18 years in Wall Street, left after finding out it was all horseshit. Founder/ Master and Commander: iBankCoin, finance news and commentary from the future.
Joined Nov 10, 2007
19,510 Blog Posts

When in Doubt — GO TO CASH

Your cost basis means nothing. Your YTD losses are irrelevant. If you’re having problems trading the market, go to cash. I’ve been investing since I was 10, and even I am having problems gauging the price action. Reason being: I’ve been programmed into believing the news to be irrelevant when it comes to stocks. For a decade, the Fed and the helping hand of the government have made sure stocks steadily increased in value. Now, all of a sudden, we’re in a spot where the Fed is tightening, while also REDUCING THE BALANCE SHEET by $80b per mo, and also dealing with the specter of a trade war and a slowing economy.

If you take that into consideration, and then look at the $3 trillion in BBB rated debt and $10 trillion in overall corporate debt, one starts to believe 2008 can happen again. But I know thinking that is my own mortality speaking to me, so I don’t believe it all the way. In other words, it might all be true and it might lead to a massive downturn — but it doesn’t have to happen now. Why not 2 months from now, or even 2 years, maybe 20. Nothing is etched in stone, which is why trading small or not trading at all is important during times of confusion.

The small caps are a key tell here. It looks like it topped out in this little range and might be heading back to fresh lows, in spite of what futures are saying this morning.

FYI: The Capstone Programme will be launching by this weekend.

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  1. ferd

    Time to resurrect Hugh Hendry? Back in 2008, he argued that Japan was the example to watch when trying to convince people that the central banks could get away with QE and such for longer than most thought.

    Is Japan the place to watch for the fall – or for continued magic tricks. Or is the world’s reserve currency economy on its own schedule.

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    • roundwego

      Japan and Germany are very restrainted and cool, until shit hits the fan and then they go ape shit. But it’s the passionate countries like Italy france and middle east that will fall before the cool collected countries loose it. Markets are in control when the people are being controlled. When the people loose it, the market loose it for good.

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  2. jbandy

    Sage advice. I will NEVER be 100% invested in equities out of fear that our financial system could collapse one of these days. The Fed’s fuckery over the last 2 decades starting with Greenspan has turned us into a house of cards built on borrowing–and the Fed doubled-down on this in 2008.

    The Middle Class “dream” has all but disappeared thanks to the constant and extreme stimulus the Fed has been enacting to ultimately drive inflation (i.e. inflate asset prices). Housing prices, car prices, education costs, healthcare–literally everything is so expensive now relative to median incomes such that our economy simply can’t handle rates above 3% give or take–or else your average Middle Class pleb (along with marginal borrowers) will be crushed under the weight of interest payments.

    I ask myself–where has all the money that has been generated from all the borrowing/credit on steroids? Corporate profits–namely to a concentrated subgroup of U.S. companies that have enormously out-sized profits and profit margins. I’m no socialist, but thanks to the leverage of our digital economy–very little of it disperses among our Middle Class. Most of it showed up in the performance of our equity markets through record corporate profits, stock buybacks, dividends, etc. And that’s how we ended up with Trump.

    The debt/credit cocaine that the Fed has been feeding our economic system for so many years is just not sustainable. What do we need? A RESET–we need a painful, devastating recession to RESET the prices of assets, goods and services across the board so that they are again affordable relative to median incomes of your average pleb. I don’t know when it happens, but I certainly don’t want to be 100% long our markets when that day finally arrives…

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