MONKEY BUSINESS

A miraculous turn of events has led the markets straight up into the final hour of trade. Before the miracle rally Stocklabs was OS and I had intended to buy TQQQ, which would’ve been nice but I was distracted by an urgent phone call. With the 500 point rally and the NASDAQ V-shaping higher, I am once again BEARISH on the tape in the short term. These sort of rallies do nothing but delay the inevitable flush out right down the fucking drain and into the sea.

All day we had Monkey Pox scares and I took a nice 10% weighted trade in GOVX for a 17% gain, which would’ve been 100% had I waited a little. Nevertheless, I am content with my 2% daily gain without ever having more than 20% of my money allocated. I closed with TZA at 10%, TNXP (Monkey Pox) 5% and CHK at 5%. My returns for the week was 3.2%, now up 5.4% for May and +33% for the year. My intention is to remain low volume during this rotation/liquidation and only take larger stabs during periods of high conviction.

Reason being: Almost every earnings call is bearish. Commodity stocks are no longer trading inverse to the markets and aren’t safe. The safe havens in secular stocks have been uprooted thanks to the rushed decapitation of the consumer, vis a vie TGT, WMT, COST, BURL, ROST etc.

Permanent bulls are just lazy thinkers and have resorted on time to save them from their poor trading skills. For over a decade the market has rewarded people for being patient, providing they bought good stocks. I do believe “this time is different” — mainly because the Fed is now working against the interests of the market. Plus, the war in Russia/Ukraine is going to have profound ancillary effects, such that you will be eating bugs by next year.

Yes, history rhymes lads. Here we are two years removed from the onset of the flu busting loose worldwide, not entreated with a much uglier disease that threatens to lay waste to whatever was left of the global economic system.

Current case count worldwide (POX TRACKER):

Like COVID, the Monkeypox has a 1% fatality rate, leaving heinous scares all over your face and body. It is spread via fluids and some are suggesting it’s primarily being spread by GAY MEN.

Already a crop of “pox stocks” have emerged. We of course are tracking them inside Stocklabs. I am long GOVX.

About an hour ago I took a 10% position in TZA, just so that I could partake in the Friday doom to come. There are rumors of panic regarding the NEW MONKEYPOX scourge hitting throughout the world. I’ve been known to dabble from time to time with issues of the conspiratorial nature. I did not see the Monkeypox coming but can tell you with 99.9% certainty — it is being afflicted on purpose.

But that’s neither here or there. Trust the science you stupid piece of shits and get yourself a nice new pox jab, otherwise your face will be covered in pox and your wife is gonna hate you for it. You do know they leave permanent scars?

At any rate: Friday is here and the collapse is now. But we also have smallpox stocks to play: SIGA, CMRX, TNXP, EBS, NNVC. There will be more, providing the pox spreads fast and big phara thinks there is money to be had.

OMG THE NASDAQ IS UP ALMOST 100; WE ARE SOOOO LIT.

No interest.

I had positioned too heavily short to benefit from this open and after I sold it all my gains are only +13bps. But that’s ok. Some of you following me in Stocklabs will need to be patient and accept the fact that some tapes are for pillaging and another tapes are for hiding out.

The NASDAQ is down more than 3% the past week and I’m up 1.3%. That’s all that matters to me.

I was hoping for a Friday collapse and we might very well get that. I closed out my shorts because I don’t like waiting around for good things to possibly happen, when I could merely go to cash for a small gain without risking anything. You can say that I’m risk averse.

Commodities are a little soft, but so are the brains of people chasing this market. My best guess is for a Friday collapse. I really truly in my heart of hearts want it to happen. But before we can get to that, we need to shatter some dreams throughout the day and hopefully by afternoon we might have a wonderful rout on our hands.

It was a terrible close. If you are a permanent bull, like some people that I know, you should have clammy hands into this close, which presided over longs with a sword against their necks ready to chop away. I will have you know, I am fully invested and slightly leveraged, big bets in commodities and heavily short banks and long volatility. It is my belief, being perfectly honest and all, markets are on the precipice of rout.

BEHOLD the returns for Fridays during 2022, data via Stocklabs.

If you’re reading this bloggery, smugly viewing the PANW earnings beat and thinking “boy this Fly guy is gonna be wrong” — let me inform you that there is ZERO chance I will be wrong and 100% certainly you will be dispatched, unceremoniously, first thing tomorrow.

They’re going to head back down is what will happen next. The last time SAAS stocks jumped up by this much, now +7%, they fell 5% the very next day. Let this be a remindoor to all of you rookies out there — bear markets are cruel affairs and designed to propel you out from your high rise window onto the pavement below.

I have been in the comforts of cash all day, doing a little of this and a little of that — but now I am ready to work. My knee-jerk reaction was to buy some oils and short banks — so I did. The “Finnies” are underperforming today and if the market heaves over into the bell — they’ll lead on the downside.

I have certain biases about the market and I will pursue them into the close. For one, I am biased against tech growth, which is where all of the fun is today, tech stocks up 2%+ for the session. But that’s ok. I am not playing their game, but mine. I am up 44bps for the day and do not need to make 2% every single session.

In the big scheme of things, both the Dow and the S&P are down, which means most hedge funds are down again. The NASDAQ is marginally higher, but there is robust action in all of the beaten up names Melvin Capital just liquidated. This is a trap. All rugs will be pulled. All bids will be hit. And all people margined into what they believe is the bottom will be zeroed out.

Today could very well be a pivotal day for stocks, but I’m out, 100% cash. I made 44bps and I sold out of everything — but still long in my quant of course.

My rationale is that I couldn’t give a fuck about a super awesome and amazing bounce. The market is diseased and my preference is not to be lured into rallies that are prone to fail.

Stocks might rise 10% today and if they do GOD BLESS. I’ll be back later to sell it short.

SIRS —

It’s over again. In the after hours CSCO missed and its shares are now off by 15%. This is standard stuff and we are soon to be ENTREATED to widespread earnings misses. This will CRASH the respective stocks, but perhaps get us into a twilight zone of normality, as we await the second half of 2022 sales projections to hit. I am not bullish, but maintain the position to trade bottoms when I see it. At this point, I am only using Stocklabs mean reversion for those oversold conditions, since the algorithms are geared to adjust to stress levels that a mere human mind cannot begin to fathom.

I gains 3bps today, mostly thanks to my oversized SQQQ position. I closed nearly 70% cash, a position in treasuries, dry bulk rates, and also 10% long in MOS.

According to text book, we should see a plunge at the open and then an attempt to bottom. Given the stark fundamentals we are facing, I would expect all rallies to fail, as pension funds and managers liquidate into rallies according to their mandates. We are in a period of deleveraging and malinvestment. In order to correct that, we might in fact overshoot to the downside.

I fully expect 20% lower from here as a base case and as much as 50% down under the conditions of a NATO loss in Ukraine. It’s relevant to consider the global impact of being humiliated in Ukraine and the recent gains by Russia against Ukr forces should give anyone rooting for the west pause.

SJM is down nearly 10%, the 4th largest drop on record. COST is off by 13%, the 5th largest drop for the stock on record. There is immense selling in consumer staples and defensive stocks today thanks to the one two punch of WMT-TGT earnings shortfalls. We are perhaps getting oversold in some of those names; but when it comes to the overall market — consider the following.

Above are valuation (price to sales) for the tech sector. As you can see we are nowhere close to where one could consider historically cheap. As a point in fact, we would need to decline 45% from here, based on current earnings, to achieve “cheap.” I did some due diligence on CSCO and learned their earnings DROPPED 40% during the previous two recessions. This is on par with what we just saw with TGT today. My point is, sadly, the sales part of the price to sales ratio might be plunging soon and thus valuations would need to go even lower to account for the recession to come.

We are still 19% above the PRE-COVID highs and we are +45% above the COVID lows. One could easily surmise the need to retest one and then perhaps the other. I do believe a 20% drawdown from here might provide time for investors to see if the economy is truly fucked. We might trade well from those levels; but up here, even though we are HAMMERED off the highs, is still too rich.

I am not attempting to short too heavily into the hole — because mean reversion rallies are a bitch. Instead, I am mostly cash, trying to fine tune exposure to commodities against short NASDAQ positions.

How many times do I have to remind you not to believe in fairy tales? This morning you see a small market rally and you went in and chased it and now your dick is on the ground, completely severed. There are various things to worry about today, NONE AS MUCH AS WHAT TARGET JUST ANNOUNCED.

“We did not anticipate the rapid shifts we’ve seen over the last 60 days,” said Brian Cornell, in a Wednesday morning call with analysts. “We did not anticipate that transportation and freight costs would soar the way they have as fuel prices have risen to all-time highs. While we were certainly anticipating the impact of overlapping stimulus and a consumer and guest returning to more normal activities, we did not expect to see the dramatic shift in many categories.”

Net profits have been HALVED and this is only the beginning.

Sir —

We are in the opening salvo of the next Great Depression, controlled demolition edition. I hate to say it, but Alex Jones was right again God damn it. Everything that is happening now was done in a pre-meditated manner to such a simple degree no one in finance is surprised. The CEO of Target was surprised, but not really. Trust me. The next phase of this collapse will be US sanctions on Russian energy and grain applying even further pressure onto supply chains until it breaks and we have calamity spilling out into our streets. Leave cities now, because when the food riots begin — fuckers will raid your homes and empty out your pantries.

Worst Target drops on record

Look at the carnage. Do not drink this blood.

As for me, I’m a professional. I walked into today 15% weighted in FAZ and now 75% cash, down 14bps for the session. Very standard and straightforward stuff.