ANDIKA BULLETin 19 JUN 2024

Okey Dokey - Back on deck after a few days off and I see the Nvidia and other handful of stocks insanity hasn't stopped.

In an attempt to not bury the lead, NVDA continued its irrepressible charge higher (up $375 BN in the last week, up $1.44 TN in the last two months, and up $2.2 TN YTD)...

...topping MSFT and AAPL as the world's largest market cap company... ever!

Nvidia (NVDA) accounts for 34% of the 14% SPX year-to-date gain, and five stocks of the Mag 7 have accounted for 60% of the S&P 500 total YTD return; MSFT, NVDA, GOOGL, AMZN, and META have collectively surged by 45% and now comprise 25% of the S&P 500 equity cap.

A key reason for this unprecedented outperformance is that these five companies posted Q1 EPS growth of 84% YoY vs 5% for the typical S&P 500 stock. Furthermore, strong results for the past four quarters have prompted analysts to raise their 2024 EPS forecasts by 38% for these five Tech stocks. In contrast, the profit forecast for the other 495 stocks in the index have been reduced by 5%.

That said, while consensus 2024 forecasts imply a 31% gap between EPS growth for these five stocks and the median S&P 500 firm (37% vs. 6%) the gap is expected to narrow to 8% in 2025 and only 4% in 2026.

Meanwhile, the CBO or  Congressional Budget Office, reported that in May, the US government collected $323.6 billion in tax receipts, it spent more than double that, or some $670 billion.

Resulting in a May budget deficit of $347 billion - about $100 billion more than consensus expected - and the second biggest May deficit on record, with only the Covid crisis peak of May 2020 higher.

As a result of the blowout May deficit, the cumulative fiscal 2024 shortfall once again surpassed the 2023 total, bringing the YTD deficit total to just over $1.2 trillion more than the $1.16 trillion cumulative deficit througth May 2023, and that's with 4 more months left in the fiscal year.

And just moments ago - and, again, with just 4 months left in fiscal 2024 - the CBO took machete to its 2024 forecast, and in hopes to avoid looking like a consummate fool, hiked its 2024 budget deficit forecast from $1.5 trillion to $1.9 trillion, confirming that there will be effectively no difference in the fiscal picture between 2023 and 2024.

The US, IMO, is now well past the Minsky Moment point of no return, and it will all come crashing down once the USD loses its reserve currency status.

Of course, by the time 2034 rolls along, the actual deficit will most likely be at least 10x more, but since gold will be about USD$100,000 by then while bitcoin will be the world's digital reserve currency, none of that will matter.

Of course, all of this is irrelevant, because even the CBO now admits that in the long-term, it's game over as there is no inflection point that makes future deficits grind down to zero, even in the most optimistic scenario.

Finally, remember the dotcom bubble... and CSCO's dominance... well you ain't seen nothing...

...meh, it's probably different this time, right!

This won't end well...

Happy Wednesday!

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