To The Moon

Wed April 12 Another sector that I have been accumulating lately are the miners. I bought a chunk of TRX several weeks back and am nibbling on GDXJ and SILJ. The dollar is finally loosing steam both technically and fundamentally. Continued Fed hikes will help support it but we are arguably getting close to the end of that road. My guess is that the Fed will then just sit on their hands (absent a crisis). Remember, if they are forced to drop rates like a rock and print away full steam…. that is not good for you or our economy. The dollar would in that case trade lower than petrified frog dung in a lagoon and we could usher in Weimar style inflation. If we can avoid crazy town, the dollar should gracefully drop over the years. There is still nothing to replace it although China would lo

Tue April 11 Natural gas that is. I forgot to mention in the last post but I am quietly loading up on NG (UNG). A variety of reasons have led to a monster short in this market which is only now beginning to be unwound. Seasonals also favor NG from spring through early winter. This has been a one way play since last summer. It has repeatedly been taking out to the woodshed for a loss of some 80% from its high. Could it go lower? Sure but R/R is now your friend at these levels. The European front month futures are up almost 10% this past several weeks. Something to consider for a multi-month play.

Sun April 9 The Fed Reserve saw fit to keep rates at 0% for well over a decade (since 2008). We have a generation of young financial professionals who have never had to contend with rates. Rates have simply been nonexistent. Our entire economy reconfigured itself to 0% cost of capital. Companies could fund themselves with free money and turn around and purchase their shares. Executives have made fortunes from stock incentive programs. Shareholders don’t complain since the stock prices keep rising. Massive bubbles have formed in real estate, credit, and stocks. Never underestimate the financial bubble formation potential of 15 years with 0% rates. Fast forward to today. Stocks act like they want to break out to the upside. Market rates have been dropping (witness the surge into sh

Tue Mar 28 Inigo Montoya coined it perfectly. Fast forward to the modern day pivot narrative. Once again frantic calls can be heard for a reversal of Fed policy. Is that what is happening? I don’t think so. I’m betting on a pause for ’23 and some rate drops in ’24. Is that Fed easing? Nope. Powell has made it crystal clear (again for all those with their fingers in their ears) that the Fed’s primary concern is balance sheet contraction. That contraction is anticipated to continue into ’24 and likely beyond. Contraction is the equivalent of synthetic rate hikes. Get used to disappointment folks. Stocks could be chained in no man’s land for several years going forward. Compound that with a tedious gravitational pull to the downside as earnings adjust to higher rates. While investors lan

Thur Mar 16 Quick $3850 profit per future since last night. Took profits based on a longer term resistance level. Used a recent low at 12096 for a stop alert. The resistance level goes back to high in Nov’21. NQ could get some legs here if it holds.

Wed Mar 15 Just a spec but like the looks of NQ after all this bad news. Yes, a credit “event” could occur but I don’t think so (just yet anyway). If futures are too cowboy for you, there is always the QQQ.

Tue Mar 14 If you haven’t heard of The Graduate, go watch it. Dustin Hoffman at his best. At a pool party, young Benjamin is given one word to sum up his entire future… plastics. This may not be such a monumental moment but it could be the beginning of a shift. While SVB was certainly not a money-center bank, it shines a light on a developing issue. A mere 3% to 4% Treasury rate environment is enough to blow up a bank. Granted it was stupid to buy longer duration paper with such low coupon rates. But really…. a 4% rate environment should not be blowing up anyone. A decade of idiotic 0% rates is now manifesting itself. Will the Fed cave now. Doubt it. But they now have to step carefully. I am still hopeful for a 25bp rate hike. 50bp is unlikely. Pausing would be a mistake and send the

Sat Mar 11 The 16th largest bank locked its doors yesterday. They had over 200 billion of assets and a little over 175 billion of deposits. Yes, the Fed guarantees up to 250K for each account. The problem is that 90% of those deposits is estimated to be over 250K. That’s a tough haircut for the depositors. With the tech industry leading the layoffs, this is bad timing indeed. A lot of startups are sweating how to meet their next payroll. Word has it that the issue was a series of poor investments last year in long bonds with rock bottom low coupon rates. As general rates rose, these investments dropped. The bank attempted to raise over 2 billion unsuccessfully. The rest is now history. So what does this tell us? We are only beginning to exit the “0%” rate decade enforced by

Tue Feb 21 Remember that game where a mole pops up and it is your job to hammer it down? There’s an eerie comparison to perpetual Fed pivot longs who keep getting monkey hammered every time they get a taste of momentum. Will the Fed pivot this year? They may stop raising rates in Q3 but I seriously doubt any drop in rates. Inflation is unlikely to comply any time soon. I doubt it will reach their 2% goal in the next several years. I am waiting for massive layoffs as corporate America re-calibrates to a higher cost of capital. None of this looks promising for a year or so. Last year was a good year for me. My trading capital reached a new all time high. This year has shifted into a much harder paradigm to make money. Bonds will be the next big trade when yields finally peak. Every

Tue Jan 10 I shorted the Jan13 12 puts last Thur at an average price of 1.00. The stock was trading in the 12.50 area. Kicked out the trade yesterday at 0.30 for a .70 profit (out of a potential maximum of 1.00). I like these naked short-term put trades because of the forced time decay. Note that the stock is currently trading around 11.50 (one point lower than Thur) and the options are 1.00 bid. That’s an 8% adverse stock move with no change in the options. Another way to look at it, is that those few days provided a nice margin of error to re-evaluate the trade and exit without much pain. If I had not taken them off yesterday, I would have kicked them out for a scratch today. Good trading!