Category Archives: Drama
Needless to say, I decided to edge long at exactly the wrong time. Ben suckered me in, and my once strong 30% cash position has been whittled away to a mere 10%.
This selloff is going to hurt, delivering its full force directly against the 9th floor, shaking the very walls.
But I find that I am willing to wait it out. The concerns that are driving this selloff are immaterial.
Spanish insolvency, fiscal cliffs, Chinese communists and Ben’s retirement – the four horsemen are dotting the sky and Twitter is like a dumping ground for snarky comments.
Earnings and growth are slowing and Bob Pisani is nowhere to be found.
The funny thing is I was sitting around in exactly the position of the bears this time last year, guffawing in between comments of doom and chugging from a golden chalice.
Let me tell you how this ends for the shorts.
First, they get run over by a stampeding flock of turkey’s. Seasonality adjustments and earnings projections tick up with bad modeling methods. A bottom in housing prices is called for the spring. Employment looks extra rosy with the holiday shopping.
Then Santa comes and mows the surviving shorts down with his sleigh.
This is how the holiday season works.
Let’s review the “impending demise” of civilization. Spanish insolvency can be flooded with EU money. The EU collapse comes from price inflation and manufacturing contraction, not outright defaults. Chinese communists are scary but China can’t exactly afford to have foreign investment flee the country at this precise moment. The fiscal cliff can be voted away.
And after his presidential inauguration, Mitt Romney is going to be ushered into a back room where central bankers will begin the process of extorting him. But even if they fail, Ben has plenty of time to sink so much money into dark pools there’s no chance of reversing his policies.
Why do we need to embrace the end of humanity right now? It’s the holidays. Can’t it wait until next June?
As the market is off a whopping fraction of a percent, commentators are literally soiling themselves on live television, trying to time the next selloff.
Oil reversed yesterday – to a flurry of publications informing us that the move higher is over with.
Bond analysts are flipping out about Europe.
Romney made some comment most everyone I hang out with agrees with – half of all American’s are lazy tits with zero self-worth – and now a few ancient and withered CNN “journalists” are creaming their pants insisting Obama now somehow has this election in the bag.
And China is thinking of crushing Japan because of some island that might have oil rights.
Folks, this is obviously a drama day. I’m checking my brain out.
Do you understand insignificant this selloff is?
Do you get how high all commodities ramped over the last three weeks as the QE announcement was obviously leaked?
Do you see that European bond yields are still lower than they’ve been all year?
Do you understand that CNN journalists all dorm together in a crawl space and haven’t made a correct prediction in the last 15 years? That the polls coming out have fluctuated consistently by 3% or more, leaving Obama and Romney (the guy supposedly nobody likes) in a virtual tie?
Do you get that Japan has nukes too?
Seriously, this is ridiculous. I’m closing the 9th floor for business early today. My things are packed. I’m closing the door behind me – the lights are flipped off as my hand slides quickly out before the latch locks tight.
Today is just too stupid to get involved with. I’ll see you tomorrow.
Witness what remains of the market rally. You could not even manage to eke one day’s worth of gains.
All of the bull’s energy has gone into sustaining the prices. Every dollar they could muster was thrown to avoid the carnage of the worst days. Now, they are overexposed, and have nothing left to give.
I also do not believe that there are many bears, in a “I’m short, fuck you” sense of the phrase. I think there are many people who are bearish. Sure. But not many shorts to fry. The last 6 months has made sure of that.
Only a few of the more…dislodged…managed to stay short through this mindless rally. It takes a certain special kind of crazy to watch your own arm get ripped off and have the self-control to do nothing. I can’t say I enjoyed it, but it will be worth it before long.
But I’m willing to wager that, even here, very few people are “short”. I think most people are waiting for the trend to establish itself. Which probably means we have a -300 DOW day in store for us, as you usually do not have orderly short rebalancings.
I find myself long a great accumulation of ERY and SCO, as well as retaining a very small (<1%) position in the notorious TVIX. Long, I’m holding CCJ (getting smashed as is typical), AEC and CLP (both incredibly resilient). And of course, I own a lot of silver that I usually don’t talk about, mostly because sometimes I forget it’s even there.
Friends! Enemies! This is your last warning. Clear out, or be crushed.
Here’s the thing about trend chasing that bothers me. It’s an obvious circular reference. You’ve got one guy who says, “Hey, I’m gonna buy some stocks today, because they look good,” and that creates the first price movement. Then you have five more guys who go, “damn, trending up,” and they dive in.
So 20 more guys, watching the first six having made money, go, “wow, the trend is your friend,” and they buy.
Now the first guy, who was only buying to take on some risk anyway, says, “well shit, that’s nice, profit taking time.” Some of the 5 bail with him.
Then the trend is established, so it’s a dip buying opportunity. The 20 latecomers gobble up some more.
At this point, the paychecks of the first five have been deposited, so they throw more money, following that initial trend.
The 20 splinter and maybe 10 of them buy some more.
There’s some profit taking, some more dip buying, some more profit taking…you get the point. But the valuations are almost entirely self-contained to the original group, who are playing chicken with a knife and the gaps between their fingers.
And where’s the payoff? If you’re stuck with these stocks at these prices, how do you make out? Half of these cinder blocks, hardened by now around your ankles, don’t pay shit, and won’t be worth these prices in your lifetime. Where are you going when the flood waters come?
Yet in spite of these questions, I have to listen to hundreds of traders daily talking smack. I get to hear the same quote subtly refurbished dozens of times.
“Don’t fight the trend.”
“Follow the price action.”
“The guy who does what he believes rather than follows what he sees is broke.”
“The trend is your friend.”
If I was handed $1,000 for every time some punk quoted John Maynard Keynes, telling me how irrational the market can remain, I wouldn’t need oil to correct to get me back to where I was this time last year.
The point is: this type of logic, based off of price action, is reflexive. You need to remember that, when rubbing mud in the eyes of people not willing to commit their life savings to your methods. Whether you’re making one line, fifty lines, one hundred lines…infinite lines (fancy mathematics here) – you’re still doing the same thing; projecting.
If you’re making money, congratulations. But at least acknowledge that what you’re doing is playing “who can stop closest to the cliff’s edge.”
And just like all the other times it’s happened over the last two years, at these speeds, you’re going to wake up one morning to very spectacular losses. If you’re ahead after everything, good for you. But my guess is that some of you are “protecting” yourselves with stops and trailing stops which, if we take a hit big enough (think flash crash), are going to aid in wiping out everything you’ve made since October.
I’ve ranted about this before, but just as always happens when any high profile event is on everyone’s radar, the analysts are out in force ushering in a statistical amateur hour.
The next bank that ups their “probability of a Greek default” DEFCON status or “chance of Greece leaving the euro” headline should have to endure a run on their reserves of epic proportions. I want Citigroups’s end of day balance to go to -$250MM for daring to front such nonsense today, telling me that Greece has a 50/50 chance of bucking the EU.
How did they measure that? Maybe they used that awesome history they have of all the other times that Greece has left the EU? Or perhaps they counted the faces of dishonest Greek finance ministers against honest ones, and came up with a more classical probability?
This is nuts. Nobody knows for sure what is going to happen, so these guys are trying to disguise that by dropping a guess. But the guess is meaningless, because either Greece eventually leaves, or it doesn’t.
Rather than hiding behind these numbers, which I know are being pulled out of thin air, these commentators should just take a chance, venture a guess about how things ultimately play out, and put their reputation on the table. Or stop throwing out indeterminable numbers parading as science. Either one, really.
We are coming to get you, America.