Krugminator2
Member

I am very leveraged long. In my opinion and only my opinion, thinking in essentials is better. Washed out breadth and sentiment, steep yield curve and 90% down days followed by either 90% up day and/or two consecutive 80% up days is all that matters. Everything else is noise. I think this is pocket aces. No guarantees. No law against stocks dropping from here. But in my opinion one of the better opportunities in the last couple of years.

You had three 90% down volume days in a ten day stretch in May. That is an objective way of quantifying panic selling or climax that has held up to historical scrutiny. You had a 90% up volume day on May 13th which shows demand. And a yesterday and today were back to back 80% up volume days. https://s3.us-east-1.amazonaws.com/docs.hamzeianalytics.com/identifying-bear-market-bottoms-and-new-bull-markets.pdf The rally might fail but I think this is textbook A+ setup to be long the market.

Pretty big drop in M2 in the last reading. Maybe that is a one off. But it looks like the inflation the Fed has the most influence over (non-energy) peaked. Jeremy Siegel is a Wharton professor and a Milton Friedman disciple and who has been right about inflation for the last 15 years thinks the Fed should possibly stop hiking after the June meeting. The Fed made the error by not tightening last year and now thinks you can somehow make up for it by slamming on the breaks and sending the passenger through the window.

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Eight straight down weeks for the Dow. Only other 8 down was 1923. 7 straight for S&P. Only modern instances of 7 down were 1980 and 2001. That was the exact bottom of 1980 and then went up 35% or so. 2001 had 6% more down before rally over 20%. It takes time to wring this type of sentiment out. But the amount of fund managers holding cash, sentiment surveys, the rate Wall Street is cutting analyst estimates, consumer confidence, fund manager surveys of the economy are all at levels about as extreme as they get. The market is pricing in a zillion rate hikes. The 2 and 10 year yield curve is close to inverting. The 3 month and 10 year has a lot more room. Is the Fed really going to intentionally invert the yield curve. Are they going to intentionally cause a recession. It seems like a distinct possibility is this is all jawboning from the Fed and they are going to surprise by stopping hikes pretty quick in the cycle.

I own when I am wrong. So no taking the L from you? I saw the article before I posted. It's May 13. Not December 31st. That article may as well have been written in 1800. The world completely changed. Nothing about it has relevance now. In case you have noticed, the average Nasdaq tech stock dropped 39% from December 31st to now.

1. Markets don't go straight to zero. Stocks are not shitcoins 2. There are always people who buy panic (i.e. me) 3. The market either gapped up or ripped in the morning only to get sold hard into for five straight days before yesterday. So the premise and observation of your article is not even factually correct. Also I noticed no posts from you about how much billionaires have lost in the last few months. A lot of posts how much they made on paper. You ranted about that for mulitple years. Netflix is 50% below where it was before the pandemic. Amazon dropped below pre-pandemic levels yesterday. Jeff Bezos has lost 30-40% of his net worth on top of his divorce. Facebook dropped roughly in half along with Mark Zuckerberg's net worth https://www.cnbc.com/2022/02/03/mark-zuckerbergs-net-worth-fell-30-billion-as-meta-shares-tank.html Four pages of rants that as of this moment today on May 13, 2022 turned out to be completely wrong. http://www.ronpaulforums.com/showthread.php?546648-Billionaires-profit-from-the-corona-crisis/page4 You going to own and take the L or just keep posting anti-business, conspiratorial nonsense.

This is one of the statistically best times to buy stocks. The market *can* do anything but I think most likely path is up over the short and medium term. So many thing lined up for a rally. Inflation peaked, sentiment and breadth washed out, a lot of long term trendlines and moving average support being touched. All of the froth was drained out. The junk SPACs and fad companies with no profits are down 80-90%. Small cap stocks are actually cheap if you don't think a recession is imminent. Which incidentally the 3 month and 10 year which is the statistically most reliable is only pricing in a 4% chance of recession. The 2 and 10 year is the more often quoted and that shows a 22% chance. https://www.frbsf.org/economic-research/publications/economic-letter/2022/may/current-recession-risk-according-to-yield-curve/

I read Drudge during times like this. I have noticed he has made market moves his centerpiece headline at least 3 times recently including today. Drudge Headline Indicator Highs and Lowshttps://www.bespokepremium.com/think-big-blog/b-i-g-tips-drudge-headline-indicator/

1522252083478634501 1521195209840857089 Market easily could drop 5%-10% more and anything is possible. This could always be different but these tend to be the times of most opporunity. Good advice in 1888 and held up in 2020. Probably good advice now.

1521857448277168128 1519664716028784642 1521806460807794699 1521606909555523585 Similar situation to spring of 2020. Big difference is Fed is doing the opposite. Probably won't get the big bull market out of this but should get a big rally.

This is such an extreme outlier year for the market and monetary policy trumps everything. All the sentiment stuff trying to catch ripples doesn't work well when the big wave is down and I have slammed my fingers in the car door some this year but.... I would not rule out markets having some sort of crazy melt up based on how negative EVERYONE is. I subscribe to website that has smart money/dumb money gauge that uses a number of inputs like commercial hedgers and spits out a number. Dumb money confidence is 15% right now. It got down to 12% during the coronacrash and was 12% during that market meltdown at the end of 2018. It was 13% just after in 2001 after 9/11. Smart money is not as bullish as dumb money is bearish but I think there is enough lined up. Ultimately I think this ends horribly. But bull markets die in euphoria and there hasn't been much euphoria for a while.

1. Biggest mutual fund outflows since 2008 a couple of weeks ago. 2. AAII sentiment survey has bearish sentiment only matched by 1990 and 2008 3. There are so many extremes in bonds this year that have no precedent even going back to the Great Depression. The TLT is the farthest under that 200 day moving average by double the runner up 4. Mutual funds are holding cash at historically high levels 5. The equity, total and index put call ratios have had spikes that would usually put a floor under things for the intermediate term 6. The 1 month and 3 month VIX has inverted a couple of times in the last week. Usually when that happens, stocks calm down and it is close to a bottom. . Buying the close before a Fed day and selling just before the announcement has a bullish bias. If the market were to sell off 4 or 5% tomorrow on the Fed announcement, it would likely be a short term event before a 10-20% rally. The beginning of a crash is very unlikely given sentiment but monetary policy might trump everything. Anything is possible All that said I am very long stocks and also bought some bonds for a rally as well. Will sell a lot of the market is up in the morning and hold the rest for a couple of months. If the market drops in the morning I will just hold for a month or so.

Printing money and demand side policies don't create wealth so it wouldn't make any country rich. Wealth is composed of goods and services produced. Bad monetary policy can make a country poorer though, whether it is letting inflation or deflation get out of control. Both bad outcomes slow investment. Once the recession ended in 2020 and it was clear there wasn't going to be Great Depression 2.0, the Fed should have started tightening. It seemed pretty obvious and now very obvious in hindsight. The Fed should have a rules based policy instead of being a political organization. It seems like avoiding a bad outcome after increasing M2 45% in a short period of time and being slow to stop inflation would make a recession almost impossible to avoid. Nothing is for certain. Doom is always a popular view but it is almost always wrong- but it can be right and it seems like we are getting closer to a recession. As a guess, we are still probably a year away from recession based on the yield curves. And I wouldn't be surprised if inflation has peaked.

Inflation is too many dollars chasing too few goods. If those dollars aren't chasing goods, are they inflationary? In a very low interest rate environment cash and Treasuries are close substitutes so exchanging cash (especially if the Fed is paying interest on that cash) for the Treasuries doesn't really do much. But lets say those dollars do start chasing goods and loans pick up. The Fed can sell those bonds for cash and take cash out of the system. And if that is too slow and situation dire, the Federal Reserve can always increase reserve requirements of banks to prevent more dollars chasing goods which brings inflation right down.

It is an argument of semantics which really doesn't matter. I would say 99.8% of people don't think of rising and falling equity prices as inflation and deflation. No. When interest rates are zero I think there is little connection. I suspect the rise in M2 since 2020 had more to do with cutting people checks directly as opposed to buying corporate bonds. Japan has very low inflation and very slow M2 growth relative to the rest of the world and has 3 times the central bank balance sheet as the US Fed. 1500495756209307653