Concentration Risk: Top Stocks Dominate the S&P

Thomas Thornton, founder and president of Hedge Fund Telemetry, returns to The Julia La Roche Show to discuss extreme market conditions with investors "all in, levered, and complacent." He argues we're at a blow-off top characterized by record call buying, leverage through ETFs, and a gambling mentality fueled by 0DTE options and sports betting culture.

Thornton highlights dangerous market mechanics: the Goldman Sachs most shorted basket is up 38% year-to-date, meaning short sellers have been squeezed out and won't provide natural buying support during corrections. He notes extreme concentration risk with 10 stocks comprising 40% of the S&P 500, and Nvidia alone responsible for 18% of market gains. Technical indicators show exhaustion signals while the market continues higher on narrowing breadth. Thornton identifies AI trade risks including slowing CapEx growth, insufficient power infrastructure, and water constraints for data centers. He rebuts bull arguments by comparing current conditions unfavorably to 2000, noting $38 trillion in debt versus $4 trillion then. He explains why the Fed can't save markets this time due to Treasury market dysfunction. Currently positioned net short with disciplined risk management, Thornton predicts people will look back on 2025 and say "the signs were so obvious." He advises investors to lower exposures and leverage, warning that opportunities will come when his indicators reach oversold levels and nobody wants to buy.

This episode is brought to you by Monetary Metals. https://monetary-metals.com/julia

Links:

https://www.hedgefundtelemetry.com/

https://www.x.com/tommythornton

Timestamps:

0:00 - Introduction and welcome

1:02 - "People are all in, levered, and complacent" - Market positioning

3:43 - Gambling mentality and comparison to past market cycles

5:20 - How leverage and zero DTE options change market dynamics

7:39 - "Market correction or something worse" - What's ahead

7:52 - "I definitely think we're at a blow off top"

9:20 - Goldman Sachs most shorted basket and dangerous market mechanics

11:51 - Passive ETFs and leverage risk

12:46 - Market sentiment analysis with charts

14:13 - CNN Fear & Greed Index critique

15:30 - DeMark indicators flashing exhaustion signals

18:22 - Goldman Sachs most shorted basket technical breakdown

19:01 - Concentration risk: 10 stocks = 40% of S&P 500

21:28 - Call buying extremes and put/call ratios

23:23 - AI trade risks and CapEx spending concerns

25:42 - Energy and water constraints for AI data centers

30:28 - Market narrowing despite new highs

32:40 - Bull case rebuttal: Why this is different from 2000

34:48 - Why the Fed can't save the market this time

36:22 - Net short positioning and risk management strategy

39:44 - "The signs were so obvious" - How we'll remember 2025

41:35 - Long idea: Golar natural gas infrastructure play

44:28 - Hedge Fund Telemetry overview and parting advice