friday speedrun

Where are the animal spirits?

Make it make sense.

July 17, 2026

Hello. It’s Friday. Thanks for signing up. I’m Brent Donnelly.

The About Page for Friday Speedrun is here.

Here’s what you need to know about markets and macro this week

Before we talk about the macro setup… My new book is out:

TRADE OUTSIDE THE BOX: Advanced Thinking for Professional Traders You can buy it on Amazon right here. Here’s the one-pager.

The book is written for experienced traders. If you are new to the game, I would suggest you start with Alpha Trader. If you have been trading or investing for more than five years, this book is for you (and you don’t need to have read Alpha Trader to enjoy it).

Let’s get started.

Global Macro

It has been a strange week for macro and an unprofitable week for me as I thought the weak CPI and repricing of July FOMC would be bullish stocks. Not so much! Instead of an eye-popping rip higher in equities, we got a big repricing of the AI trade as many factors conspire to make people nervous about the sustainability of infinite U.S. spending on data centers and Ludacris leverage in retail ETFs.

This selloff in stocks comes on the heels of a multi-standard-deviation miss in both CPI and PPI and July FOMC odds dropping from around 50/50 to zero. Normally, a big Fed repricing like that would lead to a lower USD, higher gold and silver, and a rally in high beta/long duration tech, but the exact opposite has happened.

See, for example, QQQ:

The retail buy the dip mentality has completely fizzled as the SPCX top tick insider bag dump and epic reversal in other retail bubbles like rare earths, gold, silver, and quantum computing stocks has left Robinhood accounts underfunded and BTFD money scarce. The economy may be humming along just fine, but all those 2026 tax refunds have been incinerated by this point, and institutions were already 97th percentile long information technology stocks when this all started.

So what you’ve got here is a classic buyer’s strike. And good news / bad price. I spent most of the past week looking for places to buy the dip in various things, and I too am out of bullish optimism for now. Something is off.

Anyway, my view has been that the data would not cooperate with a hawkish Fed and while that view has been correct, I am losing money because this view led me to the conclusion that stocks would rally and the USD would sell off and that is not happening. Something is wrong.

From June 10 to July 13, we made a steady move higher in yields despite middling economic data as both Warsh and Waller sounded more hawkish than expected. This delivered a 14bp rise in 2-year yields. Now, after CPI, we have reversed those 14bps (plus one more)—————–but look at the asymmetry in the moves.

Not only is there an asymmetry in things like DXY, EURUSD, and USDJPY, there is no symmetry at all in gold and silver. They went down in both regimes. This is telling, I suppose.

The USD has remained stubbornly strong and risky assets have remained stubbornly weak despite a turn in the data which should put us in Bridgewater’s disinflationary boom quadrant. But no. There are inconsistencies galore as USDCAD, for example, which is normally sensitive to equity prices and is seen as a good release valve trade for Fed policy, has been going down and then down again as yields went up and down. Lots of weird stuff going on.

Dude, where’s my disinflationary boom?

Stocks

Semis have become their own asset class and there has been a ton of froth as literally dozens of leveraged ETFs have appeared to chase the semi rally higher and they are all, instead, chasing it lower. There are more than 10 ETFs just to trade SK Hynix with leverage. That is a huge failure by the regulators as those ETFs remain poorly understood money sucks with a terminal value of zero due to fees and drag. Even worse, SK Hynix ADRs are trading at a huge premium to fair value, so if you buy an ETF leveraged to the ADRs, you are getting killed twice.

This is similar to the setup with GBTC, VCX, MSTR, and other junk that was essentially $1 bills selling for $2 or more. That does not last and paying $2 for $1 is definitionally negative EV. This is not always well-understood, especially in the retail world, and so opportunistic ETF providers continue to pump out these wealth-destruction machines. Buffett famously said that derivatives are weapons of mass destruction, and as far as leveraged ETFs go, he hit the nail on the head.

Korea is starting to learn this lesson as the entire Korean financial system now appears to be a massive leveraged bet on memory and chips. Regulators there are now starting to walk back the insanity, but it could be too little too late and I would not be shocked if there is some sort of financial crisis there at some point as retail madness has reached levels rarely seen anywhere, ever.

It’s easy to be bearish semis right now as the bears are in control, new issues are flooding the market, and the boom-and-bust nature of the sector makes it fun to short. There are pretty much two theories:

The traditional-cycle hypothesis is that AI has created a new and more powerful version of the same old semiconductor boom. High prices and shortages encourage producers to expand capacity, while customers double-down and build inventory to protect themselves. Eventually, supply arrives just as spending slows, AI returns disappoint, or heavily-indebted technology companies become less willing to fund new data centers. Memory is an interchangeable product, so even a small surplus can cause prices and profits to collapse. Under this interpretation, claims that “it’s not cyclical anymore” are, ironically, a classic late-cycle signal themselves: investors are extrapolating peak demand and peak margins too far into the future. The cure for high prices is high prices. All these new fabs will finally get built in 2027 and 2028 and they will be selling semis and memory into a massive glut.

The structural-boom hypothesis says AI has permanently changed the memory business, or at least changed it for many years to come. Large models require enormous high-bandwidth memory and conventional DRAM, while hyperscalers are committing hundreds of billions of dollars to data centers. They are signing multi-year supply agreements. Because memory capacity is expensive and slow to build, demand will stay ahead of supply for years. People on this side of the fence believe the old memory cycle has been weakened: longer contracts, more customized products, and persistent AI infrastructure spending support strong demand, stable pricing, and high margins for SK Hynix, Micron, and Samsung.

Fair to say that theory number one is in control right now. I don’t take strong views on these things—my goal is to read the narrative and positioning and sentiment landscape and surf the ups and downs. I don’t have the knowledge or expertise to make a structural call on memory demand. You are just as likely to find me short MU or long.

As Chinese models are now just about as good as U.S. models and charging less, one might reasonably wonder how this is justified:

Sure, Chinese models are piggybacking on U.S. spending, but U.S. models were built without paying a cent for trillions of megabytes of copyrighted data, so I guess fair is fair. Uber set the standard for corporate rule of law a while ago and for better or worse, their strategy worked.

I wonder if at some point this will become a national security issue. People are not particularly careful with LLM security and there are probably many U.S. persons uploading confidential contracts, specs, and other proprietary data to Chinese LLMs right now in an effort to get a cheaper response than the one provided by Anthropic. A juicy and rich dataset for Chinese authorities to parse.

Finally, the SpaceX IPO has turned out exactly as the skeptics said it would: Insiders have dumped into retail and the stock is now well below the IPO price. Things get worse for the stock in August. 1.37 billion shares could hit the market after earnings (August 6, maybe). That is in contrast to a current float of just 639 million shares. The early entry into the NASDAQ 100 has left not just the willing bagholders, but index investors underwater, too. Who knows where it goes long term, but for now it’s a classic peak cycle IPO where informed insiders dump on starry-eyed retail.

One could excuse retail for giving up on equities. The charts of all the most favored retail plays look like altcoin charts.

Here is this week’s 14-word stock market summary:

Weak CPI and July hike removed and yet stocks cannot rally. No money left.

https://www.spectramarkets.com/subscribe/

Interest Rates

This week it was Waller’s turn to send out a super hawkish message at the worst possible time as Warsh’s pleas for less forward guidance go unheard and unnecessary volatility rules the day.

I agree with Warsh: We don’t need a Fed speech the day before CPI to explain the reaction function of a single Fed voter who was max dovish six months ago and is now max hawkish today. There is a theory that without forward guidance, we will see more volatility around data releases, but this mini experiment shows the exact opposite. My view is that changes in the economy and Fed policy will yield particular amounts of volatility and moving that volatility around doesn’t achieve anything other than lowering the credibility of the institution as it looks like they are chasing their tails.

There is a high probability that pre-war Fed speeches (especially Waller) added to the rate cut mania before the war and post-war Fed speeches added to the rate hike mania after the war. The truth was always in the middle: Fed on hold. But: “We’re going to stay on hold” is boring and speeches need to be interesting, I guess.

Going forward, the Fed has shown it is desperate to flex some credibility with a hike, but the data just absolutely refuses to cooperate. Despite the hawkish lean, it’s very difficult to justify a hike if you are data dependent. At some point they may find a sequence of releases to justify a hike, but that is not going to happen before September now because the only remaining data points on labor or inflation between now and the July FOMC are second-tier stuff like Initial Claims. Core PCE comes out after the Fed meets.

2-year yields in a 4.0%/4.25% range for a while makes sense to me because even if the data continues to show disinflation and a no hire/no fire job market, the Fed won’t flip back to signaling rate cuts in their speeches for many, many months. But rate hikes will not be justified. So: Fed on hold.

Fiat Currencies

I have been playing the USD from the short side based on a variety of reasons. Some idiosyncratic (short USDKRW for the SK Hynix inbound flow and short USDMXN for good MXN seasonal and good carry) and also because I feel the long USD trade got extremely crowded after Warsh and became asymmetric. The USD short trade has worked okay, but hasn’t been explosive. In fact, it’s been quite disappointing.

EURUSD has grudgingly followed interest differentials higher, but the move has been unimpulsive and it’s like traders need to plug their nose before they buy euros. Everybody still hates the euro. See here how EURUSD can’t completely ignore the repricing in interest rates, but also can’t shake off the worms. EURUSD is a beachball underwater but there is a medium-sized hole in the beach ball.

GBPUSD tried to rally on the good news out of the UK (Miliband will not be Chancellor of the Exchequer) but even that pair stalled very quickly after a zippy 2-day rally up to 1.3550.

Whatever is ailing gold and silver is also ailing USD shorts.

You can argue that weakness in equities is triggering some safe haven demand for USD but I will say if that is the case, it will be short lived. A repricing of U.S. tech stocks when the world is massively overweight USA is not going to be bullish USD in the end. The 2001-2003 bear market (and huge structural selloff in the USD after it) are the appropriate model for how capital will flow if we enter a U.S. tech wreck. But in the short term, sure, the dollar can rally on risk aversion. But history shows that USD reactions to equity bear markets hinge on whether the world is overweight or underweight USD and U.S. assets going in.

Crypto

Man, anything requiring animal spirits is a drag right now. I took my shot in PURR and have now stopped out as the break of $7 makes the whole rally look kind of suspect now. When I buy an altcoin, I am always concerned that 99.999% of altcoins have a terminal value of zero, but I got sucked in to the perp hype and now everything is selling off again and perhaps PURR is one of the most-owned assets in crypto and so it’s not exempt from the selloff. I will plead the fifth on crypto direction for now because I am clueless. BTC and ETH are doing nothing—they don’t rally when risky assets rally, but they’ve stopped selling off when risky assets dump. Purgatory.

Commodities

Kudos to The Economist who top ticked oil at the highs and bottom ticked it at the lows. I know I am being mean, but like… It’s uncanny. It’s impossible for any rational human not to take pleasure in the observation.

Maybe I am full of schadenfreude because I am losing money and I need to project my frustration onto an external entity. Anyhoo, speaking of losing money, I was also bullish silver last week as my belief in a weaker USD and a rekindling of animal spirits had me spreading chips all over the roulette table and watching GREEN 0 come up. Silver, like most other retail-heavy risky assets, had a bad week despite the CPI miss. The spec bubble days of silver over $100 feel a long way away now. Silver traded up to $120 in late January! Not that long ago.

That’s it for this week.

Get rich or have fun trying.

The fun stuff

TRADE OUTSIDE THE BOX: Advanced Thinking for Professional Traders is out! You can buy it on Amazon right here.

*************

The artistic attention to detail in these videos is impressive. Note the young boys and girls playing on the first version and old guys on the second. She is such a great, thoughtful artist. No detail ignored.

Phoebe Bridgers on Jimmy Fallon 1 (electric Lost Boys)

Phoebe Bridgers on Jimmy Fallon 2 (acoustic Lost Boys)

…

Lost Boys” is about people—especially men—who remain emotionally trapped in adolescence: reckless, restless, seductive, self-destructive, and incapable of building a stable adult life. The title invokes Peter Pan’s Lost Boys, who never grow up or return home, but Bridgers treats that fantasy as both appealing and tragic. These men seem free because nobody controls them, yet they are also permanently homeless, frightened of intimacy and unable to change.

Calling someone a lost boy can sound sweet or forgiving, but these are not harmless children. Their refusal to mature injures themselves and the people who love them.

Bridgers is not simply criticizing immature men from a safe distance. She is attracted to them, misses them and may recognize some of the same qualities in herself.

That ambiguity keeps the song from becoming a lecture about bad men. The speaker understands that irresponsibility, fantasy and perpetual youth can be intoxicating. She sees the damage clearly but still feels the pull.

The central meaning: growing up means accepting time, responsibility, grief and permanence. The lost boys refuse all of that. Bridgers mourns them because they cannot grow up—but also because part of her still envies them and wants them to return. The song is simultaneously an anthem for eternal youth and a lament for the people destroyed by it.

*************

Why no one understands the AI boom (from groundbreaker)

*************

Via Matt Gittins, ofc