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PutinMyIdiol

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- PutinMyIdiolPutinMyIdiol
  ·2023-03-24
  Of course the banking crisis is the doing of US Fed. In fact, US Fed is the major contributorof global inflation. The rising interest rates have caused businesses to collapse and fold up and as well. I hope what goes round comes round and hit them really hard too.
  Banking Crisis: Who's Next
  SummaryIt's been a busy two weeks for the global banking system and the central banks that oversee t
  Banking Crisis: Who's Next
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- PutinMyIdiolPutinMyIdiol
  ·2022-04-20
  This is another bully tactic from mainstream america, banks' analysts inciting fear in public ti trigger a panic sell of Tesla shares. All because Musk attempt to buy out Twitter.
  Is The End Near For Musk And Tesla?
  SummaryDespite recent gains, investors should consider selling Tesla and other meme stocks now, before institutional money bails.While regulators may still be too frightened to hold Musk accountable,
  Is The End Near For Musk And Tesla?
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- PutinMyIdiolPutinMyIdiol
  ·2022-04-20
  There are no contradictions, only different groups with different interests. This one sells hedges and of course takes the current opportunity to stir up interest by selling everyone the market is going to crash!
  The Market Will Probably Crash Soon: How To Hedge And Hold
  RobertCrum/iStock via Getty ImagesThe yield curve inverted on April 1, 2022. Inversion is probably o
  The Market Will Probably Crash Soon: How To Hedge And Hold
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In fact, US Fed is the major contributorof global inflation. The rising interest rates have caused businesses to collapse and fold up and as well. I hope what goes round comes round and hit them really hard too.","listText":"Of course the banking crisis is the doing of US Fed. In fact, US Fed is the major contributorof global inflation. The rising interest rates have caused businesses to collapse and fold up and as well. I hope what goes round comes round and hit them really hard too.","text":"Of course the banking crisis is the doing of US Fed. In fact, US Fed is the major contributorof global inflation. The rising interest rates have caused businesses to collapse and fold up and as well. I hope what goes round comes round and hit them really hard too.","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":14,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/9943427910","repostId":"1194295153","repostType":2,"repost":{"id":"1194295153","kind":"news","pubTimestamp":1679645134,"share":"https://ttm.financial/m/news/1194295153?lang=&edition=fundamental","pubTime":"2023-03-24 16:05","market":"us","language":"en","title":"Banking Crisis: Who's Next","url":"https://stock-news.laohu8.com/highlight/detail?id=1194295153","media":"Seeking Alpha","summary":"SummaryIt's been a busy two weeks for the global banking system and the central banks that oversee t","content":"<html><head></head><body><h2>Summary</h2><ul><li>It&#39;s been a busy two weeks for the global banking system and the central banks that oversee them.</li><li>What are the key takeaways thus far.</li><li>Who&#39;s next and who&#39;s last.</li></ul><p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/d7d31a433776e18078bbae63346dfe9f\" tg-width=\"1080\" tg-height=\"540\" width=\"100%\" height=\"auto\"/><span>Imagesrouges/iStock via Getty Images</span></p><h2>Meet the new bank crisis</h2><p>NOT the same as the old bank crisis. This is not the Great Financial Crisis II. It’s not the collapse of Long-Term Capital Management in 1998. It’s not the Great Depression either. A lot of what is taking placetoday has some rhymes with various past episodes, but we are charting new territory with new lessons to be learned to add to the future policy maker playbook. We are likely in the very early stages of this latest banking crisis that could take months if not years to play out. SVB Financial (SIVB), Signature Bank (SBNY), Silvergate Bank (SI), and Credit Suisse (CS) are already gone. Who’s next?</p><h2>The song is over</h2><p>Over the last fourteen years since the Great Financial Crisis (GFC), we were reassured that problems with the banks were behind us. In 2017, then Fed ChairJanet Yellen declared that we will not see another financial crisis in our lifetime. The next year, legislation was passed that eased regulations on all but the largest banking institutions. It was music to the ears of capital markets awash in liquidity, low volatility, and high-risk tolerance. But in the midst of a sustained bout of blistering hot inflation that induced the U.S. Federal Reserve to whipsaw from effectively promising to keep interest rates pinned at 0% until at least 2024 this time two years ago to launching into its most aggressive rate hiking campaign since the 1970s this time a year ago, the consequences of such abrupt and dramatic monetary policy swings are now coming into view. The song is over, and what we have seen so far is likely only the beginning of what is ahead now.</p><h2>Getting in tune</h2><p>Much has been written and pontificated about what has taken place in the banking system over the last two week since March 8 when Fed Chair Jay Powell flexed before Congress that the Fed was poised to raise interest rates by a half point at its March 22 FOMC meeting (what a difference a fortnight makes). It’s not that nothing more needs to be said on these topics, but it is also worthwhile to step back and reflect on selected perspectives that may be getting overlooked as the narrative rapidly unfolds.</p><h2>March madness</h2><p>I don’t know about you, but debating whether the global financial system might implode is not the best way to relax over weekend. Yet for the past two weekends, that’s exactly what we’ve had to game out. During the weekend of March 11-12, we held our breath wondering whether the U.S. financial trinity – the Treasury, the Federal Reserve, and the FDIC – would come up with an emergency solution to save the financial system from rampant bank runs before the markets in Asia opened on Sunday night. The next weekend of March 18-19, we waited and wondered whether the Swiss would be able to arrange a shotgun merger between its two banking behemoths and prevent the meltdown of a Systemically Important Financial Institution (SIFI). What new crisis threatening the global financial system will we have to look forward to in the coming weekends? Only time will tell.</p><h2>Revising my teaching notes</h2><p>So as I prepare my Intro to Finance lecture discussing how creditors are paid in the event of a liquidation, the events of the past weekend have provided a whole new twist to the discussion. For when it comes to the order in which people traditionally get paid in liquidation, its secured debt holders first, then senior unsecured lenders, followed by junior subordinated debt holders, then preferred stockholders, and both last and least (and typically nothing at all) common stock holders. Needless to say it was eyebrow raising when in the case of Credit Suisse the subordinated debt holders got wiped out yet the common stock holders received $1 billion $2 billion $3 billion in a merger withUBSthat was completed without the customary shareholder approval vote.</p><p>Listen, I get it that there simply was not the time to get shareholders to vote on a deal that absolutely had to be done over a weekend, but not only exempting the rule of law but also having the deal structured in a way that leaves head scratching questions in terms of the way that it was structured is not the best for engendering investor confidence going forward. Something tells me that this may not be the last we hear AT1 debt and banking system instability uttered in the same sentence.</p><h2>Tightening lending standards</h2><p>If you are running a small or mid-sized regional bank, it has been a traumatic past two weeks. It has been particularly traumatic if you are among the small or mid-sized regional banks that exercised poor credit management by doing things like using your depositors&#39; money to load up on long-term Treasuries and MBS in 2021 just before they were set to lose as much as 30% of their value.</p><p>With this potential fight for survival in mind, you may be far less inclined today than you were two weeks ago as a small or mid-sized bank to lend money out to your institutional and retail customers. And if the regional banks that serve so many local communities across the country share this more cautious inclination, this means less home buying, less car buying, less consumer spending, less capital expenditures, and less hiring of new employees. Add all of these “less”es together, and you have an economic recession, just as we have seen several times in the recent past as evidenced in the chart below.</p><p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/73611566280cece7f6e202ae8736df42\" tg-width=\"640\" tg-height=\"480\" width=\"100%\" height=\"auto\"/><span>Federal Reserve Bank of St. Louis, Board of Governors</span></p><p>The deeply inverted yield curve has been screaming recession for quite a while now, and recent developments across the banking landscape have not only meaningfully improved the probability of recession, but also that any such recession is likely to be a bit deeper and longer than previously anticipated.</p><p>The fact that stocks continue to trade at a premium coupled with the fact that corporate earnings are still toward the high end of their historical range with considerable room to come back down suggests that the road ahead for stocks over the next few months could get a bit bumpy before it’s all said and done.</p><h2>The banking crisis may do the Fed’s work</h2><p>If one wants to try to put a silver lining on idiosyncratic bank failures and stressful weekends waiting for emergency policy rescues, a positive that is likely to come from the recent banking crises and the probable tightening of lending standards is that it is likely to bring down inflation both further and faster than we would have seen otherwise. As I often like to say to my Principles of Macro students, if you have too much money chasing too few goods, a great way to solve it is by simply taking money away from people. And since politicians on all sides of the political aisle no longer have the resolve to actually raise taxes on anyone other than the ultra-wealthy, raising interest rates and tightening lending standards are ways to do it. If people don’t have money, they can’t spend it, and inflation comes back down.</p><p>A sooner and deeper recession may actually help at risk banks. What has put so many small and mid-sized banks at risk has been the precipitous decline in long-term Treasury and MBS prices. But if inflation comes down and the economy falls into recession, both of these forces are typically meaningful tailwinds for these same securities as interest rates eventually come back down and investors take flight to safety. It’s an interesting thought pretzel to think that an economic recession could help fix the banking crisis while an ongoing economic expansion could send more banks over the edge.</p><h2>Who’s next</h2><p>Bringing this all back together, it is very likely that we are still in the very early stages of a banking crisis that may take many months to play out. It is important to remember that when the U.S. Federal Reserve raises interest rates, it historically takes upwards of twelve months before the tightening effects of the rate hike have fully worked their way through the economy. And given that the Fed only started hiking rates at this time last year, this means that only the first 25 bps rate hike from last year has fully come out the other side and we have 450 bps of interest rate hikes still making their way through the proverbial snake. This includes four consecutive 75 bps bombs from the middle to latter part of last year as well as the latest 25 bps cherry on top of the rate hiking cycle cake that the Fed delivered coming out of their latest FOMC meeting this Wednesday. Somehow, I have a sneaking suspicion we may someday look back with derision on this last rate hike. It will be interesting to see.</p><p>With all of this in mind, we should remain mindful that the stream of banks under stress may not be continuous as we continue through 2023. We may go through prolonged stretches where it looks like the problem is behind us (May 2008, anyone?) only to find a new set of problems emerge in a different segment of the financial sector. Thus, keeping a close eye on further rumbles across the financial sector is a prudent strategy as we move forward from here.</p><p>As for who’s next in the meantime, I am not breaking any news by saying that First Republic Bank (FRC) remains the institution to watch. The situation remains highly tenuous despite the repeated efforts of both public and private institutions to resuscitate the ailing bank. If First Republic ultimately succumbs, pressure on other at risk regional banking institutions is not only likely to persist but amplify. On the other hand, if First Republic perseveres, such a period of relief from immediate banking stress may follow.</p><h2>Who’s last</h2><p>If we go through a worst case scenario thought exercise, it’s reasonable to consider where the road might end in the current banking crisis. A name that is worth monitoring in this regard is Bank of America (BAC), which of course is one of the largest financial institutions in the world and among the top of the SIFI category. Of course, nothing at all is imminently at issue with Bank of America, but it does have a notably larger long-term bond portfolio relative to its major banking institution peers. As a result, it is worth monitoring as a back-end measure of underlying financial sector stress.</p><h2>We won’t get fooled again</h2><p>Oh no, we so will. A defining characteristic of financial markets and the policy makers that oversee them is a memory that seemingly lasts about 18 months to two years at most. Unfortunately, this leads markets and policy makers to unwittingly and repeatedly fall into the same traps, only through different means. Fortunately for investors, such dislocations lead to attractive opportunities for those that are prepared and positioned to capitalize. Thus, maintaining a sharp focus on potential downside risks such as ongoing banking industry volatility is a productive way to navigate short-term turbulence while seeking to capitalize on long-term upside.</p><p><i>This article is written by Eric Parnell, CFA for reference only. Please note the risks.</i></p></body></html>","source":"seekingalpha","collect":0,"html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Banking Crisis: Who's Next</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nBanking Crisis: Who's Next\n</h2>\n\n<h4 class=\"meta\">\n\n\n2023-03-24 16:05 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4589757-banking-crisis-who-is-next><strong>Seeking Alpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>SummaryIt's been a busy two weeks for the global banking system and the central banks that oversee them.What are the key takeaways thus far.Who's next and who's last.Imagesrouges/iStock via Getty ...</p>\n\n<a href=\"https://seekingalpha.com/article/4589757-banking-crisis-who-is-next\">Web Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","type":0,"thumbnail":"","relate_stocks":{"SIVBQ":"硅谷银行","USB":"美国合众银行","WFC":"富国银行","KRE":"区域银行指数ETF-SPDR KBW","BAC":"美国银行","WAL":"阿莱恩斯西部银行","KBE":"银行指数ETF-SPDR KBW"},"source_url":"https://seekingalpha.com/article/4589757-banking-crisis-who-is-next","is_english":true,"share_image_url":"https://static.laohu8.com/5a36db9d73b4222bc376d24ccc48c8a4","article_id":"1194295153","content_text":"SummaryIt's been a busy two weeks for the global banking system and the central banks that oversee them.What are the key takeaways thus far.Who's next and who's last.Imagesrouges/iStock via Getty ImagesMeet the new bank crisisNOT the same as the old bank crisis. This is not the Great Financial Crisis II. It’s not the collapse of Long-Term Capital Management in 1998. It’s not the Great Depression either. A lot of what is taking placetoday has some rhymes with various past episodes, but we are charting new territory with new lessons to be learned to add to the future policy maker playbook. We are likely in the very early stages of this latest banking crisis that could take months if not years to play out. SVB Financial (SIVB), Signature Bank (SBNY), Silvergate Bank (SI), and Credit Suisse (CS) are already gone. Who’s next?The song is overOver the last fourteen years since the Great Financial Crisis (GFC), we were reassured that problems with the banks were behind us. In 2017, then Fed ChairJanet Yellen declared that we will not see another financial crisis in our lifetime. The next year, legislation was passed that eased regulations on all but the largest banking institutions. It was music to the ears of capital markets awash in liquidity, low volatility, and high-risk tolerance. But in the midst of a sustained bout of blistering hot inflation that induced the U.S. Federal Reserve to whipsaw from effectively promising to keep interest rates pinned at 0% until at least 2024 this time two years ago to launching into its most aggressive rate hiking campaign since the 1970s this time a year ago, the consequences of such abrupt and dramatic monetary policy swings are now coming into view. The song is over, and what we have seen so far is likely only the beginning of what is ahead now.Getting in tuneMuch has been written and pontificated about what has taken place in the banking system over the last two week since March 8 when Fed Chair Jay Powell flexed before Congress that the Fed was poised to raise interest rates by a half point at its March 22 FOMC meeting (what a difference a fortnight makes). It’s not that nothing more needs to be said on these topics, but it is also worthwhile to step back and reflect on selected perspectives that may be getting overlooked as the narrative rapidly unfolds.March madnessI don’t know about you, but debating whether the global financial system might implode is not the best way to relax over weekend. Yet for the past two weekends, that’s exactly what we’ve had to game out. During the weekend of March 11-12, we held our breath wondering whether the U.S. financial trinity – the Treasury, the Federal Reserve, and the FDIC – would come up with an emergency solution to save the financial system from rampant bank runs before the markets in Asia opened on Sunday night. The next weekend of March 18-19, we waited and wondered whether the Swiss would be able to arrange a shotgun merger between its two banking behemoths and prevent the meltdown of a Systemically Important Financial Institution (SIFI). What new crisis threatening the global financial system will we have to look forward to in the coming weekends? Only time will tell.Revising my teaching notesSo as I prepare my Intro to Finance lecture discussing how creditors are paid in the event of a liquidation, the events of the past weekend have provided a whole new twist to the discussion. For when it comes to the order in which people traditionally get paid in liquidation, its secured debt holders first, then senior unsecured lenders, followed by junior subordinated debt holders, then preferred stockholders, and both last and least (and typically nothing at all) common stock holders. Needless to say it was eyebrow raising when in the case of Credit Suisse the subordinated debt holders got wiped out yet the common stock holders received $1 billion $2 billion $3 billion in a merger withUBSthat was completed without the customary shareholder approval vote.Listen, I get it that there simply was not the time to get shareholders to vote on a deal that absolutely had to be done over a weekend, but not only exempting the rule of law but also having the deal structured in a way that leaves head scratching questions in terms of the way that it was structured is not the best for engendering investor confidence going forward. Something tells me that this may not be the last we hear AT1 debt and banking system instability uttered in the same sentence.Tightening lending standardsIf you are running a small or mid-sized regional bank, it has been a traumatic past two weeks. It has been particularly traumatic if you are among the small or mid-sized regional banks that exercised poor credit management by doing things like using your depositors' money to load up on long-term Treasuries and MBS in 2021 just before they were set to lose as much as 30% of their value.With this potential fight for survival in mind, you may be far less inclined today than you were two weeks ago as a small or mid-sized bank to lend money out to your institutional and retail customers. And if the regional banks that serve so many local communities across the country share this more cautious inclination, this means less home buying, less car buying, less consumer spending, less capital expenditures, and less hiring of new employees. Add all of these “less”es together, and you have an economic recession, just as we have seen several times in the recent past as evidenced in the chart below.Federal Reserve Bank of St. Louis, Board of GovernorsThe deeply inverted yield curve has been screaming recession for quite a while now, and recent developments across the banking landscape have not only meaningfully improved the probability of recession, but also that any such recession is likely to be a bit deeper and longer than previously anticipated.The fact that stocks continue to trade at a premium coupled with the fact that corporate earnings are still toward the high end of their historical range with considerable room to come back down suggests that the road ahead for stocks over the next few months could get a bit bumpy before it’s all said and done.The banking crisis may do the Fed’s workIf one wants to try to put a silver lining on idiosyncratic bank failures and stressful weekends waiting for emergency policy rescues, a positive that is likely to come from the recent banking crises and the probable tightening of lending standards is that it is likely to bring down inflation both further and faster than we would have seen otherwise. As I often like to say to my Principles of Macro students, if you have too much money chasing too few goods, a great way to solve it is by simply taking money away from people. And since politicians on all sides of the political aisle no longer have the resolve to actually raise taxes on anyone other than the ultra-wealthy, raising interest rates and tightening lending standards are ways to do it. If people don’t have money, they can’t spend it, and inflation comes back down.A sooner and deeper recession may actually help at risk banks. What has put so many small and mid-sized banks at risk has been the precipitous decline in long-term Treasury and MBS prices. But if inflation comes down and the economy falls into recession, both of these forces are typically meaningful tailwinds for these same securities as interest rates eventually come back down and investors take flight to safety. It’s an interesting thought pretzel to think that an economic recession could help fix the banking crisis while an ongoing economic expansion could send more banks over the edge.Who’s nextBringing this all back together, it is very likely that we are still in the very early stages of a banking crisis that may take many months to play out. It is important to remember that when the U.S. Federal Reserve raises interest rates, it historically takes upwards of twelve months before the tightening effects of the rate hike have fully worked their way through the economy. And given that the Fed only started hiking rates at this time last year, this means that only the first 25 bps rate hike from last year has fully come out the other side and we have 450 bps of interest rate hikes still making their way through the proverbial snake. This includes four consecutive 75 bps bombs from the middle to latter part of last year as well as the latest 25 bps cherry on top of the rate hiking cycle cake that the Fed delivered coming out of their latest FOMC meeting this Wednesday. Somehow, I have a sneaking suspicion we may someday look back with derision on this last rate hike. It will be interesting to see.With all of this in mind, we should remain mindful that the stream of banks under stress may not be continuous as we continue through 2023. We may go through prolonged stretches where it looks like the problem is behind us (May 2008, anyone?) only to find a new set of problems emerge in a different segment of the financial sector. Thus, keeping a close eye on further rumbles across the financial sector is a prudent strategy as we move forward from here.As for who’s next in the meantime, I am not breaking any news by saying that First Republic Bank (FRC) remains the institution to watch. The situation remains highly tenuous despite the repeated efforts of both public and private institutions to resuscitate the ailing bank. If First Republic ultimately succumbs, pressure on other at risk regional banking institutions is not only likely to persist but amplify. On the other hand, if First Republic perseveres, such a period of relief from immediate banking stress may follow.Who’s lastIf we go through a worst case scenario thought exercise, it’s reasonable to consider where the road might end in the current banking crisis. A name that is worth monitoring in this regard is Bank of America (BAC), which of course is one of the largest financial institutions in the world and among the top of the SIFI category. Of course, nothing at all is imminently at issue with Bank of America, but it does have a notably larger long-term bond portfolio relative to its major banking institution peers. As a result, it is worth monitoring as a back-end measure of underlying financial sector stress.We won’t get fooled againOh no, we so will. A defining characteristic of financial markets and the policy makers that oversee them is a memory that seemingly lasts about 18 months to two years at most. Unfortunately, this leads markets and policy makers to unwittingly and repeatedly fall into the same traps, only through different means. Fortunately for investors, such dislocations lead to attractive opportunities for those that are prepared and positioned to capitalize. Thus, maintaining a sharp focus on potential downside risks such as ongoing banking industry volatility is a productive way to navigate short-term turbulence while seeking to capitalize on long-term upside.This article is written by Eric Parnell, CFA for reference only. Please note the risks.","news_type":1},"isVote":1,"tweetType":1,"viewCount":178,"authorTweetTopStatus":1,"verified":2,"comments":[],"imageCount":0,"langContent":"EN","totalScore":0},{"id":9086684575,"gmtCreate":1650449811745,"gmtModify":1676534726408,"author":{"id":"4108792600218380","authorId":"4108792600218380","name":"PutinMyIdiol","avatar":"https://static.laohu8.com/default-avatar.jpg","crmLevel":1,"crmLevelSwitch":0,"followedFlag":false,"idStr":"4108792600218380","authorIdStr":"4108792600218380"},"themes":[],"htmlText":"This is another bully tactic from mainstream america, banks' analysts inciting fear in public ti trigger a panic sell of Tesla shares. All because Musk attempt to buy out Twitter.","listText":"This is another bully tactic from mainstream america, banks' analysts inciting fear in public ti trigger a panic sell of Tesla shares. All because Musk attempt to buy out Twitter.","text":"This is another bully tactic from mainstream america, banks' analysts inciting fear in public ti trigger a panic sell of Tesla shares. All because Musk attempt to buy out Twitter.","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":4,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/9086684575","repostId":"1105569285","repostType":4,"repost":{"id":"1105569285","kind":"news","pubTimestamp":1650468622,"share":"https://ttm.financial/m/news/1105569285?lang=&edition=fundamental","pubTime":"2022-04-20 23:30","market":"us","language":"en","title":"Is The End Near For Musk And Tesla?","url":"https://stock-news.laohu8.com/highlight/detail?id=1105569285","media":"Seeking Alpha","summary":"SummaryDespite recent gains, investors should consider selling Tesla and other meme stocks now, before institutional money bails.While regulators may still be too frightened to hold Musk accountable, ","content":"<html><head></head><body><p>Summary</p><ul><li>Despite recent gains, investors should consider selling Tesla and other meme stocks now, before institutional money bails.</li><li>While regulators may still be too frightened to hold Musk accountable, a change in public opinion would be far more consequential to Musk and his empire.</li><li>The hype around Musk’s stake in Twitter and the speculation around his plans for the social media platform takes focus away from the troubles, which are many, ahead of Tesla.</li></ul><p>For years, Elon Musk has used hype to prop up Tesla’s stock. It’s worked so well that other companies have followed his lead. But now, we think the world has seen that the emperor has no clothes. The attempted Twitter (TWTR) takeover is yet another example of Musk bullying his way into what he wants and underscores how his super-star status cannot always convince people to overlook his irreverent, reckless, and potentially illegal behavior. As the recent lawsuit againstMusk shows, he is not completely immune from the consequences of his actions. Despite recent gains, investors should consider selling Tesla (NASDAQ:TSLA) and other meme stocks now, before institutional money bails.</p><p><b>End of the Road for Musk</b></p><p>Most investors are keenly aware of Musk’s long history of making grand promises that don’t come true – the Roadster, the Semi, the Cybertruck, full-self driving (FSD) etc. – and at times are blatantly unethical, such as tweeting “funding secured” to go private, and pumping Doge coin. But now, we have evidence that he may have acted illegally in the way he reported his purchases of Twitter stock. Given the clear rules about how investors should report large stakes in public companies – like what Musk has in Twitter – this case seems straightforward: Musk broke the rules.</p><p>The next question is how severely he will be punished. If the past is any guide, regulators will not muster more than a slap on the wrist. The real question is how institutional investors will react to signs Musk has pushed the envelope too far.</p><p>Institutional investors own Tesla stock more often because they must, given its influence on their performance, than because they see it as a good investment. Any investor with a rigorous process can see the stock is ridiculously overvalued; so, you own it for the “Musk effect”. Accordingly, the institutional investors’ decision to sell Tesla stock will be based on when Musk’s outsized influence begins to wane.</p><p>We think that moment has come.</p><p><b>Musk Meets His Maker: Twitter</b></p><p>In our view, Musk’s repeated rule-breaking behavior has finally gone too far. Details of the case are still emerging, but Musk’s failure to disclose his more than 5% stake in Twitter arguably hurt investors who sold shares after he crossed that ownership threshold. Instead, Musk kept purchasing shares until reaching a 9% stake in Twitter before disclosing his position. The initial class-action lawsuit and the potential for more have finally gotten the attention of investors, if not regulators.</p><p>The poor reception Twitter’s employees gave the news of Musk’s stake is a very public rejection of his super-star influencer status and provide the first tangible evidence that maybe his star power has limitations. If a hostile takeover prompts a mass exodus of talent, then Musk might end up destroying the company in the process of buying it. That being said, the loudest voices in the company are not necessarily the most valuable.</p><p>As more people join lawsuits against Musk, and Twitter employees continue to express their mistrust of the company’s largest shareholder, institutional investors may seize this moment to quietly unload their shares of overvalued Tesla stock. Now is the time to sell because the price of the stock to this point has been more a reflection of Musk’s ability to draw an audience than any underlying fundamental value in the company.</p><p><b>Live by the Stunt, Die by the Stunt</b></p><p>Ultimately, it appears that as much as Twitter was the launch pad for Musk’s super influence powers, his failure thus far to win the publicity battle could mark the beginning-of-the-end of his super-star status.</p><p>Musk’s Twitter play, which is another in a long series of distractions, could end poorly for Musk. Instead of addressing Tesla’s issues, Musk appears to be attempting to position himself as a defender of free speech. The risk he faces is that instead of looking like a hero he looks more like a bully running an ego-driven takeover with little regard for the rules. While regulators may still be too frightened to hold Musk accountable (more on this below), a change in public opinion would be far more consequential to Musk and his empire.</p><p>Tesla’s investors have not been impressed with Musk’s Twitter antics either, as the stock is down 11% since he announced his ownership in the social media giant. Likewise, the “Musk bump” in Twitter shares is likely to fade as investors realize the only value Musk brought was publicity, and not good publicity either. Although Twitter remains a popular platform, it has its own problems and suggestions such as removing a letter from its name can do more harm than good.</p><p><b>Why Haven’t Regulators Done Anything Before Now?</b></p><p>Tesla’s high stock price has, thus far, kept its CEO well beyond an arm’s length of regulators. Other executives in other times likely would have faced consequences for many of the things Musk has said and done. Today, Tesla’s high stock price indicates investors’ collective belief in Musk’s promises and protects Musk. Regulators don’t want to be accused of causing the company’s stock price to fall, thereby destroying the wealth of many investors and, as a result, footing the cost of defending against numerous shareholder lawsuits.</p><p>Furthermore, Musk can claim Tesla’s elevated stock price and the wealth it endows is what he needs to fulfill his outlandish promises over time. However, should Tesla’s stock price ever reflect realistic expectations for the company, authorities may feel emboldened to pursue legal or regulatory action against Musk and/or Tesla. Credible claims can be made for several offenses, including:</p><ul><li>stock and cryptocurrency manipulation</li><li>false advertising of Full Self Driving (FSD)</li><li>ignoring safety authorities</li><li>neglecting to file documentation on time related to his purchase of Twitter’s shares</li><li>and other claims of dubious veracity</li></ul><p><b>What Will Regulators Do When the Bubble Pops?</b></p><p>Musk has positioned himself as a pop-culture icon. Though society loves to build up celebrities, so too does it love tearing them down even more. Once Tesla’s stock price falls from its overly inflated levels, Musk will lose his cover that has protected him from all his unethical and arguably illegal behavior. Regulators are likely to come after Musk with knives out after all the humiliation they had to suffer at his hand.</p><p><b>Trouble on the Horizon</b></p><p>All the hype around Musk’s large stake in Twitter and the speculation around his plans for the social media platform takes focus away from the troubles, which are many, ahead for Tesla. Of course, that is likely his goal. Below we discuss the fundamentals of Tesla’s business, which cannot be wished away or made irrelevant with hype.</p><p><b>Incumbents Are Catching Up:</b> Tesla’s first-mover advantage has long been cited as reason enough for investors to pile their money into the company. However, that advantage is gone, and in some cases turning into a lag. Ford (F), Rivian (RIVN), and General Motors (GM) aim to produce EV trucks in 2022, but Tesla will be on the sidelines until at least 2023 before launching its Cybertruck.</p><p>The rising competition from incumbents means the days of Tesla’s rising profitability could be numbered. For starters, 26% of the company’s GAAP earnings in 2021 were from the sale of regulatory credits, not from the underlying economics of making and selling vehicles and other ancillary services.</p><p>Once incumbents increase production of EVs they will need to purchase fewer credits from Elon. That means Tesla needs to actually start <i>selling</i> <i>cars</i>to make money. The catch-22 is that for the company to sell more cars, it first needs to increase its production capacity. If Tesla’s succeeds in selling more cars capital expenditure and working capital are primed to grow along with sales. Tesla needs to build economies of scale before it can benefit from them.</p><p><b>Market Share Losses Continue:</b> Incumbent automakers have entered the EV market with scale and are already taking market share from Tesla. Per Figure 2, Tesla’s share of global EV sales fell from 16% in 2019 to 14% in 2021.</p><p>Tesla’s share of the U.S. EV market fell from 79% in2020to 70% in2021. With light truck sales comprising more than three out of every four vehicles sold in the U.S. in January 2022, Tesla falling behind in truck EVs means its share of the U.S. market could fall further.</p><p><b>Figure 2: Tesla’s Share of the Global EV Sales</b></p><p><img src=\"https://static.tigerbbs.com/bc4dd16dde86e1ab31f85bd8a2af4aee\" tg-width=\"630\" tg-height=\"260\" referrerpolicy=\"no-referrer\"/></p><p>TSLA Market Share Since 2019(New Constructs, LLC)</p><p>Sources: New Constructs, LLC, EV-volumes.com and Statista</p><p><b>Slow Start to 2022:</b>Though Teslaforecastedan at least 50% YoY rise in deliveries in 2022, the company is feeling the effects of supply chain problems – just like every other automaker. The company delivered 310,000 vehicles in the quarter, while consensus estimates were for 313,000.</p><p><b>Reverse DCF Math: Valuation Implies Tesla Will Own at Least 57% of the Global Passenger EV Market</b></p><p>Despite the increased competition, failure to meet delivery expectations, and diminutive share of the global EV market in 2021, Tesla’s valuation implies the company will own 57% of the global passenger EV market in 2030.</p><p>Even if Tesla increases the average selling price (ASP) per vehicle to $55K vs. ($49K in 2021), Tesla’s stock price at ~$1,100/share implies the firm will sell 15 million vehicles in 2030 versus ~936k in 2021. That figure represents 57% of the projected base case global EV passenger vehicle market in 2030 and the implied vehicle sales based on a lower ASP looks even more unrealistic.</p><p>To provide inarguably best-case scenarios for assessing the expectations reflected in Tesla’s stock price, we assume Tesla achieves profit margins 1.5x Toyota Motor Corp (TM) and triples its current auto manufacturing efficiency.</p><p>Per Figure 3, an $1,100/share price implies that, in 2030, Tesla will sell the following number of vehicles based on these ASP benchmarks:</p><ul><li>15 million vehicles – ASP of $55K (above average U.S. new car price of $47K in 2021)</li><li>7 million vehicles – ASP of $49K (equal to Tesla’s 2021 ASP[1])</li><li>21 million vehicles – ASP of $38K (equal to General Motors’ ASP[2] of $38K in 2021)</li></ul><p>If Tesla achieves those EV sales, the implied market share for the company would be the following (assuming global passenger EV sales reach 26 million in 2030, the base case projection from the IEA):</p><ul><li>57% for 15 million vehicles</li><li>64% for 17 million vehicles</li><li>83% for 21 million vehicles</li></ul><p>If we assume the IEA’s best case for global passenger EV sales in 2030, 47 million vehicles, the above vehicle sales represent:</p><ul><li>31% for 15 million vehicles</li><li>35% for 17 million vehicles</li><li>45% for 21 million vehicles</li></ul><p><b>Figure 3: Tesla’s Implied Vehicle Sales in 2030 to Justify $1,100/Share</b></p><p><img src=\"https://static.tigerbbs.com/bad84793f241565c81ebb0d29b01242c\" tg-width=\"630\" tg-height=\"284\" referrerpolicy=\"no-referrer\"/></p><p>TSLA DCF Implied Vehicle Production(New Constructs, LLC)</p><p>Sources: New Constructs, LLC and company filings</p><p><b>Tesla Must Generate More Profits Than Apple For Investors to Make Money</b></p><p>Below are the assumptions we use in our reverse discounted cash flow model to calculate the implied production levels above.</p><p>Bulls should understand what Tesla needs to accomplish to justify ~$1,100/share:</p><ul><li>immediately achieve a 14% NOPAT margin (1.5x Toyota’s margin, which is the highest of the large-scale automakers we cover), compared to Tesla’s TTM margin of 8%) and</li><li>grow revenue by 32% compounded annually from 2022 to 2030.</li></ul><p>In this scenario, Tesla generates <i>$811 billion</i> in revenue in 2030, which is 116% of the combined revenues of Toyota, Stellantis (STLA), Ford, General Motors, and Honda (HMC) over the past twelve months. Tesla must replace the U.S. auto industry before 2030 to justify current valuations.</p><p>This scenario also implies Tesla grows net operating profit after-tax (NOPAT) by 2,458% from 2021 to 2030. In this scenario, Tesla generates $112 billion in NOPAT in 2030, or 12% higher than Apple’s (AAPL) TTM NOPAT, which, at $100 billion, is the highest of all companies we cover, and 65% higher than Microsoft (MSFT), the second-highest. Those companies have intertwined themselves in the lives of consumers and businesses around the world, which seems an unlikely feat for Tesla at this point.</p><p><b>TSLA Has 46% Downside If Morgan Stanley Is Right About Sales</b></p><p>If we assume Tesla reaches Morgan Stanley’s estimate of selling 8.1 million cars in 2030 (which implies a 31% share of the global passenger EV market in 2030), at an ASP of $55k, the stock is worth just $542/share. Details:</p><ul><li>NOPAT margin improves to 14% and</li><li>revenue grows 27% compounded annually over the next decade, then</li></ul><p>the stock is worth just $547/share today – a 46% downside to the current price. See the math behind this reverse DCF scenario. In this scenario, Tesla grows NOPAT to $62 billion, or nearly 14x its 2021 NOPAT, and just 7% below Alphabet’s (GOOGL) 2021 NOPAT.</p><p><b>TSLA Has 80%+ Downside Even with 27% Market Share and Realistic Margins</b></p><p>If we estimate more reasonable (but still very optimistic) margins and market share achievements for Tesla, the stock is worth just $200/share. Here’s the math:</p><ul><li>NOPAT margin improves to 9% (equal to Toyota’s TTM margin) and</li><li>revenue grows by consensus estimates from 2022 to 2024 and</li><li>revenue grows 17% a year from 2025 to 2030, then</li></ul><p>the stock is worth just $200/share today – an 80% downside to the current price.</p><p>In this scenario, Tesla sells 7 million cars (27% of the global passenger EV market in 2030) at an ASP of $47K (average new car price in U.S. in 2021) and grows NOPAT by 24% compounded annually from 2022 to 2030.</p><p>We also assume a more realistic NOPAT margin of 9% in this scenario, which is 1.3x higher than Toyota’s industry-leading five-year average NOPAT margin of 7%. Given the required capital requirements to fund manufacturing and match increased competition in the EV market, Tesla is unlikely to achieve and sustain a margin as high as 9% from 2022 to 2030. If Tesla fails to meet these expectations, then the stock is worth less than $200/share.</p><p>Figure 4 compares the firm’s historical NOPAT to the NOPAT implied in the above scenarios to illustrate just how high the expectations baked into Tesla’s stock price remain. For additional context, we show Toyota’s, General Motors’, and Apple’s TTM NOPAT.</p><p><b>Figure 4: Tesla’s Historical and Implied NOPAT: DCF Valuation Scenarios</b></p><p><img src=\"https://static.tigerbbs.com/3e43f865637ac4c84e8199df2b05d061\" tg-width=\"630\" tg-height=\"330\" referrerpolicy=\"no-referrer\"/></p><p>TSLA DCF Implied NOPAT(New Constructs, LLC)</p><p>Sources: New Constructs, LLC and company filings</p><p>Each of the above scenarios assumes Tesla’s invested capital grows 14% compounded annually through 2030. For reference, Tesla’s invested capital grew 49% compounded annually from 2011 to 2021 and 30% compounded annually since 2015.</p><p>An invested capital CAGR of 14% represents 1/3rdthe CAGR of Tesla’s property, plant, and equipment since 2011 and assumes the company can build future plants and produce cars 3x more efficiently than it has so far.</p><p>In other words, we aim to provide inarguably best-case scenarios for assessing the expectations for future market share and profits reflected in Tesla’s stock market valuation.</p><p><b>Tesla Won’t Be the Only One to Fall</b></p><p>Other meme stocks have taken pages from the Musk playbook and will likely suffer the same fate we expect Tesla to suffer once the game is up. GameStop (GME) promised to transform itself into an ecommerce powerhouse, yet the company continues to head in the opposite direction and earnings continue to disappoint. GameStop’s Core Earnings fell from -$200 million in fiscal 2021 to -$321 million in fiscal 2022.</p><p>Despite the company’s inability to quickly execute operational change, GameStop’s stock has remained well above a reasonable valuation thanks in part to announcing the launch of a marketplace for nonfungible tokens (NFTs) and partnerships with blockchain firms.</p><p>AMC Entertainment Holdings (AMC) has also run several Tesla-esque plays to prop up its stock. Indeed, the company’s CEO recently tweeted that the company is “playing on offense again” with its investment in a microcap gold mine. Before gold mines, the company got on the crypto bandwagon in 2021 by accepting Bitcoin, Ethereum, Bitcoin Cash, and Litecoin.</p><p>Beyond the repeated attempts at propping up their stocks, the fundamentally weak business models of Tesla, GameStop, and AMC Entertainment in highly competitive industries burn cash and continue to dilute shareholders whenever possible. Per Figure 5, despite combining for more than $1.1 trillion of market cap, Tesla, AMC Entertainment, and GameStop have a combined economic book value, our measure of the no growth value of a stock, of -$52 billion and -$4.3 billion of free cash flow over the past twelve months.</p><p><b>Figure 5: Meme Stock’s Market Cap, Economic Book Value &amp; FCF: TTM</b></p><p><img src=\"https://static.tigerbbs.com/add55782c8e6b0e8a891f84c9ec7421f\" tg-width=\"630\" tg-height=\"119\" referrerpolicy=\"no-referrer\"/></p><p>Meme Stocks Market Cap, Economic Book Value, FCF(New Constructs, LLC)</p><p>Sources: New Constructs, LLC and company filings</p><p><i>This article originally published on April 14, 2022.</i></p><p><i>Disclosure: David Trainer, Kyle Guske II, and Matt Shuler receive no compensation to write about any specific stock, sector, style, or theme.</i></p><p>[1] Tesla’s ASP = (total automotive revenues – regulatory credits) / deliveries</p><p>[2] General Motors’ ASP = Vehicle, parts and accessories / wholesale vehicle sales</p></body></html>","collect":0,"html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; 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height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nIs The End Near For Musk And Tesla?\n</h2>\n\n<h4 class=\"meta\">\n\n\n2022-04-20 23:30 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4501979-is-the-end-near-for-musk-and-tesla><strong>Seeking Alpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>SummaryDespite recent gains, investors should consider selling Tesla and other meme stocks now, before institutional money bails.While regulators may still be too frightened to hold Musk accountable, ...</p>\n\n<a href=\"https://seekingalpha.com/article/4501979-is-the-end-near-for-musk-and-tesla\">Web Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","type":0,"thumbnail":"","relate_stocks":{"TSLA":"特斯拉"},"source_url":"https://seekingalpha.com/article/4501979-is-the-end-near-for-musk-and-tesla","is_english":true,"share_image_url":"https://static.laohu8.com/e9f99090a1c2ed51c021029395664489","article_id":"1105569285","content_text":"SummaryDespite recent gains, investors should consider selling Tesla and other meme stocks now, before institutional money bails.While regulators may still be too frightened to hold Musk accountable, a change in public opinion would be far more consequential to Musk and his empire.The hype around Musk’s stake in Twitter and the speculation around his plans for the social media platform takes focus away from the troubles, which are many, ahead of Tesla.For years, Elon Musk has used hype to prop up Tesla’s stock. It’s worked so well that other companies have followed his lead. But now, we think the world has seen that the emperor has no clothes. The attempted Twitter (TWTR) takeover is yet another example of Musk bullying his way into what he wants and underscores how his super-star status cannot always convince people to overlook his irreverent, reckless, and potentially illegal behavior. As the recent lawsuit againstMusk shows, he is not completely immune from the consequences of his actions. Despite recent gains, investors should consider selling Tesla (NASDAQ:TSLA) and other meme stocks now, before institutional money bails.End of the Road for MuskMost investors are keenly aware of Musk’s long history of making grand promises that don’t come true – the Roadster, the Semi, the Cybertruck, full-self driving (FSD) etc. – and at times are blatantly unethical, such as tweeting “funding secured” to go private, and pumping Doge coin. But now, we have evidence that he may have acted illegally in the way he reported his purchases of Twitter stock. Given the clear rules about how investors should report large stakes in public companies – like what Musk has in Twitter – this case seems straightforward: Musk broke the rules.The next question is how severely he will be punished. If the past is any guide, regulators will not muster more than a slap on the wrist. The real question is how institutional investors will react to signs Musk has pushed the envelope too far.Institutional investors own Tesla stock more often because they must, given its influence on their performance, than because they see it as a good investment. Any investor with a rigorous process can see the stock is ridiculously overvalued; so, you own it for the “Musk effect”. Accordingly, the institutional investors’ decision to sell Tesla stock will be based on when Musk’s outsized influence begins to wane.We think that moment has come.Musk Meets His Maker: TwitterIn our view, Musk’s repeated rule-breaking behavior has finally gone too far. Details of the case are still emerging, but Musk’s failure to disclose his more than 5% stake in Twitter arguably hurt investors who sold shares after he crossed that ownership threshold. Instead, Musk kept purchasing shares until reaching a 9% stake in Twitter before disclosing his position. The initial class-action lawsuit and the potential for more have finally gotten the attention of investors, if not regulators.The poor reception Twitter’s employees gave the news of Musk’s stake is a very public rejection of his super-star influencer status and provide the first tangible evidence that maybe his star power has limitations. If a hostile takeover prompts a mass exodus of talent, then Musk might end up destroying the company in the process of buying it. That being said, the loudest voices in the company are not necessarily the most valuable.As more people join lawsuits against Musk, and Twitter employees continue to express their mistrust of the company’s largest shareholder, institutional investors may seize this moment to quietly unload their shares of overvalued Tesla stock. Now is the time to sell because the price of the stock to this point has been more a reflection of Musk’s ability to draw an audience than any underlying fundamental value in the company.Live by the Stunt, Die by the StuntUltimately, it appears that as much as Twitter was the launch pad for Musk’s super influence powers, his failure thus far to win the publicity battle could mark the beginning-of-the-end of his super-star status.Musk’s Twitter play, which is another in a long series of distractions, could end poorly for Musk. Instead of addressing Tesla’s issues, Musk appears to be attempting to position himself as a defender of free speech. The risk he faces is that instead of looking like a hero he looks more like a bully running an ego-driven takeover with little regard for the rules. While regulators may still be too frightened to hold Musk accountable (more on this below), a change in public opinion would be far more consequential to Musk and his empire.Tesla’s investors have not been impressed with Musk’s Twitter antics either, as the stock is down 11% since he announced his ownership in the social media giant. Likewise, the “Musk bump” in Twitter shares is likely to fade as investors realize the only value Musk brought was publicity, and not good publicity either. Although Twitter remains a popular platform, it has its own problems and suggestions such as removing a letter from its name can do more harm than good.Why Haven’t Regulators Done Anything Before Now?Tesla’s high stock price has, thus far, kept its CEO well beyond an arm’s length of regulators. Other executives in other times likely would have faced consequences for many of the things Musk has said and done. Today, Tesla’s high stock price indicates investors’ collective belief in Musk’s promises and protects Musk. Regulators don’t want to be accused of causing the company’s stock price to fall, thereby destroying the wealth of many investors and, as a result, footing the cost of defending against numerous shareholder lawsuits.Furthermore, Musk can claim Tesla’s elevated stock price and the wealth it endows is what he needs to fulfill his outlandish promises over time. However, should Tesla’s stock price ever reflect realistic expectations for the company, authorities may feel emboldened to pursue legal or regulatory action against Musk and/or Tesla. Credible claims can be made for several offenses, including:stock and cryptocurrency manipulationfalse advertising of Full Self Driving (FSD)ignoring safety authoritiesneglecting to file documentation on time related to his purchase of Twitter’s sharesand other claims of dubious veracityWhat Will Regulators Do When the Bubble Pops?Musk has positioned himself as a pop-culture icon. Though society loves to build up celebrities, so too does it love tearing them down even more. Once Tesla’s stock price falls from its overly inflated levels, Musk will lose his cover that has protected him from all his unethical and arguably illegal behavior. Regulators are likely to come after Musk with knives out after all the humiliation they had to suffer at his hand.Trouble on the HorizonAll the hype around Musk’s large stake in Twitter and the speculation around his plans for the social media platform takes focus away from the troubles, which are many, ahead for Tesla. Of course, that is likely his goal. Below we discuss the fundamentals of Tesla’s business, which cannot be wished away or made irrelevant with hype.Incumbents Are Catching Up: Tesla’s first-mover advantage has long been cited as reason enough for investors to pile their money into the company. However, that advantage is gone, and in some cases turning into a lag. Ford (F), Rivian (RIVN), and General Motors (GM) aim to produce EV trucks in 2022, but Tesla will be on the sidelines until at least 2023 before launching its Cybertruck.The rising competition from incumbents means the days of Tesla’s rising profitability could be numbered. For starters, 26% of the company’s GAAP earnings in 2021 were from the sale of regulatory credits, not from the underlying economics of making and selling vehicles and other ancillary services.Once incumbents increase production of EVs they will need to purchase fewer credits from Elon. That means Tesla needs to actually start selling carsto make money. The catch-22 is that for the company to sell more cars, it first needs to increase its production capacity. If Tesla’s succeeds in selling more cars capital expenditure and working capital are primed to grow along with sales. Tesla needs to build economies of scale before it can benefit from them.Market Share Losses Continue: Incumbent automakers have entered the EV market with scale and are already taking market share from Tesla. Per Figure 2, Tesla’s share of global EV sales fell from 16% in 2019 to 14% in 2021.Tesla’s share of the U.S. EV market fell from 79% in2020to 70% in2021. With light truck sales comprising more than three out of every four vehicles sold in the U.S. in January 2022, Tesla falling behind in truck EVs means its share of the U.S. market could fall further.Figure 2: Tesla’s Share of the Global EV SalesTSLA Market Share Since 2019(New Constructs, LLC)Sources: New Constructs, LLC, EV-volumes.com and StatistaSlow Start to 2022:Though Teslaforecastedan at least 50% YoY rise in deliveries in 2022, the company is feeling the effects of supply chain problems – just like every other automaker. The company delivered 310,000 vehicles in the quarter, while consensus estimates were for 313,000.Reverse DCF Math: Valuation Implies Tesla Will Own at Least 57% of the Global Passenger EV MarketDespite the increased competition, failure to meet delivery expectations, and diminutive share of the global EV market in 2021, Tesla’s valuation implies the company will own 57% of the global passenger EV market in 2030.Even if Tesla increases the average selling price (ASP) per vehicle to $55K vs. ($49K in 2021), Tesla’s stock price at ~$1,100/share implies the firm will sell 15 million vehicles in 2030 versus ~936k in 2021. That figure represents 57% of the projected base case global EV passenger vehicle market in 2030 and the implied vehicle sales based on a lower ASP looks even more unrealistic.To provide inarguably best-case scenarios for assessing the expectations reflected in Tesla’s stock price, we assume Tesla achieves profit margins 1.5x Toyota Motor Corp (TM) and triples its current auto manufacturing efficiency.Per Figure 3, an $1,100/share price implies that, in 2030, Tesla will sell the following number of vehicles based on these ASP benchmarks:15 million vehicles – ASP of $55K (above average U.S. new car price of $47K in 2021)7 million vehicles – ASP of $49K (equal to Tesla’s 2021 ASP[1])21 million vehicles – ASP of $38K (equal to General Motors’ ASP[2] of $38K in 2021)If Tesla achieves those EV sales, the implied market share for the company would be the following (assuming global passenger EV sales reach 26 million in 2030, the base case projection from the IEA):57% for 15 million vehicles64% for 17 million vehicles83% for 21 million vehiclesIf we assume the IEA’s best case for global passenger EV sales in 2030, 47 million vehicles, the above vehicle sales represent:31% for 15 million vehicles35% for 17 million vehicles45% for 21 million vehiclesFigure 3: Tesla’s Implied Vehicle Sales in 2030 to Justify $1,100/ShareTSLA DCF Implied Vehicle Production(New Constructs, LLC)Sources: New Constructs, LLC and company filingsTesla Must Generate More Profits Than Apple For Investors to Make MoneyBelow are the assumptions we use in our reverse discounted cash flow model to calculate the implied production levels above.Bulls should understand what Tesla needs to accomplish to justify ~$1,100/share:immediately achieve a 14% NOPAT margin (1.5x Toyota’s margin, which is the highest of the large-scale automakers we cover), compared to Tesla’s TTM margin of 8%) andgrow revenue by 32% compounded annually from 2022 to 2030.In this scenario, Tesla generates $811 billion in revenue in 2030, which is 116% of the combined revenues of Toyota, Stellantis (STLA), Ford, General Motors, and Honda (HMC) over the past twelve months. Tesla must replace the U.S. auto industry before 2030 to justify current valuations.This scenario also implies Tesla grows net operating profit after-tax (NOPAT) by 2,458% from 2021 to 2030. In this scenario, Tesla generates $112 billion in NOPAT in 2030, or 12% higher than Apple’s (AAPL) TTM NOPAT, which, at $100 billion, is the highest of all companies we cover, and 65% higher than Microsoft (MSFT), the second-highest. Those companies have intertwined themselves in the lives of consumers and businesses around the world, which seems an unlikely feat for Tesla at this point.TSLA Has 46% Downside If Morgan Stanley Is Right About SalesIf we assume Tesla reaches Morgan Stanley’s estimate of selling 8.1 million cars in 2030 (which implies a 31% share of the global passenger EV market in 2030), at an ASP of $55k, the stock is worth just $542/share. Details:NOPAT margin improves to 14% andrevenue grows 27% compounded annually over the next decade, thenthe stock is worth just $547/share today – a 46% downside to the current price. See the math behind this reverse DCF scenario. In this scenario, Tesla grows NOPAT to $62 billion, or nearly 14x its 2021 NOPAT, and just 7% below Alphabet’s (GOOGL) 2021 NOPAT.TSLA Has 80%+ Downside Even with 27% Market Share and Realistic MarginsIf we estimate more reasonable (but still very optimistic) margins and market share achievements for Tesla, the stock is worth just $200/share. Here’s the math:NOPAT margin improves to 9% (equal to Toyota’s TTM margin) andrevenue grows by consensus estimates from 2022 to 2024 andrevenue grows 17% a year from 2025 to 2030, thenthe stock is worth just $200/share today – an 80% downside to the current price.In this scenario, Tesla sells 7 million cars (27% of the global passenger EV market in 2030) at an ASP of $47K (average new car price in U.S. in 2021) and grows NOPAT by 24% compounded annually from 2022 to 2030.We also assume a more realistic NOPAT margin of 9% in this scenario, which is 1.3x higher than Toyota’s industry-leading five-year average NOPAT margin of 7%. Given the required capital requirements to fund manufacturing and match increased competition in the EV market, Tesla is unlikely to achieve and sustain a margin as high as 9% from 2022 to 2030. If Tesla fails to meet these expectations, then the stock is worth less than $200/share.Figure 4 compares the firm’s historical NOPAT to the NOPAT implied in the above scenarios to illustrate just how high the expectations baked into Tesla’s stock price remain. For additional context, we show Toyota’s, General Motors’, and Apple’s TTM NOPAT.Figure 4: Tesla’s Historical and Implied NOPAT: DCF Valuation ScenariosTSLA DCF Implied NOPAT(New Constructs, LLC)Sources: New Constructs, LLC and company filingsEach of the above scenarios assumes Tesla’s invested capital grows 14% compounded annually through 2030. For reference, Tesla’s invested capital grew 49% compounded annually from 2011 to 2021 and 30% compounded annually since 2015.An invested capital CAGR of 14% represents 1/3rdthe CAGR of Tesla’s property, plant, and equipment since 2011 and assumes the company can build future plants and produce cars 3x more efficiently than it has so far.In other words, we aim to provide inarguably best-case scenarios for assessing the expectations for future market share and profits reflected in Tesla’s stock market valuation.Tesla Won’t Be the Only One to FallOther meme stocks have taken pages from the Musk playbook and will likely suffer the same fate we expect Tesla to suffer once the game is up. GameStop (GME) promised to transform itself into an ecommerce powerhouse, yet the company continues to head in the opposite direction and earnings continue to disappoint. GameStop’s Core Earnings fell from -$200 million in fiscal 2021 to -$321 million in fiscal 2022.Despite the company’s inability to quickly execute operational change, GameStop’s stock has remained well above a reasonable valuation thanks in part to announcing the launch of a marketplace for nonfungible tokens (NFTs) and partnerships with blockchain firms.AMC Entertainment Holdings (AMC) has also run several Tesla-esque plays to prop up its stock. Indeed, the company’s CEO recently tweeted that the company is “playing on offense again” with its investment in a microcap gold mine. Before gold mines, the company got on the crypto bandwagon in 2021 by accepting Bitcoin, Ethereum, Bitcoin Cash, and Litecoin.Beyond the repeated attempts at propping up their stocks, the fundamentally weak business models of Tesla, GameStop, and AMC Entertainment in highly competitive industries burn cash and continue to dilute shareholders whenever possible. Per Figure 5, despite combining for more than $1.1 trillion of market cap, Tesla, AMC Entertainment, and GameStop have a combined economic book value, our measure of the no growth value of a stock, of -$52 billion and -$4.3 billion of free cash flow over the past twelve months.Figure 5: Meme Stock’s Market Cap, Economic Book Value & FCF: TTMMeme Stocks Market Cap, Economic Book Value, FCF(New Constructs, LLC)Sources: New Constructs, LLC and company filingsThis article originally published on April 14, 2022.Disclosure: David Trainer, Kyle Guske II, and Matt Shuler receive no compensation to write about any specific stock, sector, style, or theme.[1] Tesla’s ASP = (total automotive revenues – regulatory credits) / deliveries[2] General Motors’ ASP = Vehicle, parts and accessories / wholesale vehicle sales","news_type":1},"isVote":1,"tweetType":1,"viewCount":239,"authorTweetTopStatus":1,"verified":2,"comments":[{"author":{"id":"3574212256342028","authorId":"3574212256342028","name":"tradingnoob","avatar":"https://static.tigerbbs.com/0db67f1fb32bf605337189e4ba02a158","crmLevel":3,"crmLevelSwitch":0,"idStr":"3574212256342028","authorIdStr":"3574212256342028"},"content":"they can sell more so we can buy more","text":"they can sell more so we can buy more","html":"they can sell more so we can buy more"}],"imageCount":0,"langContent":"EN","totalScore":0},{"id":9086885279,"gmtCreate":1650433851424,"gmtModify":1676534723624,"author":{"id":"4108792600218380","authorId":"4108792600218380","name":"PutinMyIdiol","avatar":"https://static.laohu8.com/default-avatar.jpg","crmLevel":1,"crmLevelSwitch":0,"followedFlag":false,"idStr":"4108792600218380","authorIdStr":"4108792600218380"},"themes":[],"htmlText":"There are no contradictions, only different groups with different interests. This one sells hedges and of course takes the current opportunity to stir up interest by selling everyone the market is going to crash!","listText":"There are no contradictions, only different groups with different interests. This one sells hedges and of course takes the current opportunity to stir up interest by selling everyone the market is going to crash!","text":"There are no contradictions, only different groups with different interests. This one sells hedges and of course takes the current opportunity to stir up interest by selling everyone the market is going to crash!","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":2,"commentSize":0,"repostSize":3,"link":"https://ttm.financial/post/9086885279","repostId":"2228146079","repostType":4,"repost":{"id":"2228146079","kind":"news","pubTimestamp":1650419755,"share":"https://ttm.financial/m/news/2228146079?lang=&edition=fundamental","pubTime":"2022-04-20 09:55","market":"us","language":"en","title":"The Market Will Probably Crash Soon: How To Hedge And Hold","url":"https://stock-news.laohu8.com/highlight/detail?id=2228146079","media":"seekingalpha","summary":"RobertCrum/iStock via Getty ImagesThe yield curve inverted on April 1, 2022. Inversion is probably o","content":"<html><head></head><body><p></p><p><img src=\"https://static.tigerbbs.com/f01f8e4a5c3614f9ff7467abd0a28ef2\" tg-width=\"750\" tg-height=\"500\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/></p><p>RobertCrum/iStock via Getty Images</p><p></p><p>The yield curve inverted on April 1, 2022. Inversion is probably <a href=\"https://laohu8.com/S/AONE.U\">one</a> of the most accurate leading indicators to recessions. In fact, a market crash and recession has promptly followed each inversion in the last 40 years. More importantly, there has not been a recession which was not preceded by a yield curve inversion.</p><p></p><p><img src=\"https://static.tigerbbs.com/af284a58365ebaf631cd799c7b9df6eb\" tg-width=\"640\" tg-height=\"263\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/></p><p>Yield Curve (FRED)</p><p></p><p>(Source: FRED economic data from St. Louis Fed)</p><p>By this alone, investors should begin considering protection against a serious market drawdown within the next 15 months. This yield curve inversion comes with an interesting set of macroeconomic conditions and geopolitical backdrop which suggest an increased probability of market volatility ahead.</p><p>For one, the current US inflation is very concerning. It is the highest in 40 years. The inflation’s root cause is the monetary policy used to evade a prolonged COVID-19 induced recession in 2020. The US monetary base has almost doubled in the last two years while the real GDP has not nearly doubled. This means the value of each unit of money must decrease, which means prices must increase. This concept is basic supply and demand—the supply of money has increased while the amount of goods and services have not increased to create a matching increase in money demand (people demand money when they are trying to buy goods and services in an economy). Thus, the value of money decreases.</p><p></p><p><img src=\"https://static.tigerbbs.com/f31f311d57ffe1de8f3897518852ad41\" tg-width=\"640\" tg-height=\"236\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/></p><p>Monetary Base (FRED)</p><p></p><p>(Source: FRED economic data from St. Louis Fed)</p><p>Unexpected high inflation is problematic because people become poorer. Owners of financial assets lose because the cash flow they receive are worth less than what they originally signed up for. Also, there is an expectation that central banks will raise interest rates to curb it, thus decreasing the value of financial assets.</p><p>The inflation today is a troublesome situation which the US has not experienced since the late 1970s. Back then, the public debt was only a 30% of GDP. Today, it is 123% of GDP. This is what makes Paul Volcker’s 1981 interest rate hike infeasible today. The interest payments that the federal government would take on in a substantially higher interest rate environment would dramatically increase the US deficit. This may lead to cuts in government spending, which would decrease aggregate demand and therefore corporate profits. This is bearish. The alternative is to print more money to service the increased interest rate burden. This is not necessarily bearish since the US has done this consistently in the past few decades all while seeing a prominent rise in US equities. But today, printing more money would exacerbate the inflation issue, and that would be bearish.</p><p>Without being able to curb it by simply raising rates as Volcker did in 1981, the Fed is in unchartered territory. If the US government turns to price controls to solve the inflation problem, the unprecedented intervention in free markets will probably cause many investors to sell US equities. Also, interventions like this do not work because they introduce other issues. Basic economics tells us that if a firm cannot sell something at the marginal cost of producing it or higher, then it will cease operations. What this looks like in real life is increased unemployment and civil unrest. This is all bearish.</p><p>The geopolitical issues surrounding Western sanctions on Russia also contribute to inflation. Much of the world’s commodities are sourced from the regions involved in the conflict. For example, Ukraine and Russia together exports over a quarter of the world’s wheat. This will cause the price of food substitutes like rice and soybeans to rise as well. The impact on crude oil and natural gas is well known at this point to most people.</p><p>The larger issue comes from the West being adamant in not buying from Russia and countries which are friendly with Russia. This will force a reroute of well-established supply chains, all while existing supply chain issues still exist. This could lead to Q2 and Q3 profits being much lower than expected as many companies report supply chain issues and are unable to give guidance for when this issue will be resolved.</p><p>On top of that, this trend of de-globalization hinders growth. Over the last twenty years, the Western service economies have become very dependent on specific parts of the world for specific points of value creation. For example, raw materials for electronics are sourced from mines in Africa or Russian and then put together in places like China and Southeast Asia. There will undoubtedly be growing pains moving forward with the West’s decision to fragment this process along ideological lines. Redoing so much of the value chain so suddenly will impede growth. Add that to an inflationary environment and you have stagflation, which is never good for the economy and rarely good for equities.</p><p>Thus, the current outlook is less than favorable. The yield curve inversion reinforces the thesis that a crash is on the horizon. However, market crashes usually require a catalyst—something that makes many people decide that it is time to take profits, which initiates the heavy selling and downward spiral. In 2008, this was the collapse of Lehman Brothers. In 2020, this was the realization that COVID-19 would be worldwide in short time. Over the next 15 months, the catalyst (if there even is one) is anyone’s guess. The point is that the current macroeconomic environment offers sufficient tinder for a firestorm of selling if a catalyst materializes. This all exists separate to the fact that multiples of the SPDR S&amp;P 500 Trust <a href=\"https://laohu8.com/S/PSFF\">Pacer Swan SOS Fund of Funds ETF|ETF</a> (NYSEARCA:SPY) and Invesco QQQ ETF (QQQ) have been at historic highs for a while. Both are likely due for a serious drawdown.</p><h2>The Crash Approaches, What Will You Do?</h2><p><b>It rarely makes sense to sell passive index holdings</b>. Despite the headwinds presented, America still enjoys its position as the controller of the global reserve currency. American securities enjoy the most credibility and central bank backing. The US economy is still very strong. Trying to time market swings generally ends in the investor paying large opportunity costs by waiting forever for a crash.</p><p>A better solution is to start hedging when indicators are flashing signs of trouble. Because that is the case today, hedging makes sense now. First, I will list some names which do well with market volatility. Investors can build positions in these stocks and funds as a hedge. Then, I will describe some ways to hedge using index or index ETF options. With options, I aim to establish the hedge at a near zero cost such that the credit from option sales mostly offset the debit from option purchases.</p><h2><a href=\"https://laohu8.com/S/VIRT\">Virtu Financial, Inc.</a> (VIRT)</h2><p>VIRT is a market maker for all kinds of markets. Market makers consistently do very well during bouts of market volatility because their revenue is decided by the bid-ask spread and the volume of trades. When markets sell off, both the bid-ask spread and transaction volume grows, exponentially increasing revenue. This is enormously profitable for shareholders because VIRT’s costs are mostly fixed. A quick glance at VIRT and SPX against each other shows how good of an equity hedge VIRT is. Notice VIRT’s price action during the SPX correction in early 2018, the (almost) bear market at the end of 2018, the COVID-19 crash in March 2020, and the most recent volatility due to Russia and inflation. Furthermore, VIRT has a history of growing its dividends and has a very high level of insider ownership, meaning its management is well aligned with shareholders.</p><p></p><p><img src=\"https://static.tigerbbs.com/b768354a50beab7de87dbdf53ce81da7\" tg-width=\"640\" tg-height=\"227\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/></p><p>VIRT Price and SPX TR (Seeking Alpha)</p><p></p><p>(Source: Seeking Alpha)</p><h2>CME Group Inc. (CME)</h2><p>CME operates markets for futures and options on futures. Like VIRT, CME earns more from increased trading activity. When equity markets are in turmoil, futures and options will naturally experience more activity as people are using them to hedge various exposures. Because the nature of this next crash is likely based around the inflation of commodities, commodity futures could see larger volume as well. Also, CME is naturally a steady growing stock with a growing dividend. Over the last ten years, the dividend per share has increased six-fold.</p><h2><a href=\"https://laohu8.com/S/SPD\">Simplify US Equity PLUS Downside Convexity ETF</a> (SPD)</h2><p>SPD holds an S&amp;P 500 ETF with some 50% OTM SPX and SPY puts all in an ETF wrapper. Therefore, it is less of a hedge and more of a replacement for SPY during “risk-on” periods. One could also just keep SPY holdings and buy 50% OTM puts in the same maturity and allocation as SPD, but getting the ETF is less hassle. The main downside is that SPD hedges respond best when the market crashes over 30%. Otherwise, the puts are too far OTM to provide good protection, and you end up experiencing the market drawdown while paying for puts which did not pay off. I do a deeper review of SPD in this article.</p><h2>Options For A Fast Crash (Within A Month)</h2><p>A crash which happens in the span of a month (-25% in less than a month) can be hedged using a put spread which exploits the extra gamma short-dated options have over long dated options. The long puts will expire in about 30 days and their purchase should be financed by puts expiring in about 60 days. There should be more long puts than short puts, and the strikes of the long puts should be above the strikes of the short puts. Aim to have both sets of options reasonably OTM. Generally, one can get five longs and three shorts. Below is an example set up including the P/L with four different volatility assumptions.</p><p></p><p><img src=\"https://static.tigerbbs.com/6be49b00ca23b0a2a3625e69bb69032d\" tg-width=\"640\" tg-height=\"272\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/></p><p>Fast Crash Hedge (TD Ameritrade TOS)</p><p></p><p>(Source: TD Ameritrade ThinkOrSwim)</p><p>The SPX is 4391 at the time of writing, there are five 32 DTE long puts with a 3805 strike, the three short puts are 60 DTE with a 3600 strike. The net credit for establishing this position is -5 x 910 + 3 x 1530 = 40. If the SPX falls 25% to a price of 3293 within the month, the total position P/L is between $140,000 and $150,000. The actual value depends on the implied volatility at the time. A total of 5 x 910 = 4550 was spent on the longs, which means this is effectively a 30-bagger: 140000 / 4550 = 30.77. Therefore, only a 0.85% allocation to the long puts are needed to fully protect against a 25% drawdown occurring within the month. Smaller accounts can use SPY options instead of SPX.</p><p>The risk of this trade is that the timing could be off such that the long puts are near expiry when the crash begins. This means the long puts will not offer much protection (options close to expiry have lower vega, so they are not as sensitive to volatility increases) while the short puts are still over a month from expiry at the start of a market crash. This risk can be mitigated by applying a tranche of this trade every two weeks. This way when the first tranche’s long puts are 15 DTE, another set of 30 DTE long puts are bought. When the first tranche’s long puts are 1 DTE, buy back the short puts and get another tranche. Over time, this would be expensive because you continue to buy back the short puts at 30 DTE while the long puts expire worthless, so even though the net entry credit was 0, there is a net debit to exit each tranche. Therefore, it is not advisable to do this trade unless the environment is such that a very fast crash is significantly more likely than normal.</p><h2>Options For A Medium Length Crash (Within A Year)</h2><p>A crash which happens in the span of a year (-35% within a year) can be hedged using longer term, far OTM puts. One can finance the OTM puts by selling put credit spreads with an ATM short strike. Below is an example set up with the P/L modeled with four different volatility assumptions. A 35% drop from the current 4391 is an index value of 2854.</p><p></p><p><img src=\"https://static.tigerbbs.com/2913c6254966a3b9e8132872a18938e0\" tg-width=\"640\" tg-height=\"271\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/></p><p>Medium Length Crash Hedge (TD Ameritrade TOS)</p><p></p><p>(Source: TD Ameritrade ThinkOrSwim)</p><p>The put credit spread involves selling a 32 DTE 4385 strike put and buying a 32 DTE 4000 strike put. This is then used to finance the purchase of two 50% OTM puts with 423 DTE. With this series, the net credit is 9510 – 1980 – 2 x 3320 = 890. Based on the chart above, assuming IV will be 52% after a 35% drop, this entire position will have a P/L of $55,637. The value of the far OTM puts was 6640, so they are net 8-baggers: 55637 / 6640 = 8.38.</p><p>The concept of tranches is again important here. Each month, a new put credit spread can finance the purchase of two more 50% OTM puts with +400 DTE. In three months, you would have an inventory of 6 puts each expiring in well over 300 days. If the market crashes at that point, expect the P/L figure from above to be much larger.</p><p>Clearly, this strategy requires more buildup than the last one because you are purchasing tranches of far OTM puts monthly. It is also less effective if there isn’t an existing inventory of long puts. The major risk of this strategy is that the market corrects 10% and then bounces back repeatedly. This would cause you to repeatedly realize the max loss on the put credit spread without ever allowing the hedging puts to be useful. A possible solution to this would be to roll the put credit spread at the exact same strikes so that when the market returns, you earn back more of the premium lost during the previous month. Note that with SPY puts, there is a very small chance of early exercise for ITM puts. Index options will not have this issue.</p><p>Variations of these strategies include adjusting the number, delta, and DTE of the far OTM puts. For example, it could be possible to buy more than two puts if the puts had less DTE. You can also adjust the distance between the strikes in the put credit spread to receive a greater credit to finance more puts. The point is that these strategies are a general idea which each investor can implement to fit his own preferences.</p><h2>Options For High Volatility</h2><p>Assuming the market is already drawn down 10%, you could still apply hedges with options. Insurance is more expensive at this point because of the elevated IV. However, increased IV is generally accompanied by a steeper IV skew. This means OTM puts are relatively more expensive than ATM puts, and this premium of OTM over ATM puts (in terms of IV) is higher than what it normally is. This makes put debit spreads very useful for hedging against short term downturns after an initial drop has occurred.</p><h2>Options For A Long Crash (Lost Decade)</h2><p>This is much harder to deal with because America has not had a lost decade since the aftermath of the Great Depression. Back then, America did not control the reserve currency and its economy was very different than the one it is today. I view the possibility of a lost decade as very unlikely as long as the reserve currency is still the USD. While global debt is denominated in dollars, the US can always get itself out of economic binds. Foreign investors will still invest in American securities because they have the highest credibility. If you are seriously worried about a lost decade in the US, consider international equities.</p><h2>Exiting</h2><blockquote>Bulls make money, bears make money, pigs get slaughtered</blockquote><blockquote>- An old investing adage</blockquote><p>When the market is down 30% and your total portfolio is flat, it is time to consider exiting hedges and buying equities. If your hedging turned a large market crash into a relatively small dip, it was successful. Waiting too long on options hedges in anticipation of the puts going even higher is problematic because volatility is naturally mean reverting. When the VIX is over 60, the conditional probability that it starts falling soon is very high. Often, volatility peaks right before the market bottoms. As volatility collapses, so will the value of the puts. At market bottoms, it is volatility which has the largest impact on the value of options, not the option&#39;s closeness to being ITM. Therefore, you can definitely use the VIX as an indication to exit options hedges.</p><p>When the VIX futures curve is severely backwardated as shown below, it is usually a sign that markets have overreacted and that the bottom is near. Notice that the front month VIX future price is over 60.</p><p></p><p><img src=\"https://static.tigerbbs.com/8c6a49cd90be813a19c51689bfede20d\" tg-width=\"640\" tg-height=\"304\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/></p><p>VIX futures curve in Backwardation (vixcentral.com)</p><p></p><p>When exiting options hedges in this situation, it is safe to rotate some of the new liquidity into high beta stocks or even leveraged ETFs. At this point, the risk for them to continue selling off is much smaller. To play it safe, one could allocate 1/3 of the new liquidity into a 3x leveraged fund. This way, if you caught the bottom, the subsequent rally will be experienced as if you had bought in entirely. And if you did not catch the bottom, you still have 2/3 of the liquidity to buy in at a lower point. Either way, having the hedge means you are in a tremendously good spot.</p><p>If the hedges are stock holdings like VIRT, then one can simply rebalance the portfolio to pre-crash allocations between passive equity holdings and the holdings meant to be a hedge.</p><h2>A Word About Selling Calls</h2><p>Selling calls is a great source of income. But unless calls are sold ITM, they are not a hedge. Selling calls can also cut off the upside when markets bounce back from a drawdown. Furthermore, if any of the risk factors mentioned above suddenly received more clarity (for example, if we knew for a fact that the West would ease on Russian sanctions and allow existing supply lines to remain), the market will likely rally and short calls will be losing positions. Even with a yield curve inversion, the market still tends to rally quite a bit before the selloff begins. Don’t ditch passive index holdings over signs of higher risk. Similarly, don’t be so quick to sell calls against them indiscriminately. Have a plan to cut loss on a short call.</p><h2>Conclusion</h2><p>Risk is on. There are numerous factors in place which could trigger a market crash if a catalyst materializes soon. Inflation, de-globalization, elevated equity multiples, monetary policy, kinetic conflicts are all pointing towards a major downturn in US equities. The answer is almost never to sell. Instead, aim to hedge and hold on. My previous thoughts about hedging can be found here.</p></body></html>","source":"seekingalpha","collect":0,"html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>The Market Will Probably Crash Soon: How To Hedge And Hold</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nThe Market Will Probably Crash Soon: How To Hedge And Hold\n</h2>\n\n<h4 class=\"meta\">\n\n\n2022-04-20 09:55 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4502249-the-market-will-probably-crash-soon-how-to-hedge-and-hold><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>RobertCrum/iStock via Getty ImagesThe yield curve inverted on April 1, 2022. Inversion is probably one of the most accurate leading indicators to recessions. In fact, a market crash and recession has ...</p>\n\n<a href=\"https://seekingalpha.com/article/4502249-the-market-will-probably-crash-soon-how-to-hedge-and-hold\">Web Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","type":0,"thumbnail":"","relate_stocks":{"QQQ":"纳指100ETF","BK4534":"瑞士信贷持仓","BK4561":"索罗斯持仓","BK4581":"高盛持仓","FRED":"弗雷德","BK4550":"红杉资本持仓","VIRT":"Virtu Financial, Inc.","UVXY":"1.5倍做多恐慌指数短期期货ETF","BK4566":"资本集团","BK4532":"文艺复兴科技持仓","BK4112":"金融交易所和数据","BK4127":"投资银行业与经纪业","CME":"芝加哥商品交易所","SPD":"Simplify US Equity PLUS Downside Convexity ETF","BK4535":"淡马锡持仓"},"source_url":"https://seekingalpha.com/article/4502249-the-market-will-probably-crash-soon-how-to-hedge-and-hold","is_english":true,"share_image_url":"https://static.laohu8.com/5a36db9d73b4222bc376d24ccc48c8a4","article_id":"2228146079","content_text":"RobertCrum/iStock via Getty ImagesThe yield curve inverted on April 1, 2022. Inversion is probably one of the most accurate leading indicators to recessions. In fact, a market crash and recession has promptly followed each inversion in the last 40 years. More importantly, there has not been a recession which was not preceded by a yield curve inversion.Yield Curve (FRED)(Source: FRED economic data from St. Louis Fed)By this alone, investors should begin considering protection against a serious market drawdown within the next 15 months. This yield curve inversion comes with an interesting set of macroeconomic conditions and geopolitical backdrop which suggest an increased probability of market volatility ahead.For one, the current US inflation is very concerning. It is the highest in 40 years. The inflation’s root cause is the monetary policy used to evade a prolonged COVID-19 induced recession in 2020. The US monetary base has almost doubled in the last two years while the real GDP has not nearly doubled. This means the value of each unit of money must decrease, which means prices must increase. This concept is basic supply and demand—the supply of money has increased while the amount of goods and services have not increased to create a matching increase in money demand (people demand money when they are trying to buy goods and services in an economy). Thus, the value of money decreases.Monetary Base (FRED)(Source: FRED economic data from St. Louis Fed)Unexpected high inflation is problematic because people become poorer. Owners of financial assets lose because the cash flow they receive are worth less than what they originally signed up for. Also, there is an expectation that central banks will raise interest rates to curb it, thus decreasing the value of financial assets.The inflation today is a troublesome situation which the US has not experienced since the late 1970s. Back then, the public debt was only a 30% of GDP. Today, it is 123% of GDP. This is what makes Paul Volcker’s 1981 interest rate hike infeasible today. The interest payments that the federal government would take on in a substantially higher interest rate environment would dramatically increase the US deficit. This may lead to cuts in government spending, which would decrease aggregate demand and therefore corporate profits. This is bearish. The alternative is to print more money to service the increased interest rate burden. This is not necessarily bearish since the US has done this consistently in the past few decades all while seeing a prominent rise in US equities. But today, printing more money would exacerbate the inflation issue, and that would be bearish.Without being able to curb it by simply raising rates as Volcker did in 1981, the Fed is in unchartered territory. If the US government turns to price controls to solve the inflation problem, the unprecedented intervention in free markets will probably cause many investors to sell US equities. Also, interventions like this do not work because they introduce other issues. Basic economics tells us that if a firm cannot sell something at the marginal cost of producing it or higher, then it will cease operations. What this looks like in real life is increased unemployment and civil unrest. This is all bearish.The geopolitical issues surrounding Western sanctions on Russia also contribute to inflation. Much of the world’s commodities are sourced from the regions involved in the conflict. For example, Ukraine and Russia together exports over a quarter of the world’s wheat. This will cause the price of food substitutes like rice and soybeans to rise as well. The impact on crude oil and natural gas is well known at this point to most people.The larger issue comes from the West being adamant in not buying from Russia and countries which are friendly with Russia. This will force a reroute of well-established supply chains, all while existing supply chain issues still exist. This could lead to Q2 and Q3 profits being much lower than expected as many companies report supply chain issues and are unable to give guidance for when this issue will be resolved.On top of that, this trend of de-globalization hinders growth. Over the last twenty years, the Western service economies have become very dependent on specific parts of the world for specific points of value creation. For example, raw materials for electronics are sourced from mines in Africa or Russian and then put together in places like China and Southeast Asia. There will undoubtedly be growing pains moving forward with the West’s decision to fragment this process along ideological lines. Redoing so much of the value chain so suddenly will impede growth. Add that to an inflationary environment and you have stagflation, which is never good for the economy and rarely good for equities.Thus, the current outlook is less than favorable. The yield curve inversion reinforces the thesis that a crash is on the horizon. However, market crashes usually require a catalyst—something that makes many people decide that it is time to take profits, which initiates the heavy selling and downward spiral. In 2008, this was the collapse of Lehman Brothers. In 2020, this was the realization that COVID-19 would be worldwide in short time. Over the next 15 months, the catalyst (if there even is one) is anyone’s guess. The point is that the current macroeconomic environment offers sufficient tinder for a firestorm of selling if a catalyst materializes. This all exists separate to the fact that multiples of the SPDR S&P 500 Trust Pacer Swan SOS Fund of Funds ETF|ETF (NYSEARCA:SPY) and Invesco QQQ ETF (QQQ) have been at historic highs for a while. Both are likely due for a serious drawdown.The Crash Approaches, What Will You Do?It rarely makes sense to sell passive index holdings. Despite the headwinds presented, America still enjoys its position as the controller of the global reserve currency. American securities enjoy the most credibility and central bank backing. The US economy is still very strong. Trying to time market swings generally ends in the investor paying large opportunity costs by waiting forever for a crash.A better solution is to start hedging when indicators are flashing signs of trouble. Because that is the case today, hedging makes sense now. First, I will list some names which do well with market volatility. Investors can build positions in these stocks and funds as a hedge. Then, I will describe some ways to hedge using index or index ETF options. With options, I aim to establish the hedge at a near zero cost such that the credit from option sales mostly offset the debit from option purchases.Virtu Financial, Inc. (VIRT)VIRT is a market maker for all kinds of markets. Market makers consistently do very well during bouts of market volatility because their revenue is decided by the bid-ask spread and the volume of trades. When markets sell off, both the bid-ask spread and transaction volume grows, exponentially increasing revenue. This is enormously profitable for shareholders because VIRT’s costs are mostly fixed. A quick glance at VIRT and SPX against each other shows how good of an equity hedge VIRT is. Notice VIRT’s price action during the SPX correction in early 2018, the (almost) bear market at the end of 2018, the COVID-19 crash in March 2020, and the most recent volatility due to Russia and inflation. Furthermore, VIRT has a history of growing its dividends and has a very high level of insider ownership, meaning its management is well aligned with shareholders.VIRT Price and SPX TR (Seeking Alpha)(Source: Seeking Alpha)CME Group Inc. (CME)CME operates markets for futures and options on futures. Like VIRT, CME earns more from increased trading activity. When equity markets are in turmoil, futures and options will naturally experience more activity as people are using them to hedge various exposures. Because the nature of this next crash is likely based around the inflation of commodities, commodity futures could see larger volume as well. Also, CME is naturally a steady growing stock with a growing dividend. Over the last ten years, the dividend per share has increased six-fold.Simplify US Equity PLUS Downside Convexity ETF (SPD)SPD holds an S&P 500 ETF with some 50% OTM SPX and SPY puts all in an ETF wrapper. Therefore, it is less of a hedge and more of a replacement for SPY during “risk-on” periods. One could also just keep SPY holdings and buy 50% OTM puts in the same maturity and allocation as SPD, but getting the ETF is less hassle. The main downside is that SPD hedges respond best when the market crashes over 30%. Otherwise, the puts are too far OTM to provide good protection, and you end up experiencing the market drawdown while paying for puts which did not pay off. I do a deeper review of SPD in this article.Options For A Fast Crash (Within A Month)A crash which happens in the span of a month (-25% in less than a month) can be hedged using a put spread which exploits the extra gamma short-dated options have over long dated options. The long puts will expire in about 30 days and their purchase should be financed by puts expiring in about 60 days. There should be more long puts than short puts, and the strikes of the long puts should be above the strikes of the short puts. Aim to have both sets of options reasonably OTM. Generally, one can get five longs and three shorts. Below is an example set up including the P/L with four different volatility assumptions.Fast Crash Hedge (TD Ameritrade TOS)(Source: TD Ameritrade ThinkOrSwim)The SPX is 4391 at the time of writing, there are five 32 DTE long puts with a 3805 strike, the three short puts are 60 DTE with a 3600 strike. The net credit for establishing this position is -5 x 910 + 3 x 1530 = 40. If the SPX falls 25% to a price of 3293 within the month, the total position P/L is between $140,000 and $150,000. The actual value depends on the implied volatility at the time. A total of 5 x 910 = 4550 was spent on the longs, which means this is effectively a 30-bagger: 140000 / 4550 = 30.77. Therefore, only a 0.85% allocation to the long puts are needed to fully protect against a 25% drawdown occurring within the month. Smaller accounts can use SPY options instead of SPX.The risk of this trade is that the timing could be off such that the long puts are near expiry when the crash begins. This means the long puts will not offer much protection (options close to expiry have lower vega, so they are not as sensitive to volatility increases) while the short puts are still over a month from expiry at the start of a market crash. This risk can be mitigated by applying a tranche of this trade every two weeks. This way when the first tranche’s long puts are 15 DTE, another set of 30 DTE long puts are bought. When the first tranche’s long puts are 1 DTE, buy back the short puts and get another tranche. Over time, this would be expensive because you continue to buy back the short puts at 30 DTE while the long puts expire worthless, so even though the net entry credit was 0, there is a net debit to exit each tranche. Therefore, it is not advisable to do this trade unless the environment is such that a very fast crash is significantly more likely than normal.Options For A Medium Length Crash (Within A Year)A crash which happens in the span of a year (-35% within a year) can be hedged using longer term, far OTM puts. One can finance the OTM puts by selling put credit spreads with an ATM short strike. Below is an example set up with the P/L modeled with four different volatility assumptions. A 35% drop from the current 4391 is an index value of 2854.Medium Length Crash Hedge (TD Ameritrade TOS)(Source: TD Ameritrade ThinkOrSwim)The put credit spread involves selling a 32 DTE 4385 strike put and buying a 32 DTE 4000 strike put. This is then used to finance the purchase of two 50% OTM puts with 423 DTE. With this series, the net credit is 9510 – 1980 – 2 x 3320 = 890. Based on the chart above, assuming IV will be 52% after a 35% drop, this entire position will have a P/L of $55,637. The value of the far OTM puts was 6640, so they are net 8-baggers: 55637 / 6640 = 8.38.The concept of tranches is again important here. Each month, a new put credit spread can finance the purchase of two more 50% OTM puts with +400 DTE. In three months, you would have an inventory of 6 puts each expiring in well over 300 days. If the market crashes at that point, expect the P/L figure from above to be much larger.Clearly, this strategy requires more buildup than the last one because you are purchasing tranches of far OTM puts monthly. It is also less effective if there isn’t an existing inventory of long puts. The major risk of this strategy is that the market corrects 10% and then bounces back repeatedly. This would cause you to repeatedly realize the max loss on the put credit spread without ever allowing the hedging puts to be useful. A possible solution to this would be to roll the put credit spread at the exact same strikes so that when the market returns, you earn back more of the premium lost during the previous month. Note that with SPY puts, there is a very small chance of early exercise for ITM puts. Index options will not have this issue.Variations of these strategies include adjusting the number, delta, and DTE of the far OTM puts. For example, it could be possible to buy more than two puts if the puts had less DTE. You can also adjust the distance between the strikes in the put credit spread to receive a greater credit to finance more puts. The point is that these strategies are a general idea which each investor can implement to fit his own preferences.Options For High VolatilityAssuming the market is already drawn down 10%, you could still apply hedges with options. Insurance is more expensive at this point because of the elevated IV. However, increased IV is generally accompanied by a steeper IV skew. This means OTM puts are relatively more expensive than ATM puts, and this premium of OTM over ATM puts (in terms of IV) is higher than what it normally is. This makes put debit spreads very useful for hedging against short term downturns after an initial drop has occurred.Options For A Long Crash (Lost Decade)This is much harder to deal with because America has not had a lost decade since the aftermath of the Great Depression. Back then, America did not control the reserve currency and its economy was very different than the one it is today. I view the possibility of a lost decade as very unlikely as long as the reserve currency is still the USD. While global debt is denominated in dollars, the US can always get itself out of economic binds. Foreign investors will still invest in American securities because they have the highest credibility. If you are seriously worried about a lost decade in the US, consider international equities.ExitingBulls make money, bears make money, pigs get slaughtered- An old investing adageWhen the market is down 30% and your total portfolio is flat, it is time to consider exiting hedges and buying equities. If your hedging turned a large market crash into a relatively small dip, it was successful. Waiting too long on options hedges in anticipation of the puts going even higher is problematic because volatility is naturally mean reverting. When the VIX is over 60, the conditional probability that it starts falling soon is very high. Often, volatility peaks right before the market bottoms. As volatility collapses, so will the value of the puts. At market bottoms, it is volatility which has the largest impact on the value of options, not the option's closeness to being ITM. Therefore, you can definitely use the VIX as an indication to exit options hedges.When the VIX futures curve is severely backwardated as shown below, it is usually a sign that markets have overreacted and that the bottom is near. Notice that the front month VIX future price is over 60.VIX futures curve in Backwardation (vixcentral.com)When exiting options hedges in this situation, it is safe to rotate some of the new liquidity into high beta stocks or even leveraged ETFs. At this point, the risk for them to continue selling off is much smaller. To play it safe, one could allocate 1/3 of the new liquidity into a 3x leveraged fund. This way, if you caught the bottom, the subsequent rally will be experienced as if you had bought in entirely. And if you did not catch the bottom, you still have 2/3 of the liquidity to buy in at a lower point. Either way, having the hedge means you are in a tremendously good spot.If the hedges are stock holdings like VIRT, then one can simply rebalance the portfolio to pre-crash allocations between passive equity holdings and the holdings meant to be a hedge.A Word About Selling CallsSelling calls is a great source of income. But unless calls are sold ITM, they are not a hedge. Selling calls can also cut off the upside when markets bounce back from a drawdown. Furthermore, if any of the risk factors mentioned above suddenly received more clarity (for example, if we knew for a fact that the West would ease on Russian sanctions and allow existing supply lines to remain), the market will likely rally and short calls will be losing positions. Even with a yield curve inversion, the market still tends to rally quite a bit before the selloff begins. Don’t ditch passive index holdings over signs of higher risk. Similarly, don’t be so quick to sell calls against them indiscriminately. Have a plan to cut loss on a short call.ConclusionRisk is on. There are numerous factors in place which could trigger a market crash if a catalyst materializes soon. Inflation, de-globalization, elevated equity multiples, monetary policy, kinetic conflicts are all pointing towards a major downturn in US equities. The answer is almost never to sell. Instead, aim to hedge and hold on. My previous thoughts about hedging can be found here.","news_type":1},"isVote":1,"tweetType":1,"viewCount":82,"authorTweetTopStatus":1,"verified":2,"comments":[],"imageCount":0,"langContent":"EN","totalScore":0}],"defaultTab":"following","isTTM":true}