Bear Traps Report Turning Point Final New II Aug 16 2026 1 .01

01 Global Macro: Old news – backward-looking. CPI

Sunday, and PPI this week reduce the number of rate hikes the market is pricing in for the remainder of 2026. Duration risk globally is HIGH – Iran knows this.

August 16, 2026 Rates/forex: The advance of the far left in the 02 Democratic Party has now pushed AOC to the top of the betting odds and is a medium-term risk to markets. Coupon issuance has not changed since 2023, but T-bill issuance continues to ramp up. Who owns the US debt?

03 With Larry McDonald Credit: Oracle is heading for junk - Hyperscalers’ purchase and lease commitments quantified. & Remember the FCG ETF (natural gas equities, all stocks combined), fits nearly 8x (!!!) into Nvidia’s “The Dr” Robbert van market cap.

Batenburg, CFA 04 Equities: Margin debt as a percentage of S&P market cap, our trade alerts in WDAY. GPU becomes a CME contract, OpenAI complex gaining ground on GOOGL complex, Ackman piles into “NVDA $500B fund (not to be confused with funding) consortium plan credit card companies and other notable 13F will not likely age well. Assets of unknown life as filings. One crowded trade - Druck, Loeb, Tepper, Klarman, Buffett are all adding – Google GOOGL. collateral for long-term debt? Why not do a 30-year ABS deal backed by warehouses of bananas? It’s OK, they’ll be newly engineered bananas of unknown life.” -- Jeff Gundlach 05 Technicals: S&P, FANGs vs Mag 7, CRM, Private Credit, S&P vs Retail, NKE, S&P stocks that broke through 200d MA.

Trade Alert: Buy 1/3 VIXY near $19.

Commodities: Wheat rallies on the closure of the 06 Port of Odesa, FNV, our GDX trades, First Quantum.

07 Energy: WTI, Hormuz crossings, Brent futures vs Brent curve, our SLB trades.

How can one ever forget? On the trading floor at Lehman Brothers in the summer of 2007, the VIX was grinding lower, sitting between 13 and 14 in June and July. Traders were relentlessly selling volatility, and complacency was off the charts. That “calm before the storm” feeling was everywhere. We were on the deck of the Titanic, heading toward the biggest credit-risk iceberg that had ever been witnessed, and everyone was still dancing. NO ONE cared.

Fast forward to today, and we have a similar setup. Equity volatility has come way down, but the warning signs are flashing. SPY volume, the near-$1T-sized S&P 500 ETF, just hit its lowest level since February 2025, right before that 20% drawdown. Triple-Cs, the junk of the junk in high yield, keep making new wides (higher yields, lower prices).

In our view, economic activity and S&P 500 earnings have peaked. The risk-reward here is extremely poor. At the end of the day, when the set-up is this complacent, you don’t want to put money to work.

Picture a pendulum swinging all the WAY up to the right. At that jaw-dropping moment when it starts to go the other way, with the HIGHEST conviction we believe that’s where we are. Again, economic activity and S&P 500 earnings have peaked, and the pendulum is at the genesis of its descent. Political risk looking forward is NOT appreciated. The left is on the RISE across the USA.

Above all, the biggest encroaching risk to equities is that we’ve had economic data that should have been extremely bullish for bonds. Over the last 15 days, retail sales have missed, we've gotten an ugly jobs number, and inflation has come in calm again. But above all, duration —especially global long-term bonds and the U.S. 30-year—can barely rally. That tells us something very big and very dark is under the surface. Before the great fiscal overdosing, back in 2019, those three events would have sent the long bond rallying 30–50 bps, LOWER yields / much HIGHER bond prices.

Instead, today global bond yields in France, the UK, Japan, and the United States are all breaking out. For U.S. equities, what makes the risk-reward so poor here is not just complacency; it’s interest-rate risk. If we have one more problem out of the Middle East, a strait closed for another 20 days—global bond yields will break out hard, and that is really bearish for risk assets.