Weird Tape

Yesterday we had $TGT ramping because they reported people were looting less. Today we have sharply lower prices in $AAP, $WSM, $SNOW, $NTES, and $URBN, just to name a few. The idea of a runaway market is alway palatable, given we’re in an election year and both candidates want to appease the people. But Harris is talking some nonsense about taxing UNREALIZED returns at 25%. Now you read that and think ‘no way is that going to happen’; and it might not happen this election cycle. But, eventually, it is 100% happening.

Reason being: we have a tremendous chasm between the national debt at $35t and personal wealth at $150t. Thomas Jefferson warned you bastards about the Federalists, catamite Alexander Hamilton and his debt building ways. Now we have a govt that must impose heavy taxes in order to keep themselves paid and afloat. These are long term anchors around the necks of people and one day this new form of taxation will be foisted upon people in order to bail them out.

Today’s tape is somewhat dreadful, dispassionate and weak. With breadth at 35% and trending lower, be careful to not get Mcfooled int buying dips yet.

The famed and illustrious Medallion fund. Their methods are so good and consistent, it is a secret. You cannot invest, even if you wanted to.

It’s comforting to know the best fund in the world actually sucks.

BEHOLD: Actually good returns: Le Fly

While it’s true, I am not running $10b; but it’s also true that I rarely trade small caps anyway. The idea that high tier returns is inescapable to the average pleb is fantasy. The key is, if being honest: avoid the drawdown and trade the tape in front of you not the one trapped inside of your heads.

It happens to us all but when it happens to me it’s especially annoying. In other words, if you had a bad trading day I’d forget about it 10 seconds after you told me. But when I have a bad trading day, it remains ETCHED deep into my fucking soul and I hate myself for it.

It all started this morning with that rascal inverse ETF $TZA, booked it for a loss of 2.4% and then I had this fucking winter jacker stock $GOOS that beguiled me for 3.3% and then the icing on the cake was $UVIX for 5.4%. That bastard of an ETF has given me great pains over the years, but on occasion works wonder, so I keep going back to it for another hit. After that I traded well against a fully long portfolio and did some rebalancing to overweight; but ultimately ended the session DOWN 30bps like a moron. I know losing 0.3% isn’t a big deal; but my quant was +87bps and this means I should have been up over 100bps.

These things happen.

What can I say? Truthfully, I have been distracted with the overwhelming response from my readers and members of Stocklabs, taking calls with them about managing their money. If you didn’t know, I am getting back in the biz and will entertain the idea of managing your piker accounts, providing you’re nice to me. What this means for the site is obvious: less direct recs and more general market commentary, which is fine if you really think about it. If you want to get in line to speak with Le Fly: email me [email protected] and maybe one day I can lose 30bps for you too in a market that was otherwise handing out free money like the DNC hands out abortions.

I hate to sound conspiratorial (not really) but today’s massive revisions lower provide the excuse the Fed needs to massively cut rates ahead of an election, thereby solidifying markets for the incumbent.

We can slice and dice this 100 different ways. And the market gapped down on these revisions. I think that was a knee jerk mistake. All this proves is the Fed has the go ahead to INCREASE the velocity of money and as a result markets “should” go higher, based upon recent history.

I say this with confidence judging by the US 10yr at 3.77% and the recent comments out of the Fed, suggesting that a Sept cut was all but a foregone conclusion.

Moreover, if job losses were really a big deal we’d see that reflected in credit delinquency data and/or consumer confidence numbers and certainly at places like $TGT, who just reported great numbers, same with $TJX.

The combined weighting of the largest facets of the market in both the NASDAQ and the $SPY are as follows:

TECH 39%
HEALTH 12%
CONSUMER DISC 13.5%
FINANCIALS 7%

In Stocklabs, the largest sectors by weight are as follows:

Tech: 37%
Health: 12%
Financials: 15%
Consumer Goods/Services: 20%

What that means is those are the areas of the market that move the needle. It might also mean that industrials or basic materials are extremely underweight. I find it interesting to see financials so lowly weighted in the broader indices, but very much a large part of the market cap total inside Stocklabs.

Why is this important?

Because most fund managers attempt to mirror the allocations of the $SPY or the $QQQ and will pile into trades accordingly. I recall a time when Tech was only 15% and Basic Materials was 15%; but things have changed over the past decade or so and now all of the very profitable high EBITDA margin companies are in tech. This specifically means that if you’re bullish and want to outperform you need to be in these areas of the market.

How do you manage it?

Set a rebalancing interval of one month or one quarter or if tax efficient minded one year and move the pieces around to conform with your top down weighting. If you want 15% in financials and they’ve underperformed and been reduced to 10%, you’d add. If your goal is to be 25% tech and they’d gone up and now represent 50%, you’d sell.

For me, I just dialed up my tech holdings and reduced basic materials, which might be a bit premature given the recent run. But ultimately, providing the world doesn’t collapse. high EBITDA companies should continue to outperform and their stock prices rise.

Sirs,

I eagerly inform you of my 120% leveraged long position. This is not something I do lightly of without thought. I do believe this farce of a tape is merely the consequence of GOING UP IN A STRAIGHT FUCKING LINE for the past week and we’re merely pulling in a bit for the sake of doing so.

On the morrow you might be entreated with magnanimous gains, a light mist coming in from the backyard golf course during breakfast to enliven you for the day to come.

Breadth is a cantankerous 30% and people are scared to do anything now, since it wasn’t too long ago when most people got zeroed out again during The Great Japanese Yen Carry Trade Collapse of 2024! BEHOLD the uncertainty of the future and try to peer into it if you dare, accepting the black smoke and the fires and the heat it all brings.

But before we get to that, I am just looking for 1 or maybe 2 more days of upside. I do, however, reserve the right to completely change my mind on everything I just wrote.

This is the moment we have all been waiting for: the gigantic collapse of the Bank of Japan and with it the entire global stock market. The Yen is +0.75% on the day, likely because someone in Tokyo lost a trillion yen on his monkeypox longs and had to sell them in order to buy back his Yen before it’s too late.

But it might already be too late, as the tone and tenor of this tape takes on a macabre element, plunging lower by 0.22% for the NASDAQ and down a horrifying 1.1% for the Russell. There is NO MUSCLE IN THE RUSSELL. I repeat: THERE IS NO MUSCLE IN THE RUSSELL.

To take advantage of this, I am presently a little hedged via $TZA, but sadly am down 0.13% on the position at the time I am writing this. God willing the entire infrastructure of the market will falter and fail, sending $TZA to the moon so that I could take profits on it. Sure, the rest of my positions would be burnt to a cinder; but I’d find solace in the fact that I was there when it happened and I had a small part in bringing about its destruction via $TZA.

The alternative view is we are down a little after being up for 7 straight days and this is nothing more, or less, than a mediocre attempt by the bears to assert their dominance.

Everyone expected calamity to unfold and for it to be over; but alas, here we are on the precipice of RECOURD highs with markets never looking better. The idea of COLLAPSE since like a distant memory; but rest assured we’ll be reminded once again, in a continuous and never ending battle when dealing with the juxtaposition of record profits and record national debt and enmity.

I closed the session +118bps, long a little of this and a little of that: 111% leveraged long staring directing into the sun. I even took out some monkeypox longs because why the fuck not?

Gains for the month stand at a respectable 3.3% and I yearn for me. I feel, in a sense, I haven’t truly been able to extend my legs in 2024 and look forward to a tape more in line with my mood and demeanor. As always, I endeavor to outperform and in that process learn a few things about how systems work and how I can interface with to increase my efficiency.

In other words, I expect to bust loose to the upside soon.

Good Day.

People are often beguiled by the character of the market. I’ve seen it my whole life, dating back to when I first starting trading as a teen in the early 90s. The market only appears to be crazy now, mostly because it’s coupled with insane news. But it’s always been crazy, rest assured. We aren’t only talking about people’s play money, but their life savings and their ancestral fortunes. Because of this, the stakes are high and nerves are almost always on edge.

As a trader, your job is to see the forest through the trees, if that makes sense. I like to compare it to when I was in high school being the star athlete that I was, going through a slump. The pitchers were throwing a lot harder and I was intimidated for a short while. Anytime a ball came high and tight I stepped out. Anyone who plays balls understands that when you begin to step out, you’re never going to get a hit. It took some time but I eventually got accustomed to the harder throws and leaned into the ball instead of out and achieved success. I recall mentally preparing myself to get hit in the fucking helmet by a 93mph fastball, and to have my head explode on the home plate, in order to earn the chance to get a single.

Naturally, I am not suggesting you stick your head out into the market for some lunatic to bash your brains in about the pavement; but what I am suggesting is that you should be afraid of the speed, and to also make sure your helmet is sturdy.

Let’s review.

Semis +10%
Tech +7.5%
Gold +7.3%
Retail +5.1%
Regional banks +4%
Nasdaq +5.5%
Russell +3.9%
Value +2.65%
Materials +2.3%
Mining +2%
Energy +1.2%
Treasuries +1.1%
Utilities +1.1%
Bitcoin down 1.6%

It was a broad based relief rally because the Yen Carry mini crisis passed. The hard part was being confident enough to do several things right:

1. Trust the market would bounce.
2. Not get overweighted in defensive areas.
3. Not hold too many oils for fears of an Iranian strike
4. Holding after the initial bounce.
5. Not get whipped intraday due to volatility.

The market looks easy from the outside looking in, since it seems to almost aways go up. But as pros in the trenches with PTSD from former market calamities, sometimes knowing too much can hurt you. I know for a fact that a younger less experienced Fly would have made 15% this week, HEAVILY LEVERAGED AND LONG, because that’s what I used to do. I’d turn in monstrous returns over short periods in heavily overweighted positions and then, eventually, draw down like a motherfucker because the tide always comes in.

You’ll find, if doing this long enough, it’s best to take the long road than the short cuts. That doesn’t mean you should invest like an old man and always avoid risk. There are moments in time when markets can be juiced to their extremes and it’s very obvious and it’s very novel. The bull is so infectious that everyone wants a piece and everyone understands we are going up, the only question is by how much and what are the next stocks to go. Those are the markets that I truly excel in, because I micro fixate and obsess over the hunt. This tape is not that. This tape is wrought with indecision and churn, apprehension due to a number of events.

Because of this, I am presently allocated more broadly than usual with smaller positions than usual to reduce company specific risk: an earnings miss or general market malaise. I’m also top down diverse, not focused on any one part of the tape and instead using my tactical trading to hedge and/or juice returns. I do not expect to have this low of a risk profile forever; but it seems appropriate given the potential headwinds.

Nevertheless, it’s worth noting it is a static 90% long position with the cash and margin used to intraday and hedging opportunities.