iBankCoin
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
22,011 Blog Posts

The Market Isn’t Cheap Yet

The market never cares about valuations until the market is destroyed and need a narrative to support price stability. The pricing mechanism of stocks has always been a game of confidence. At times this confidence is shattered to pieces, and when it is, the market panics lower. This process replays itself over and over. Back in the olden days they called these occurrences “squalls”.  History is littered with such things and when you’re in them, you really do feel like it’s the end of the world. Alas, the world never ends and stocks, eventually, make higher highs.

In Stocklabs I planned for the fires and have historical valuation data at my finger tips. Here are some interesting facts for you.

I blacked out the avg PS column here because many of you are idiots. This is the technology sector. Look at it and tell me with a straight face it’s cheap, based on historical precedent.

Gross margins are DOWN year over year suggestive that companies are doing things to meet sales expectations. This is unsustainable and if the economy worsens, sales will fall off a cliff.

Earnings are down 12% YOY in tech.

Sales are up YOY, but look at the Q1 QOQ growth -29% v -24% the prior year.


YTD returns per sector with PE, PS.

During previous recessions earnings drop around 20-40%. Sadly, time is the most important antidote for a bad market. Prices stabilize after enough people had been wiped out and expectations are reduced to the point when earnings misses are met with high prices. Back in the 1973 oil embargo induced recession, big companies like MCD fell more than 70% from peak and market did in face SOAR in 1975 by more than 30%. Since we are merely 6 months into our squall, you should expect another year of agony before prices stabilize, if we are to follow the path of previous recessions.

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NO SAFE HAVENS

I shed more than 3% for the week, mainly due to never being at the desk — busy with the new home. This is my excuse — what’s yours pal?

My YTD gains remain near +50% and my goal here, heading into the sleep molasses months of summer is to keep them. I am almost always hedged and although this strategy might seem moribund to those following along, trust me I am a professional and know exactly what I am doing.

When out of pocket or rhythm, it’s good to play it small under reduced risk scenarios. God forbid I had remained heavily long commodities into this disaster, I would’ve lost 15% for the week.

Life is long and there isn’t any rush to make money now, in this tape.

For the weekend and Father’s Day I intend to do nothing at all. Food will be without flavor, because who needs seasoning. Alcohol will not be consumed and the cigars will remain stowed away. Life isn’t about pleasure or comfort. Life is about toil, sacrifice, and endurance. I will never be tricked or fooled and I will never again believe. I intend to waste away my days working and thinking, trying my very best not to get hooked and I will most certainly not attempt to find joy.

 

Good day.

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PUTINS SAYS EUROPE STANDS TO LOSE $400 BILLION DUE TO SANCTIONS; MARKETS COLLAPSE THE OPEN

UPDATE: NASDAQ BACK TO SESSION HIGHS BECAUSE FUCK YOU.

It was a nice open, but it’s all dust now — as the market descends back into hell and anarchy. The price action today is especially deleterious because oil is off by 4.6% too. This sort of trading is on par with RECESSIONARY DOLDRUMS and we should soon expect to be ENTREATED with bad economic news.

I’d also like to rattle off a series of comments made by Putin today.

PUTIN SAYS IT IS OBVIOUS THE RULES OF NEW GLOBAL ORDER WILL BE SET BY STRONG AND SOVEREIGN STATES

PUTIN SAYS RUSSIA ENTERS THE NEW ERA AS POWERFUL AND MODERN COUNTRY

PUTIN: WE WILL DEAL WITH WESTERN COMPANIES TOO

Putin:

Sanctions “blitzkrieg” against Moscow never had any chance of succeeding

EU could lose more than $400 billion due to sanctions, which he says would rebound on those who had imposed them

Putin: “Everyone who wants to continue to work/cooperate with Russia is being threatened by the United States.
However, this shows if real leaders are at the helm of a country or not”

Putin: Our partners in the West deliberately undermined international foundations in the name of their geopolitical illusions

PUTIN SAYS SOME GLOBAL CURRENCIES “ARE COMMITTING SUICIDE”

Putin: “The United States, having declared victory in the Cold War, declared themselves the messengers of God on earth, who have no obligations, but only interests. They seem not to notice that new powerful centers have formed on the planet

PUTIN SAYS UNITED STATES IS PRINTING MONEY AND SNAPPING UP FOOD ON GLOBAL MARKETS

And also…

Gazprom to reduce its supply of gas to Italy’s Eni by 50%

EU: RUSSIA IS USING GAS SUPPLIES FOR BLACKMAIL.

CHINA’S PRESIDENT XI SAYS CHINA-RUSSIA COOPERATION IS SHOWING GOOD MOMENTUM ACROSS THE BOARD

What exactly is going on here?

The West meddled in Ukraine and thought Russia would do nothing and just take it — because hubris. Russia invaded Ukraine and the west went all in with supplies and financial weapons, but failed to plan ahead in terms of needing Russian energy and food supplies and now find themselves in a position whereby their ally in Ukraine is losing 1,000 soldiers per day against a barrage of Russian artillery and now facing down the barrel of zero food and energy coming from Russia as a result of this rift. This isn’t even about the war per se. This is basic planning and the western countries are ill equipped to fight a war against Russia, let alone fight a financial one when the winter is coming and the cold winds sweep through Germany.

The fact of the matter is, and this should come as no surprise, Russia is winning the war in Ukraine and due to the logistics of the situation there is very little the United States can do about it and it’s astounding to me to see these mistakes being made over and over and over by seemingly incompetent people, unserious people. And now we deal with the consequences of their poor and corrupt leadership.

Markets are down 220 Dow and the NASDAQ is barely up, having given back more than 150 NASDAQS since the open. I am 10% FAZ, 10% TZA and 80% cash, down by 30bps.

Embarrassing.

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Markets Bounce, Stocklabs Is Down

Markets are gaily up today, NASDAQ rocketing nearly 200 and all I can do is is consume myself with the fact that Stocklabs IS FUCKING DOWN and our server company is trying to find out why. No reasons or rationale, even an ETA.

I apologize for this and will take steps in the future to make sure we aren’t exposed like this.

For now, I am holding my shorts, even my oil commodity long. I am mostly cash, and capping off a week of poor trading, ever more distracted by my house move and dealing with contractors.

As soon as I know more about the server, I’ll let you know.

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THE FED IS CRASHING THE ECONOMY

The only problem with raising rates at a break-neck pace in order to defeat inflation is it also destroys the economy. You can see this as clear as day if you look at the money supply — down the most in 60 years.

Many analysts are suggesting earnings will come down by 20%; but that is being optimistic. I have done the research and the earnings decline for tech/growth is more like -40% from peak. Ergo, all of your PE and PS ratios are MEANINGLESS stats if you are not account for those stark reductions.

Here is the historical PE ratios for the tech sector overall market and below that price to sales.

data by Stocklabs

To get down to 2008 levels, we’d need to see stocks lower by another 40%.

If we are to repeat the 73-74 recessionary time period, the issue here isn’t price but time. We would be stuck/trapped in this type of market until the latter part of 2023.

What’s next?

Lower prices and earnings warning and layoffs.

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MARKETS CRASH, REVERTS BACK TO NORMALCY

The Dow is off by more than 700 you piece of shits. I told you not to get involved with dat. Why listen to me, the space alien magician who has successfully navigated every single market calamity since the dot com crash.

I entered the day hedged and closed everything out for a slight gain. I did not hold my shorts because I won’t be around today, as my youngest son graduates high school. The last two years of school have been a blur, thanks to COVID and remote learning policies.

The markets are reverting back to normalcy today, crash partners in the face of a crashing economy in a world crashing with violence and supply chain issues. Gas has been CUT to Europe and the Russians are saying it’s due to the sanctions, as they cannot get turbines. They do, however, say NORDSTREAM 2 is available for use right away, something the Europeans must be seething over at this very moment.

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THE CRISIS HAS ENDED; MARKETS RESPOND FAVOURBLY TO EASILY PREDICTED FED FUNDS MOVES

Listen to me.

The market went up on news the Fed is going to HIKE RATES into your fucking face, causing RAMPANT unemployment, pain, and suffering. Do not avail yourselves to believe the crisis has ended, in spite of my headline. The fact of the matter is, and pardon me for being candid, the beginning of the end has only just begun.

Having said that, I am not an idiot and positioned myself amidst longs and shorts with a slight bias towards going LOWER. At some point, and hopefully soon, the rally will FAIL and markets will resume its downward trajectory en route towards the inevitable retesting of the COVID lows.

Although terrible, the single best thing that can happen to the west is its complete destruction.

I closed the session DOWN 36bps because I do not gamble and would rather poke my eyes out with BBQ stocks than go directionally long into a brainless rally fueled by emotions.

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MARKETS RALLY ON POWELL’S ERRONEOUS LOGIC

SIRS–

This is a scam The NASDAQ shot higher and is now STEAMING UP on the news that the Fed might ONLY hike by 50bps next meeting. EXCUSE ME if I interrupt your meth induced thinking — but this is fucking retarded.

The Fed cannot control inflation.

The Fed has LOST the initiative and WAY BEHIND THE FUCKING CURVE.

SIR —

The Fed funds rate is 1.75% and the CPI is 8.6%.

This is DISASTER.

Markets will do what markets will do. But if you’re buying here in the hopes inflation has been defeated — might I remind you now that you are fucking retarded.

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MARKET CLOWN PUNCHES LOWER AFTER HISTORIC FED HIKE

Fed’s George said “fuck you” and preferred a 50bps hike, but they all ignored her and did 75bps anyway. The result of this hike in the bond market is MOOT, as yields remain where they were before the news. The Nasdaq is down 1% since the hike, but I suspect that is hot money fleeing for safety — because morons are terrified to lose more.

I had sold my SOXL before the news and have only 5% allocated to BTU — based off the FREEZE POLAND trade. I will likely re-enter the tape after 3pm and believe the market to be doomed. We are in a Fed fuckery zone and no one will escape it alive.

That being said, nothing surprises me and I will keep an open mind to the possibility of a bounce.

NOTE: The Fed funds rate is 1.75%. The market is pricing in 4%.

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BALLS OR VAGINA INTO FED?

So which is it? Are you heavily positioned long or short or mostly cash into this fucking move?

HAPPY LGBTQ Pride Fed Day bigots!

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