Tony Greer: "We Needed to Let the Air Out of This Balloon"

Regime change, figuring out the AI story, and the Lacrosse Dads indicator... it's the final Talking Markets episode of 2024.

Every time The Morning Navigator’s

Tony Greer

joins me on Talking Markets, it’s a BIG day for markets. TGTM indicator anyone?

Yesterday, Tony - or, “Mr. Tell It Like It Is” as someone called him in the YouTube comments - joined me to discuss the markets’ red day, what’s next, and what he’s focusing on for 2025.

The Market’s Fed Freakout

The markets had an ugly close yesterday after the Fed indicated fewer rate cuts in 2025 as it tries to get a handle on inflation. Was Tony surprised?

“Can you see my surprised face?” he said:

TG’s surprised-not-surprised face

In other words, nope. “We finally saw that agnostic selling that we knew had to come at some point,” he said.

Last time Tony was on Talking Markets, he warned:

“[The Fed"] is at risk of a policy error because we’re cutting rates with the S&P at all-time highs, and it seems like it might be wildly inflationary.”

Yesterday, he said: “You had to be sitting up in your chair when PPI came in hot, because the risk the whole time was that the Fed is cutting rates into an inflationary environment. And it sounds like they acknowledge that they may have done that… If there's no more easing and we're going to be on a slower easing path or the money's not going to be as easy, there's not going to be as much liquidity.

What does this mean for investors?

💡“What that suggests is that if you are levered to your eyeballs, it's time to get out of those trades,” he said. “Your leverage trades are done. They all exploded right in front of us on the screens today.”

The Lacrosse Dads Indicator

There were plenty of warning signs that a shakeout was incoming, Tony said:

• S&P protection was “historically cheap - they were handing out insurance to the S&P and nobody wanted it.”

• There was a historic number of long futures positions in the S&P: “We found all the stop losses today, we’ll probably find more tomorrow.”

• And… the Lacrosse Dads Indicator: “I had lacrosse Dads calling me up last week asking me if it was a good time to get into Bitcoin,” Tony said. “That hits you in the side of the head like a freaking frying pan, things got as frothy as could be.”

However, he added that the frothiness wasn’t really reflected in “the easy places” like the fear and greed indicator, or the AAII or things like that. Instead, “it was reflected in position sizing, in the options,” he said. “It wasn’t as easy to tell that this was a no-brainer sell-off.”

Regime Change?

“Today was a little bit of a regime change of some sort,” Tony said. “I’m thrilled about what happened. We needed to let the air out of this balloon a little bit.”

He also thinks there is more leverage in the system to be unwound: “I’d love to see the S&P attack the 100 day moving average at 5,850,” he said. “I’d love to see a classic waterfall where we get a couple of big red days in a row.”

That doesn’t mean Tony is bearish. Far from it. “I still maintain a sort of bullish posture because I think today is not fatal. I think today is something that the S &P can adjust to,” he said. “And the reason I think that is because the yield curve didn't really budge. Still 15 basis points, solid as a rock.”

In other words, the Fed has just signaled that they can’t be as easy as they have been, and the market will have to adjust. “But I’m getting ready to buy the dip,” Tony said.

Tricky Times in 2025

Source: The Hill

After Elon Musk and Vivek Ramaswamy criticized the spending bill yesterday, I asked Tony whether he thinks it’s going to get trickier to navigate the Washington issue as we move into 2025.

“Oh hell yeah,” he said. “This is going to turn into a full on snowball fight as we get towards inauguration, and then after inauguration it’s going to be a big snowball fight. And by that I mean markets reacting to new fresh headlines, more unknowns for the markets.”

If Elon Musk and Vivek Ramaswamy “have at” the government budget, “it’s going to be inherently bearish in some ways,” Tony said. “I think this is a dynamic that can roil markets all over the place. And I'm on my toes for something like that.”

Top of Mind for Tony in 2025

Number 1: AI.

“AI is everywhere,” he said. “Even with the sell-off today, NVIDIA is up 160 % year to date. I doubt they're going to take too much of a haircut before December 31. The AI data center, power generation story is definitely one that I want to figure out how to profit from in the new year.”

(This is apparently “Tony Greer figuring out how to profit from AI, according to Microsoft Designer.)

And off the back of that, energy is coming in from the cold. “Energy was very dangerous until it became necessary for the next leg of technology,” Tony said. “Now all of a sudden everybody’s like, ‘what we need is an energy portfolio.’”

Tony sees “a lot of nuclear power talk, a lot of liquid natural gas developments” ahead, and thinks Chris Wright, the nominee for Secretary of Energy, is “the perfect guy for the job.”

Crypto Outlook

“If we’re going to cut leverage out of the system, and Bitcoin is a levered bet on US risk assets… it sounds like you should probably be really careful with your Bitcoin position,” Tony said. “It looks to me if we take out the $92,000 low, there’s probably selling. If the stock market's going to back off and we're in a deleveraging, maybe Bitcoin goes to $80,000. That sounds fine with me.”

Tony’s not “terminally bearish” on Bitcoin though, pointing out that corporate inflows haven’t stopped. “There are now more ETF assets in Bitcoin than in gold,” he said. “That took 5 seconds in market time. This thing is living along with the visual death of fiat currency, which you can observe in things like our $36 trillion deficit.”

A Shot of Optimism

Tony stronggggggly disagrees with people who think we’ve been in a “no reason rally market.” “Are you kidding me?” he said. “We're in the age of artificial intelligence, nuclear power. We're going to make the country healthy again. We're going to war with big food and seed oils. You're like, nothing going on. Everything is going on. You know I mean? Like like Elon Musk bought Twitter and saved free speech. Like there's a lot of good sh*t going on. So I think that that's why the market can get excited.”

And Finally

As this was the final Talking Markets episode of 2024 (we’ll be back on January 6), our poll in the live chat on YouTube deviated from the usual finance Q. Let’s recreate it here (there is only one correct answer, folks).

To watch the full episode, right this way.

Enjoy,

Maggie

Important Disclaimer: It is crucial to remember that this article is for informational purposes only and should not be considered investment advice. Consult with a qualified financial advisor to assess your risk tolerance, investment goals, and overall financial plan.