Todays rally was largely accredited to the suggestion by the US President that there was a “A light at the end of the tunnel” due to encouraging news from NY State. That disregards the fact that hot spots during a pandemic shift. While we all hope and pray for NY, the fact is that seven States have not attempted a pandemic response and several others are playing lip service. So, lacking national leadership, the “Light” that the President sees is probably an inbound train.
While Amazon is seemingly purpose built for situations such as COVID-19, there are symbolic strikes occurring in their fulfillment centers that could easily become more serious and impact company performance at this critical juncture.
The last few days have triggered a significant upside rally that in some years would actually be considered a great annual return (+13%). Do not get suckered into it unless you are buying stocks you are willing to hold long term. The initial drop of over 25% in just a few weeks time is indicating that another drop up to that amount may occur in the ST future. The market has rallied on the news that the US is willing to run the national credit card to max levels. That isn’t something to rally on. It’s modern monetary theory.
Short term, it may offer some relief. Don’t think for a second that this is the last of the ballout bills. Its just the first big one of several. The party will end next week when the news that COVID and the economy remain on grim a trajectory.
Last fall I wrote that the trajectory of the failure of the US dollar had at least 10 years to unfold. That was based on the math of $1T USD in deficit spending per year for 10 years. $10T total. The US Government now appears (with published FED monitization of debt) to be on track to print $7 trillion out of thin air this year. The clear investment winners will emerge later this summer- Gold, Silver and Bitcoin.
Do NOT judge this book by its cover! I was very surprised and impressed with the content. Well worth the time and money. Many might find it invaluable. This site isn’t linked to Amazon Marketplace. I’m not making a penny on the advice it holds.
Sneak Peak: I’ve bought some silver and gold coins over the years. It seemed prudent. What this author describes when he was faced with hyper inflation was that a 18K gold chain was better. When he needed to buy something, he would sell gold links. Owners of gold coins quickly became targeted as “rich” by the desperate. Besides, gold chain is cheaper than trying to buy a coin. Win- win. I had never heard that before I read this book. Probably I wasn’t paying enough attention.
I got some Permi- Bull friends that keep calling a bottom and keep trying to catch this falling knife. I know and understand the temptation. Fell for it in 2000 to my regret. My notes to them:
But anything will be short lived. The Fed announcement
today that they are buying bond ETFs lead to a rally.
Until people had some coffee and said “I didn’t know the bond market was that f-ed the Fed has to get involved!” We are, as Koreans say, in deep kimchi. The credit market is failing and its massive compared to the stock market.
I think we are into this correction about where we were in Oct 2008. People seem to believe a bailout will create a V shaped rally. V’s happen in bull markets. Not in Bears. Bear markets last 4-9 months. This is month #1.
Last 12 years has been marked by a lot of V’s (Chart below) A decent Bull Market trains people into almost robot like programming “to buy the dip”. The last Bull we had was one for the ages! ITS OVER!
After all the destruction in recent weeks, seemingly people cannot wrap their noggins around that truth. The situation is fundamentally changed since last month. The Fed cannot save this. Neither can Congress nor Trump. Collectively we are in a rough patch and it’s portfolio suicide to do what TV pundits suggest… “Buy the Dip!” They are paid to say that! Yes, from my perspective its OK for ME to buy a bit on AMZN, NFLX, ZM, RNG. Nibble only! Its not the apocalypse. But its not the end of the Bear, either!
The uptrend that happen in Bear Markets are called either Dead Cat bounces or Bull Traps. They often last 4-7 days. Sometimes longer. Suddenly, people are more afraid of missing out on the rally then they are of follow on losses.
Inevitably, a final fall happens that crushes their hopes and dreams. I suspect we won’t see a final bottom until after they remove the 10% penalty for early withdrawal from retirement funds. The unemployed will demand that. The day after that happens, hundreds of billions will head for the exit and never return. Terrified Boomers will bolt too. Then the market will make its final move down.
That said- I’m nibbling a bit on some Amazon, NFLX, and Ring (RNG). Crime will rise. Ring is a good deterrent . Also the Gold Bugs are starting to make noise. They drove prices higher off the “Dollar is dead” argument. They were right in 2009. They are more right now.
Will spare you the chart. Fundamentally, the EU is asking Netflix to slow its streaming lest it drop the entire internet architecture to its knees. NFLX has to be scoring huge customer adds in many countries.
Based on a belief there is at least another -20% downside, holding EDZ, SQQQ and TECS. On days where market is up +5% or more, buying short term (14-21 day) calls on SQQQ and TECS to escalate gains. No longer trading from TECS to TECL on a hard down day to catch the next days rally attempt- at this point, the bulls have got to be getting tired of getting caught in a bull trap. At this point they are 4 times burned in 10 trading days. Have reduced Puts on Disney and others once they hit 75-100% up so those positions are now house money.
Sold YANG and FNGD. The inverse FAANG ETF has got to diverge at some point- there is a bullish case for NFLX and AMZN. Apple is the one in the FAANG most susceptible to out sized draw-down.
If market moves down more than 5% on 3/16, will sell YANG and reduce shorts. While there is still $$ to be made in YANG, on a global basis it’s the US stock market that is the most highly over-valued and has the most room to fall if / when draconian measures are put into place to try to get a handle on COVID-19.
Goal will be to get long TQQQ and TECL in anticipation of a sharp move higher ( probably due to Congressional action) on Tuesday.
Relief rally? That is a suckers bet. A Bull Trap. Stay in cash or stable coin OR be dumb enough to follow my cynic trades. Markets today rallied on the news that President Trump finally declared a National Emergency. The lines at Costco two weeks ago would have told any dummy that something nation wide was amiss! Any American could have told you last week we have hit a crisis.
The US Government is actually going to get serious, but its far too late to stop this from pushing the US into recession. When China closed Wuhan, it gave the world weeks of time to react. To plan. To prepare. The US wasted the advantage it was given.
Federal inaction has allowed this to spread and its impact on the economy will be harsh. For all the people that will die, ten times more will lose their jobs, their houses. Student loans, car loans and personal loans will go into default. The entire debt ridden system is under threat. Bailouts are coming next. Bailouts of under performing debt @ the expense of the US taxpayer for out of control corporate debt.
Don’t buy into today’s Bull Trap where people who perpetually believe that ‘everything is awesome’ lose their money to those that are more grounded. I believe COVID-19 is the Bull Killer & we are at risk of losing another 15-25% of market capitalization. Below in a previous post are my holdings. Lost a lot on paper today. Not worried. This Bubble has found its Pin.
This is a birthday present, of sorts! These are subject to change in the event the market turns markedly bullish. On Monday, with the market down a notable 7%, some didnt realize that a +3% bounce the next day was almost a certainty. Bull markets die quickly, but not easily. Expect more downside moves with rally attempts along the way by the perma- bulls. Drunks are the last one to accept the party is over. Once they do realize its over, expect a significant culmination draw down.
retirement plan accounts
TECS- 3x short
I’ve adjusted SL higher than purchase price.
EDZ- 3x Short
markets are in more jeopardy than US is at this point
on the overvaluation of Facebook, Amazon, Google & Netflix
YANG- 3x short
may have COVID contained- but economic shock may just be getting felt
Cruise Line Put
3 $26 puts. If hits $8, will move to a Jun/Jul timeframe in money put
Cruise Line Put
15 2021 $27.5 put. Holding until bleeding stops in travel
Before you leap blindly into TECS, pull up the 12 year chart. Betting against technology would have turned $40,000 into $6 during this last bull market if you bought and held. An inverse ETF comes with severe loss potential.
After doing a lot of charting over the past day, the possibility of a short term counter downtrend rally has become more likely. Things don’t fall straight down without even mild attempts of a rally and this fall off has been spectacular. Assuming the financial services folks have spend far more of their weekend trying to engineer a stabilization strategy for the market, it makes sense to expect one- however short or long lived.
The riskiest way to play a bounce is with Leveraged ETFs (3x). UPRO and TECL are candidates I’m considering. If markets in the US open with a significant bounce higher, I am going to wait until closer to 1200 to get a sense of its strength. If markets resume a downtrend, I am going to closely watch levels at 1030 to await a turn of events.
My thesis is that COVID-19 is an awful flu that is feared more for its unknown impact to the economy and everyday life than the actual disease impact itself. My approach to investing in this chaotic period is towards the bottom of post.
Markets hate uncertainty, and there is no historical model available to attempt to model the potential impact of this form of Coronavirus. Latest data suggests that container ships arriving in China was down 30% compared to same month last year. China is the worlds builder of “stuff”, and the US its best customer. The movement of that ‘stuff’ is clearly dwindling rapidly- which portends a significant global slowdown.
Declines started before COVID Panic hit full
force. Unknown why it hasn’t reversed. Seems to be a “sell anything with
a Ask/Bid mentality”
In theory, as the global markets turned south, Precious Metals and ‘Digital Gold’ should have appreciated in value. What we are seeing in all markets currently is a flight to liquid fiat. Concurrently, markets are expecting a Central Bank global intervention reducing interest rates. The world is already awash in paper money and its derivatives! No form of currency has ever cured a disease! This is a nonsensical, “lets do something to look like we are doing something” self distructive trap.
As indicated in Para 2, the world might be facing a Supply Shock of goods. Last one I remember was the 1973 Oil Embargo, the 1979 Oil Crisis and then the impacts of the Hunt Brothers trying to corner the Silver market in the late 1970s. Supply shock brings panic and reckless behaviors out in the most rationale of people. A supply shock in tandem with a flood of paper money is a recipe for an inflationary spiral. If inflation gets out of hand, most of the governments of the world to include the US will face an existential crisis. A huge portion of the US debt is in short term notes, so inflation will significantly alter its ‘refinancing rates’. A spike in inflation may become an existential crisis to fiat currencies on a global basis.
My ST investment Equity Market Strategy is to maintain my SQQQ and TECS (inverse ETF) positions. The market should bounce up before falling further and setting a bottom. This is not a time to be hoping for a “V” shaped bottom. It won’t happen. If you are not currently Inverse, its prudent to wait for a move up before betting on further drops. Assume that this weekend that all the global financiers and bankers are trying to plan a market intervention intent on pushing indexes up in order to soothe fears. I expect a move higher in equities starting Monday. Due to the never ending stream of bad news / COVID-19 Panic, that may not work.
My ST Precious Metals Strategy: (not physical here- market related assets like SLV, GLD, PAAS, JNUG, NUGT). I was stopped out of all of my PM positions in last 2 trading days. Gold: Anticipate continued weakness. Silver: Expect heavy short selling. Remember that in 2008, $SILVER futures were pushed down to $8. If silver gets anywhere near that level, I am backing up the truck & going all in.
Crypto: Wait and see from the sidelines. Will do a BTC, ETH and LINK update this weekend. Crypto is a hopeful asset, in that these assets are not fully established as legit and for the average Joe to put hard earned money in this seems a gamble. Since average Joe is getting more fearful by the day- lets assume that new money will be unlikely to enter this space in the short term and what we will be seeing is mostly current participants trading in and out of fiat in a zero sum game against each other.
The Nasdaq Composite Index closed today near session lows at 8965. While it may bump higher ST next significant support is at 8494 and then at 8069. Those would be drops of -13% and -18% from all time high. $COMPQ has already lost 9.2 % from ATH, so neither of these are a stretch.
If this was a normal correction, I would be looking for upside from current levels. The index has fallen hard and fast and usually one can expect a bounce. COVID-19 has too much of an X factor to potential news at this point that the sidelines are a decent place to sit, rather than anticipate a rapid “V” shaped turn around now.
GBTC has many downsides to just outright owning Bitcoin, but it has convenience and also can be placed in retirement accounts. GBTC is a derivative investment- so charting it has risks not inherent to the underlying. Because GBTC trades at a premium (that shifts constantly) to the price of bitcoin, it is a great indicator of the opinions of stock market investors.