I’ve always been schitzo when discussing markets, so bear with me. Let’s just forget about the whole depression aspect to this economy and only base trades by price action. Does this look like a market topping or about to head for another leg up?
And the top rated stocks in Exodus. Lots of virus related names in there, including a position of mine CODX.
If you sit there with your Austrian book of economics and live by it, you’ll never make any money in this rigged game. You need to rethink your approach and ignore reasonable suggestions in favor of the obscene. While you may believe I am being tongue in cheek, I am not. I am merely a reflection in the calm waters of the Federal Reserve, water that liquifies everything and nourishes the soil for the crops to be eaten later.
Admittedly, I was reticent to press the envelope on very small cap stocks these past few days and the past week I reduced my potential returns by having too much cash and hedges. Nevertheless, I am in fact very much willing and able to careen recklessly into markets next week — in celebration of the great big titted opening of the global economy!
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“I’ve been to the other side. I learned the game is rigged, so I’m changing the rules.” — Franklin Saint
Another (less revolutionary) way to beat the game is to just play it differently.
Gook.
It took $1 Trillion dollars added to the Fed balance sheet over three weeks from March 3rd to March 23 to arrest the crash if the balance sheet is indeed correlated to the market.
Another $1 Trillion added since March 23 gets us to the current day. $2 Trillion to be added over the next 3 months. How much will that add to the market’s performance?
Energy, Travel related, Reits etc… are the wildcards. 70% of the market is above the 50 day moving average.
Kind of scary to think the balance will double from $4.7T to $8.7T plus more on the way. The balance sheet is going exponential.
Maybe the law of diminishing returns kicks in. Who knows?
Stocks aren’t trading on fundamental, but on artificial demand created by the FED. This is well understood. What is less understood is that the FED liquidity is needed to **sustain** current prices.
We are at current levels not just due liquidity already deployed, but also **investor expectations of future deployments** as you have demonstrated in your post. To put it another way, if the FED said tomorrow that they will not be buying any more bonds in the near future, would you expect asset prices to
a) rise,
b) stay at their current levels, or
c) decline?
I am surely biased, but I believe that most people would pick (c).
Behind the doors and facade of that calm building might be a calm atmosphere but I doubt any will want to re-live this in their tenure. There is a myriad of enterprises that will run out of money by year end if not sooner. Long term accounts should have nothing in them that needs selling. This is the window for that now. Gold is an oddity, not sure if that is a keeper or not.
I think PMs get a boost from knee jerk. To go farther might require them to be seen as a deflationary hedge.
I’m 50/50, want it to go up on Monday so I can sell longs (BA,BP,DAL,GILD,RTX,SGP) and shorts (FAZ,TZA,SQQQ) ride.
To your question, Fly, at the end of a bull market, you may see a slow roll over as the market runs out of steam. However, once you enter a bear market, volatily is so high that the drops are sudden. Take a look at IWM in during te dot com bust (2000-2003).
Also, if you want to look at charts, this is actaully the *2nd* huge rally the samll caps have amde, because techncailly IWM has been in a bear market since Dec 2018 and never made a new ATH.
We could go higher or lower, but that chart’s messageing is probably only good for a day and then who knows what happens.
Also, if you had drawn a diagonal lower support line on May 1, then May 4 would look like a bearish breakout. “Fat markers” allow you to draw whatever you want, which is one reason why why horizonatl support/resiatnance wrks so much better.
Does support and resistance work in an environment of unlimited liquidity? I see the Elliot wave, Fib, TA guys drawing lines and making assumptions. I think all of that is out of the window because Fed actions are the biggest variable imo.
No one in their right mind would say the market would be at present day levels back in mid March
The bounce that follows a substantial drop (almost) always exhibits some kind of log linearity.
Ending the day with 100% cash and just buying runners every morning worked well last week.
This market only wants to go up. I’m staying 100% long (shorting volatility and long ERX calls), up bigly on the year. ?
Stuck in a range I say. We’re nearing the top of it.
A year from now who knows but the government can manipulate until the markets reject the dollar. No sign of rejection yet.
Deficits and printing could go on quite a while but not forever.
If the manipulation stops, we also get a crash. We’re trapped. It used to be that the long side was safer since the market had to go higher sooner or later. That will change sooner.
Steve Jobs said AAPL is going to all time highs in a week.
As @Diddy said, you can’t make money in stocks if you’re focused on the real economy, JOIN THE PR OR DIE.
It is the best $499.95 I ever spent! Fly is God! Call now!
the devastating flood of corporate bankruptcies commences in May. This leads to bank runs and to a banking crisis, starting from Europe by summer. Alas, there is no real recovery in the global economy.
And then the second wave of the Covid-19 pandemic strikes. The virus starts to spread rapidly around the world during the fall of 2020 and continuing into the winter, with a possible third wave erupting in the spring of 2021.
Countries across the world are forced to reinstate broad and draconian lockdowns. Supply-chains break down completely and global logistics routes are disrupted by huge numbers of sick (or frightened) employees and the strict closures of both factories and national borders. Nations start to protect vulnerable industries and resources. Food security becomes the main national security issue. Global food transfers are halted or disrupted.
These grim factors, combined with soaring unemployment, business failures and market turmoil topple the global banking sector. Bank losses are so large that though depositor bail-ins are enacted, they are insufficient to keep banks from failing. The European banking sector collapses completely, followed by an implosion of the global financial order. Global commerce evaporates. The world succumbs to utter economic annihilation.
You forgot the part about a giant sinkhole opening up and the NYSE being swallowed.
2nd wave fer sure, after that hard to say which items you listed will occur. Non-V-shaped recovery
It’s tough to make predictions, especially about the future.”
? Yogi Berra
360,000 babies are borne daily; 300,000 mostly elderly died so far form this lousy cold, now the world is ending in a year? Let it be then.
We are opening up too fast. Wave two will be 2X deaths (no kidding).
Tiger dude Roy died from COVID today. 75 years young.
I was borne before word snowflake came into vogue. 2nd wave? It may be no more than the tail of the first that itself has not put a dent into world morality figures. But I agree, the second wave of “fear” will be far more devastating.
The game isn’t rigged. It wasn’t rigged in 08/09 when all those banks failed and peoplelost their homes. A trillion dollars from the Fed and another from Congress didn’t save us the bottom months later. And it’s not saving retail now. Even if Congress keeps airlines alive like they saved GM in 2009, the shareholders lost everything.
What if stocks are rallying just because a lot of people are lying to themselves convinced the game is rigged?
There’s a real argument that this rally makes sense. If you’re betting on earnings returning by next year. The 09 bottom made sense too; CAPE ratios were single digits.
So do you buy at 22x PE ratios now believing that earnings are on track to recover within the next 18 months? If you believe that, then buy.
Earnings are a joke for now unless its FAAMG.
You are so correct. Then, it was a black swan, a real fear for the manipulators themselves. This time the epidemic is real but the reaction to it is so managed. Although someone might say that was also manufactured, remember the famous hedge fundy, with help from GS, manufacturing custom securities comprising worse RE assets to short those instruments?
Reportedly, no one dying in China.
Musk on Rogan “I have 7000 employees in China, none died. I have a supply chain dependent on China, and see no interruptions in it. China is 100% back. Danger of death from Covid is way overstated. Let our people go.”
The above kind of reportage may take a couple more days to be digested and reflected in stock prices. But this rally still has the look of a classic 2/3s back …then plunge to new lows ..bs distributionist rally.
https://www.youtube.com/watch?v=Zk11vI-7czE
But peak population 46.00
The Chinee sic lie
Can you please explain connotation for word SNOWFLAKE, I am a little too old for that?
https://www.zerohedge.com/health/bubble-wrapped-americans-how-us-became-obsessed-physical-emotional-safety
Most of the above is bullshit.
The THING I hear practically no one talking about is demand. Consumer demand.
It has not simply evaporated into thin air. No Sir!
That demand is temporarily in a bottle, tightly corked, like the leftovers of last evenings wine.
Over the next 6 months, barring a huge uptick in WuFlu numbers, that demand is going to begin seeping not only past the cork but blowing through it.
Our little general store in the locked down and Whitmerized state of the Wolverine, has recorded 2 record months of sales. Not up by 10% or even 30% or 40…or 50.
…try up 148% increase in sales in the meat and grocery end of things and 132% in the hardware store. (It’s not a typical hardware…or grocery…you can buy a Sig or Glock or AR, to go with your new Deutz tractor along with nuts bolts and screws to hold the old house together or reinforce it for the coming Apocalypse in the hardware. In the grocery and meat side, you can haul old Bessie the cow in on Thursday and pick her back up in the form of steaks and burger of the next week. Cut vacuum packed and frozen.
We are essential on many fronts and have recorded customers driving over 200 miles to purchase freshly slaughtered beef and pork from our processing facility. (no corona here) …yet…baby…
People are buckling down to the old fashioned ways of survival. Canning jars are flying out the door of the hardware by the pallet. Smaller hobby sized LS tractors from S Korea are leaving the yard at an unheard of rate. People are spending $15-25,000 on these along with multiple attachments to make life more enjoyable…BECAUSE THEY ARE BORED OUT OF THEIR FRIKKING SKULLS, and they want something to play with.
WOMEN ARE BUYING THEM!!!!
When Whitless banned garden centers of the Big Box varietal our seed supply was decimated in a matter of days. Again…the Apocalypse is pending.
Ammunition supplies were wiped out and the number of first time firearm buyers was not only staggering but also rather scary. When you have to take someone out back to show them how to not only load and chamber a round but also how to aim and fire…it makes one a little nervous.
But such is life. Everyone has to learn new skills of some kind and some point.
Back to my premise…demand…it is still there. It has not gone away and likely will not.
Prepare for MAGA…or perish.
Insane but entertaining. Thanks for the post. I think.
Longer the wine stays in the half-empty bottle more it will turn into vinegar, I hope we all don’t turn into snowflakes.
What?
https://www.zerohedge.com/health/bubble-wrapped-americans-how-us-became-obsessed-physical-emotional-safety
I agree, I never got the bear side in this situation if it’s short term. The demand has just been shifted into how crafty and adaptable a company is. The supply issue is somewhat of an offshoot from China (maybe trying to cull their elderly in which communism determined not worth it to feed)
You’re contradicting yourself here. Which is it, normal demand or prepper shit?
The MAGA crew is sitting on UE, making more now than when they had a job. So you have that mountain dew and gas station food demand.
How about the corporate appetite for spending right now? How do you think that is doing? The writing is on the wall, it’s just a matter of time. Corona would have to completely disappear to change that.
How exactly do sales at your bullshit local prepper store translate to stocks?
Sooner or later manipulation will fail to save the economy and markets. But. There is nearly a 1:1 relationship of federal deficits to corporate profits.
This game could go on a long time and the longer it is played the worse the reckoning is likely to be.
I see no way to avoid a crash but the markets can go higher…no way to tell when it has to end. It just depends on how ruthless or desperate the government wants to be.
IMO it’s a certainty: either the system collapses under it’s own weight or people just lose confidence. I’m trying to be short or in puts whenever possible.
This is like your 100th “it could do this but it will eventually do that” post. We get it. You have no idea.
One more thing…I have seen the new economy over the horizon. It is not global in the current sense of the word.
I have nearly zero visibility. I think I know what’s out there but no idea when I’ll bump into it.
What was the death rate in US in April 2018, 19, 20? Can’t find updated data on this. …Can’t find updated “excess death rate” info: https://www.medrxiv.org/content/10.1101/2020.04.02.20051532v2 ..although I haven’t looked all that hard …has anyone out there?
Anyway, forgetting about Covid, the post-oil-collapse-DC/Fed-juiced market is more fragile than before. It is distributing borrowed candy to those who free markets would shun …all based on politics and connections.
One Bank Explains Why QE No Longer Stimulates The Economy And Only Leads To Higher Stock Prices
https://www.zerohedge.com/markets/one-bank-explains-why-qe-no-longer-stimulates-economy-and-only-leads-higher-stock-prices?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+zerohedge%2Ffeed+%28zero+hedge+-+on+a+long+enough+timeline%2C+the+survival+rate+for+everyone+drops+to+zero%29
Money is the electricity, COVID19 is the insulator, blocking its flow by slowing transactions for goods&services.
I can carry the analogy further; to overcome the resistance to flow of this electricity FED speeds up the dynamo, raises the voltage, some of this electricity enters storage(stocks&bonds) to be used later. Remember “wealth effect”, ” Trickledown”?
Pretty good write up.
https://www.zerohedge.com/markets/under-surface-trouble-brewing-once-again?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+zerohedge%2Ffeed+%28zero+hedge+-+on+a+long+enough+timeline%2C+the+survival+rate+for+everyone+drops+to+zero%29
We all know where to find doom porn if we want it.
Yes it is a worthwhile read. But the underlying assumption of the authors that those running the place lament that the real economy and plebs will ultimately suffer while the already asset-rich make a fortune off of Fed and DC actions, is an assumption that I would not make. And no alty, I wouldn’t dismiss it as doom porn ..as they’re predicting a 40% rise in risk assets before the end.
sorry ..my comment was re the one bank article
I read zero hedge daily but despite the great amount of info in their articles they tend to be be unbalanced or incomplete.
This article focuses almost exclusively on the the fed yet federal deficits will match earnings almost 1:1!
Zerohedge is downright dangerous for those who lack discernment.
Doom porn is the ZH mantra and Drudge is the same way now.
THE BOTTOM IS IN – STOP BEING BEARISH
I think (at least I hope) everyone understands the stock market is a leading indicator. This is not fantasy land, as many of you have suggested. The bad economic data is simply irrelevant to stock prices. The entire world already knows this is the worst economic contraction since the Great Depression. This news was priced-in over a month ago when the market declined by 35%. So all the data you guys fret over each day doesn’t really matter much. March 9, 2009 was the last bear market bottom. The recession didn’t end until June and unemployment didn’t peak until October. Was that fantasy land? NO – the market is forward looking.
Since March 23rd, the stock market has been pricing in a return to some semblance of economic growth in the back half of the year. Sure, shutdowns could drag out into August/September, but that’s unlikely. Hell, if Q3 simply projects flat GDP and a bounce in Q4, that’s probably fine, given the incredibly low base we’re bouncing off. Will the stock market keep climbing by 30% each month? Absolutely not. But we ain’t retesting any lows.
But if this is the worst economic contraction since the Great Depression, then surely the market should have been down more than 35% right? NO. Unlike the Great Depression, we took the opposite actions. We swiftly cut interest rates and increased the money supply. Also, there is such thing as FDIC insurance now, so there’s no chance of a run on banks like back then. And unlike 2008, the Fed and Government acted swiftly and decisively. In 2008, they created massive uncertainty. One day they were orchestrating bailouts/buyouts, and the next day they were letting Lehman fail. This time, they sent a clear signal to the market immediately that they were going to backstop the credit markets to prevent the bubble from popping.
So the bottom is in. And this market is going to keep climbing. The more this plays out, the more it looks like 1987. A speed bump in the midst of a secular bull, driven by innovation that is making businesses far more efficient and productive than ever before. At some point it will come crashing down. But in the meantime, stay long. There will be corrections, but my gains over the next decade will dwarf whatever you can pick up on the short side during a correction.
Yeah it looks like that. The can kickers will get away with it until confidence is lost. SPY looks like its rolling over to flat. No matter. Expand the balance sheet even more. This is a joke. Time it right guys.
I agree with everything you just said except for “at some point, it will come crashing down.” When you make a great, well thought out post like that, leave the cheap disclaimers out of it.
Excellent post!
Fair critique. But I genuinely think it will come crashing down at some point. Too many sat the last decade out. The next leg up will reel them all in. It will culminate in a bubble similar to the dot com one. Only this time, I think it will be AI.
In order to price something in, you have to take the time to actually price it in.
We’re bary down for the year and everyone is just assuming this is like when the planes hit the towers on 9/11. Well guess what? After the planes hit the WTC, they didn’t split into 3 more planes each and go hunting new targets.
People are also assuming that manufacturing reopening will lead us out of recession. But this recession started in services and services is where it will stay. How are you going to save the entire services industries? Even if they claw back to 80% of revenue, unemployment isn’t slipping back below 10% any time soon.