Weighing It All

Current Views:

Stay long Gold/Palladium

Stay long Equity Risk (Reducing More Today)

Long UPST & CRWD (Both up ~20% since entries)

Buying Bonds (Started Today)

So, lets talk about what happened and how views have shifted here in the medium term. Since the "time to get long beta" post, stocks have rallied almost 400 points off the low (SPX) and the call to "buy European gasps lower" was quite good. Sorry, have to toot my own horn because.. well, I want to. It has not been an easy market.

A cheeky near 7% rally off the low.

But who cares: what now?

Well this is where it starts to get tricky. For one, I think we have to decide which of the following regime has the highest level of significance:

1. World War 3 not happening

2. High multiple stock compression / bear market

3. Yield curve inversion

Trading, and actually life in general, is all about weighing things appropriately and prioritizing opportunities by via those weighting ratios. What sticks out to you in this market? For one, I think that we could have seen a big multi-month bottom in ARKK based names.

Like, as an idea, this is an option that will most likely go to 0.

XBI same deal. We bottomed. What is the confusion here? Covid is over. Drug trials should come back to full capacity and capital be properly allocated.

The main gist is this: is the tech market rut over? I kind of think its about to be, yes.

Look at the chart above. We are back down to historical averages on technology earnings. How much worse can it really get? So many blow-ups have happened in the high growth space (along with almost every other market, lol). What is the downside case from here?

VIX looks like it has topped.

But what about yield curve inversion? Isn't that basically signaling a recession is right around the corner. Ugh, I mean.... yes? I suppose. The problem is we have never had so many supercycles and market turns in such a short period of time. We went from an industrial boom to near depression to greatest economic comeback to inflation destruction all within the span of a couple of years.

One thing that is for sure: it is not going to happen all at once. At some point, equities will be topping out as short-term yields go higher. The Fed is shooting themselves in the foot here by not going full 50 I think. We can drag this out as long as it takes but real people are feeling the pain of higher overhead costs from inflation. Wages need to really start picking up.

So for now, I'm playing the upswing. When AAPL gets back to 170 I might look at some kind of short trade. I have fundamental reasons for this one: basically consumers not being able to afford the latest and greatest iPhone. Also AAPL overhead is coming up at the same time too. Double whammy on margin compression. Ouch.

My CRWD idea also looking good and using the gap low as a stop.

Expecting short-term reversion on rates but guiding principle is we see near 3% eventually. I can't not buy bonds in the medium term though, especially on the long end of the curve.

Anyway, bear markets bottoming and wealth destruction at the same time. Interesting time to be alive.