I did so many trades in so many directions today my head is spinning. I ranged from 1pm on from -2.3% to -3.2%, until I closed out my shorts and went 4x TNA into that little rally. I closed it out and my losses lessened to 1.8% before sinking again to -2.3% at the close. Today was entirely self inflicted and now I ride into tomorrow, in what I view as a very bad tape, exposed long with hedges but not enough to withstand a major shift lower.
We are tenuously ebbing towards perdition and the only thing that keeps it from hastening is hope.
Both TZA and UVXY now make up 25% of my holdings, in a portfolio 101% invested. Coverage from those inverses should, in theory, negate any appreciable downside in the market. However, given the heart attack drops happening now, I doubt even that heavy exposure should withstand a selling barrage.
Into a rally, I’m guessing I stand to make 0.6-1.3% by the open, providing VIX doesn’t implode. VIX should, again in theory, hold up due to people clamoring for protection. We’ll see.
I closed mid month -2.2% for December so far.
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Yeah today was not what you wanted to see.
I mean it’s what I wanted to see since I’ve spent the last year drinking from a chalice brimming with black smoke.
But if you’re long and hoping not to get vaporized in stocks?
Yeah today was not what you wanted to see.
Everything that fools like got hammered today, including crypto. Better get used to it, this is only the beginning. Newbies and fools have not seen a bear market in their lifetimes so it will come as a complete surprise to them that bear markets even exist. It won’t be painless…
There you have it.. Bear market starting today.
https://twitter.com/LilMoonLambo/status/1471414312963125251
https://twitter.com/nic__carter/status/1471470669120610310
Hmm very curious. Treasuries getting bid hard.
4 possibilities
1) everything is fine and Cain is about to get slapped down
2) People have realized inflation is much worse for stocks than bonds and are temporarily rushing into bonds as a life raft
3) economy is about to run hard into a recession. Or globally recessions / hyperinflation abroad just mean foreigners don’t care if they lose money in bonds because they would have lost worse where they were
4) traders are just speculating wildly that inflation is about to peak
Hard to tell and maybe several of these are happening at once. What I am quite certain of is that no inflation is not about to peak (caveat: unless major recession is in the works).
PPI is at 10% but CPI is only 7%. That’s 3% that’s coming next year. Still a huge gap between housing and shelter inflation as well. And core inflation has lifted up. Even if core inflation drops to 2.5%, you add in housing and CPI future lift to rebalnce with PPI and you’re already at probably 6.5%, maybe 7%.
Then, by probably February, all these businesses will have doled out cost of living adjustments to salaries and were racing again.
You are right on most, but inflation is harder on bonds than stocks.
I’m talking long bonds- 10 year treasuries and 20-30 yr corporates.
That is a truism, bit of salt of rhe Earth wisdom that is actually going to be wrong here. You can math it out. Take 10yr from 1.4% to 3.5% and look at loss of face value, then assume the same spread to stock yields and look at what happens.
The problem is PE multiples. If bonds lose 15-20% of their face value, it’s a stonk bloodbath as multiples contract.
rushing into bonds as a life raft
ha ha, good one
from an ice bath into a pool of lava
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Again, as I wrote above, that’s not true in the open neighborhood of the point where we actually are now.
Suppose bonds go up from ~1.5% to ~3.5%. Stock yields are an average of 3.5% today, give or take. Why would you accept that yield when you could just buy a 10y? Today the spread between 10yr debt yield and S&P 500 earnings yield is about 2%.
Even if that spread closes, it’s way worse for stocks for a ways.
If 10yrs sell off from 1.5% to 3.5% (which is about what they need if inflation is 2.5% long term) then treasury spot price should drop about 18%, right?
If the spread between 10yrs yield and S&P 500 yield drops to just 1%, the index will still lose 23% from here, and if the spread holds at 2% the S&P 500 would drop about 37%.
Stocks take a bath if bonds drop. We’re too near the zero bound. Eventually those long term truisms reassert and yeah stocks will do better than bonds upon further inflation. But that’s somewhere beyond 20%+ losses for 10yrs and the S&P 500 dropping something like 65%. That’s how bad the bubble is.