In a holiday abbreviated week, markets certainly gave us bang for our dollars. I had some difficulty dealing with the chop on Monday but quickly adjusted my position and did what I always do best: follow the trends.
I don’t teach people how to trade. It’s a waste of my time and yours. But for those who are moderate to good at trading, hear this.
At some point the market will DEMAND we retest the lows. You cannot contemplate it now because MUH FED and MUH RE-OPENING OF THE ECONOMY. I’ve done the homework and we’re looking at 3 months minimum of harsh economic conditions. What we’re boring witness to now is on par with a video game. This is merely a parlour trick to give society something to hang their hats on. Happy Passover and Happy Easter — markets surge the fuck higher and everything is going to be ok.
No it isn’t.
Timing is everything and the past week was a bad time to be short. It doesn’t make you wrong, but stubborn. Heed what I am saying to you — it’s always better to fade the opening rip than guess on the next day’s direction.
I closed out the week on a 26 for 26 winning streak, still going strong. Roughly 45% cash, heavily long dividend paying consumer staples all trending higher.
My trades:
JWN +24.6%
WW +16.4%
ALLY +13.7%
STWD +18.5%
H +14%
TREE +10.1%
SQ +7.7%
ZEN +7%
CPB +1.9%
NYMT +33%
MFA +8.3%
MAC +10.8%
CNK +4.4%
SM +4.8%
GCO +5.1%
STWD +1.4%
RWT +25%
PMT +8.6%
MTG +7.8%
CIT +12.5%
CC +11%
ORC +9%
CBRL +8%
HA +8.8%
NUGT +10.4%
FTI +6.6%
NOTE: If you want to read about how I traded the dot com disaster and how I got fucking wiped out, for new readers out there — I wrote two books on the subject.
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The 2-headed eagle made me think of emperor Justinian and the plague for the some reason.
Days of +1700
+800
+400
Are Running Out
vix
is still
+40
19.4× earnings. Wow. Depending on your views about earnings, of course.
Is the S&P worth that in this environment- since American assets are risk free? Maybe that’s what people are thinking. It’s the only bullish argument I can see.
It is worth whatever the Fed says it is worth at this point. Take Boeing for example and all the downstream companies from engines, car rental, hotels, aluminum, avionics, sub assemblies, jet fuel etc… Who needs to buy planes while summer schedules are cut 90%. What happens when/if Covid comes back in the fall?
This is fuckery of the highest magnitude. There is no long or short trade. Get in and get out on a daily basis.
Don’t hang your trading hat on the return of Godzilla. The virus spread rampantly due to our collective incompetence ( a good thing in this particular situation). Imparting herd immunity. Now if you are an argumentive type, dismiss it at your own peril.
What is your prediction based on recent events and Fed action? I think technical/fundamental analysis is totally worthless now.
Technical/fundamentals do have value, not as much what some claim. Fundys long term, technicals short term. look at current spy chart: big scare, precipitous drop, double bottom and we will take it from here.
Isn’t herd immunity >80% ? There is nothing like that being reported until everyone gets an antibody test.
Exact numbers, unknown/knowable. So much confusion, every TV personality wannabe a doctor/researcher. I am stating on the authority of my experience.
Nemo, that’s pretty much it. I hold little overnight typically. The fed determines worth. Yes, that was my point. Buyers are confident of Fed support. I think. Probably overconfident.
Tjnyt. Give up man. There will be plenty of susceptible people in the fall. And it will likely mutate. You’re 0 for 20 on this virus.
If stabilization was the motive
they wouldn’t be jamming
(vals)
with this
magnitude&pace
What’s the consequence of upward jamming?
Everyone just
Re – Learned
that in march
They’re running a spike ruse, Again
and now with,
the present
carnage
“Maybe that’s what people are thinking.”?
Are you serious/kidding?
You really think the tail wagging the dog
is people and not
Master level algos leading desk algos?
I don’t understand your logic, just a low IQ fool and short.
You’re right,
You’re a common idiot, along with the rest of the common idiots,
If you’re not aware that stabilization in markets after drops,
is consolidation
(consolidation = the opposite of returning overheated indexes immediately back to overheated condition)
The 3 primary indexes being controlled and massaged, It’s clear that this guided “ridiculous” spike has
a green light, a go ahead, a signoff.
So Quit With The IQ Short Idiot Shpiel
If You Have That Restricted Brain Power
I’ll give the wording 1 more chance to sink in:
What’s the best fucking way to cause a crash.
Make everything so displaced that there’s a
black hole waiting when the tide turns.
10/19 to 2/20 A massively jammed leg.
(endgamelike. i was calling it realtime)
They’re jamming the retrace, Resumption of
collapse not only more likely but lol with intention
Yet most of you fall for it again because you’re:
not able to process the behavioral logic
I just trade it, never trust it. So far I’ve enjoyed this market. I hope it jumps up and down a while longer.
BRO WHO IS “THEY”
morgan stanley had it right. only a forced liquidation will cause a retest of the lows and that is unlikely. we will have extreme moves down, but we are not retesting the lows.
You’re discounting Black Swan Part II
AND ????? Enlighten us…..
showtime, i don’t know your history beyond 5 years or so but the trading nymph was a bear at the time of the great recession, and at that time seemed brilliant (or crazy like a fox as cramer said back in the stockpickr days), but she had remained a bear to this day. it completely escapes reason. at what point do you stop being a permabear?
Cain Thaler Esq.
Has the professorial version decently
however it’s ridiculously low probability that the context of this finely matriculated black swan does not allow it to run the full course
Debatable. Selloffs of 30% or more tend to not bottom until 300-600 days. We’re 30-ish days in.
We’re going to have the rest of the year of decelerating earnings and major job dislocations to test P/E ratios and build the recession narrative. This isn’t like flicking back on a light switch.
The Fed can make cheap loans available but there are rules. They can’t capitalize companies. And on the fiscal side, you get maybe one more tentative agreement in Congress before full scale fighting breaks out along ideological lines.
So how comfy are you holding shit at 30x earnings then?
30x fits like a tightly squeezed vise.
Forgivable loans are, arguably, capitalizing. We’re going full Japan.
Maybe it’s time to go MMT. I never thought I’d say that but free markets are badly mangled and unable operate as intended.
MMT in a college setting is this thing rebellious econ majors play around with to show that they’re edgy and cool.
MMT everywhere else is like this mark that socialists tattoo on the inside of their forearms and show each other before the meeting starts.
Going to MMT will basically be the beginning of the end. Our markets are actually functioning just fine. After this crap passes, they’ll recover. It’ll take a year or two but if you have faith, we’ll be back to where we started and more.
But go to the system that MMT wants and it will be corrupted before the gavel closes the first session of government. At which point those of us with PMs will be calling the shots and the rest of you are ‘capital F’ fucked.
My point is that bailouts erode the middle class. After this round they will be irreversibly fucked. I expect to be fine but this ain’t working.There will be unrest and changes. Capitalism is pretty much dead.
As far as the forgivable loans are concerned, yes the Federal Reserve is buying them, but the quantity issued is determined fixed by the US government. Powell can’t just wake up tomorrow and decide on more.
And I think I can see where those loans are going to be a major disappointment. If, as a business owner, I was offered one, I can tell you right now I would probably not keep payroll.
Who knows when payroll will come back or if you’ll ever get another loan like that? The interest rates are so low, screw it, keep the money to help get the business back up and running in September and repay it as you go.
I have this feeling that unemployment numbers are going to keep disappointing.
Snoozemr, short term the fed can manipulate. After that, it still could but gets harder. They could bail out a liquidation. Or not.
Also eventually reality will sink in. We’re not going to see 2019 level earnings again for a long time.
My retest the lows scenario is when in a month we have 20-25% unemployment and their is still no clear safe path to fully opening the economy. I am telling you this now.. We do not have nearly as tight of mitigation measures in as italy and spain. They have barely come off of their top of the curve. I do not think we are going to come down significantly on daily cases in the next 3-4 weeks. I may be wrong but i just don’t see it happening considering our controls in place. If we only plateau at these levels they will be forced to tighten controls more or just continue burning through bodies for a long time. Either way this is going to be a much longer ride than the market is pricing in.
even in your scenario it seems like we are still flattening the curve.
Yes true flattening the curve. But that is only the first step toward being able to relax restrictions and open the economy. If we stay flat our hospitals and ICU’s will be just as full in a month as they are now and there will not be any way to justify loosening restrictions which will cause a new spike that will further overload hospitals. The curve has to flatten and then come down substantially. with our restrictions i don’t think we will come down much which will make it very hard to open much of the economy. If you look at other countries with large outbreaks that have been able to get numbers to trend down they have done much more to limit movement, test, trace. Time will tell but the evidence seems pretty clear to me. 3 weeks into NY lockdown and the daily numbers aren’t going down. Yes they are getting flat but that isn’t going to do it. We are talking about 30k+ cases a day still. I think some people are confused about NY daily reports also. They are reporting net change in ICUs. So when they say 100 new ICU’s that,s not 100 cases, thats a 100 total ICU increase across the system which is still steady increase
new yorkers were oblivious and out partying for saint patti on march 14. seems like an eternity ago but it hasn’t even been a month ago. so just weeks of mitigation in hot spots. non-hot spots shortly thereafter. national numbers are going flatten to start going down. don’t know timeline; i guess we start opening slowly beginning of June.
Agree June is reasonable for slowly opening. There will be a lot of hesitant people though. I think the impact that isn’t being talked about that’s going to carry over heavily into 3rd 4th quarter and next year is the capex impacts across the world. The only way for companies and governments to pay for all this and balance their budgets is to make major cuts somewhere. This is going to trickle through the world economy for at least a year and then slowly recover after that. We all know the consumer will be destroyed worldwide. People that had savings no longer do and people that didn’t have savings are running up credit cards. There is a reason Jamie Dimon is saying he expects this to be as bad or worse than 2008.
Probably sf. We’re a large country with innumerable hot spots, each with it’s own timeline. There is no reason to believe that we will flatten the way others have. Eventually of course. But our curve sucks.
Traders should read it like a stock chart. It will go up, down, and wiggle. Most of the moves will mean nothing. I’m thinking in 4-6 weeks some will try to halt lockdowns. I say try because many won’t leave home until they’re good and ready. I won’t.
What has happened to us, all this covering? We used be proud of being the biggest baddest bullies on the planet. Did we do it to ourselves or someone outside did it to us?
That’s the subtle brilliance of it. You can’t really fight it. All this military might, and it doesn’t help at all.
Tj I’m pretty sure I could handle you but not this thing. “Fight or flight”. We have choices.
i live in the florida panhandle. redneck riviera. last place in the world you would think there would be mitigation efforts. but nonessential is closed. court hearings on zoom. marina to forklift your boat in the water appointment only. 50 person limit in groceries with everyone 6 foot apart. most wearing gloves and masks. if it’s going on here, it’s going on in most of the country.
This virus really is something. You could hardly design a better weapon to screw over world governments.
It’s just harmful enough. Nearly everyone in a position of power has reacted with lockdowns. Some figured it sooner and some were idiots. However. Most or all of the complainers would do the same thing. Even Trump didn’t want to be seen as the cause of hundreds of thousands of unnecessary deaths. Just for political purposes in his case, but still.
Over the next year I’m thinking that the S&P earnings are maybe 75% of what they were in the previous 12 months. Will people pay 19× for that? I think not and the average is about 15×.
So 75% of 3400 is 2550. 15/19 × 2550 is 2013.
Will the fed try to prevent that?
Plug in whatever numbers you want. 2800 can’t be held without Fed buying stocks.
19 (p/e) = 2800 (p) / x (e)
x = 147.37
.75 x = 110.53
=> y (p/e) = 2800 / 110.53 = 25
So if the long term average is 15 – and I agree with you – it would actually require 40% of downside from here with a target of 1,680…
Come on thou, the bubble pe’s were never by accident.
Intention the whole way. How about intention the night
of election 2016? Erasure of -5% minicrash on result
by the open?
And because of the displacements from qe-zirp debt,
it wouldn’t floorboard through 1500 1300 1000 at
that point?
With the gaping hole the Fed just had to dig themself
currently,
even deeper?
Cain, I’ve seen reasonable (IMO) estimates that go lower and higher. The E part is hard to figure so I didn’t put much work into it.
Clearly, 2800 is not reasonable.
That’s fair. Personally I think earnings decline 5-10% not counting the bloodbath this quarter will be.
That’s pretty bleak. Close enough for me.
Do you think it is some housewife comparison shopping? Fed is not buying stocks but that’s where some of the new money will end up.
I trade so I don’t care what it’s worth. But yes people who invest look for value, and valuations were at record highs at the time of the crash. Caution will be in order. Ask Warren.
The fed is now buying junk bonds so yes, stocks might be bought but by the treasury which is not restricted from doing so. The treasury would ask the fed to fund an SPV.
Mnuchin does what Trump tells him and Powell has only slightly more spine, in case you think it’s wildly improbable.
Still I agree, maybe not this time, other ways might be better. Perhaps allowing the appearance of a free market while stuffing in money somewhere else.
But if not this time next time for sure. This is Japan you know.
It’s a distinction without a difference imo. All this liquidity, like when they bailed out the massively leveraged funds, is just going into buying equities at “great prices”. I think the FED is still hesitant to buy stocks directly, so they can at least somewhat pretend that the dealer isn’t looking at the cards in this casino.
Awanka, agree. It’s nothing but window dressing. They found a legal loophole. The fed said that they would look into other asset classes. What’s left?
bitcoin, toilet paper, trump hats
LOL Peaches. Thanks for the laugh.
Toilet paper is the most valuable on the list these days.
To all douters and virus worriers: I was almost prophetic when I said ” You all gonna get it and ventilators not gonna save you (if you are that sick). low and behold 80% mortality of Vent patients.
I just spoke with my daughter a pharmacist at UCSF hospital, the hospital is cutting staff, in dire financial straights, in middle of an epidemic with all that federal loot? The flood of COVID19 pnm that never materialized. Their capacity is 600 bed, normal census 250, current census 66. The reduced /cancelled normal operations. The emotionally traumatized patients won’t go to the hospital again for moderate emergency for a long time. Save your local hospitals folks.
Do they perform calf implants on pigs?
It’s going to be lit when people finally accept that our curve (and really every Westetn country’s) doesn’t look anything like South Korea’s.
You would think; reality is so hard to accept though. But then again, I never expected people to pay 2800 for the S&P. I guess math is hard too.
News reporting about ‘virus less bad than expected’ may yet bump us up a bit higher …but we won’t just retest lows, we will look up at recent lows from far below (on an inflation-adjusted basis).
I like your humor. But the middle class is about to take a first-class ass whooping. They are just barely able to hold their head up now, and after this will be too disoriented to point straight up.
I don’t see inflation in the absence of a “wreckt” middle class and without that, while the fed is free to print, they can’t create an artificial economy.
I think. We’re in uncharted territory. Surprises await.
In the presence of a wreckt middle class I meant to say
…and that wasn’t all I fucked up.
…middle class and WITH that…
I am just starting to see how gassed and stressed I am. Glad I’m not trading today. I need this three days. It’s been fun but the intensity. It’s been what, six weeks? I don’t even know but it seems a lot longer. Maybe it’s in part because of the lead-in, there was two or three months of suspense waiting for it to happen. When it broke loose the speed and ferocity caught everyone flat footed, it even surprised Showtime, and he’s been getting ready since birth.
Speaking of Showtime my point of contention with him is primarily the view that this is engineered but does it even matter? The accidental bungling of capitalism is human stupidity at its finest. And as we know stupidity is limitless. It is a very fine trap, better than any we could have imagined IMO.
I drove almost five hours to my house in the woods yesterday, almost double the normal time. The markets interfered of course so I was constantly stopping and trying to joust with world’s best. On a smart phone. Did you ever sell puts when you thought you bought them?
Good thing I checked my positions quickly, one of the things we learn the hard way, but it still cost me 20% of the day’s very good profit. It was a great call. If only.
It’s so nice to be writing from the woods. Nicer to do nothing for a day or two.
This is why I almost never trade on my phone. I’m worried I might go long when I meant short, or fat finger 10x the amount I meant to.
Yeah. I noticed right away the market was running in my direction. But red numbers on my position.