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.
Just when you thought it was over, Amazon came through with an earnings miss that pleased markets and caused a surge of 1.9% in the NASDAQ in the AHs, halving the losses endured today.
Some of the highlights.
Apparently, social media isn’t dead just yet, just Facebook.
So now it looks like a massive squeeze will reveal itself in the morning, mostly oversold tech stocks left for dead — like SHOP, AMZN, probably SE and any online retailer. These stocks were behaving like they were shutting down their websites.
That being said, the numbers are old and stale. I am much more interested in what Q3 will look like and dare I say — not as good as Q4 2021.
I closed heavily margined net long hedged with a massive $TZA position just in case, down 30bps for the session.
Because I have psychic powers and can bend reality to my worldview, I am going to show you where the bastard son of a bitch IWM is heading next.
IWM target, cock-solid analysis
Don’t overthink it. The headlines have already been written. This is where we are heading — 15% lower from here to PRE COVID highs. The next step down after that is POST COVID lows — but let’s not make this an unpleasant day.
Still hedged, 30% of assets long TZA — here for the fires.
It’s hard to calculate the amount of stimulus firehosed into the global economy post COVID. We do know for sure that is amounts to tens of trillions. While the ordinary plebs at home got a few thousand to tie them over to pay for toilet paper and Clorox wipes, large companies and institutions got billions.
Total debt now approaches $300 trillion. Normally this might be viewed as oppressively deflationary — but lads the firehose is still on and government debt is still increasing at a rapid rate.
Also let’s not forget that Congress authorized $4 trillion to be wasted and still has another trillion left to spend. Think about this and every country in the world and now you can begin to understand how and why inflation is our albatross.
Total debt levels, which include government, household and corporate and bank debt, rose $4.8 trillion to $296 trillion at the end of June, after a slight decline in the first quarter, to stand $36 trillion above pre-pandemic levels.
Globally, household debt rose by $1.5 trillion in the first six months of this year to $55 trillion. The IIF noted that almost a third of the countries in its study saw an increase in household debt in the first half.
“The rise in household debt has been in line with rising house prices in almost every major economy in the world,” said the IIF’s Tiftik.
How does this affect you? Quite severely actually. Not only are rates going up and the cost to carry debt, but we are seeing unprecedented inflation in just about every facet of the economy.
This is the reason why even on big down days like today oil will not go lower. We have a problem and it is starting to look a lot like stagflation, slowing growth meets inflation. The idea of bonds becoming a safe haven in a bear market is quickly becoming a fantasy. Today alone the 10yr is +7bps to 1.83%. We can only see lower rates if that debt becomes a burden and that debt can only become a burden if and when yields go too high and/or the general economy undergoes a harsh downturn, in which case you’ll be better off shorting stocks to hedge instead of attempting to hide in bonds.
The euro is up 0.8% v the dollar, suggesting either we will not tighten or they will too. Perhaps a slowdown in big tech is all the Fed needs to justify inaction?
But if that were the case, why the fuck are yields soaring today? The 10yr is up 7bps to 1.83%. The last time rates got off the floor was 2018, at which point the 10yr soared above 3% before coming back down.
Oil is undeterred. In spite of market weakness, the price is oil is barely down, pinned to highs.
Today’s market weakness is concentrated in big tech, with small caps doing better.
SAAS and all of the great high growth plays are quickly racing to become value stocks.
I made a few minor adjustments this morning but more or less kept everything intact, heavily hedged with TZA. I probably should sell TZA and man up and let my stocks run freely. All of these cross currents is somewhat insane and the fact we are seeing weakness is earnings now should create a new danger to holding stocks. However, the one silver lining is we are seeing economic weakness which can provide the Fed with a one and done approach to rates because tightening into a downturn is purely nonsensical.
With shares down 22% in AH’s, FB shareholders are about to be entreated with the largest stock price decline in company history tomorrow.
This was the news:
Meta Platforms misses by $0.16, reports revs in-line; guides Q1 revs below consensus due to ad impression and pricing related factors
Co issues downside guidance for Q1, sees Q1 revs of $27.0-$29.0 bln vs. $30.27 bln S&P Capital IQ Consensus.
On the impressions side, FB expects continued headwinds from both increased competition for people’s time and a shift of engagement within its apps towards video surfaces like Reels, which monetize at lower rates than Feed and Stories.
On the pricing side, FB expects growth to be negatively impacted by a few factors:
First, FB will lap a period in which Apple’s iOS changes were not in effect and FB anticipates modestly increasing ad targeting and measurement headwinds from platform and regulatory changes.
Second, FB will lap a period of strong demand in the prior year and FB is hearing from advertisers that macroeconomic challenges like cost inflation and supply chain disruptions are impacting advertiser budgets.
Here were some of the previous large stock price declines for FB in a single day.
With the AH’s plunge, FB is now trading at 17.5x PE and 5x forward sales, marking the low point on a valuation basis for the company. In other words, the stock has never been cheaper.
Curious what the market did in July 2018 when FB dropped 18%? Three long days of losses for the QQQs.
It’s over again. We shall retest the lows because we, as a people, are retestoors. There is nothing more to predict or explain. With SPOT -20%, $FB -15% and every other social getting hammered, we are now moving into the real world of headwinds and with that gentlemen — we are looking at RECESSION of the looming varietal.
SAAS stocks were off by 4.5% and it seems like the small bit of momentum we enjoy in the past two days was in fact nothing more than a way station to lower prices. The pain trade IS DOWN. The news flow is becoming ribald and now we are seeing high valuation tech stocks, aka NERDS, getting wrecked.
In a sane society, will would destroy the nerds and revert back to a rural community of patriot farmers.
Hope kills more people than margin balances. The idea we can crawl out of our graves today and reverse these losses is laughable.
Indexes down 4% with just 2 hours left to trade do not reverse, lest there is news. We have no news and we have no Fed to help us. You are on your own.
Whether this spills into tomorrow is anyone’s guess. I had done some legwork for you to understand what this was about a week ago. Read it over again.
I am fully invested with a TZA hedge at 20%. My positions are not in battered sectors, aside from one or two. I am heavily leaning on commodity related stocks and equities that have outperformed in 2022, not lagged.
This era will be known for easy access to capital and how companies like SQ, AFRM and PYPL took advantage of good economic times in order to boost profits. The only problem with the buy now and pay later schemes is eventually people will never pay. You’re extending credit to those least likely to pay you back. This is sub par of the sub par and now we see shares of PYPK careening lower in a manner unbecoming not such a once great stock.
Let’s not forget about SQ and how they extend lines of credit to just about any business who uses them, at a time when, thanks to COVID policies, sales at restaurants are down 50% in major cities across the country.
I sold some stocks at the open, but not all. I hedged a little via TZA and feel ok with most of my stocks. I’m no longer chasing high beta and view the recent rally as the easy money made. It’s possible we can still rally, which is why I’m still long. However and nevertheless, I remain pessimistic about the prospects for too great a rally amidst the backdrop of higher yields, higher commodities, and Russian military wares on the move.
It’s worth noting, shares of SHOP and other online retailers dropping like a stone on this PYPL move. How much of the post COVID online retailer boom was predicated and reliant upon credit schemes?
I was thinking about doing a blog showing you CRM post big dips and how, eventually, it came back. It’s true, the recent decline in stocks has been for the most part algo driven — but perhaps there’s something a bit more to it. There are shadows of 2008 — but not exactly similar since there isn’t a credit crisis yet. We have a run away commodity bubble, which almost always pops, conjoining Federal Reserve policy to tighten, ergo SLOWING GROWTH with intention. It’s important you understand that last factor.
With respects to the markets, more of the same shall occur in the interim. We went from -25% in SAAS to -14.5%. Why am I obsessing over software stocks? Because software stocks have the best growth rates and their businesses are predictable and also they’re most beloved by Wall Street. Presently they’re reflating again and it’s possible the run can go a bit further. But let me remind you of something looming large.
I don’t think many of you understand the immense mobilization taking place in Russia — with assets being moved from the most eastern part of the Federation into Eastern Europe, on the border with Ukraine. We have the President of Belarus making batshit statements, pounding the drums of war.
And now we have reports Chechen forces loyal to Russia are moving towards the Ukraine border, as well as elements of Russia’s Baltic fleet being moved to the Black Sea via land. All of this is occurring in Russia’s front yard and post Afghanistan disaster, there is next to zero iron will amongst the American people to wage a war with Russia over Europe.
So who will check them?
The entire German army totals 65,000 men, unionized — 250 tanks.
The entire UK army is 82,000 men.
Europe is a shell to be cracked and if Russia wanted to — they could take the entire continent.
Obviously we live in much more genteel times than 80 years ago, as western cities embrace all of the wonderful trappings of post modernism. But in the east, places like Moscow or in Poland or in Hungary — the men are still militant with very few transgendered Admirals amongst their ranks. I view the specter of war in Ukraine as a 100% probability and ponder if this could lead to an American response, which in turn might lead to Russia invading NATO Baltic countries in an effort to destroy the organization? Who can stop them? Brussels?
Now if this happened and China felt the mood was right to take Taiwan, we could find ourselves in a world very different from the masked one we find ourselves in presently. Again, this is a long shot scenario — but a military defeat in Europe or Taiwan coupled with the dissolution of NATO would lead to, in my opinion, a run on the dollar. In such a scenario you would see an immense shift out of dollars and into Bitcoin. Just my two cents and because of these geopolitical events, I am second guessing my decision to sell all of my ETH during 2022. I have sold two of 12 tranches so far.
On the issue of war and how it affects stocks — NOT GOOD — lest you’re winning.
Botton line: We have a nice oversold bounce underway and it might spill into a short squeeze and we might find ourselves lulled by the normality of it all. But all it takes is one airstrike to change the course of history and you’d be very wise to pay close attention to the details of this crisis over the next 4 weeks.
After our last oversold signal, we just V shaped the fuck higher so fast and strong — we are now overbought on our 6 month algorithm.
Here is the results had you bought during a 6 mo OB over the past 5 years.
Into this news, “The Fly” heavily leveraged long into tomorrow’s symphony of profits.
A great man once said “no balls, no babies.”
I closed +144bps for the session, new quant up inside the platform, and the world seems balanced again, as we waft higher and sever the heads of our enemies and burn their cities to ash.
