A Reminder That Tech Wrecks Are Irrational and Can Last Longer Than You Think

Back in 2014, I underwent my worst drawdown of my life. It was a pivotal moment for me. I didn’t know it at the time, naturally, since I was dealing with the realization that I had made ruinous choices with my money. Heading into 2014, I had a chest full of pride and sack filled with courage. By April of 2014, I had nothing but BALs (BIG ASS LOSSES). Here’s a blog I had written then, lamenting over my situation.

The majority of my holdings are in 4 stocks: WDAY, FEYE, SPLK and YELP. I bought them because they were growing their revenues (LOL) and were winners, led by fantastic management teams. All of that means absolutely nothing today, as this basket of hell, death and aids netted me losses in excess of 10% (that’s right, 10%…for the day). I am beyond words. This is more than what I signed up for and ponder to myself the very meaning of life.

As a general rule, I sell after 10% losses. This time around, I rode these stocks straight down the toilet bowl and now swim with them in the raw sewage, with the rats and alligators.

I sold out of some small positions today, CLIR, FLXN and ANGI. But the money raised from those sales do nothing for me, as I am completely decimated amidst a crowd of geeks laughing at me for being so stupid.

With today’s sales, I could average down in these stocks again; but the life has been drawn out of me and I am giving up. I won’t sell. However, I intend to drift away on a small piece of wood, into the sunset, without any paddles or provisions. It was just meant to be, a fantastic blow up, broadcasted live in a public forum for all to scrutinize. Please do not let my newly found tone of pathetic contrition stop you from poking fun at my state of affairs, as I would not grant you safe quarter if the scenario were reversed.

The reality is the market eats its young and spits out the old men from windows. It’s never personal and just because you suck now and lost a bunch of money, that doesn’t mean you can’t regroup and rise again from the ashes. Greed is a wonderful emotion, but it cuts both ways. You get to make all of that money during the good times, but suffer, abhorrently, during the bad.

Bottom line: Assess the damage and stay in the game. For me, the market crashed today, and funnily enough, it’s barely down 1% for the year. Fuck me running sideways with a pineapple.

Looking back on that post reminds me of the perils of hubris and how success can, in fact, defeat you.

On Friday tech stocks, led by Semiconductor – Broadline, crushed traders. The decline was steeped in retribution — cast upon fast trading monkeys by old money bastards. I know for a fact, ‘they’ don’t want you to success. The market is a casino and the house prefers to win.

I’ve read comments by people jumping into the decline, hoping for a bounce. Here is what the Exodus oscillator is saying.

Based on what I’m seeing above, the sector looks somewhat oversold. But that’s under normal conditions. Those oscillators are useless in a six sigma event.

For those who forgot, let me show you the severity of the drawdown during the tech wreck of 2014.

I recall doing a post, highlighting the losses of early 2014 — which displayed a sundry of popular tech stocks down by 30-60% inside of a few short months. The point here is to expect the unexpected during times of duress. Is this the beginning of an extended pullback in tech?

Maybe.

From a market cap standpoint, tech now represents more than 25% of all stocks, or $10 trillion. I cannot recall the weighting being so high — so you should expect a reversion to the mean in the not-too-distant future.

Here I documented corrections from 1998-2000.

A case study of SCMR during the dot com crash.

God I love this timeline, if only for the distraction from the other horrible stuff — such as $2k per month health insurance. In his first press conference since the Comey testimony, Trump laid into the press, again calling them ‘fake news’, called Comey a ‘leaker’ and felt he was totally vindication from the suggestion of collusion or obstruction — and also hinted that the existence of tape recordings of his conversations with Comey could be real.

In the event they are and prove Comey to be a liar, will the press apologize? Will you shills apologize and genuflect to the orange God?

Here are some of the more classic varietal Trump moments and full clip below.

Trump calling out FAKE NEWS to press pool. It doesn't get old. "Such a nice man.' pic.twitter.com/qxWKbhovk7

— The_Real_Fly (@The_Real_Fly) June 9, 2017

Trump calling out FAKE NEWS to press pool. It doesn't get old. "Such a nice man.' pic.twitter.com/qxWKbhovk7

— The_Real_Fly (@The_Real_Fly) June 9, 2017

Get in here shills. It’s time for your daily lesson on the sacred documents of the U.S. Constitution. Following up on his emphatic belief that the President can, essentially, do whatever the hell he wants with the FBI head — the famed Harvard Law professor called the former director a ‘coward’ for leaking his notes to the press, saying “I thought it shows a lot of cowardice. The head of the FBI (audible laughter), the guy is supposed to be a strong and powerful guy and he’s afraid of a couple seagulls (referring to Comey’s depiction of the press outside his home to seagulls).”

He added, “He should have had the courage to get on television and release the memos and talk about it or not talk about it. But to have some friend become his surrogate was absurd.”

Dershowitz then reiterated his thoughts about the non-existent obstruction case against the President.

“We should just stop talking about obstruction of justice, there’s no plausible case there.”

You know things are bad when the head of the FBI is called a coward by Alan Dershowitz — for fucks sake.

Semiconductors are leading the charge sharply lower for tech, led by NVDA, AMD, UCTT and a few dozen others — with bone crushing declines. These stocks deserve to be murdered or buried alive. The oscillator in Exodus, powered by predictive algorithms, is not close to oversold yet.

Amazingly, there’s a flipside to this debacle, an alternative universe where the rotation is as clear as the day is long. The banks are being bought with extreme vigor.

On May 31st, 2017, Exodus‘ mean reversion intelligence flagged oversold for FAS. It’s important to note, for the sake of posterity, it was correct — yet again.

Our track record is 13 wins zero losses over the past year. No one knows mean reversion better than me.

The regional banks are enjoying the tech wreck the most — with 3%+ gains in dozens of names. Candidly, this all feels too mechanized, not very spontaneous. This organized and orchestrated rotation does not feel main streetish. My best guess, Goldman is making a killing today, while Joe Blow is getting his brains shot out in his tech heavy margin account.

The house always wins. Get an edge.

Cramer just got owned here.

Jesus Christ NVDA is overvalued. The stock is up 50% over the past month. It is up 225% over the past year. God damn it, it’s up 1,269% over the past 5 years. Truth be told, the gains are well deserved. Look at the batshit earnings and revenue growth — nothing short of stellar.

With a PE in the ballpark of 50 and p/s of 9, this stock is fucking stupid. Professional bearshitter from Citron made the call today, strongly suggesting the stock was heading back to $130. Lucky for Left, the market decided to dump out today, making him an instant winner. Perhaps the Gods are on his side, or maybe he has complete control over the market — rendering free will to be idle nonsense. Either way, he got long term bull of NVDA, Jim Cramer, to agree with him that the stock was heading for a correction and could see $130 in short order.

The rumor is, aside from RUSSIAN FAKE NEWS (fucking CNN) is that the Kingdom of Qatar paid a billion dollars for 26 hostages, who were hunting in Southern Iraq. What the fuck were they hunting?

Whatever the reason may be, our cromagnon Sec of State, Rex Tillerson, is calling for the shit to stop — especially since we have military assets in that country and the blockade is causing kids to skip school.

Saudi Arabia claimed Qatar is supporting terrorism and they’re not going to take it anymore. This is rich, coming from a country whose soccer team just refused to observe a minute of silence for the innocents killed in the London attacks.

The Al Udeid U.S. military base in Qatar houses over 10,000 military personnel and is a hub for CENTCOM, vital to operations in both Iraq and Afghanistan.

We’re finally seeing some tangible losses in the tech sector, and the NASDAQ as a whole. The widely owned FAAGS (Facebook, Apple, Amazon, Google, Snapchat) trade is taking a breather today. Thus far, there is no reason to be concerned, unless of course you were betting on weekly call options.

Perhaps the market can now get destroyed, crashed, with no survivors.

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At the very minimum, a serious and arduous drop in the indices will help the VIXfags recover from their record, breath-taking, losses. In smaller cap stocks, the losses have extended to more than 2%.

My model forced me to sell half of my risk off assets, GLD, TLT. Additionally, I sold every God damned stock that I owned, because the market cap was all wrong. This week was all about small cap. Since I’ve been quantitatively tracking this, I’ve seen the market reward smaller and smaller capped companies over the past 5 weeks. As such, I am now long a basket of 12 stocks, across various industries, in the $1-5b market cap quintile.

Everything else had a lackluster week. Mostly, stocks were flat, aside from the smaller ones.

I understand the risk inherent in allocating assets into a strategy that is backward looking. However, predicting the future is even harder. Mostly, stocks in motion tend to stay in motion. When a gorilla run is set to ensue, very rarely will it end in 1 week. In my studies, large runs usually stretch for 7 weeks. The point of this systematic approach is to discipline my allocation into what’s working now — forcing a quick end to bad trades and underperformance. I am chasing alpha, but in a smart way.

Details of my new portfolio are in Exodus.

One of my hobbies is to collect old newspapers. I find that reading the prose and the news events of yesterday, as they were written then, to be of immense entertainment. Nowadays, we fashion ourselves to be of supreme intellect, casting aspersions at our Victorian Era reprobates. But can anyone else argue the indelible fact that — at least — they knew how to build a better home back then? One hundred years hence and people still prefer the style and design of those Victorian era homes. Personally, I like a newer home — but I do enjoy looking at the old ones.

I came across this article today, which spoke of ‘bicycle insanity.’ According to the good doctors back then, women were going insane from the wheel. Apparently it was afflicting their spine, in turn, they were going insane. I am certain plenty of poor women were tossed into asylums by their husbands back then, after taking to the wheel one too many times.

Read this shit. The prose is fantastic.

Does anyone else dispute these claims? Clearly, women who take to the wheel too often are insane. I’ve seen it with my own eyes. While people do not get ‘bicycle humps’ anymore, the seats are rarely any good, which is likely the reason why so many women out there are haggardly hogging up the road, riding erratically and without decorum or respect for the road.

Clearly, insane

For some reason this reminds me of the little show given at the Hugh Mercer’s Apothecary in Fredericksburg, VA. If you’re ever in that town, definitely go check it out. Also, the local pizza shop there sells the largest pies I’ve ever seen in my life.

Because he wants to save the world from ‘climate change’, Frances Macron wants to impose an ass-raping carbon tax of 30 euros per ton of CO2 emissions — which is an astounding 6x the current price. If approved by his superiors in Germany, this would equate to a very nice and very large windfall for anyone long carbon credits.

German utilities, namely RWE AG and Uniper SE, said such a plan would crush them — leading to job losses. Those jobs, however, are in the way of progress.

France tried and failed to pull this stunt last year, in an effort to supplement the EU’s Emissions Trading System (lolz) — but failed. The subsequent result was ‘pollution rights’ prices plunged and are down more than 80% since 2008.

Desperate for gains, France thought about doing a unilateral price floor for carbon — but ditched the effort ahead of the Presidential elections because labor unions were chimping out because it’d lead to job losses.

But now that the elections are over and Macron won, France is feeling eager to provide the $48b carbon credit market with stimuli — once again lobbying their German leaders of support their plan.

Leaders from both countries intend to meet this summer to discuss the issue.

The UK placed a similar floor of $22.88 per ton of CO2 emissions, in order to offset ‘social impacts.’ The net result was glamorous tax receipts for the government and a 30% decline in coal powered electricity production.

“The time is the right one today for an initiative that maybe could be generated in France, with quick support of Germany, obviously after the September elections,” Levy said. “It can be done gradually, and it can be done in such a way that it leads to no massive phasing out of production means in the short term.”

The carbon credit racket reminds me of the taxes placed on cigarettes and other tobacco products. Our government claims they do it to mitigate healthcare expenses absorbed on the state level, in addition to serving as a deterrent for mass consumption by making prices too expensive for people to buy. However, anyone taking a look into the profits enjoyed with this tax, in addition to the amount of money raised via the tobacco settlements and subsequent issuance of tobacco bonds, knows they’re full of shit and simply profit, enormously, by imposing taxes on items that people are addicted to consuming.