Stay Positive, But Keep An Open Mind to Embrace a New Bear Market

Long term, you’ll be dead. In the short term, anything can happen.

I want to show you a random blog I selected from my archives, 1/30/08. The Nasdaq had already dropped by 17% and Cramer was bullish again, as well as most of the people on the site, thinking the market was done going lower. There is a lesson in all of this.

Since When Do You Need Armaggedon to Have a Bear Market?

Seriously, I’m not etching any of my predictions in stone. Should the economic data change, I will adjust my position. However, a certain tv personality is getting on my fucking nerves with grandiose calls of a “market bottom,” just because the Fed is cutting rates.

WTF?

First of all, he needs to quit comparing this environment to 1990. It’s not the same. The losses are much greater.

Secondly, will someone inform him that corporate profits dictate the direction of the market, not the lack of “Armageddon” in our nation’s financial system?

Thanks.

I mean, just because WM and C may stick around for the next 10 years doesn’t mean their stock prices will go up.

More craziness.

Despite the rates cuts, credit is tight. In addition to that, our consumer based economy is tapped the fuck out. Don’t believe me, take a look at the companies who do big business in the U.S. Then, look at their stock prices. Not too pretty, is it?

Suggesting stock prices can keep marching higher, because China and India are growing fast is inane. At some point, the world’s largest economy has to count. Keep on thinking it’s ok to deplete the economy of high paying manufacturing jobs, in exchange for service crap; see where it gets you.

Bottom line: After the 2000 blow-up, it took almost 3 years for the market to bottom, despite Greenspan dropping rates to a shocking 1%. Don’t listen to coked out asshats who declare market bottoms, following two tough weeks of declines. Instead, listen to anonymous bloggers, who claim to have access to time machines, and other types of “space alien magician” technologies.

The way 2008 ended up going on iBankCoin was with massive winship by Le Fly — banking +65% for the year. I had hedged with inverse ETFs, shorted the banks, and had a great and horrible time doing it. It was harrowing and I hated every second of the crisis. There was a disparate feeling of doom around every bend and I always felt the money I was making was for nothing, since it was all going to end with wanton destruction.

The lesson to be learned is this.

Even though we’ve been automatic for 9 years to the upside, keep an open mind to the idea it’s going to end. There are negative headwinds here, ripping thru supply chains and adversely effecting global trade. The one upside is this could be remedied with some diplomacy, so bear that in mind when you’re placing short positions. Until there’s evidence of hard wired bearish trends in the economy, cover shorts and sell those inverse ETFs for profits quickly.

Don’t panic — everything will be fine.

I will be very blunt with you. Get your affairs in order. All that you see in front of you, the pain and the bloodshed, is nothing more than a morsel of a preview of the horror yet to come.

I have zero longs to speak of and now very much SHORT. I just bought some YANG — triple hating on China — because I want something to root for tonight.

The winds of vengeance and misery are sweeping thru Wall — wasting away and cleaning the weak and the greedy. You’ve all been very gluttonous and because of that — you will lose it all.

Find solace in knowing that every penny you lose in your longs, Le Fly gains. I do not require your attention, but demand your bloodshed.

Very soon, markets will disconnect and fuck itself into the sewers. Nothing can stop the selling and I would not be surprised to see it crash thru the fucking floor boards tomorrow and halt.

Limit down, young man, limit down. I shall abscond with all of your money, AND MORE.

Good day.

Top picks: TMF, DRIP, SOXS, YANG.

It’s going to be a VXX Halloween, believe me.

I’ll make this direct and to the point.

I have no idea if the market will bounce. But I will say, the market is trying to communicate something here and this isn’t a garden variety sell off. This price drop is in response to increasing pressures on the market, as foretold by the semis.

The Semis have gone down the most this month in six years.

The TXN and STM warnings are worrisome — because it has everything to do with their supply chains in China.

STMicroelectronics beats by $0.05, reports revs in-line; guides Q4 revs below consensus

Texas Instruments: Street collectively cuts targets following revenue miss, downside guide

Today’s Beige Book is painting an awfully grim tale, one FESTOONED with back breaking inflation by way of FUCKING TARIFFS on China.

Telling anecdotes: Nearly two-thirds of manufacturing contacts in the Cleveland district raised their prices in September and early October. This was the fifth straight report where more than half of manufacturers in the district raised prices.

In Philadelphia, one firm reported “significant pushback” to its announced price hikes from a major retail customer. Other firms in the district reported difficulty meeting the prices of foreign competitors now that tariffs were in place.

Because of worker shortages, one firm in St. Louis had launched a program to teach foreign-born workers English to prepare them for jobs in the medical field.

In Southern California, hotels were passing along higher costs to guests in the form of one-off surcharges.

Source: Marketwatch

Here’s the full run down of the Beige Book.

Overall Economic Activity

• Economic activity expanded across the United States, with the majority of Federal Reserve Districts reporting modest to moderate growth. New York and St. Louis indicated slight growth, overall, while Dallas reported robust growth driven by strong manufacturing, retail, and nonfinancial services activity.
• On balance, manufacturers reported moderate output growth; however, several Districts indicated that firms faced rising materials and shipping costs, uncertainties over the trade environment, and/or difficulties finding qualified workers.
• Demand for transportation services remained strong.
• Labor shortages were broadly noted and were linked to wage increases and/or constrained growth.
• Reports on commercial and residential real estate were mixed, although several Districts saw rising home prices and low levels of inventory.
• Overall, consumer spending increased at a modest pace while consumer price growth ranged from modest to moderate.
• Travel and tourism generally picked up with a notable exception of North and South Carolina, where Hurricane Florence deterred tourism.
• Agricultural conditions were mixed as rainy weather helped some farmers but caused delays and crop damages for others, including the loss of crops and livestock due to Hurricane Florence.

Employment and Wages

• Employment expanded modestly or moderately across most of the nation; San Francisco reported robust growth while three Districts reported little to no change.
• Employers throughout the country continued to report tight labor markets and difficulties finding qualified workers, including highly skilled engineers, finance and sales professionals, construction and manufacturing workers, IT professionals, and truck drivers.
• A couple of Districts reported that worker shortages were restraining growth in some sectors.
• Many firms reported high turnover rates and difficulties retaining employees.
• Some businesses implemented non-wage strategies to recruit and retain workers, such as giving signing bonuses, offering flexible work schedules, and increasing vacation allowances.
• Wage growth was mostly characterized as modest or moderate, though Dallas reported robust growth. Most businesses expected labor demand to increase modestly in the next six months, and looked for modest to moderate wage growth.

Prices

• Prices continued to rise, growing at a modest to moderate pace in all Districts.
• Manufacturers reported raising prices of finished goods out of necessity as costs of raw materials such as metals rose, which they attributed to tariffs.
• Construction contract prices increased to cover rising costs of labor and materials.
• Retailers and wholesalers in some Districts raised selling prices as they continued to see increased costs in transportation and also worried about impending cost increases resulting from tariffs.
• Districts reported rising oil and fuel prices but gave mixed reports on movement of agricultural commodity prices.

Why should you worry?

Motherfucking Smoot Hawley — that’s why.

The Fed is tightening while a trade war continues to gain steam. These taxes are not being absorbed by China — but by America. That’s right, fucked face, this is a new tax on your heads and based on the laws of macro-economics — THIS WILL SLOW THE ECONOMY and maybe even crash it.

Know your history.

The Tariff Act of 1930 (codified at 19 U.S.C. ch. 4), commonly known as the Smoot–Hawley Tariff or Hawley–Smoot Tariff,[1] was an Act implementing protectionist trade policies sponsored by Senator Reed Smoot and Representative Willis C. Hawley and was signed into law on June 17, 1930. The act raised U.S. tariffs on over 20,000 imported goods.[2]

The tariffs (this does not include duty-free imports – see Tariff levels below) under the act were the second-highest in the U.S. in 100 years, exceeded by a small margin by the Tariff of 1828.[3] The Act and following retaliatory tariffs by America’s trading partners were major factors of the reduction of American exports and imports by more than half during the Depression.[4] Although economists disagree by how much, the consensus view among economists and economic historians is that “The passage of the Smoot–Hawley Tariff exacerbated the Great Depression.”[5]

How will it happen?

China cracks from liquidity crisis and the world as we know it sinks into a giant orange void, on its path to war, pestilence, and famine.

I sold out of my last meaningless longs and bought triple upside bonds — TMF.

Current positions of note in my trading account: SOXS, DRIP, ABX, and TMF.

Here’s Jim Cramer, legendary finance guy on the teevee, former hedge fund manager, universally hated by hateful people. In the segment below, which might get pulled by CNBC for copyright, Jim laments the weaker than expected earnings results — highlighting STM Micro and how they’re more important than Boeing.

Other things he said.

— The Fed should pay attention to slowing economy.
— Trump can’t talk market higher anymore.
— Eventually the consumer will absorb the cost of tariffs.
— We’re oversold, but hopes we go lower today to wash out sellers.
— Wished Trump would shut up.

To put some context on Cramer’s desire to shut Trump up, I think he means he wished the President would stop calling out the Fed. Like Trump, Cramer wants the Fed to stop hiking rates and believes Trump calling them out will only make them hike even more, just to show how independently stupid they all are.

It’s all a conspiracy I tell ya, according to Donald Trump. The Fed is out to get him and destroy an otherwise fantastic economy. He’s bringing jobs back like fucking crazy, building walls, showing China who’s boss, and having a nice and easy time making America great.

Meanwhile, the high IQ men at the Fed continue to normalize rates — because the economy is at full employment and growing very fast.

Fed’s Kaplan echoes the opinions of other hawks at the Fed, implying more hikes are coming.

“As we reach our dual-mandate objectives, I believe that the Federal Reserve should be gradually easing off the accelerator — we no longer need to be stimulating the U.S. economy,” he said in an essay. “As such, I believe we should be gradually and patiently moving toward a neutral policy stance.”

The comments come a day after Atlanta Fed President Raphael Bostic said the Fed doesn’t need “to keep our foot on the gas pedal.”

Kaplan backs further rate hikes even though he said he expects economic growth to slow in the years ahead as fiscal stimulus fades. He added that his estimate of the longer-run “neutral” late is somewhat lower than his colleagues’ median estimate, but he said he’s on board for at least the next several rate hikes. Kaplan favors allowing the benchmark funds rate target to rise to as high as 2.75 percent to 3 percent before pausing for evaluation. The current range is 2 percent to 2.75 percent.

“I intend to avoid prejudging what, if any, further actions we should take once we get into the range of our best estimate of a neutral stance. I intend to make that judgment sometime in the spring or summer of 2019 based on the economic outlook at that time,” Kaplan said.

Whether I believe the Fed should hike or not isn’t important. But they are and it has nothing to do with Trump being President. This is what the Fed does — slow shit down when it gets hot and speed shit up when it gets slow. If they didn’t, we wouldn’t feel the need to keep them. It’s very possible they’re creating a crisis by squeezing liquidity, which hurts China more than us. After said crisis is created, the high IQ men at the Fed will be called upon, once again, to save western finance. Then we’ll be proud of them again and write books about them, and hold them up to the sky as saints — for doing the right thing during a time of crisis.

I bought SOXS, DRIP — betting on lower prices in semis and oils.

Here’s some data for your money cup of oatmeal.

Data provided by Exodus.

All stocks -8.5% over the past month.

Losses by market cap.

$100b+: -5.5%
$50-100b: -6.5%
$10-50b: -7.75%
$5-10b: -8.9%
$1-5b: -10.3%
under $1b: -8.9%

Worst Industries:

Truckers: -21%
Small Tools and Accessories: -21%
Semis, Memory Chips: -19%
Farm and Construction: -19%
Home Improvement -18%

Best Industries:

Gold: +7%
Foreign Utes: +4.2%
Electric Utes: +1.7%
Publishing: +1.6%
Discount Stores: +0.6%

Numbers of stocks down 1 mo:

More than -30%: 197
More than -20%: 667
Between -10% to -20%: 1,520
Between -5% to -10%: 1,197

FAANG -5.3%

I’d love nothing more than to attack Fed’s Powell, since I hate his guts. We haven’t had a man at the Fed since Dr. Bernanke. But this attack on Powell and their INSANE policy on rates is misguided.

Let’s be clear. The fucking Fed, under the direction of Grandma Yellen, start their ‘dot plot’ lunacy back in 2014. Look, I still have their insane chart, one that has, pretty much, come to fruition.

Chairman Powell is a lawyer and literally knows nothing about economics. He’s a technocrat who is at the Fed to take orders, not to give them. The Grande Recursive Order of the Knights of the Lambda Calculus prefer to have idiots at the Fed who can be told what to do. Alas, we haven’t had a man at the Fed since Bernanke, who bravely seized power during the financial crisis and saved the world.

Here’s Trump in a WSJ interview not knowing what’s he’s talking about — making a generally fool out of himself.

“I’m just saying this: I’m very unhappy with the Fed because Obama had zero interest rates,” Trump told the Journal on Tuesday. “Every time we do something great, he raises the interest rates.”

The president said Powell “almost looks like he’s happy raising interest rates,” but declined to elaborate, according to the Journal.

WTF?

And there’s more.

Asked if he regrets nominating Powell to his Fed chairmanship, Trump told the Journal: “Too early to tell, but maybe.”

Here’s Andrew Left, expert in shorting stocks. He runs Citron Research, which is a likely a front for some influential hedge funds who have short positions that need to go lower. They likely influence Mr. Left via great research, bullet points, soft dollars, and drinks at the pub. He then issues said report and stock cascades lower.

In this case, said hedge funds might want stocks to barrel higher. So here’s Left shilling for Tesla now, in spite of having an active lawsuit against Musk for his “funding secured” tweet.

The video is below for you to peruse — and he also casts shade on TLRY, CGC, CRON and other pot stocks.

Here’s the cliff notes.

– Left knows nothing at all about Tesla. Fucking black box, so err, go long.
– He was wrong forever on the short side, but feels confident about being right now.
– Tesla is crushing the competition.
– Give pot stocks a few quarters to see if they’re viable investments.

NOTE: I know what you’re thinking. “What the fuck is wrong with Fly, placing a photo of sloth next to Mr. Left?” Ten thousand apologies, I don’t like sloth.

Ron Wan is a financial expert in China and here is his pleasant bio.

Mr. Wan is an experienced investment banker and financial expert with more than 25 years of international investment banking experience in Asia and Greater China Region. He has rich experience in off-shore listing and reorganisation of various major Mainland Chinese enterprises in capital markets. He was also one of the pioneer investment bankers involved in the restructuring of state-owned enterprises in Mainland China and have deep understanding of the economic development and securities markets in the regional and Greater China markets.

He is also an Examination Committee Member of HKSI, Honorary Chair Professor of Renmin University of China and Founding Committee Member and Vice Chairman of CUAAFA. Mr. Wan was graduated from London School of Economics and Political Science with a Master’s Degree in International Accounting and Finance in early 90s. He has also served as senior management in various major multinational and regional financial institutions previously. During 2004 and 2012, Mr. Wan has achieved various awards in recognition of his achievements in the industry.

You can watch the video below and behold his logic. Or, I can save you the trouble and paraphrase what he said.

– China’s economy is worse than is being reported.
– Many people and companies are facing bankruptcy.
– There is a motherfucking liquidity crisis brewing. No one has cash.
– China needs to do something.

Cynics believe China is rigging its currency in order to offset losses due to Trump’s tariffs. But it’s entirely possible there is, in fact, a massive capital flight underway — which is crushing the yuan, and that would explain the liquidity crisis that is apparently brewing, according to the venerable Mr. Wan.

If the market went down 5,000 points from here, I wouldn’t forgive myself for what I did today. Because of my indecorous behavior, making excuses for myself due to absence and a busy schedule, I somehow ended up in Greek shippers that were literally cracked asunder this morning, producing garish losses in my trading account. This circumstance soured an otherwise gentile demeanor and caused me to increase my cautiousness and lie idle whilst markets caved.

The narrative that I had planned was one of a predator, agile and ferocious, ripping into the flesh of the zebra; but instead it was I who became the hunted, convalescing in the dark as my pride tore through the prairie like a jagged blizzard. I missed the turn and took losses. My SPY sale was 5 points below present values. I permitted an isolated event, getting stung by a few bad stocks, limit me and blind me to the bigger picture.

Even still, I remain stoically recalcitrant in the idea that the market has been bastardized and there’s no V shape recovery in store. I believe we’ll plod around the bottom and eventually W shape higher, using time as the elixir to heal the wounds that have impugned us.

Nevertheless, we have record lows on the Exodus OS and Ragin Cajun was kind enough to plot them against the SPY. Here’s all scores under 2.20, since 2008. Not too many.

Into the waning minutes of trade, I am 100% long in my Quant account, 80% cash in my trading. My confidence, if nothing else mattered, has been bruised; but this too shall pass, just like it has in the past. If you’re like me, suffering from a few bad trades, find solace in knowing the vast majority of experts, people like me who’ve done this forever, lost money too during the great fall of 2018. It’s important to move on and even more important to avoid getting lured into a false bottom.

There will be time to buy breakouts, if they’ll ever come again. But if you’re diving in here, you’re playing for a strong bounce. If you catch said bounce and are fortunate enough to make some money, don’t forget to take profits.