FUTURES COLLAPSE; CRYPTOS BURIED DEAD — HAPPY THANKSGIVING WEEK!

This is sort of an obligatory post and I do not mean to rub salt in the wounds of crypto-FAGS. Look, you had plans to upend the dollar hegemony. You got bold and then permitted the system to trade futures on your little currency. Every since then, it has been straight down the shitter.

Mistake #1 thru 1 billion, never trust the guardians of the dollar with your bullshit computer money. Exactly one year ago, the cryptos were the talk of a generation — now they’re the noose from which many young and aspiring investors took their first major L. I do not find solace in that at all and wish you well throughout your investment career going forward.

Equity futures are sharply lower, after Target reported bad numbers. This is not a situation to be envious of, for equity longs. The market is so tenuous now, we’re literally dependent on retail numbers to set the mood. Yikes.

Nasdaq futures are down 90.

Yesterday HUBS had the second largest single day decline in its short history, running up to Feb of 2016. We’ve entered a paradigm of auto-catalyst where selling begets more selling. Liquidations are happening and it’s prevalent. This is the part of the narrative when valuation starts to mean something.

Where do we find a bottom?

Let’s pick a sector that possesses the spirit of the market and then the stock that could be considered the benchmark. I’m going with SAAS and CRM.

Over the past 13 years, the historical median PS ratio is 7.8x. Back in 2016, CRM traded at 6x. If we were to create a price target funnel of maximum downside to a point where valuation gets attractive, given we’re presently trading at extended levels, we’re looking at $92 to $109 — based upon current sales. Now if that S in the P/S ratio should move lower, then we have to adjust. I’d be a serious buyer inside that funnel, betting Wall Street’s diabolical algorithms are pre-programmed to start buying stocks like CRM at historically attractive valuations.

Data courtesy of Exodus.

I’m never sure if corrections are real or not, while enduring them in real time. Ten out of ten times, they feel like the end of the world. It’s only with the benefit of hindsight that we find out how stupid or smart we were. Luckily for me, I have an archive on iBankCoin. You can dig into my records and bear witness to 100% gains in 2008, 60% gains in 2009 — and an overall market acumen very few have ever been able to communicate to others on a wide and transparent scale.

This is what I’m watching now to assess the risk, to determine if this is a real credit worthy event that will imperil the entire capital structure of the market, or a passing storm. After stocks go down, next is credit. When corporate bonds diverge from sovereign, there is an issue there. When FX markets get disrupted, pay attention — because there is no bigger markets in the world.

We haven’t heard about the Yen carry trade in some time. Should FXY continue to trend higher while corporate bonds and stocks low, you will hear about it all day long, damn it.

High yield bonds are getting killed. Unremarkable, aside from the fact that investment grade bonds are getting killed too, while TLT is going up.

The ultimate currency haven — Swiss Francs. The ECB chimps out when this happens. Watch it.

That’s all for now. Try not to stress out ahead of National Festival Day. Get small and stay that way until morale improves.

Let’s lay our cards on the table and do a proper workflow of what this market is predicated on.

Great economic growth, tech, innovation, lower taxes, free cash flow, momentum.

All of the above is at risk, all of a sudden. The auto-catalyst of the negative feedback loop is real. Trump’s lies about working on a China deal in flaccid attempts to buoy stocks have hurt sentiment more than people realize. Those short term rallies have all been negated and now we’re in a position where retail sales, of all things, can further push us down the train tracks in front of speeding trains.

The SAAS sector is most important when analyzing risk and growth. Those stocks were staggered by 10% today. HUBS is your main tell.

In private markets, VC funds regularly fund companies at 30x. That’s an issue now.

Semis are part and parcel of any tech rally. NVDA is your tell.

The FAANG stocks are in a bear market.

Those are facts. If you’re betting on a bounce of that this sell off is temporary, you’re simply guessing. We will reassess the market and try to play the upside when stocks trade up. Playing mean reversion during a brutal tape like this is extremely hard and low probability.

My core thesis for the moment is for lower rates. Hence, I am 10% long TMF and the rest cash. I’d love to play the upside, but nothing in this immediate tape has proven to be constructive. You might disagree. If you’re unable to see in more than 1 dimension and only possess the cognitive ability to act upon first order thinking, this post will be frowned upon. But for those open minded and able to implement lattice structured decisions, BEHOLD THE FOLLOWING CHART.

SAAS stocks are down 9% today. That’s not a misprint. NINE FUCKING PERCENT.

The pivotal name in this group is HUBS — down nearly $20 for the session.

Over in the leadership stocks, FAANG, $FB is lower by 40% from the highs. The entire groups is heading into bear market turn over the past 3 months.

How do we dig out from here?

As I’ve discussed before, bulls have two magic bullets — but Trump needs to deliver.

1. A China trade deal will cause a furious rally.
2. Fed pause in response to market conditions will make Powell Goldman’s bitch. This is a good thing for markets.

Other than that, the trend is lower. The data is good, but deprecating. Watch leadership stocks and sectors for a tell. I’m betting on a Fed pause, which should help start a furious rally in bonds.

US treasuries are attractive here, especially for safe haven status. This could be a point of true breakout or perhaps the top of the channel. Give then low volatility of bonds, I don’t think this is a very risk trade.

Much of my “bearishness” is admittedly emotional — but the data is definitely driving my bias. I am still 100% long in the quant and that is 75% of my money. I only have GLD/TLT in a 10% weighting, as a sort of hedge. If markets ran higher by a thousand tomorrow, I’d be a big winner there and possibly a nothing burger in my trading account.

For my tactical account, I am 85% cash, 10% long TMF and that’s all. I’d prefer to buy into a healthier tape.

Two things to watch that are not being discussed in the FUCKING MEDIA.

A vicious move to the upside in both Swiss Francs and Japanese Yen. The Yen carry-trade comes to mind and the ultimate safe haven of SwissFAGS is very relevant. Those who’ve played bear markets before know those two currencies draw in buyers during periods of duress.

I know that I sold SOXS and I just sold NUGT for a 9% gain. I am 90% cash and not trying to play the downside because of my losses endured today. I lost 4%, even with TMF, NUGT, and SOXS and lost the right to speculate in this high octane market.

Here’s the important aspect of today’s market.

The retest the lowFAGS have won again. We’re retesting and it doesn’t bode well. FAANG is hitting new 52 week lows. For the session, negative breadth is 85%, only succored by strength in old man stocks like Tootsie Roll, Utes, and gold.

We’re at the lows and it looks like another damned head and shoulders. At a minimum, channelFAGS will argue today supports the idea that we’re heading back down again and the Nasdaq should crater soon and very strongly.

LISTEN TO ME: If you’re down big and long, you have to sell here and raise cash. Period, end of story. If you’ve been in cash, this is a good place to gamble on the long side — hoping for a seasonal bounce. Please understand, the circumstances of those two totally different positions are important. Loss management is the most important aspect of money management. Any monkey can make money in a bull market. Preserving capital in order to trade in a better tape, one without wanton rape, is the goal.

Even with my SOXS position, my portfolio took a ~4% drawdown today. Most of my holdings were at or near my stops, so I had no choice but to sell.

The obvious questions now arise.

Are you afraid of missing the rally?

No, because I don’t deserve to enjoy a rally. I bought too early; therefore, I am out.

Why not hold and hope for higher prices?

I am past the point of hoping. My losses, although terrible at 4%, could double if markets really knife lower. The risk reward isn’t there for me right now.

Will you short or buy more gold or bonds?

No. Gold and bonds are barely up and not showing bullish signs. It’s still up, but not enough to warrant more purchases. Too late to short, especially into Thanksgiving.

Plus, let’s not forget, 75% of my money is in a quant fund, which is down — but not nearly as bad as high beta tech. I will reassess the quant fund at the end of November.

Bottom line: Cash is a position and this set up is equal to gambling. I lost the initiative by being so long into this meltdown and have lost the privilege of being able to take a high risk position.

Give me your fucking stocks, I’m throwing them away. Unfortunately, I was out this morning and could not opine on this lovely market. I had a few hedges, one in SOXS because of white candles that never fail. I just sold it for a 5% gain.

Aside from NUGT and TMF — everything is directly in the shitter.

It just so happens, I was 95% long heading into today. I know that sounds wild and crazy, but I had some hedges and I really didn’t think the market would crash. I WAS WRONG. So now my options are simple: sell everything and wait, or wait and risk burning in the fires.

Tech is getting hit the hardest, down more than 5% today.

FAANG itself is lower by more than 4%.

Since I just was able to sit down and asses the situation, I’m gonna have a nice look at things for 30mins over some coffee, chill the fuck out, and then react.

See you in about an hour, or much sooner in Exodus.

I am so god damned busy today I can’t even see straight. Years ago I was so lazy and spent my days in complete leisure, spare time to watch cinema, afternoon faggot sessions of reading books, cavorting online with animals in a fleeting effort to make them better investors. Now that I’m older, grizzled, and wholly odious — bald head, weather beaten face — I am so busy I sometimes prefer to be dead. Don’t worry, I’d never commit suicide — because that’s a waste of a perfectly good death. If I ever wanted to die, I’d do so in a comedic manner, such as hostilely takeover a Chicago drug corner in the manner of an investment banker — producing documents to said kingpins of my intent and the new leasing conditions set forth for their continued pharmaceutical enterprise. Or maybe I’ll venture off to Syria and walk around with an Israeli flag, planting it into the center of holy muslim sites, or vice versa.

There are lots of hysterically heroic ways to die. Maybe I might decide to be a vigilante. Who knows?

At any rate, I realize I am fighting an uphill battle here. With a decade long bull market, many of you have developed bad habits. You’re permanently bullish and therefore stupid. You attribute blind luck to skill and lack discipline and focus. This is where The Capstone Programme comes into play. I will call you up on the god damned phone, or via web based communication service, and force strong and good habits into your investment lives.

The service should be launching by Black Friday and it will be on a first come, first serve basis. Since each session is a personalized mentoring, educational experience, I can only accept so many members per month, maybe 100. If you show up late and lament over missing the opportunity to buy 1 hour’s worth of my time, do not fear — for you’ll be placed on a waiting list and I’ll get around to you. At the moment, Jeff Macke, Ragin Cajun, and RAUL will also be available to help, with Macke specializing in retail (his father invented the modern day Target), Ragin for technicals, and RAUL for futures.

The purpose of the service is as aspirational as it is ambitious: transfer our knowledge and expertise to you in order to hasten your journey into becoming a better investor/trader.

Courtesy of Exodus, here is my current Quant fund — +1.5% over the past two weeks, versus a SPY which is flat. I win again.