I CHANGED MY MIND; PREPARE FOR RUIN

I was going to get long into the close but nothing was popping out and we registered THREE BLACK SOLDIERS on the Nasdaq.

The beginning of the late 2018 market squall.

Now.

In short, we could very well be fucked here with junior at the trading turret, Trump going bananas, and stocks reflecting greatness and not a Chinese trade war and all of the trimmings of latter day Empire.

I hedged into the bell.

HAGW.

Before you wrap yourself with a burlap cloth and toss yourself into a lit fireplace, consider the following.

Trump just freed A$AP Rocky
Trump likes higher stocks
The Fed is now Trump’s bitch
The market cannot stay down for more than a few days

This is the worst week of 2019, which is pathetic — really. This is not even a blip, yet people are panicking the fuck out of their positions. If I was a betting man, and I most certainly am, I’d wager for a sharp heart attack run to the upside next week. But one cannot be sure about these sort of things, so one needs to prepare for all eventualities.

Heading into the balmy August weekend, I am 35-40% cash. I have one overnight trade that needs closing out and my biggest exposure is to gold. I am not immune to the pangs of this sell off, but my losses pale in comparison to yours.

This market feels both sloppy and lazy today. I’d be shocked if we rallied into the close.

As long as TLT keeps going higher, stocks will be under pressure. The entire yield curve is fucked now and it’s applying stress onto banks. While we do not need banks rallying for the market to rally, we do need the banking sector to be vibrant and healthy, otherwise capital flows will contract and the economy will fuck itself into a recession.

I’m suggesting that you watch the 10yr yield too, presently at 1.87% for signs of a reversal before you step in large with big dicked buy orders. This being a Friday and all, you’d be hard pressed to find the market rallying with any real verve — and much more likely to panic press into the close.

I’m on a bit of a losing streak here, booking losses and not really complaining about it. It’s all part of the game, this stock business. One minute you’re riding high and pissing out of stretch limos and the next you’re getting ran over by a 1983 Oldsmobile by someone’s grandma.

At the moment, I’m 35% cash, red painted ALL OVER my portfolios — happy as a fucking birds in a house filled with seeds.

I sold out of my TVIX and SOXS too god damned early. Had I known Trump would ruin and otherwise perfect rally, I would’ve held. But I didn’t. Those are the rules. I don’t make them up. Overnight trades are sold, win or loss, the next day. So I took a 0.5% loss in SOXS and a 5% ding in TVIX. So what both ETFs are sharply the fuck higher now and I would’ve made a fortune. So god damned what! You don’t see me lamenting over it — do you?

Those are the rules and I follow them without complaint.

On the plus side of things, my gold and silver stocks are giving shorts strokes now. The heat is hot because it’s fucking fire. The key tell now is oil, down nearly 8% — complete and utter destruction in the oil space. That shit is getting lit the fuck up. If you’re buying the dip in oil, you might as well hand your money over to a financial advisor and have him lose you money at a slower pace. Seriously, oil is cooked.

On a very interesting note, BOND YIELDS HAVE FUCKING COLLAPSED. Look at TLT. The 10yr is 1.89%, down an astounding 12bps.

Why did all of this happen? Fucking Trump, declaring war on China via Twitter. He even blamed them for our opioid crisis. This is autistic stuff.

…buy agricultural product from the U.S. in large quantities, but did not do so. Additionally, my friend President Xi said that he would stop the sale of Fentanyl to the United States – this never happened, and many Americans continue to die! Trade talks are continuing, and…

— Donald J. Trump (@realDonaldTrump) August 1, 2019

…during the talks the U.S. will start, on September 1st, putting a small additional Tariff of 10% on the remaining 300 Billion Dollars of goods and products coming from China into our Country. This does not include the 250 Billion Dollars already Tariffed at 25%…

— Donald J. Trump (@realDonaldTrump) August 1, 2019

…We look forward to continuing our positive dialogue with China on a comprehensive Trade Deal, and feel that the future between our two countries will be a very bright one!

— Donald J. Trump (@realDonaldTrump) August 1, 2019

My advice:

Raise cash and be patient. I am 40% cash and about 25% precious metals. I will win, sir.

I know what you’re thinking.

“Why can’t I be like Le Fly?”

You just can’t, so quit acting like me.

Lesser men sold gold and silver yesterday, during the pangs of the decline. Do you remember how dreadful it looked yesterday and then I said this?

If you’re not buying gold now, you should close your accounts and just put it all in $BTC

— The_Real_Fly (@The_Real_Fly) July 31, 2019

That’s just how I roll, bro.

What did I do today?

Oh, I don’t know. How about reconstruct the only Quant in town, on these internets, worth looking at and also sell out of my losers and book some small losses, in order to make room for some massive wins. How about that?

Doesn’t sounds like much and some might accuse me of making a big deal out of nothing — but fuck off.

I bought a few stocks today, based off the algorithmic greatness of Exodus.

Oh, what does that mean? (I am not insane for interviewing myself with fictitiously dumb questions)

It means momentum based algos leading me towards the promise land. This is what you called high probability hit rates, not so much different from an American bomber laying waste to some Middle East shit hole. This is what I do all day long.

Other than that, not much going on. Just running a world class trading room and data platform, making gazillions. No biggie.

Great, I thought markets were actually going to do something fun — trap door lower — maiming a whole crop of freshly minted traders. Instead, more nothing. I just had a headline up promising collapse with the Dunkirk soundtrack attached. Now I’m the laughing stock on Wall Street — fucking great.

I would say “the day is still young and anything could happen” but you know how this story ends. The fucking market and its big floppy tits are going to bounce all the way back up to record highs, cutting all of the dicks off who tried to fuck it on the way down. This is what the market always does and will continue to do for as long as you live.

Sure, I had some hedges that could’ve been sold for wanton profit, or at least small profit — but now I’ll probably have to sell at losses. That’s what this market is, a gigantic dick cutting device for bears. You cannot be a bear and live to tell the story.

On the agenda today, pick back up on the bull narrative. Get my shit in order. Forget about black smoke and chards of metal bustling throughout your city streets. Re-allocate the Exodus Quant for August and prepare to see prices walked higher.

If you want to know what the market will do tomorrow, listen to this soundtrack for clues.

Dunkirk, all day, wanton surrender in the face of adversity. Tuck tale and flee because the opposition army is too strong and big. Hope to God women with boats come to rescue you to safe harbor and the fucking Americans come to save the day.

A nation of cucks.

Time to get greasy.

Lots of cross-currents during today’s tape. Let’s start with the fact the Fed is making themselves look ridiculous, being dragged around by Trump. Also, the 2s and 10s tightening like a motherfucker today. In the past people cited bullshit treasury duration spreads as warnings. But listen to me pal, the only one worth paying attention to is the 2s and 10s and that’s only 14bps now.

Gold dropped. Bitcoin surged. Stocks dropped.

I won’t make any definite determinations here, however. It’s tempting to call for a collapse — but the market has proven to be resilient. That being said, this Master Ace Trade sold out BEFORE the Fed meeting and raised his cash to 40%. So I was already ahead of the curve.

Did I mention I bought SOXS too? No I did not — because free picks on the free site is illegal now. Sue me.

I’m only up 6.5% for the day, no big deal. Nothing to brag over.

The policymaking Federal Open Market Committee drops the target range for its overnight lending rate to 2% to 2.25%, or 25 basis points from the previous level.

The Fed cites “implications of global developments for the economic outlook as well as muted inflation pressures” in its first rate cut since December 2008.

The Fed also leaves the door open to future cuts, saying it will “act as appropriate to sustain the expansion.”
The central bank also ends its balance sheet reduction two months earlier than planned.

2nd biggest 2s30s flattening since Brexit pic.twitter.com/5d1lWtkKhM

— zerohedge (@zerohedge) July 31, 2019

POWELL: I DIDN'T SAY IT'S JUST ONE RATE CUT

this is an absolute disaster

— zerohedge (@zerohedge) July 31, 2019

yuge flattening on 2s10s pic.twitter.com/u5V3QKvEpm

— Alastair Williamson (@StockBoardAsset) July 31, 2019

I’m thinking we fucking plunge thru the floorboards and fuck everyone tomorrow. But I could be wrong. I also think gold is a steal here. Whenever it drops it pops the next day. But my best advice is to raise cash. We’re in a dangerous spot now, because of the bond market and because we’re doing something with rates that has never been done before — cutting while at record highs.

But get this statement out of Powell. What sort of shit is this?

Powell on not fearing the extension of this recovery: "There’s no sector that’s booming and therefore might bust."

Fed officials have also been comfortable with a continually tightening labor market that hasn't resulted in huge inflationary pressures

— Brian Cheung (@bcheungz) July 31, 2019

I took out a PINS overnighter trade yesterday and that worked just fine. 310% annualized return, fucked faces. But now I need to step aside, since many of my positions have grown old and stale. This is a trading account. The rules of said account demand that ALL POSITIONS be relevant for now, and not some fucking narrative that I yarn up in my attic. If the shit isn’t popping off now, I’m out.

As such, I sold a slew of stocks — a fucking slew — most for small gains and losses. The net result was me, this guy here, raising cash to 40%. Also, I took out a hedge. Also, I’m drinking black coffee now because I ran out of milk.

For now, “The Fly” is chilling, eye twitching, head throbbing with pain, body filled with aches from laborious labor (GRAMMAR ALERT!), eagerly awaiting a mean pullback.

It’s also fun to do, apparently.

Let’s examine the mechanism that helped propel Apple’s share price to new heights.

The company was and is generating a shit-tonne of free cash flow. Carl “fuck you, give me three seats on your board” Icahn demanding that Apple, incredulously, borrow money in order to buy back shares. Tim Apple acquiesces and a new era of financial engineering was born.

Fast forward 5 years and Apple isn’t making all that much more in FCF, but the shares are +125% — double the return of the SPY. How?

Well, because THEY FUCKING BORROWED $104 BILLION DOLLARS AND USED IT TO JIMMY RIG THEIR OWN FUCKING STOCK, reducing the amount of shares and artificially increasing earnings.

Is that a really good fucking idea?

You tell me? What if Samsung’s phones did not catch fire and instead poleaxed Tim Apple into a giga factory? Well, if that happened then business would sink, earning collapse, and then Apple would be out of $104 billion with nothing to show for it. This really is a shameful exhibition of journalism by CNBC, cherry picking Apple as a poster child for financial rigging, when in fact the exact opposite is true for 90% of companies doing share buybacks.

HOW MUCH DID LEHMAN WASTE ON BUYBACKS?

In present day, how much did GE waste buying back their own stock? Or how about old Valeant Pharma? Remember those fuckers? Companies desperate to get a rise in buybacks usually buy back shares in an attempt to assuage activist shareholders. Instead of using the FCF to build the business, they dick around with their brokers reducing shares and creating artificial EPS growth by this insidious fucking process.