Dead Cat Bounce or Higher? – by Arbitrage Andy

Nice to see a bit of a bounce in. markets — today we will walk through some of the reasons why I think this could be more than a dead cat bounce and cover some of the major happenings around the world before the weekend.

If you missed the piece covering some of the causes of the sell off we saw last week and earlier this week you can read it below along with yesterday’s covering the troubling trend of government overreach we have seen in both the UK and the US over the last several years.

Despite the bounce we saw the last 48 hours the S7P is on pace for the 4th consecutive week of losses (RealFly). Our SWBI 0.00%↑ play is still in the money despite dropping during the sell off.

Crypto had the largest surge with Bitcoin and Ethereum recovering nicely from the god dump that occurred earlier this week. Bitcoin is trading over $60,000 and Ethereum chilling just over $2,600.

Certain meme coins like $PEPE have shown some impressive strength bouncing quite hard off the local lows. Keep an eye on these — as they are showing resilience and will run hard once the majors begin to creep back to ATHs.

The Yen Carry Trade fear has cooled to some extent but it’s worth mentioning some facts brought to us by The Kobeissi Letter this week on X, according to Deutsche Bank, the Yen carry trade amounts to a whopping $20 trillion, or 505% of Japanese GDP based on Japan’s government balance sheet assets and liabilities mix. Other estimates that use Japanese banks’ foreign lending data from the Bank of International Settlements show that it is ~$1 trillion.

Regardless — markets recovered in Japan on Tuesday bringing global indices higher and allowing crypto to bounce. The Fed has dismissed any rumors of an “emergency” rate cut — and now we look to the upcoming weeks for a continuation of the pumps we’ve become accustomed to over the last several years.

• BlackRock (IBIT) Daily BTC Flows were +164.5m yesterday: (Bloomberg)

• France is heading to one of the worst wheat harvests in 40 years

• Cisco is said to be planning to lay off thousands of employees in second massive job cut this year (Macroedge)

• Russian economic growth dips to 4 percent in second quarter (InsiderPaper)

• Chrysler-parent Stellantis is laying off 2,450 factory workers from its Warren Truck assembly plant outside of Detroit (Macroedge)

I am consciously looking for a spot to get back into PLTR 0.00%↑ and a range to up my exposure to POWW 0.00%↑ ahead of the Fall.

Outside some VOO 0.00%↑ buys — sitting on my hands for equities for the time being.

If you read our paid post: Surviving the Global Mega Sell Off you know what my thoughts are on the recent dip in crypto. My main take away was for you to do one thing: survive.

A big dip was expected — there was no way we were going to simply

Too often new entrants in crypto make one of the following mistakes:

Crypto is a long game if you want to make it. It is a highly volatile asset class and one that is now subject to bigger swings due to the involvement of major financial institutions. You cannot expect us to go up only in a straight line, particularly right after big players are getting involved in ETH and BTC. There will be more shake outs, there will be more FUD.

The number one method to outperform over the long term in crypto is DCAing into majors (BTC/ETH). Once you have a good chunk of exposure to BTC and ETH THEN you can begin to add higher risk alts and memes as a way to capture some of the upside during bull pumps. How you invest is your business — this is merely my opinion, but over 7 years I have managed to outperform by following these simple rules. The best is ahead of us.

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Institutions are buying.

Whales are adding.

While we may have some volatility due to politics my conviction has never been stronger.

Also a side note — make sure that your assets are in cold storage or on an exchange you trust (although even this can be sketchy as we’ve already seen). 11 Israelis were robbed recently in Costa Rica. They had their security guard overpowered and then the assailants robbed them of over $700,000 in Bitcoin.

The current macro environment is not one in which you want to openly flaunt wealth — whether that’s wearing your Patek Phillipe in Manhattan or boasting to locals in Aruba about how much crypto you own. People are becoming more bold and desperate in the current macro environment.

Lay low and stack kings.

Bigger crypto post next week.

As the US Presidential election race continues Kamala Harris’ VP pick Tim Walz is coming under increasing scrutiny for stolen value claims among other things. Several outlets including CNN have criticized Walz on several of his claims and actions including claiming he carried a weapon in a combat zone.

Kamala and Trump are set to debate on September 10th as she is receiving more and more heat for not taking a full interview since announcing her bid for the Whitehouse.

• Former President Trump’s favorability and approval ratings are approaching their highest mark on record, according to CPR and FiveThirtyEight (LeadingReport)

• A Voepass airlines passenger plane fell out of the sky in Brazil — the plane was carrying 62 people thought to all be deceased

• President Maduro suspended the X social network in Venezuela for 10 days after a heated exchange with Elon Musk (AP)

• Tim Walz Reportedly Imposed a 95 Percent Tax on Zyns in Minnesota — this guy is sick!

• A court upheld the Maryland AR-15 Banfinding ARs to be ‘Highly Unusual in Society’

• The legal age for marriage in Iraq will be lowered from 15 to 9.

• Virginia Gov. Glenn Youngkin issued an executive order to require all votes for the upcoming November election to be cast with a paper ballot.

• The President of election systems company Smartmatic was indicted on $1 million dollar bribery, and money laundering charges but don’t worry our elections are secure

The US election race is commanding most attention right now along with the unrest in the United Kingdom where we are seeing some Orwellian measures employed by the government including arresting people for tweets and sawing down residential doors to apprehend troublemakers.

Predictably the entire media narrative is that the “far right” is the problem.

This morning one of the police departments posted a photo of one of their vehicles saying someone had spit on it — there response was as follows:

Thanks to the lovely individual who decided to spit phlegm all over one of our unattended cars while we were conducting enquiries in the @PoliceStafford

area. We hope you have a great day whoever you are! Unfortunately for that person is was captured on CCTV #seeyousoon

Is this even real life? Don’t you idiots have extremists and stabbings to go investigate? Is a 15 year old running this twitter account? Sheesh. The UK Police website is now actively IP blocking anyone who’s not in the United Kingdom due to people flooding their hotlines with hilarious trolls.

UK law enforcement is now warning “keyboard warriors” abroad: “There are numerous terrorist offenses regarding the publication of material.” Not only are they going after their own citizens but they are also attempting to charge international citizens who don’t live in the UK.

It even gets better — Police Commissioner Mark Rowley threatened to EXTRADITE and imprison American citizens and public figures over online posts!!!!!!!!

LMAO.

Across the English Channel tensions are mounting as the Olympics conclude in France. A 17-year-old and a 19-year-old were arrested for planning a terror attack inspired by ISIS at one of Taylor Swift’s concerts in Austria this week. A third suspect, aged 18, was arrested two nights later. The suspects intended to drive a car loaded with explosives into the Eras Tour crowd to cause mass casualties. Had this played out — it would’ve been horrific.

In the Russia Ukraine conflict it would appear as if we have entered a new higher risk phase of the war — the recent Ukrainian offensive in to the Kursk region of Russia — marks the largest push into Russian territory since the conflict in Ukraine began.

During World War II the Battle of Kursk is particularly famous for the largest tank battle in history, the Battle of Prokhorovka, which was part of the overall Kursk campaign. Thousands of tanks clashed in this single engagement, with heavy losses on both sides.

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Now the legendary battle ground sees a new conflict, one that is causing a good deal of panic within Russia.

Ukrainian forces, consisting of both regular and special operations units, are advancing deeper into Russia’s Kursk region in a cross-border incursion that caught even American officials off guard, according to multiple US and Ukrainian sources reported by CNN. This operation differs from previous Ukrainian actions inside Russia, which typically involved covert units and local collaborators.

Let me be blunt — this opens up a whole new host of escalation possibilities in this conflict given Putin has Ukrainians in his own backyard. It’s a bit unsettling — and you can expect a severe reprisal from the Russians in the coming days and weeks.

kyiv is pressing the US to support the move to use ATACMS long-range missiles to strike deeper into Russia. Zelensky has emphasized the need for Russia to “feel the pain” of the war and it’s obvious that this brings a new element to the conflict. The Ukrainians have definitely dealt some serious damage so far striking various Russian convoys in the area and taking dozens of Russian troops prisoners who may have been surprised by the attack.

What’s the end goal?

Im not sure — nobody in recent history has ever been able to successfully conquer and occupy Russia — Ukraine is no exception, they have neither the manpower nor the infrastructure to continue to gain Russian territory.

The Ukrainians needed a distraction and curve ball to get themselves off their heels in the Donbass region but this is alarmingly bold. Seems like suicide to me — Americans and Europeans should be more concerned about the retaliation potential from the Kremlin. This is very much a new element in this conflict and I don’t see it ending well.

Quick recap today — make sure to check out our chat room on Substack. We will be back next week to cover my alt coin picks in crypto and provide a geopolitical deep dive focusing on the conflicts we are seeing across the world.

Have a great weekend!

Andy

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Disclaimer – I am a former trader, enterprise sales rep, and current entrepreneur. Nothing I say should be considered formal financial advice – always do your own research and diligence before investing and ensure you have a good understanding of your personal risk tolerance.