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Dr. Fly

18 years in Wall Street, left after finding out it was all horseshit. Founder/ Master and Commander: iBankCoin, finance news and commentary from the future.

Closed Out Hedges — Ready for Ze Pomp

I spent the whole day finding reason to hate the market. I discovered carnage amidst numerous sectors — dozens of stocks down 15%+ the past week. It all looked very bleak, as if the world were about to end. I’ve felt this way countless times during my trading career. Things always felt bad before they got real good. You never get a sneak peak into tomorrow’s tape and more often than not the ugliest closes leads to a ripper of an open.

Set aside the news for a moment. This is the way price action behaves via human behavior.

We trend follow and when it stops working we grow obstinate until we cannot hold out and then we sell. After enough selling, we panic and sell more and sell short. Two out of ten times these bouts of panic precede actual bad news. We saw this during the COVID breakout, 2008 financial crisis, and all the way back during the dot com collapse. But more often than not, short term squalls are met with flush outs and rippers to the upside.

So I did what I didn’t want to do most: I closed out my shorts, bulked up on longs, and will now wait for markets to punish me. I closed down 49bps mostly due to being impatient with a large $UVIX position that I closed out this morning. I do expect markets to open lower and might use my 22% cash to either hedge or buy more. I am, however, reticent to short into this hole — knowing full well that once the psychology of down stocks breaks up there will be a fierce buying frenzy to the upside.

Understand something, this doesn’t make me bullish — but merely a greedy man in search of bounty — attempting, if you will, one last gambit on the upside before it all comes crumbing down on Joe Biden’s fucking head.

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Something is Very Wrong With This Market

I am keeping this 100% business because I have questions about what I am seeing here. We now find ourselves at the familiar crossroads of fate. Is this sell of a buying opp or a prelude of something much more severe to come.

I want to highlight a few things here.

1 Mo losses:

$AAPL -3%
$MSFT -3%
$GOOGL -1%
$AMZN -4%
$NVDA -0.6%

On the other hand…

$NKE -17%
$BA -17%
$RTX -18%
$SCHW -17%
$USB -16%

And more…

1 week losses

$MARA -30%
$CHWY -27%
$JBLU -25%
$ILMN -23%
$SQ -22%
$SHOP -21%

Shares of $ETSY typifies the type of action we’ve been seeing as of late.

Taking into consideration seasonal factors, this is somewhat expected in September, especially with Biden at the helm and just about everything else going wrong with Pax Americana. On the other hand, we have a stubborn, an almost surreal obstinance, in the tera cap stocks — whereby hedge funds keep piling into $AAPL and $AMZN in the hopes of preserving gains in a market clearly spiraling lower.

If you look at the data, this from Stocklabs, “all stocks” are down 8.1% over the past month and down 7% over the past 12 months. We’re down on every time frame expect 3 years — all thanks to the trillion dollar market capped rally of 2023. But everything else has been left behind — somewhat stereotypical of modern day America.

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Very McPlungy

I’m actually waiting for a bounce. As you know, I’m a bit of a bull myself. I do fashion myself to be something of an opportunist and really just want to oversee the betterment of me.

Early going, stocks are fucking careening lower. We have the NASDAQ greater than 100, this time with rates dropping a little. It just goes to show you how they’re now fucking with you.

Small caps are strongest, alongside biotech — which is up.

We had a few early green candles, fooling people back in, and then thr Guillotine came down hard and now traders are reeling, unsure as to what to do.

I’ll tell you what to do.

Get small, buy a hedge, and wait for those sons a bitches to rally the market again. They always do it. They cannot help themselves. I’ve been watching it closely for decades and always notice they rally it most when you least expect it. The only way to play it, if you’re not day trading, is to just wait it out.

Naturally you don’t want to own piece of shit stocks otherwise you might be “waiting it out” with nothing left. No, you need to own good stocks.

Over in Stocklabs, we are very oversold and have been for a week. These sort of oversold conditions always lead to a grandiose rally — something to make bears rue the day they were conceived.

If by 12:30pm markets haven’t rallied, you might want to start to panic.

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Of Course It’s Rigged

A few days ago the Fed announced a new treasury buy back program. All of the early 2023 bank failures had to do with holding low coupon treasuries in a fast moving higher yield environ. Losses were and still are astronomical.

Most estimates place bank losses at around $2t. But are they really losses? No. If they hold until duration the government will make them whole. But they’ll need to wait a long fucking time for that to happen. In the meantime, capital will be constrained because their balance sheets are shredded.

The solution, naturally, is for the Fed to buy back low coupon bonds and issue higher yielding ones. This way, the Fed gets to eat their losses, pay the banks a much higher rate of return, and enjoy their post Fed jobs at one of those illustrious institutions.

If you’re waiting for a bank collapse based off those treasury holdings, forget it. We might get some small bankruptcies and minor fracas, but on the whole the only way banks will face severe dislocation is via the customer. If unemployment spikes and delinquencies rise, then we might see a real banking collapse.

The game is rigged in favor of status quo. Those in a position to profit from this may do so. Others who are not afforded the luxury of liquidity watch in horror as scam after scam occur making the worst people richer.

I closed -14bps in a hedged book, heavy shorts on the banks and some long VIX exposure.

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One chief complaints I’ve heard about my trading is the difficulty in which it is to follow. One hour I’m short and the next I’m long. Typically I’d toss these complaints into the trash where they belong. However, being the charitable person that I am, I considered this to be a novel challenge for me. So, effective immediately, I’ll taper down my activity to be less of a day trading morass and more of a coherent methodical direction when executing trades.

Today’s tape would be very bullish if not for the fact that rates have soared again. The drug addicts are already saying stuff like “rates don’t matter bro” and they’re happy as pigs in slop. But maybe there is a modicum of truth to this lazy way of thinking. After all, the housing market is dead from fall to winter and rates aren’t too important until next year. Ergo, markets don’t seem concerned about it now.

But is this retarded way of thinking dangerous? YES! You forget the balance sheets of banks own a ton of treasuries and those fucks are down to 50 cents on the dollar now. We are steaming towards a banking crisis.

Meanwhile, at least for now, markets look constructively bullish.

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Some Clarifications May In Fact Be Needed

Last week I toiled extremely hard removing by hand my lawn to both reseed and resoil it. I poured endless streams of high quality manure and top soil onto the barren lands, myself covered in it for all the neighbors to bear witness to. They’d visit me after golfing and preside over me as I wrangled thick roots from beneath the red clay and marvel at my stubborness. I had planned this for 6 months. I bought all of the tools and materials necessary to complete it, even employed Mrs Fly to help in this Great War against the weeds.

Three days ago I completed the project, seeded over it and then began to make sure the lawn was properly hydrated twice per day.

Fast forward to today: torrential rains have poured down into it, without let up, creating a morass of mud and ruin. All steepened areas of the lawn are now stripped of seed, puddles everywhere: DOOM.

The market is very much like my lawn. After the rain stops, I’ll head back out there to seed again. See I have endless amounts of seed and enough money and willpower to make sure the grass will grow again. I will wait out the cold, the climate, and my own personal injuries. But rest assured, that fucking grass will grow.

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I had an eventful day, clawing myself out from a 1% hole by heavily shorting the market into the final hour. We then saw an equally absurd spike that just about poleaxed anyone who shorted into the hole. You’ve got to be fast and take those 1-2% swings in tapes like this.

I ended up down 42bps, a little better than midway and with an $SQQQ position representative of 22% of my holdings, another 20% in stocks long, and the rest cash.

I’m fairly confident we splash lower on Monday and turn higher into what is almost assuredly going to be one of the best rallies of 2023.

It doesn’t seem likely now because we’re all so glum and depressed. But the sun also rises and Pax Americana can still shine bright, if only for a week or two. We might reminiscence over better times when stocks flailed higher during pompous circumstances — all of us rich and chest strong — skipping out on leg days because our $300 pants were enough.

We shall have better times soon, rest assured. After all, this is all we’ve got left.

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Oversold Bounce

I was on a call when markets doubled early gains and I got caught, fooled even, with shorts in tow. As a result of this, I am down 69bps. Knowing what to do, I covered my shorts and added to more longs in an effort to invest alongside the prevailing intra-day trend. I am, however, short oil stocks — because of weakness apparent.

I wanted markets lower — but it seems there is a chasm between what I want to happen and what is actually happening. My intent here is to halve my losses, hopefully harvest gains, and then reload some shorts into the close for the big Monday belly-flop onto the hard pavement covered with rocks and glass.

I’d place the odds of a downside reversal for today at exactly zero. Although breadth is a middling 56% — there is very good action in tech and mega cap stocks. I will need to dig into the market some more to get a more educated or sophisticated view on things.

But for now, this looks constructive.

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Having traveled around Europe, which by most standards is superior to Asia, I can conclusively say that America, even with its inner city doldrums taking place thanks to foreign agents, is a far superior civilization. I think it’s important to remind people from time to time that my modus operandi is for the American people first and foremost — fuck everyone else.

Sure Putin seems like a nice fellow. He says nice things and Kim Jong Un has a really nice haircut; but at the end of the day — fuck those guys. There is an American culture that celebrates supremacy in its people and I’m here for it — but not for those fucks who’ve been in charge for the past several decades. We are at the point of busting loose in this country, from all sorts of angles. You have the ANTIFA transgenders running amok defending pedos in schools, blacks looting and shooting, and the hard right fomenting discord in a more cordial but equally maniacal way.

I suppose you can say we are well past political solutions and hard tactics need to be deployed to make permanent changes. Because of this future, I can only surmise stocks are bounded by fate to collapse. We saw a meltdown today, all to do with the increasingly arduous issues of interest rates. There are some out there who will tell you “rates don’t matter”. But you really have to ignore those people — for they do not know what they speak of.

I closed with a portfolio beta of -0.57 — net short and diversified amongst various industries — just in case one or two escape my wrath tomorrow.

I did warn you numerous times about the horrors of September. You could’ve sold a long time ago and now you have to contend with your ego crossed against your largess losses. Moron.

I closed +30bps — because I do not lose in crashing tapes — not now not ever.

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Slow Methodical Grind the Fuck Lower

These are the facts, an array of them if you will.

The $IWM is down 12% since August. The cunts in the White House have declared war on the American people in exchange for their new people’s migrating into the country. None of their priorities are central to the needs of Americans, instead they are at war and have always been at war because it’s easier to destroy than to build. Devils.

The market hasn’t come to grips with the fact that they are pathetically fearful of the plebeians only as it pertains to food and shelter. They cannot afford a slave revolt. As such, they once again place the middled class onto the slab to be cut into and dissected. Rates are higher than they need to be — because it doesn’t matter to them. NYC home sales are at a record 70% all cash deals.

They will do everything they can to sustain stock prices — but the levies are bulging and the infrastructure is weak and they’re running out of time.

DO NOT BE FOOLED by small rallies inside of larger pockets of weakness.

This is what I mean.


$ZM -82%
$SE -75%
$TWLO -75%
$PYPL -70%
$BABA -70%
$SQ -68%
$SNAP -63%
$MTCH -61%
$ROKU -55%
$T -47%
$VZ -44%
$SHOP -41%
$DIS -38%
$WBA -38%
$SPOT -36%
$BBY -35%
$INTC -30%
$NFLX -22%
$TGT -20%
$NKE -20%
$C -19%
$CRM -16%
$AMZN -12%

Seeing the market bid here, I have some directional longs against hedges — with the intent to closing the session net short — but nothing too extreme since I know markets need to rally.

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