Unless today and tomorrow end in deep, blood red, I’m ready to consider this another educational experience. That’s a nice way of saying I went against my better judgement to stay the fuck out and lost some money. This is the second time this year that I’ve been a step behind the market, or else it’s three steps behind me, which in the end amounts to the same thing. Clearly we’re playing poker here, not chess.

The first of these was the fascinatingly disastrous Facebook IPO.  Everyone knew facebook was going to go up a lot for at least the first few days, so everyone was getting in there with the intention of flipping it, totally ignoring all other market conditions, specifically the slow, steady decline of most social media stocks. Their murder was even more dramatic because everyone was holding all these secondary stocks to see if there would be a “facebook pop” that would let them get out or take profits. It was a zero risk move, because when facebook inevitably went up the secondaries would either catch some of the enthusiasm or they wouldn’t, but they definitely wouldn’t lose any money on that day of days, social media’s triumphal day in the sun! Everyone proccupied themselves with secondary questions: Will the secondaries get a bounce, is this bounce already priced in, how long until facebook cracks after the inevitable initial meteoric rise, etc. Fucking nobody that anyone’s ever heard of said what in retrospect seems obvious:  “there will be no facebook bounce, it will enter a choppy, downwardly trending market and it will suffer the fate of all speculative stocks with really high P/E ratios–aggressive compression, and this process will only accelerate the secondary selloff.”

The first order question was considered answered, so everyone moved on to question two, which proved to be a disaster for most. I was net short and closed out all my positions, fearing the mighty facebook bounce–if I’d stuck with fundamentals and ignored the hype I would’ve hauled the loot away.

So now, onto today. In my heart of hearts I didn’t think there would be a QE3 announcement today. In fact, I was sure there wouldn’t be: in the larger world a 7-9% correction of the stock market after it’s gone up more than that from January based on nothing but bad fundamentals is not a disaster that requires central banking. So, the big question was “will there be strong QE3 hints/announcements or not?” The clear implication was that if you thought yes you press on with being a bull, if you thought no you buy some shorts and rub your hands together in anticipation of the slaughter.

So now it’s today, there’s no QE3, no announcement, nothing even resembling a vague hint, and the markets are still fucking up, and they’re still fucking up. This was the absurd position, the paradox I once again failed to grasp, the crazy question I wasn’t smart enough to ask. It seemed very clear to me: if you thought there would be QE3 you were a bull, if you thought there wouldn’t be you were a bear. There now appears to be a third position other than stay the fuck away from large indexes.

This third choice was that a QE3 announcement, (contrary to all banker assurances) wasn’t going to happen but that the markets were going to go up regardless, because traders are a mixture of drugged out zombies and miniature skynets plotting the doom of humanity. This position would’ve offended bull and bear alike, who can denounce it for making no sense, for being myopic, for being intentionally absurd… and yet, it looks like that’s exactly what’s going to happen, at least for awhile. Keep in mind nearly all bull action since monday has been largely based on this magic announcement, so if we don’t finish lower than last Friday, good news that was priced in but isn’t true somehow isn’t going to dent the optimism of investors.

Throw away all investment books, stop looking at technicals, stop saying things are “overbought” and “oversold.” Read Kafka, look at the paintings of Dali, watch El Topo and Chris Morris, try to understand that for now anyone who can’t embrace the absurd and challenge the most basic logical assumptions about market action is going to get burned here. I don’t know if I have the stomach for it, but I’m going to try.

PS: just realized shorting gold today would’ve been the best way to get in on the “no QE, market rally anyway” action. Fuck my life and portfolio.

Tweet