Who's Optimistic?

1.) SIGNS – We’re always looking for signs that danger might be approaching. This is still early, but Google (Alphabet – GOOGL) just announced that they will seek to raise $80 billion in equity capital for AI spending. What does it say about the market in general if a $4.5+ trillion company needs to issue equity like some small-cap company starving for capital? GOOGL just reported $109.9 billion in revenue for the most recent QUARTER! And they feel the need to dilute current shareholders for more capital for AI spending? I’m not yet sure that this amounts to anything… it may not. But these sorts of headlines do make me wonder. We’ll see, but for now, we do know one positive aspect: AI usage has increased total employment rather than decreased it.

2.) OPTIMISM – We know that most people feel pretty pessimistic right now based on various surveys I’ve shared over the past several weeks. The Iran war isn’t helping that as it is estimated that it has now cost $750 per household. Markets don’t march to the beat of geopolitics…they move based on flows, and big managers control those flows. So what do some of the world’s more powerful money managers think? Well, they're optimistic! Their optimism appears undented. Perhaps more surprisingly, they increasingly believe that multiples will expand, even though many measures are historically high. This speaks to the “Flows” that are so important for global markets.

3.) VIX – Here’s that little “pop” I spoke of. Volatility of Volatility (VVIX) was up 5.54 points to 91.60 yesterday. It’s approaching lower high territory, so I would not expect this move in VIX to last too long or get out of control without some unknown unknown hitting the wires. VIX 18 is still possible, but becoming less probable.