What’s in Store for 2024?

0:00Hi, I'm Raoul Pal, CEO and co-founder of Real Vision. Alongside brilliant minds like Edward Snowden, Benedict Evans and Balaji, I'll be on stage exploring the extraordinary potential of AI and the profound change it represents, not just for financial markets, but also for the world as we know it. With over 5 ,000 attendees and over 150 side events, Singapore will become a vibrant hub for a full week from the 3rd to the 9th of June. Visit superai.com to register and join me with 20 % off tickets with the code REALVISION. Link in the description. Thanks.

0:47What's in store for 2024? Hi, everyone. Welcome to the Real Vision Daily Briefing. With me today is Tommy Thornton, founder of Hedge Fund Telemetry. Hey there, Tommy. Hey, Maggie. How are you? Doing okay. How are you? Good. Good. Just trying to get to the end of the year. It's been quite a year. I will say from my own personal view, it's been very humbling. It's not easy as a long, short manager to navigate this, especially when you really just haven't embraced the magnificent seven. So it's been humbling. I will say that. Yeah. For a lot of people, Tommy, I mean, I mean, Brian and I have lost count of the amount of people who have come on here and just say it is one of the hardest macro environments, one of the hardest trading environments.

1:33They've seen, and I want to touch on that a little bit more as we kind of head into the new year, because I feel like those kind of reflections are important as everybody kind of resets. But let's touch base first on what happened today. Stocks finally hit an air pocket, the S &P and NASDAQ down over 1%. In fact, it looks like we were, yeah, selling into the close. So 1.5 for NASDAQ down percent wise. Same with S &P Dow down 1.7. Funny, Russell down 1.3, like had outsized gains on the way up, but kind of keeping pace. Even the VIX is moving, which is dead in the water, up 9%, but still at 13. I just guess this was bound to happen, right?

2:16Yeah, I think so. Oh, and from the backdrop of what I've been seeing in the last few weeks developing, we've had market sentiment go back up to extreme levels. And I'll just go back to October. We were at market sentiment levels that were pretty depressed. I was expecting and hoping for some sort of capitulation type downside push. And I think I was on Real Vision around then. And I did not capture the full upside move. Actually, I was caught short on a lot of things. It happens. Not the end of the world here. But I think now we have market sentiment at extreme high levels with the data that I look at.

3:03We have almost every technical indicator extreme on the upside. You look at every RSI on the market, markets, stocks, sectors, you name it. It's been very, very extended. And I also look at the mark indicators, and we've had a lot of exhaustion signals. and we had really good exhaustion signals on the S &P only one time this year. And that was towards, I think that was July. And we saw the market come back, fall off a bit. And then we had a buy signal that wasn't the full signal that I wanted, but it was a buy signal in late October. And now we have, and I didn't expect it, across the board sell signals on almost every index in the market.

3:53The S &P is on day 12 of 13, so we're close. And when I see that many signals occurring at the same time, it gives me a lot more confidence that we will see a pullback. And I'm not sure what the pullback will be if it's something that like we saw back in the end of 2021. We had very similar setup with all the sell signals with DeMarc. We didn't just have daily timeframe sell signals. We had weekly timeframe sell signals, which we have, again, on the NASDAQ 100. And the S &P is very, very close. We could have that next week. So we could have something that's rather interesting going into 2024. One thing also that we just were mentioning, we had three really big earnings reports in the last week.

4:44We had Oracle, Adobe, and last night we had FedEx. and those stocks got murdered after hours. Yeah, FedEx was smoked today, right? Yeah, and I got one right. I was short this into the number and covered it. Take the gains when you can. But I got lucky with that one. And I think that is sort of indicative that we're perhaps bubbled up and the bar is very high for earnings going into Q4 earnings that we'll be starting in a few weeks. So I think that's a risk. Again, I think the Fed, with all the liquidity injections from the Fed and the Treasury, and I'm sure you've had a lot of people that talked about the plumbing and the liquidity injections.

5:32So I'm not going to reiterate that. But that could be coming towards an end, the run here. Which is super interesting. And we get people who have some different opinions on that liquidity too, which we'll continue to sort of go over as we go into the new year. So, you know, there's one thing about sort of setting up, I feel like so many people feel it's overextended, right? And there's a, you know, a setup for a pullback. Does this feel like just one of those sort of profit-taking pullbacks, Tommy, and a sort of consolidation? Or does it feel like what we went through a lot in 23, which was sort of, you know, mean reverting all the way back, we'd have these run-ups on expectations of things changing in a Fed pivot.

6:17And then we'd have a reversal in rates and a really harsh pullback again. We keep saying every day I say this, and it's true that it was sort of rocking one side of the boat to the other. Does it feel like it could be something like that? Or does this just feel like, I don't want to say healthy consolidation, but the kind of pullback you'd expect to see? I will say with certainty, I don't know. And the reason I say that is it's one day. And, you know, look, the bulls have had a great year. And one of the things that's really been interesting in the last five days, and I'm looking on one of my screens up there, is the Goldman Sachs most shorted basket was up 15 % in the last five days.

7:01And the S &P was up about 2 % in the last five days. It's actually 11 % and 1.2 % now because of today's action. But you've squeezed a lot of shorts out of the market, and the shorts have been very correlated with the Russell indices. So a lot of people are like, oh, it's going to broaden out. Here's one of the problems that I have is it did broaden out. And we have DeMarc sell signals in the equal weight indices, both the S &P, RSP, and the NASDAQ 100, which is the QQQE. Those have DeMarc sell signals. So we have them just basically everywhere, as well as the NASDAQ and the S &P, as I mentioned, is closed.

7:46The Dow has one as well. That's the CNBC index. I think we'll see a lot of Dow points on the downside. For those that know and laugh at that, that's how I see it. So, look, I don't know. Follow-through is always important. This could be a one-hit wonder. There was a big put action put by with the S &P. that hit the market down. I don't know. It's going to take some time. But when you do have that type of short squeeze, you lose the natural buyer. So when you do have, let's just say, some downside, there could be a vacuum a little bit lower because the natural buyer, when things go down, are the shorts.

8:31So if you have fewer shorts, you can go lower. So that's possibly what we saw today. Look, again, I've been so humbled by this market this year that I take each day one day at a time. And if it goes lower, I'm positioned for that. And we'll see. Look, again, I think it's very similar to what we saw at the end of 2021. and I think the Fed has still work to do. And I mean, I was, Austin Goolsbee spoke and pushed back on some of what Powell said and he's the biggest dove there is. And he was flummoxed, I mean, if I'm saying that correctly, by the market's reaction to this. And I just want to say, I don't get it.

9:20And I think the Fed, yeah, okay, hey, they're going to pivot. I've been thinking higher for longer. They're going to keep rates higher. And I still think that. But if the markets go down, I've said this the last time I said it, the Fed's going to cut rates if the markets go down significantly, if there's a liquidity event, or if there's some sort of geo-macro war, terrorism, or something like that. That's how the Fed will pivot and cut rates. Talking about it is one thing. Doing it is another. And usually, when the Fed cuts rates, it's a cycle and markets, equity markets, bond markets do well, but equity markets don't do so well.

10:04It's because earnings start to go down. There are other problems that happen. There are bad things happening. If they're on an easing cycle, it's because there are bad things happening. That is true. And we really haven't seen anything bad. The economy still shows everything looking great everybody's on the soft landing you know boat and if you go back in history you'll look back and i i mean i'll i'll tweet out um i have some snippets of every time the the economists say a soft landing is ahead from the 70s to the 80s to the you know bernacki and his crew soft landings ahead it turned into a hard landing and and i've seen people say well it's going to be like 1994, 95.

10:50Well, maybe, but I doubt it because there's a whole different thing happening. And back then the Fed pivoted and you also had Windows 95 and everybody logged onto the internet and the internet was the greatest technology innovation in our lifetime. It was bigger and will be bigger than AI. AI is cool, but I don't see my mom or your mom logging on saying, I'm going to chat GBT to figure out something. It's not going to happen. It's going to be great for so many people, but it's not going to be the internet. So I don't think we're going to have the tailwind like we had then that really took us out of the recession, actually gave us a soft landing and made Greenspan look like a genius.

11:42I just don't see that. I think it's going to be a hard landing. And when it happens, and I don't know when it's going to happen, well, it'll be soft and then it gets harder. And that's the problem. I don't mean to, I mean, that sounded kind of odd, but it generally happens that way. And I can't see the Fed saying, oh yeah, we got this. And the unemployment rate is at 3.7%. We've had a market that's gone up on bad news. Oh, wow. You know, bad news and buy stocks because the Fed's going to pivot. Now we know what the Fed has said. They're going to cut rates probably in 2024. So is bad news now going to be perceived as bad and stocks go down on that?

12:27I mean, are people going to freak out when the unemployment rate goes up above 4%, 4.5%, maybe 5 %? I think people then will start to hit the panic button and say, oh, this could be a little bit worse. So everybody's cool with the soft landing right now. The markets are higher. It looks all OK. But I think things are going to happen. Hey, everyone, we're going to take a quick break right now to hear a word from our partners. We'll be right back with more of the day's top analysis on the Real Vision Daily Briefing.

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14:03Yeah, it's so interesting because I think you brought up two really, really important points. And these will be points that people differ on and they debate and we're going to have to wait and see. But I think this is where the battle lines are going to be drawn. And that is one, whether this idea, I think what really took, the reason everyone really took off after Powell spoke is because you're right. The Fed always is forced to ease because things are going bad. whether they know it and we don't know it or we all know it, that's usually the way it goes. Powell introduced this idea of preemptively easing to soft land.

14:37We're not going to wait until we see the eyes of disaster. I think that's what lit the fire under everyone, because that would be different if that's the case, if they're trying to fine tune to that level. I mean, that means you think they can do it, which is a completely different conversation. But you just said something really important that this AI is not the internet. There are people who think that it is. And that seems to be one of the things underpinning this idea that we may have these gains in productivity that will allow for us to escape that sort of historical. So I think that's going to be really interesting because we just don't know, right?

15:18This is brand new. We just don't know. So that's going to be really cool. Yeah, it's deflationary. And the Internet was inflationary. And you had tons of jobs created because of the Internet and businesses because of the Internet. And that's how I see it. I think that there will be jobs eliminated because of the AI functionality. And that's technology. That's always what's happened with technology. Jobs are eliminated. You have an, you know, we have iPhones and it's eliminated 15 different things that you used to have to carry around cameras, you know, computer laptops, everything, phones. It's just all in one now.

15:59So that's how I see that. Yeah, I listen, I'm not negative on everything. I know I know everybody's like, oh, my God, I just want to turn this off and blow my brains out. But I do think that energy is starting to line up as long ideas again. I started buying energy stocks, the drillers and the typical ETFs that you'd buy. Started buying those. My favorite place, actually, my favorite stock for next year is Alibaba. And I think China could see a bounce. Look, Alibaba trades at eight times earnings. And it reminds me of Meta a year ago when Meta was, you know, Jim Cramer was crying on TV that he got it wrong and it was under$100 and now it's$350.

16:47That was trading at nine times earnings. And I think Alibaba at eight times earnings, it has 10 times the revenues today of when it went on its IPO and it's below its IPO price. And I know they're trying to do restructuring and I know that it's been absolutely killed. risk? Isn't that because of the political risk? Yeah, but I think that a lot of that is pretty much priced into it. And you probably have some tax loss selling going into the end of the year and they can't get, you know, and financial to go public and certain things like that. But I think people will come back into it and look at it from a value point of view.

17:25And if something possibly goes right with it, I think the stock would be over a hundred dollars and possibly I'm just going to throw this out there. Maybe it'll double this year. It's 70-ish dollars. It just had a dividend come out today, the ex-dividend. And I like FXI. And I haven't liked these. I've been really sort of negative on these for a while. What's FXI? FXI is like 23 today. I think I just can't see it on my screen. It's covered up by something. But that went ex-dividend today and it paid, you know, it's paying a really pretty good dividend as well. So I'm cool buying these here. So is this the iShares China large cap ETF?

18:08Yeah. Yeah. And I'm not necessarily pro-China or anything like that. I just think that these are mispriced and I think they can work higher. And that's basically it. Yeah. Interesting. I just want to flag, I'm always trying to sort of, I know we're all time crunch and we don't get a chance to watch everything on the platform. We've had a couple different people comment that they think that the stimulus coming from China, people are getting that wrong. They think they're stimulating more than people think. And that could be a little bit of a different story. Gio Chen was one of them. Brian, maybe you remember the other one.

18:43But we just had this conversation that's been dripping out, Tommy, as a sort of under, you know, maybe something the markets got wrong. So that's interesting that you like China as well. I know Are there a couple other stocks you're looking at? I want to ask you about steel because the last time you were on, you're focused on M &A, which is interesting. Yeah. Last time you mentioned steel and we had big developments recently in that. Yeah. US steel, last time I was on, I told everybody that was my largest holding in my fund. I was the first one out the door the other day when they were bought out.

19:17I sold it for over$50. I was pretty happy about that. So I bought this after the initial pop. I think my average was around$31. And I was watching it in the 20s. And then the Cleveland Cliffs came out and said that they wanted to buy them for$35. I bought it, told everybody else to buy it. And I bought more. It was maximum size. And I thought, okay, hopefully it goes for$40. It went for$55. I knew there would be antitrust with unions and everybody freaking out. So I told everybody as soon as this, you know, there's an announcement, you sell it immediately. And, um, I was very, very, uh, pleased because I sold it at 50 rather than 40.

20:02And so that was a nice little, um, present, um, in a year that again has been very humbling. So I was, I was happy that that succeeded. And I'm, I'm, I have other ideas that, uh, like I'm also, uh, long paramount and that That one has been a mess. Oh, gosh. And I think that one is the never-ending fight, right? Isn't Paramount, when you've been around so long, you forget what you used to know. Yeah, it's - The Redstone, right? Isn't that still - Yeah, it's the Redstone family. Someone's gonna sue or something. Well, listen, Sumner Redstone was a real character. He used to call Bear Stearns' desk, the media trader, who's a good friend of mine, every single day and say, who's selling my stock?

20:49You know, he's like that. That anyone would do that is just hilarious. Yeah. And time gone. But Sherry Redstone owns the 90 % of the voting rights through her vehicle, National Amusements. So there could be somebody buying that. That's Larry Ellison's son who might do that. I've heard other companies like it just came out. Warner Brothers Discovery may merge. uh i look i think there's assets there that uh are really worth probably double wow so you think this stock's gonna pop on news of a merger well we'll see i you know look it's it's a it's a little hairy because there's a lot of debt and you know when you dead drama yeah there's debt there's drama there's there's i mean there's the family it's a family business basically we're going to take another quick break to hear a word from our partners we'll be right back with more of the day's top analysis on the Real Vision daily briefing.

21:47Hi, I'm Raoul Pal, CEO and co-founder of Real Vision. Alongside brilliant minds like Edward Snowden, Benedict Evans and Balaji, I'll be on stage exploring the extraordinary potential of AI and the profound change it represents, not just for financial markets, but also for the world as we know it. With over 5 ,000 attendees and over 150 side events, Singapore will become a vibrant hub for a full week from the 3rd to the 9th of June. Visit superai.com to register and join me with 20 % off tickets with a code REALVISION. Link in the description. Thanks. I'm sure there's a million books on this. Like the amount of people that have been embroiled in that drama over the years, by the way, is just incredible.

22:33Like it's such a saga. There's a good book about Viacom, Paramount, CBS that was written by the New York Times reporter, James Stewart. And I forgot what it was. I think Les Mubez was like at war with her forever, right? I think that's the point. Well, I mean, he's a whole nother thing. Or the kettle of fish. I just want to mention why I'm talking about - His son used to go to school with my daughter. Oh, really? And he used to tell my daughter, if you want more, ask less. That was the whole thing. know. So I love that one. Yeah. What a gem. He was on the love boat too. He was an actor before he was a studio executive.

23:14He was on the love boat. I did not know that. Yeah. Yeah. You youngsters out there may not know what the love boat was, but hopefully, hopefully TikTok has drug it up out of the depths. It's probably on some sort of compilation as is everything on TikTok. By the way, I just want to point out for those of you follow Scott Galloway, Paramount, I'm not, I'm not saying like I don't even know. I can't remember. But media mergers on his radar for 2024 as well. And Paramount was one of the names he talked about. I don't know what his thought was about it. So I'm not saying that he is bullish Paramount.

23:48I'm just saying that he sees Paramount involved in some of the merger activity that's going to happen in media, too. So you're right on. Yeah. Look, the problem is they could it could be, you know, they merge with Warner Brothers Discovery and it's a one plus one equals one. But I do think that they're going to have to sell assets. And if they sell assets, that will increase the share price. So that might be the way it goes. Look, you have Larry Ellison's son, David Ellison, who's a media, a film executive that wants the studio. We'll see what happens there. You know, you remember Warren Buffett is the largest shareholder of Paramount.

24:27Excuse me, I'm dying here. So that's something to watch. metaphorically, physically, we all feel exactly that way, Tom. It's like the longest year, the longest week. We have some questions coming in and they're really good ones. But before we get to them, I just want to take a moment and thank and acknowledge the amazing community we have. This audience is so smart, so engaged, so generous about sharing knowledge with each other. I'm looking at the chat now. In addition to the really smart questions, there are people who are swapping all kinds of information about things that happened in the market today and some of the background on what Tom's talking about, which is just amazing.

25:05I mean, Raul talks all the time about the power of the network. And a great example of that is Christopher, who's just talking about options expirations from two o 'clock today. He's in the chat daily dropping this kind of stuff. He's a very experienced trader. We had him do an academy session a few months back. Some of you may have seen it. And it was so good that Roger wanted him to sit back down and have a one on one with him. We want to play you a little snippet of that conversation. When I first arrived on Wall Street, I started trading options, over-the-counter options with a firm called Ragnar.

25:38And Ragnar was Spirandio's firm. He'd gone from being the king of the order clerks to having his own little firm. And there they would rip your eyeballs out going in and going out. I I mean, it was an over-the-counter market. It was just dreadful. But so I was trading options long before the Chicago board existed. And then the futures finally got listed in 1982. And since I was kind of known as the futures guy, the head of our firm then, Ace Greenberg, was very friendly with Leo Melamed. And Leo Melamed was the head of the Mercantile Exchange. And he was basically the father of modern futures, both currency futures and index futures.

26:22And so he said, you guys should do the first trade. I mean, it's so amazing. It's just a tiny little snippet of his incredible story. I love the rip your eyeballs out. That's certainly what it probably is exactly like. But there's so much wisdom gained for the decades of experience and having a front road to those kind of market evolutions, the creation of new products. Thank you, Christopher, for sharing it with us every day. You can see that whole interview on our platform. Just go to realvision.com. If you are not a member, you can go there and sign up. But Tommy, you are a longtime experience trader too.

26:53And I hear it through your voice when you're talking, first of all, so honestly, about being humbled by what happened. But you learn from that, right? You make adjustments. You think about how you're doing that. And you always protect yourself, which is how you live to fight another day, which is why we're having these conversations about what you're focused on next. Yeah. Yeah, I mean, listen, I had a fantastic year last year. The year before was great. This year has been, you know, I'm going to call it a flat year. You know, that's disappointing because I have very high expectations of myself.

27:24And it's okay. I don't, you know, beat myself up over it too much. But, you know, you move on and there's a new trade ahead of you. And that's kind of how you have to look at it. That's exactly right. And you got to live to be able to put that trade on, which is something we talk about all the time in the academy and how not to blow yourself up. And we're going to focus on that again, January. I don't even know if I'm supposed to say this, but it's education months. We're going to be doing a lot on that. Lena had a question. A lot of people chimed in on what a good question it was. Why did Tom's DeMarc signals work so well in 2022, to your point, with up over 50 % and not necessarily this year?