Orderly Dumping of the Markets

I’m feeling terrible this morning, but grateful for not being vaccinated.

Last night cryptos just completely liquidated. Most are now worth zero. This morning stocks are tricking people left and right into believing a bottom is in. The sell off is once again ORDERLY and I ended up selling my hedge for profit and several longs at a loss. As of now I am half cash and half refiners, ag, and SE.

SE is the perfect stock to embody this market, always has been. It went from $40 to $400 in the recent bubble and now back into the 50s, clownishly. There are major institutions who own it and buried by it and it’s the perfect stock to bounce, if there even is such a thing.

Since I’m not feeling well, perhaps it’s allergies or perhaps something a bit more, I’ll be trading light, but checking in every now and then in between nightmares.

I’m feeling under the weather and may very well be DYING of COVID-19. If I do die, just know that I was grateful for not having been vaccinated, seeing the FDA just approved booster number 5. I’m here alone in my dark cold basement, sleeping on a very uncomfortable chair with moving boxes all around me.

There was some data I wanted to share and some of it looks good for potential upside buying action soon. Basically, the bull case is stocks are down and normally when the mood is this grim bottoms are put in. The argument against a bottom is the fact that we’ve yet to see massive unemployment numbers, which are coming soon and in a big way.

Ok, here’s the stuff I wanted to share.

THE BIDEN ADMINISTRATION HAS CANCELLED THE SALE OF OIL AND GAS LEASES IN ALASKA – CBS.

— The_Real_Fly (@The_Real_Fly) May 12, 2022

Hardest hit industries the past 9 months, total collapse, trillions lost pic.twitter.com/S1Ygq16A3R

— The_Real_Fly (@The_Real_Fly) May 12, 2022

Cloud stocks cheapest since 2016, via ?@stocklabsapp? $WCLD pic.twitter.com/OHhMUr1UUn

— The_Real_Fly (@The_Real_Fly) May 12, 2022

Second worst start to New Year. 1932 was peak Great Depression. Biden is a piece of shit https://t.co/tJ6ariTZb7

— The_Real_Fly (@The_Real_Fly) May 11, 2022

NASDAQ FUTS are up 80. If we gap up, I’ll likely just move to cash and take what I can get and then reload at the close.

I thought it was funny until it wasn’t anymore. I was barely down all session and then we STEAMED lower into the close. I closed down 1.7%, a formidable loss — but not my concern at least intraday. I am worried about tomorrow, which is why I sold out of my 2x TQQQ position and replaced it with a 2x UVIX hedge. I am in a 17% cash position and certainly exposed on the long side. In the event we violently flush in the morning, I will close out the UVIX and go long. If we gap the open, I will close out the UVIX and probably most of my longs.

I permitted myself to be comfortable today and didn’t take the selling seriously. There was immense damage done to the tape, in a number of stocks.

Irrespective of what the market does tomorrow, the next phase of this bursting of the bubble will be job losses, millions of them. By Fall we will be discussing how best to jumpstart an economy barreling into depression.

Perhaps a world war will save us, financially speaking.

After so many accounts have been emblazoned with losses and the margin call telephone festooned with the guts of all of the zeroes out there, I have decided to bulk up long here. I doubled down in all of my positions and even started one in UPST, now trading 2.3x sales — an absurd valuation all things considered.

I am cognizant of the fact that Tiger Global, Ark Funds and many others are getting their brains blown the fuck out — but I am old enough to remember all of the previous fires and how they burned the brightest when they were just about to be extinguished. Shorting here is on par with believing “this time is different.” In many ways the dynamics of the market IS different, with the Fed fixing to screw us. Also, this is merely the opening salvo into what will likely become a depression. That being said, I am not in this for the long term and I am merely trading to and fro. I was up 1% earlier and then after I doubled down my losses accelerated to 1.6%. Right now I am down 40bps, basically a giant nothing burger, with 13% cash.

The temptation is take quick profits is always lurking. However, there are times and places when you must take a shot and seeing so many stocks down more than 10% today (390) has me believing in a capitulation near term bottom trade might be happening today.

With 1 hr left to trade and stocks back to selling down, it looks like we might CRASH THE FUCKING CLOSE. I will reserve the rest of my cash and margin for an opening flush out tomorrow.

As hard as stocks have been hit YTD, today is really adding insult to injury with absolutely mind boggling declines.

Here is a look at the bloodshed.

U -36%
KRNT -32%
COIN -30%
RCUS -28%
FVRR -25%
MSTR -23%
ADV -23%
UPST -22%
BRP -21%
TXMD -19%
NVAX -19%
CVNA -18%
AFRM -18%
RYI -17%
DISH -17%
BGNE -17%
SG -15%
SI -15%
SQ -15%
AMC -15%
BSY -14%

IN ALL, MORE THAN 390 STOCKS ARE DOWN 10% OR MORE TODAY.

I would have to admit, I fell for the imaginary bottom. I could see it all, me walking on it and then propelling myself upwards to the sky, perhaps a sojourn to the moon with some cheese and champagne. But it was not meant to be. My losses pale in comparison to yours, but they hurt just as much! I had been, earlier today, a genius. I had 100bps of gains whilst being 80% in cash, safe and secure. Feeling a bit under the weather, perhaps infected with COVID or more likely some seasonal allergies, I went to take a nap and dreamt of the Dow being +400. It felt so real. When I was awoken by dogs needing to be walked, I discovered, sadly, the market had reversed and careened lower. My aspirations were castles of sand and my dreams retarded.

I am presently down 40bps, a 1.4% reversal in fortune, because I believed. Also, I bought shit stocks in the hopes of miracles.

I’ve committed numerous errors today and it always happens from a position of comfort. I must remember the pain and how it feels to be pressed up against the swords of Damocles. My intention is to hold, only because of stubbornness. What I should be doing is liquidating now — because nothing is redeemable and everything is rot.

It was one of those economic stats that could do no wrong. We already knew inflation was hot, but in the offchance it came in light — we’d moon.

But the data didn’t come in light and we reverse mooned into the grave. However, upon opening of the markets, we are once again rallying.

CPI 0.3% MoM; Exp. 0.2%
CPI 8.3% YoY, Exp. 8.1%

CPI Core 0.6%, Exp. 0.4%
CPI Core 6.2% Y/Y, Exp. 6.0%

— The_Real_Fly (@The_Real_Fly) May 11, 2022

No one should care about the CPI data because it’s backward looking. At this point only three things matter.

1. The war

2. Economic growth or lack thereof

3. Commodities

The absence of sharply higher oil prices was beginning to wane on people in recent days. The idea oil could trade lower without Russian oil on the markets would equal some sort of economic apocalypse around the bend. Now with WTI +5%, we all feeeel better.

We are extremely oversold and markets act weird during periods like this, since so many people are getting wiped out. It’s rare to see markets V shape recover from such carnage. I would expect a process to take place, but at some point all of the pent up fear and loathing to turn into a different kind of fear of missing out and loathing for not buying when everyone else was selling.

Let’s assess the situation.

The bubble has popped. All of the 30x sales stocks are back down below 10x, some a lot cheaper. This is a traditional valuation level for growth, pre 2016.

The economy is slowing but the Fed can’t help due to high inflation, measured by the CPI.

Therefore, if tomorrow’s CPI numbers comes in even a little bit better than expected, markets are going to absolutely  rip to the upside. We should soon enter a period of stability, where inflation is waning as the economy slows. To avoid earnings disasters like UPST, one could not buy stocks ahead of their results. Markets might improve during a slower inflationary period based on the notion the Fed can get less hawkish. HOWEVER, by the time summer swings around, the entire focus of the market will be on employment and economic growth. The major major concern isn’t inflation — because plunging share prices and growth rates solves that. The bigger issue down the road is economic prosperity in an environment that is deleterious to anything on par with scaleable globalized growth.

War looms and relations with east worsens daily. Ergo, take profits fast and don’t believe in bottoms.

I made 0.35% for the session, closed with 60% cash the rest long.

SIRS —

Because I built my time machine, aka Stocklabs, during the market meltdown of 2008, I can tell you with clarity how oversold we are now in comparison to then. At the session lows today, this was the 7th lowest technical reading since inception. We were nestled right around 1.00, now with the market rising we are at 1.20.

What does it all mean?

It all but guarantees a face ripping rally just around the bend. My issue with this idea, naturally, is that it’s too damn scary. I prefer the comforts of cash and view bargains as a cause for concern. This of course is psychological warfare and I am accustomed to seeing carnage on Wall Street and have been victim to heinous losses in the past, so of course I am reticent to jump right in. Nevertheless, I am comfortable with several approaches here.

1. NO HEDGES. DO NOT SHORT INTO OS
2. Buy the closes for morning bump
3. Opt for ETFs over stocks in order to avoid earnings and/or dilutive secondaries after the bell

My preferred ETF is TQQQ, but TNA, LABU or SOXL work too. I am of the belief that markets should be avoided intraday, unless of course you enjoy babysitting brimstone. I will be buying the close, with the vast majority of my money in cash and perhaps a small allocation into consumer staples.

As for energy, I am extremely gun-shy to buy the dips in commodities. The price action is suggesting the economic fallout to come will cause a complete reversal in inflationary pressures, irrespective of Russian supply disruptions. This makes no sense to me, but this is what the market is saying.

If Tiger Global goes out of business, everyone is going out of business. The once $95b hedge fund that does not hedge but goes long lunatic tech stocks only reported a loss of 15% in March ($17b), like morons. YTD, their STACKED LOSSES are 44%, representing 2/3rds of ALL OF THEIR GAINS dating back to 2001.

Let me clarify.

The last 4 months of trading caused the gurus running Tiger to allow the market to abscond with 66% of 21 years of capital gains. DARE I SAY ‘GOING OUT OF BUSINESS SOON?’

Judging by today’s action, once again a fierce reversal and plunge, we have liquidations taking place en masse. I would not be surprised to see the likes of Chase Coleman III on the soup line over the next 3 months, as clients withdraw funds and those businesses and their losses become so obscene, it would BEHOOVE them to continue it any longer.

I have been 100% cash since 9:35am, +48bps for session.