MARKETS IN FUCKING TURMOIL

I gave up trying to believe and shorted into the fucking hole and recovered HALF my losses, closing down just 0.6%. I feel this is ok and I would feeeeel better if I was up. But look at my quant -4%, and the market in ashes, it’s good to know Le Fly is still immune to market pullbacks and no matter how deleterious a tape gets — I am almost always able to navigate it.

My trick is simply never believing what my thoughts are and instead staying disciplined with stops and following trends, rather than obstinate ideologies.

This is the first week of January, which means the tone is being set now. This immediately reminds me of the semis in 2005, down 6.8% for January — but it was much worse in the trenches. I was managing money back then and I recall, very vividly, wanting to cry all over my book. It also reminds me of Q1 2014 when SAAS got fucking wrecked. The common narrative with those corrections is the fact that they bounced for a single month and then was catacombed in a bear tape till summer.

Could we be entering a bear market?

Well, the fact the Fed is interested in hiking and tapering to fend off inflation, coupled with a weaker economic backdrop, one has to muse at the possibility we are entering a worst case scenario period of STAGFLATION, whereby your buying power deprecates while you lose your job.

We have always felt there was some grand plan of malfeasance taking place, ever since the Fed started to monetize everything, now up to a staggering balance sheet of $9 trillion. Aside from all that, which is of course terrible, we now stare down the barrel of a world wide totalitarian lockdown based upon healthcare under the false guise of expertise and noble stewardship. Nothing could be further than the truth and the COVID cases and deaths continue to spiral higher, almost as fast as government officials strip freedoms and force your children to vaccinate against a virus that cannot be vaccinated against. It all paints a very bleak and terrible picture. People on the other side of the spectrum might believe me to be spewing Chicken Little styled doom.

But am I?

I closed 50% cash, long XLP, DRIP, UVXY, TZA and WCLD.

Aspiration is the enemy of man. It keeps us satiated to feed off of dreams and also from awakening to the harsh cold realities of the truth. When in a dream-like trance, I envision all sorts of trades going right for me — at the mast of a large ship firing grape into a town of devils. In this dream I alone return from the battle victorious, everyone else completely slewed.

In the real world, I keep thinking the market is going to go up and so the way my mind works, simple enough, I hold onto the dream, in this case it was LABU and CWEB and WCLD. See I sold all of my longs at the open bell like a good boy should. But then I also sold my hedge and then I was forced to reapply a hedge via DRIP and then forced to keep forcing myself to adhere to the markets and now I am down 1.05%.

See how that works?

The NASDAQ IS THROUGH THE FUCKING FLOOR BOARDS, led lower by SAAS, as silicon valleys favorites get gassed and exterminated. I want to believe there will be a turn higher — because it fits my world view.

But look at me now, -1.37% for the month, but angry and possibly irrational enough to turn it around.

(there I go again)

Let’s examine the move in energy names the past two days to start 2022, up 18.5% on GUSH. That’s wonderful but if you went in heavily long oil to start the new year — you were in fact a contrarian since it lost 20% the previous two months. On that same train of thought, the market appears to be churning through narratives in attempt to produce alpha.

The hardest hit areas of the market are in tech and healthcare, specifically software and biotech.

Perhaps an enterprising man would go balls deep into this narrative, hoping to see a mean reversion bounce like what just occurred in GUSH. Such a man is me, now long WCLD and LABU, but I do so skeptically. Naturally, it’s also normal to feel like you’re doing something wrong buying the blood. There is a vampirish quality to it and I have never remembered feeling good about it.

For the day, I closed at session highs +78bps, long but also hedged with a 10% weighting in TZA.

Never relax. Never trust the process. Fuck them.

Software stocks are in fact shot to pieces — off by 7% for the session. CRM is your tell. This is an especially grueling tape because micro capped biotechs are again running alongside oil and chemicals, making it increasingly alluring to those wanting to partake. The simple fact of the matter is, those industries can be rugged at any moment. Look at the divergence between small biotech and large, vis a vie $LABU — hammered to dust.

Along the chain of market cap performance, tera caps are doing best — off by 0.2%, which is great in comparison to the small caps -1.35%. Bear in mind, breadth is decent at 52% because of widespread gains in financials, oils, gold, and other commodities. If you’re buying today, you’re either interested in the tech dips or the aforementioned momentum.

Some of you have managed spectacular gains the past two days, while I sit here down 0.5% MTD. Admittedly, I am behaving like a sort of pussy, cowardly watching from the safety of cash. But am I supposed to chase drillers already up 7% for the session, or a micro capped biotech +25%? It seems to me the easy money has been made and I am more likely to screen myself a deeper hole than escape from the pangs of mediocrity.

I do have a plan and will execute it after 3pm.

I moved to 100% cash, up 59bps for the session, in spite of what I see as great trading action in regional banks and commodity related stocks. From a trading point of view, biotech is behaving very well too. But what has me troubled is the complete destruction of software stocks for the second day in a row. This is going to be resolved soon and I fear by taking the market down with it.

The market cannot go up without tech, full stop.

I am tempted to trade the strong sectors, but they’re up so much it has a trappish feel to them. Or I’m reading the tea leaves wrong and we go straight up from here. Typically high valuation tech gets hit when growth is a concern. The fact that banks are up is due to widening spreads. Higher rates equals better book value. Biotech up is not to be taken too seriously.

Hashtag loser.

I started off the year in a most heinous indecorous manner — by way of losing coin in an otherwise fine market. I like to judge myself versus my Quant, which is more or less market performance and that motherfucker was up 2.55% today.

Now I normally would blame the loss of 1.1% on myself, typically due to some fucked trading. But this wasn’t the case today. Today the Gods rained golden showers upon my head, as I optimistically barreled into 2022 long SAAS and other fine sectors. Well, those fucking stocks got their brains blown out. These were my booked losses in the morning.

So I was long bonds, gold, old man stocks, software for alpha, and an SQQQ hedge. I could not be placed in a more wrong position today, as the inverse of all those things occurred. If not for my 10% position in LABU — I’d be routed.

I am long LABU for seasonal factors. But that same narrative also exists in January for SAAS.

Seasonal returns for LABU

My curse aside, gains were concentrated in small caps today and excuse me if I don’t believe in this shit anymore. Each an every time we get a run in the smalls, we get the smalls routed.

BIG PICTURE: Off by 1.1% isn’t the end of the world and I could easily make it back tomorrow. The greater story for me is this feels more like a continuation of a tape designed to be tricky. By the grace of God, I was able to retain all of my gains last year and I’d be lying if I told you it was easy. I really hated the market last year and I hate it this year too, so far.

If you positioned in risk averse stocks or SAAS, you were flayed to start off 2022. Strength is heavily concentrated in small caps, energy. retail. Even crypto miners are gapping up.

I, on the other hand, was positioned exactly wrong. I had an SQQQ hedge, long treasuries, long gold, long risk averse, and long SAAS. The only reason why I’m down 120bps is because I also had a 2x position in LABU and lots of cash.

Honestly, it’s as if the Gods themselves cherry-picked bad stocks based upon what I was holding. I liquidated my quant left over from December and will push out a new one for Jan by 1pm. That is up 2.2% today and I’m here with cursed stocks to start off to year.

FML

Predictions are stupid and since blogging I’ve realized what’s hot in the beginning of the year often gets completely destroyed and turned upside down by late in the year. Having said that, and also bearing in mind that most of my predictions in the past were heavily influenced by recency bias, I’m going to do that opposite for my 2022 predictions.

Inflation will peak and commodities will collapse
Tech stocks will rebound sharply
COVID will disappear, the vaccines and boosters will be proven successful
Biotech stocks will do best followed by tech. Basic materials will do worst
Lockdowns and mandates will cease to exist. People will forget they ever happened
Democrats will increase seats in congress and do great in 2022 elections
TWTR will hit a new record high
Hedge fund managers will become stylish again
Crypto popularity will peak and prices will triple
TSLA will be cut in half
The Mets will win the World Series
Biden popularity will skyrocket
Real estate prices will finally drop, enabling people to better afford homes
Democrats and Republicans will unite in their love for country
No wars in 2022. Biden will ink a peace treaty with Russia
Chinese stocks will soar, led by BABA
Trust in media will recover; CNN ratings will be #1
Traditional women will beat trans-women in all sporting events
Cruise ships will be booked solid throughout 2022
Crime rates will collapse
The Trump library will be built in San Francisco
“The Fly” will be super happy, dedicate his Twitter feed for good news only.

SIR

I am preparing the chickened wings and will be eating a giant heroed sandwich tonight, with GOBS of fried chicken on it and other accouterments. I just returned from the Town of Cary CHINESE LANTERN FESTIVAL, which had zero Chinese people in it — just an assortment of cowboys in big hats and Ford shirts cavorting around with their little children running rampant.

Now home, I am trying to drown out this past week of trading with an excessive quantity of booze. I have my country music blasting, much to the chagrin of ANTIFA FLY, blogging now and hoping to wish whoever is reading this a happy New Year’s. Know this and don’t ever forget it, no matter how often I curse you out and call you a piece of shit, you fucking internet people are priceless to me. I sometimes feel like Stocklabs should be free — because I get so much out of the community in there. The great part of the internet is being able to build community with people you enjoy talking to.

Thank you from the bottom of my black heart for being part of my world and let’s do something great in 2022.

Stay safe and go tell someone you love them.

What a year. This wasn’t easy and I didn’t have fun. There is always an under current of fuckery, but none as much as 2021. This was a year of science and totalitarianism, supported in whole by democracies in the west and also supported by its people in the name of MUHHHHH health. There was nothing I particularly enjoyed about 2021 and I really really despise the timeline we’re in now.

This was also a year of the Tera cap and fuck you you’re dead pin action in the smalls. Healthcare stocks were racked for -25% and tech posted a down year too. If you weren’t in stocks with caps over $100b, you had a hard time trading. The allure of grandiosity kept me going back to the small capped well over and over and over again. I wanted to relive the past, the halcyon days of 2020 when making coin in the market was simple and refreshing, without fear or reprisals. Now we have chop and there is a distinct malevolence to the tape and although I made over 220% for 2021 I do not feeeel good because I know to achieve those types of returns in 2022 I’ll need a fucking miracle. It simply cannot be done given the market I’m trading now, at least with my methods. In order to perform on a level like that I’d need to run naked with my balls out without fear, and I’m simply not prepared or willing to do that now.

The issue is cushion. I’d need to be up fast and big to take outsized risk and the market has not been momentum oriented. Instead we get mean reversion chop, which is why I’m dedicating an account to my mean reversion algorithms in Stocklabs for 2022.

I’ll do another post before the New Year’s celebrations begin. But if you don’t get a chance to read it, happy tidings and best to you and your families. I want to see you succeed and do well and be happy.