We’re Gonna Need a Miracle to Get a Thanksgiving Collapse

I am sorry to report to you lads, it doesn’t look promising for a Thanksgiving market crash. The Turkey Gods are working overtime, zealously pouring copious amounts of gravy into the mouths of Wall Street. While we all hope and wish for a market dislocation, sending rookies and faggots to the cleaners for good, it’s very likely that stocks will continue to jog on thru the holiday’s.

I’ve made arrangements for myself, as some of you know — long a sundry of well meaning and performing stocks. It’s worth mentioning, my directional bets against oil are doing swell. One could always hope for catastrophe, even when the sun is shining bright and safe.

My Quant trades pushed ahead by 0.34% today, double the gains of the SPY. I think I’ve demonstrated, in real time, that my methodology is superior to passive investing and I will up there ante of this in 2018, converting the weekly changes to quarterly, geared towards my money management business. At some point, Exodus might be taken under lock and key, private for advisory purposes only.

So enjoy it today — because you are not promised tomorrow.

In summary, Exodus flagged oversold on SPY last week, and implied that the rally might taper off by Wednesday of this week. Let’s see how all of that plays out, shall we?

Look how stupid you all are, betting against the FIZZ.

Stupid dog, everyone loves flavored seltzer water.

Moving on, my VUZI, DRIP, LABD, HMNY and UCTT are all doing just fine, while UVXY, naturally sinks to the bottom of the ocean. I’m also a yuge fan of RUSS, betting against Russian not once, or twice, but three times. I realize this is turkey week and national festival is just around the corner. But stocks are weak — you just can’t see it yet on the surface because you’re fixated on the pageantry. Once the glitz and glamour dissipates, we’ll get the broken elevator pin action I’ve been clamoring for.

Meanwhile, top pick $DRIP.

Literally any time, lads.

Art’s commentary was on Friday before the market opened — but still relevant today. The gist of his dire warnings had to do with market breadth, the astonishing fact that 30% of stocks in the SPY are down for the year, and the retardation of government not being able to do dick.

“We’ve been setting record new highs, and often the breadth has been negative. We’ve had more declines than advances,” Cashin said Thursday on CNBC’s “Futures Now.”

“We’re starting to get more new lows than new highs; 30 percent of the stocks in the S&P [500] are down for the year. Those are very unusual combinations with new record highs.”

“I’m troubled by the market internals, and I’m very cautious about what is going in Washington,” he added.

“It’s not expected, but it would be very negative,” he said.

Even though he thinks a sell-off may be coming, Cashin isn’t sure how deep it will be.

“We haven’t had a drop of 3 to 5 percent in an abnormally long period. So, that would be my first target,” said Cashin, who points out he’s never seen an environment quite like this one. “You want to play it cautiously.”

Bitcoin finally eclipsed 8,000, after weeks of being a piker. Remember like a week or so ago when it dove under 6,000 and everyone was crying in the streets, hoping to be bailed out by the crypto-gods? Thank goodness those stark days are over and new highs are being enjoyed — up 60% or so since then. On an annual basis, BTC is merely up 10x, a rounding error for those interested in largess.

Moving onto the pedestrian field of play, equity markets, Nasdaq futures are off by 4 and Europe is slightly higher. It’s all very nice and good.

In other news is real news, of which I will communicate to you now. BEHOLD.

Jack In The Box downgraded to Neutral from Outperform at Wedbush
Cavium Networks confirms deal to be acquired by Marvell (MRVL) for roughly $80/share in cash & stock, or approximately $6 bln
Vale S.A. upgraded to Outperform at RBC Capital Mkts; tgt raised to $14.50
Broadcom: AVGO announces Brocade deal close; expect financial outlook on 12/6 AMC results call – BRiley-FBR
Wal-Mart downgraded to Neutral from Buy at Goldman
Delphi Automotive upgraded to Buy from Neutral at BofA/Merrill
DBV Technologies reports Topline Safety Results from REALISE Phase III Trial of Viaskin Peanut
National Beverage upgraded to Positive from Neutral at Susquehanna

I don’t know what I’m all excited about — but down futures warms my heart like a recently microwaved blanket. Nasdaq futures are down 11 and Dow -40. What the fuck are you retards doing these days? Why haven’t any of you compared your awesome investment skills to mine or asked why I’m so proud about having HMNY on my books, down $4 from my basis?

What about FIZZ? What of the FIZZ? Isn’t it overvalued? Am I out of my fucking gourd being long DRIP and RUSS? After all, the Russians make good stuff — you know that.

How about my dearly and beloved Exodus that I shill here all the time? Isn’t that fancy pants software nothing more than a glorified Finviz, or what some might call Finviz with a god damned heart, soul and brain?

I’ll be adding some new tools to Exodus soon, so most of you lazy ham and eggers could ignore them and simply glean stock picks off the Pelican Room stream.

How do you live with yourselves?

The dollar is up 0.5% and I must admit that I am a bit saddened by the lack of alpha in these comments sections. Back in the old days, when I was a softer man, I’d run out and email Jeremy to ban you motherfuckers from the site because you looked at me sideways.

Look, we even went through the trouble of creating an elaborate IP catcher tool that would redirect you from the site onto a Greg Solomon video of my choosing.

Check it out. I promise you will laugh.

Fun fact: that video used to trigger the fuck out of Chart Addict, who hated Mr. Solomon for reasons a rational man could not explain.

At any rate, I’m a tad hungry now and need to be jogging on, toiling through the night on developing investment strategies, whilst FEEDING myself foods of the highest order.

Good night and fuck off.

I’ve been excited like a little schoolboy the past weekend about getting back into money management. After two years of respite that afforded me with time to unwind, write books, shit post on the internet all day long, I’m finally ready to re-enter the field and shit on all of you inferior advisors like an elephant in the jungle, after eating a fuckload of grass.

Doing my work this evening, I noticed there is a blowout underway in the Brent-WTI spreads — widening to more than $6.

Listen to me, this is pure profit for some refiners out there and I know just the one’s who stand to profit the most. Back in the old days, Le Fly was an avid buyer of refiners, to the point of obsession. I’ve always found that when I obsess over something it allows me to become an authority on the subject. Over the years, I’ve obsessed over plenty of things, many of which you fucktard readers have bore witness to. As sure as I am sitting here now, the refiners will bust the fuck loose tomorrow.

Here is the field from which we will play from.

Aside from that, futures are lower — expect to lose money in your idiot stocks.

Out of all of Trump’s crazy as shit tweets, this one takes the cake.

Here’s the President of the United States tweeting that he should’ve LEFT THOSE PLAYERS IN JAIL because one of their bonehead dad’s were talking smack. Imagine coming home from school and seeing the President tweeting this about you, because your alcoholic father made a negative remark about the President.

Now that the three basketball players are out of China and saved from years in jail, LaVar Ball, the father of LiAngelo, is unaccepting of what I did for his son and that shoplifting is no big deal. I should have left them in jail!

— Donald J. Trump (@realDonaldTrump) November 19, 2017

NOT NICE!

Late at night I like to run investment models, discerning Sharpe ratios — trying to find the best model to use for my longer term investments. Many lazy ham and eggers will simply say ‘just buy the QQQ’ and forget about it. But the problem with the Nasdaq is in its weighting. About 7 stocks make up more than 40% of the whole index. Even though they’re all mega cap stars, I’d hardly call that a diversified approach to portfolio management, especially when considering that all of them are in the tech sector.

What we want to find are high quality returns, not just throwing crap at the wall, hoping HMNY will shoot to the moon. As an advisor, ZERO smart money will invest with you with that harebrained philosophy. It’s imperative that you learn excel and get your sharpe ratio game going strong, or find some other methods to communicate that your model is, in fact, quality.

Let’s examine what the market has done over the past year.

According to Exodus,  the median return for all stocks (3,997),was 11.5%. This is the true health of the entire market. But no one invests in all stocks, instead favoring a more rational approach through ETFs.

1yr returns

SPY: 19.8%
IWM (small cap): 14.9%
DIA (Dow 30): 25.5%
QQQ (Nasdaq): 32.2% 6mo: 12.5%, 3mo: 9%, 1mo: 3.45%

Again, while the QQQ returns are impressive, they are wrought with risk. All you have to do is go back in time and bear witness to what that God forsaken index did to investors in previous markets squalls. In the 30 months following the March 2000 top, the Nasdaq slid by 78%. I rest my case.

I’ve been experimenting with ways to chase alpha (high returns) while reducing my non-systematic risk. By non-systematic, I mean individual stock risk. I can do this by diversifying amongst sectors and different stocks.

Part of the problem with analyzing returns by market cap only is that you’ll grab the same top stocks that are outperforming in the Nasdaq. You’ll find yourself with a bunch of tech stocks, running hard in a car made of dynamite heading for the sun. Through countless hours of experimentation, I’ve found the perfect combination of fundamentals that produced the best returns, using qt rev, earnings growth, gross margins, free cash flow, price to sales and PE.

On a weekly basis, I reshuffle my personal portfolio using this approach. I call it Exodus Quant. The reason why I’ve been turning over so quickly is to find the model that works best. Since it’s my own money, turnover isn’t my prime concern. But for you, the navy suit wearing monkey in a necktie, you can’t go around switching client portfolios every week. I think a reasonable time frame to reevaluate is on a quarterly basis.

Here are the returns using my ‘perfect fundamental’ criteria across market caps.

Over 50b
1 mo: 2.78%
3 mo: 11.7%
6 mo: 21.3%
1 yr: 36.4%

10-50b
1mo: 0.57%
3mo: 7.71%
6mo: 12.97%
1 yr: 28.5%

5-10b
1 mo: 2.9%
3 mo: 11.1%
6 mo: 20.9%
1 yr: 45.6%

1-5b
1 mo: 1.57%
3 mo: 12.06%
6 mo: 22.09%
1 yr: 32.31%

Under 1b
1 mo: -2.24%
3 mo: 0.45%
6 mo: 0.22%
1 yr: 7.2%

I bet you didn’t expect the top returns to be found in the ambiguous $5-10b market cap quintile, did you? It’s worth noting, my strict criteria annihilated most micro caps, which is why the returns under $1b are so poor. If you stripped away my free cash flow criteria, 1 yr returns shot up to 17.6%.

Let me remind you, those returns are the entire basket, not a truly diversified approach across different sectors. There are 8 principle sectors: Basic Materials, Consumer Goods, Financials, Healthcare, Industrial Goods, Services, Technology and Utilities. My approach is to buy 2 of each, providing they fit the criteria. If, for example, I did a quarterly review and found that stocks in the $5-10b quintile was where I wanted to allocate assets, but zero utility stocks fit the criteria, I’d simply leave it out. Reason being: I am not going to sacrifice my core beliefs just for the sake of diversification. While it might increase the Sharpe ratio of my portfolio, it would most likely reduce the overall quality and returns. If you adhere to these basis principles, you would’ve avoided the oil and gas and retail rout over the past 2 years. Those sectors do not show up in my screens because their fundamentals aren’t good enough. While technical analysis can help find good investments over the short term, over the long term, fundamentals is the only thing that matters.

Let’s have a look at what a $5-10b portfolio would look like, using this approach.

1 yr median returns of 56.5%

Now the actual screen produced a lot more stocks — but I would only accept the top two of each sector — ranked by our Hybrid score (a combo of technical and fundamental factors).

Here are the returns for the above portfolio over different time frames.

1mo: 7.4%
3mo: 15.8%
6mo: 21.1%

Going forward, it would be important to analyze the quality of the returns on a quarterly basis, using said criteria, and adjusting the portfolio accordingly.

I think I speak for everyone in the comments section and America when I say ‘please, Mother Market, crash this fucking bastard through the floorboards.’ Although I voted for Trump, mostly for the laughs, it’s ILLEGAL and against the superstitions that built Wall Street to brag about market returns, claiming they are a result of you. What I mean by that, plainly, is that Trump has done literally nothing to help markets. They just go up freely because that’s what they like to do.

Since 2009, under the evil Obama, stocks have catapulted higher, bringing forth a perverted version of finance — one that is recalcitrant in the idea that pullbacks are unacceptable and that all should partake in this great splendor that is modern day finance. It is a fucking abomination and should be stricken from the earth, cast down into the vulgarities of hell.

We want stocks lower — because we love America. We love America, because we hate everyone else. We hate everyone else, because we’re smart and it’s hard not to. Being happy and dumb are two of the most wonderful gifts a person could have — living out rote lives as a public servant or lawyer. To have self-awareness and a high degree of intelligence is a god damned curse. Sometimes I wish I could lower my IQ and stop the madness. I was much happier when I didn’t know — but you can’t unlearn certain indelible truths, can you?

So, we toil on against the current, hoping for our boats to crash against a wave that sinks us for good. It will be my honor to preside over this great masterful vessel as it descends into the dark abyss, joining the Octopi in a ceaseless peace.

I got to make this quick, as I am on the run — fam related.

For the week, Exodus Quant netted 0.02% — which is a nothing-burger — but still better than the -0.10% for the SPY. Chalk up another week of outperformance. Small caps broke higher this week, which means I reallocated to smaller caps. Also, I went long TLT and GLD at 5% each. This is my risk aversion hedge that only triggers when it is alpha.

On the discretionary side, oil is higher, ergo, my oil shorts in DRIP and RUSS are lower. I am not in the least bit concerned and have no interest in selling before mid next week. It’s worth noting, DRIP was higher by 6.1% for the week and is still conformably above my basis.

As for UVXY, it’s a god damned rounding error, 3% here, 9% there. The ETF is lower by only 3% for the week. One does not go long triple upside VIX and expect to see calm returns. The point of UVXY is for surprise rape — which hasn’t happened.

HMNY and FIZZ continue to show signs of life and LABD wants to break out — because biotech is old and fat — just like your Dad.

My BAC short will work, only if yield curves continue to flatted, and VERI is a fucking lunatic — but I am willing to be a little patient with it.

Ciao