Most Hated Market Of All Time

The pain trade is DOWN gentlemen, always down. With the vast majority of Americans invested via retirement and discretionary accounts, the pain trade is almost always DOWN, except for rare occasions when the gloom is so infectious and caustic — the move higher comes as a surprise.

Here we are again, gingerly trodding higher amidst deleterious economic circumstances. Ordinary plebs are having their septic tanks explode on them, shitted lawns, all the while Lawrence Summers vacations in the Caribbean informing said pleb that his job is about to be lost in order to preserve the FOMC mandate.

YOU WILL BE FIRED IN ORDER TO PRESERVE THE FEDERAL RESERVE MANDATE pic.twitter.com/BkDPzQzTs6

— The_Real_Fly (@The_Real_Fly) January 9, 2023

All market professionals understand stocks belong lower. Those of us unburdened with the shackles of having to manage it for others, collect exorbitant fees, trading from wine cellars, really just want the whole thing to burn down — sometimes because others might’ve retired from managing OPM in 2017.

But will it?

The answer is YES! The market will, at some point, crash and burn — and it’ll make for a great spectacle. However endearing the thought might be, as of now, sadly, we are trending up.

Zero complaints if you’re a permanent bull. Everything you like to see is happening. Stocks are happy and fat. Bears crucified and their bodies displayed for all future potential bears to see as a warning.

I closed out my trading account this morning, as is customary for me at the start of a new week, +152bps in spite of a monstrous 8.8% loss in my SOXS hedge. I would’ve been up 3% this morning if it weren’t for that small misfortune.

I can and will allay my hedging losses on the fact that the market has stunk to high heavens for the better part of the past 12 months. Even though we are rallying and all seems to be going well for Pax Americana, it is clear to me that the market is overbought and also it’s clear to me that stocks are vulnerable to a weak economic backdrop.

Nevertheless, price action is king and right now the prices are going up.

I’ll re allocate a 100% long book after 12pm today, using the Stocklabs weekly quant.

Let me just say, I cannot believe it’s 2023. The time flies and not in a very graceful way.

Here’s my take on week 1 of 2023.

It was rot up until Friday, typical of the sort of market we’ve endured for more than a year. The big leaders were in China: BABA +22%, PDD +17%, fucking BEKE +27%.

Airlines +11%
Gold +10%
Copper +8.9%
Aluminum +8%
Foreign banks +7%

Interesting divergence between copper and other materials and oil. For a long time they traded in sync; but recent weakness in oil and gas has caused a divergence — with oils lagging and stocks like FCX, X, and CLF surging.

On the issue of gold: I believe it has filled the void the SHITCOINERS left behind with their disaster. Is gold done going higher? If this is a legit breakout — hardly. Here are seasonal returns in January for AEM.

From 2014 to 2017, gold socks commenced sizable breakouts in January, much more than the current +10% gains.

Interestingly, there is a tight correlation with gold and rates. As you can see below, as TLT goes — so does AEM.

I’d argue TLT is way ahead of itself here, with limited upside potential. Who are we kidding — inflation isn’t dead and the Fed are not going to slash rates just to save some fucking retards leveraged long NFLX.

Regarding the FAANGT block of stocks — middling — with outperformance in META/NFLX and woeful underperformance in TSLA — as monsters like Bill Miller sell it short.

If I didn’t have a brain and only glanced at the price action of stocks for the first week of January, I’d like it. Lots of industries jimmied higher, from retail to tech. The high growth cash burners DID NOT bode as well as real companies like WYNN (+13%) — which is a good thing. If we start next week strong again, I might just get out of my own way and stop hedging.

There is, however, an overbought signal inside Stocklabs now on our long dated mean reversion algorithm — which is foreboding. In the past, the OS was a buy and the OB was a buy — because stocks always went up. But over the past year of bear, the OB was most definitely a sell signal — solidifying my thesis to be true that a bear market would in fact be actionable with the often ignored OB during bull runs.

My confidence level on any signal, including my own, is always met with suspicion. I don’t view this as some sort of holy grail, but instead a guide to the past and what might be in the future. But like Ebenezer Scrooge once found out, the future can be altered based upon some good deeds. Should we get some news that is BAD next week, we might very well continue to rally — because we’re at the point in the cycle where bad news is now viewed as good for stocks.

NEVERTHELESS, I activated my algo account, which has been dormant since October, to sell short stocks via SQQQ. God willing, I will be entreated with gains early next week — betting on the misfortune of others — snatching their gold chains and making them mine.

I am salty — specifically because I managed a long only book into a loss of 87 bps today via an outrageous loss in a SOXS position gone awry. No need to rehash old news — for I am certain it will ruin my weekend. Let’s just say I had it pegged wrong — because I underestimated the fervor of the PERMANENT BULL class of investor.

It should also be noted, many stocks faded into the close, sans tech — which was strong throughout the session. During bull runs, these types of fades are part and parcel of keeping bears committed to being retarded. I will not look too much into it, since the Dow rose 700 off the back of RUINOUS news that the economy is in contraction.

The theory goes… slower growth means more job losses means Fed pause. The only issue I have with this train of thought is that it’s fucking stupid. The economy slowing does not equate Fed easing — since those cuckholds are waiting for 2% CPI — which should come back ’round by about 2026. It is very likely rates will be above 6% by year end — at which point the economy would be in shambles and only those with cash would be able to sop up assets on the cheap. The timing will of course be tantamount in any venture whilst on the precipice of depression. But that’s neither here or there. What is important now, at this very moment, is what does this week’s action portend for the balance of 2023?

The Dow and SPY rose by 1.5% and the NASDAQ +0.9%. By all accounts, we should now be off to a splendid year.

How did I manage it?

RUEFULLY.

I am down for the year to the tune of 0.76%, mainly due to bad hedges, very sour indeud. Had I not chanced upon SOXS today, I’d be up 2%+. But we cannot and mustn’t cry like babies about spilt milk. If I were to do that, I’d cry myself to death. Let’s think about the future and how grim it might be, with all of those future layoffs and LESS THAN EXPECTED earnings results. And let’s not forget about the earnings and possible wars — and maybe even a Presidential funeral! We have so many great things ahead of us, so chin up if you shed a little this week — for the worm shall turn soon and when it does it will swallow the bulls whole.

Happy January 6th!

Big balled rally today, built upon the bones of those about to be buried.

Briefly, markets are rallying because the economy is in COLLAPSE MODE, as evidenced by today’s major ISM miss.

ISM contracted for the first time since 2020, coming in at 49.6 vs an estimate of 55. Immediately following this news, markets took off and haven’t look back since.

The US 10yr is down nearly 14bps because the market believes the Fed will need to PIVOT in order to stave off a Great Depression. In short, the pavlov effect is happening and traders are salivating from their mouths in the belief that the FOMC will save them.

The only problem with this theory is that it isn’t true. No one is coming to save you and the Fed cannot cut rates.

I will repeat.

THE FED CANNOT CUT RATES, so what are you getting all excited about?

Bottom line: My feeeeelings are that markets should crash and burn forever. However, I see the response to retarded news and realize not everyone is as smart and sophisticated as me. Ergo, I have a fully long book, which is hedged to my own detriment at the moment. I am merely +26bps thanks to a series of bad hedges. NEVERTHELESS, I remain steadfast in my belief in collapse and will pray to the Gods all afternoon in order to demand a crashing of the close to validate my beliefs, rooted in my own insecurities — likely because I grew up in the sewers and like to feeeeel right about things from time to time.

Markets closed near session lows, DOWN 155 NASDAQ — deservedly so.

Pray tell me, aside from your holdings — why should stocks go up? Why can’t they go lower — much much lower?

See, I am of the belief that the economy is SLOWING, as evidenced by massive job cuts at Amazon and CRM. I am also of the belief that this time, apparently so, the Fed isn’t coming to save you.

With that in mind and all other things, you know it and I know it — we are STEAMING towards perdition and nothing can stop this train from derailing and crashing into the ravine.

I traded +26bps today, Quant +44bps — because I am a professional.

Another boondoggle of a day. We had such gay thoughts of upward surging markets, only to be rudely interrupted with a hard move to the downside. I will tell you this in complete confidence, I was never worried about myself, since I know myself very well you see and I knew that if markets COLLAPSED I’d protect myself. As it stands now, I am +35bps, not a whole lot — but also not nothing.

I am hedged a 100% long book with 20% in SQQQ and DRIP.

But it’s not all rot to start the New Years. Sure TSLA, MSFT and oil are down, but have a look at gold will ya — or maybe you should sneak a look over at what BIG ZUCK is doing these days.

Most up tera caps, YTD

Most down tera caps, YTD

Most up by industry, YTD

There are numerous areas of the market that are performing well.  The BIG LOSERS are in the commodity space — aka last year’s winners.  Naturally the very best place to put one’s money in 2023 is wherever I put mine. What is in store for 2023? Will markets CRASH into an ocean of fire or perhaps march higher into Ukrainian victory (SLAVA UKRAINE!) — as they advance quickly into Crimea and displace and kill all of the Russians there.

To sell TSLA down 70% because Elon Musk is allowing free speech on Twitter is like selling BP back in the day for accidentally almost destroying the Gulf of Mexico. It was unfortunate and the seagulls were unappreciative —- but they got over it. And you will get over it too, the hatred for those who do not censor and let just anyone get on Twitter and voice opinions.

Whilst I know it’s important to adhere to state doctrine and dogma, there are other factors that go into running a business. We already know growth is slowing and the economy is in the shitter. We should expect stocks to trade lower for at least 6 months, if not longer.

HOWEVER, in my view, when dislocations occur so does opportunity. I cannot tell you how many times over the past 30 yrs trading I thought to myself and out loud “THIS IS IT, THE BIG ONE. WE ARE GOING TO CRASH NOW.”

And to be honest, that shit really did happen ever time: we crashed.

We crashed in 2000, 2001, 2002, 2008, early 2009, a little in 2011, 2020 and again in 2022. Yet in spite of all of those crashes, enormous wealth had been created over that time period and stocks eventually rebounded and reached new highs.

Therefore, with that spirit in mind, I made my second of 12 tranche purchases of TSLA. I can’t think of a more disruptive force multiplier than Musk. The stock is in the dumps and that’s a good thing — because I’ll be dollar cost averaging in for all of 2023 and hope to see these purchases bear fruit by this summer.

The technical analysis nerds controlled today’s tape and bought every support, sold all lines of “resistance.” Ergo, markets closed up 77, off the highs — but a decent showing nonetheless.

I closed almost exactly FLAT for the session, which is a massive skill on its own right. Many can make money. Most can lose money. But how many can close flat?

I am 25% hedged via SQQQ and down 2% on the position, so my patience tomorrow morning will be thin.

What the fuck am I doing?

Not sure yet. I am speculating around the fringes and do not trust the market. Since the NASDAQ is down 0.17% for 2023, I am more or less in line with the broader indices — eagerly awaiting for an opportunity to bust loose.

This morning I had to run around, sashay to and fro, so I applied 25% weighted hedged to my account, which all but negated the gains ENJOYED, or lack thereof, in the rest of my account. In a BOOL market, this is to be expected. However, in an evil bear market, such as this, one would expect the opposite.

For two days now I’ve hedged WRONGLY and given up my gains. Considering I am merely down 10bps for the week, no harm, no foul.

I am still holding these hedges, namely SQQQ and TZA, because it is my belief, based upon the tingling feelings in my nuts, we are to CRASH THE CLOSE again. Perhaps this is all fanciful wishful thinking. A boy can still dream.

An update at House Fly:

The entire house inelegantly is afflicted with plague, sans me. I suppose because it nearly killed me 3 months ago (over dramatization), I have enough anti bodies to fend off this scourge. Back in September I was racked with 104 fever for 10 days and listened to the entire history of the Mongol Empire for 35 hours, which because of that — I am now a foremost expert.

Did you know when Mongol hordes besieged walled cities they’d simply build a bigger wall around it and lock them in and also shoot arrows down from their superior walls? Something to think about, or not.