HEAVILY LEVERED INTO CATACLYSMIC COLLAPSE

Calm yourselves and STEEL UP for the fires I’ve been warning you about are here and if you’re going to make it — you’ll need to be made of sterner stuff.

Markets have dislocated and are now seaworthy. The NASDAQ shed 530 and nearly everyone long was down more than 5% for the session. Whilst I empathize with your predicament, I am here to help and have been telling you the correct path to take for more than 6 months now.The fact that you’ve refused my advise is an affront on my person and I will never forgive you for it.

That said, I closed the session DOWN 0.43% due to some late day buying. I am 125% leveraged both long and short in a concoction designed to perform magic acts at 9:30am. The stated goal here gents is to live to fight under better conditions. If we can arb out 10% monthly gains while we wait for nuclear warheads to detonate over Warsaw, so be it.

We all must sacrifice for the greater good.

With rates jacked to the roof and stock values collapsing, any company with negative free cash flow and large amounts of debt are in serious danger of collapse.  We have a real time tool inside Stocklabs to examine debt/market cap ratios, which I prefer over debt/equity — which I believe to be shit.

This much is known.

Companies enjoyed cheap credit for over a decade and borrowed to the hilt, never bothering to build a FCF positive business because of incompetence. Now with everything unraveling, these companies will either bust or be forced to partake in dilutive PIPE offerings in order to stay afloat, some with very amusing “death spiral” features.

Here are some stocks that hit this screen that are worth sharing.

(Stock/debt-mkt cap ratio/debt)

MSTR 1.37X $2.44B

UONE 2.7X $858M

CMLS 6X $1.16B

RRGB 6X $663M

RXT 2.9X $4B

WE 5.8X $21B

F 2.85X $135B

GM 2.3X $109B

CHTR 1.2X $95B

PCG 1.8X $46B

AAL 5.3X $45B

WBA 1.1X $37B

CCL 3.1X $36B

CZR 3X $26B

TEVA 2.6X $23B

The list goes on and on.

I am not a believoor in anything. I do not share your optimism. I moved to cash, closing out my FAZ/TZA positions because I am not a greedy man. I do not believe the market is heading up, but I am not stupid either. I will reposition towards the end of the session and attempt to bank some coin tomorrow.

At the moment I am down 13bps for the day, fortunate due to my heavy overweighted FAZ/TZA holdings, coupled with my risk averse longs such as ABC.

BOTTOM LINE: My advice to you is to protect your accounts. This is not the time to be greedy.

We have ourselves a fucking rout underway, with the NASDAQ off by more than 500. If you’re wondering what the news is: here it is: Pax Americana is over.

What is the premium attached to being the dominant super power in the world?

But today isn’t about stocks, per se — but the calamity occurring in the crypto markets. In fairness to the mood, often times bottoms are placed during times like this. Just when you think the world is going to explode — BAM we melt up. The only problem with that narrative is the FUCKING FED MIGHT HIKE RATES BY 100BPS ON WEDNESDAY!

The US 10yr is +16bps to 3.36%. The cost of servicing debt is exploding and this has spilled into both the MBS and CMBS markets. I have no way of being able to predict what tomorrow might bring. I can only tell you from experience that when shit like this happens — unemployment is around the bend and lower stock prices are all but a foregone conclusion. This issue we are facing isn’t transient. The inflation monster might be tamed — but by the time it is — the economy will be in such disrepair it’ll take Fed rigging to get us back to normal again. And then we might undergo yet another round of inflation and this cycle will repeat itself for years to come.

My trading is FLAT for the session, now holding 10% positions in FAZ and TZA, the rest cash.

Happy trading!

Last night Celsius announced crypto withdrawals are on pause due to market volatility.

CELSIUS IS IN TROUBLE pic.twitter.com/S3xJdLjkBx

— The_Real_Fly (@The_Real_Fly) June 13, 2022

On that news BTC dumped hard 4,000 points and ETH even more on a percentage basis..

Now Binance is saying the same but with the caveat “FUNDS ARE SAFU.”

Temporary pause of $BTC withdrawals on #Binance due to a stuck transaction causing a backlog. Should be fixed in ~30 minutes. Will update.

Funds are SAFU.

— CZ ? Binance (@cz_binance) June 13, 2022

Either way,  markets are not in a joking mood and ETH is in the 1200s.  It’s fucking over.

Now we sit and wonder about crypto derivative stocks and when they margin call out of the market.

CRYPTO DERIVATIVE STOCKS DOWN SHARPLY PM $MSTR pic.twitter.com/cuWKGZUB14

— The_Real_Fly (@The_Real_Fly) June 13, 2022

NASDAQ FUTS are down 330 and the Fed meeting this Wednesday might come with a massive rate hike surprise, some suggesting 100bps is in the works.

In other words, the Fed is hiking like madmen into a massive economic and market decline. This is the things nightmares are made from.

Expect higher yields, commodities,  and lower asset prices until the Fed meeting. I’m not so sure about the commodity part either. That might succumb to selling pressure too.

Happy Monday.

Mortgage broker Lou Barnes had an interesting blog last week, as he witnessed MBS go “no bid” following the worse than expected CPI print.

We’re already seeing the technicals of the banks get truly horrendous and worst of all the junk bond markets are completely upended. Even high grade credit is getting hit. It’s worth noting the leveraged loan market is at a record $3t + now.

Much of the low grade credit is in consumer oriented areas of the economy, which is directly under siege from high inflation. Bear in mind, these companies were finally starting to come around post COVID lockdowns, a spiteful assault by government on business. Now with gas in excess of $5 and natural gas approaching double digits, it goes without saying this winter is going to test the consumers mettle. It might possibly be the worst Christmas season in several generations.

Then we have the de-globalization effect happening, again all purposeful and pre-mediated items popping up here.

CHINA'S WEI SAY WE WILL FIGHT TO THE END IF ANYONE TRIES TO SECEDE TAIWAN FROM CHINA

CHINA'S WEI SAYS RELATIONSHIP WITH UNITED STATES IS AT A CRITICAL JUNCTURE

CHINA'S WEI SAYS U.S. INDO-PACIFIC STRATEGY WILL CREATE CONFRONTATION

— The_Real_Fly (@The_Real_Fly) June 12, 2022

Back in 2008 the housing market collapsed due to rates increasing at record housing price levels which led to ARM resets and massive delinquencies that ended up on the balance sheets of banks who rigged their numbers to issue so many of those bad loans.

Two things we’re not seeing yet.

High unemployment
High delinquencies

Those two items above are key to everything. Providing people have money to pay their loans, they should be fine. The main question is, can employers maintain overhead in this environment?

During the 1973-74 recession, unemployment crested to 9% from pre recession levels of 4.6%. Similarly, the unemployment rate during the housing crisis of 2008 saw unemployment top at 10%. It would seem reasonable to assume our 3.6% unemployment rate is at a bottom and might soon start racing higher.

Down below this post is the best performing themes on Friday, Risk Averse being #1. Below that is the worst performers and below that are the top rated stocks/ETFs in SL.

YOU CAN HIDE in bear markets. You can withstand the pangs of agony as we wait for things to improve. But you have to commit all the way, even if it means admitting you were wrong and moving on from legacy positions.

The value of your accounts is reality, not where they were last year. By holding a losing hand, you’re only going to make your situation worse. People ask me all the time about what they should do with their losing positions. Ask yourself: would you buy it today in this tape? If the answer is no, then sell it. It’s not that big of a deal.

The main stumbling block keeping people from selling their losers is fear of missing out. The thought process is, “OMG STOCKS ARE DOWN SO MUCH, IF I SELL NOW I’LL MISS OUT ON THE BOUNCE/BOTTOM.”

But what if you’re wrong and this economy is fucked for two years like in the 73-74 recession? You might be down 30-40% now; but if that scenario plays out you’ll be down 75% by next year.

LISTEN TO ME: HARDEN YOURSELVES FOR TOUGHER TIMES AND REMOVE THE FILTH FROM YOUR PORTFOLIOS.

Over in Stocklabs just 6% of stocks are rated bullish. In the past during periods of panic, such a low reading preceded a mean reversion rally higher. I suspect that’s exactly what’ll happen next, although it’s never clear beforehand. The current state of things has people in a grim mood, foreboding even. If you’re long to the hilt, you’re having a 4 martini night today.

I, on the other hand, closed up 190bps, went heavily long and short in a combination of positions that will hopefully arb me a gain of 1.5% on Monday.

If you want to know how I made 52% in this type of market, don’t even bother trying. I was built for bear tapes and have exceptional instincts buoyed by my algorithms and tools that helps me crush. You’re way better off following exactly what I do than ever trying to do it alone. Eventually, as is the case now, I’ll end up way ahead.

After the move higher, we are going to rush lower again.

I am en route to flooring store so this will be brief.

We are in a recession. The stocks you want to own are consumer staples and drugs. I am talking wholesale drugs like CAH and ABC. You want to be long groceries via SYY and KR. And, as crazy as it sounds, you want to be long utilities and oil — up until the oil sector implodes. Eventually everything will wash away and inflation will be stymied with DEBILITATING DEFLATION. But we are not there yet.

Also, and this is noteworthy, GOLD IS A SUPER SAFE HAVEN. Forget about SHITCOINS. Peter Schiff was right all along.

My portfolio into the weekend is as follows:

11% cash.

HAGW.

Let’s review, shall we?

I’m bald. My wife probably doesn’t like me very much and I’m a medicocre tennis player. But I can do this. New record highs, +52% YTD.

The Russian Ruble is up 4% vs dollar, now $57.

The 2-10 spreads are narrowing, with the 2yr up 14bps, suggestive of recession looming.

Cryptos crash with stocks.

Commodities are lower across the board with stocks.

I am 100% cash, closing out large positions in FAZ, SOXS, and UVIX. I sell most opens to reduce my holding time and mitigate risk. Since this method has been working almost without flaw, I have no rush to change it.

I’m not sure what happens from now till 2pm. But I’m pretty sure what happens afterwards. Having said that, Stocklabs is likely to flag oversold and I am likely forced to get long, even though I don’t want to. Rules are rules.