the crazy just yet.
I’ll let you know when it comes.
Stay sharp,
JC Parets, CMT
Founder, TrendLabs