Those Anecdotal Data Points, You Know?
As we blaze through the first month of a new year filled with equal parts angst and optimism, there seems to be very little that will dull the appetite of investors for speculation in nearly anything with the perception of value. Be it sports memorabilia, commodities, vintage goods or stocks, if it fluctuates in value, then odds are there is appetite for it. Anything works, except for holding onto eroding wads of cash that serve no purpose other than incremental depletion of value on a seemingly perpetual basis. In the midst of this celebration of crisis era capitalism, brought on by seismic shifts in the economic landscape of the past century, anecdotal data points continue to appear that suggest the fondness for speculation may have crossed the line from holy into unholy grounds that threaten to unleash the oversized fists of the market gods, causing tremors that few are prepared for. Now lets me first explain that while the theme of this note may seem generally bearish in tone, as an investor, you very simply cannot buck the present bullish trend. What I am attempting to express here is that the comfort with which most are approaching this market, as expressed through leverage in its various forms, will lead to a period of exhausting volatility, be it short lived or otherwise. The violent nature of this market suggests that investors should be looking for evidence of such an event, as it will be the key to outperforming both the markets and peers in 2021. In other words, unlike 2020, 2021 will not be a year where you can simply grab nuts and buy whatever is going up. There will be consequences for acts of juvenile barbarism that few are prepared to face. In 2021, thus far, I have received numerous inquires that go something like this: My god, my friends are making so much money in the markets. I cannot sit this out any longer. What's the best way to get involved? This one was an insta-classic: My 10 year old wants to start trading options, what brokerage firm do you suggest for him? And then there are the more refined individuals who simply ask for advice on recent IPOs that they have no idea about, but like the symbol or the fact that it trades in the triple digits right off the bat. While anecdotal data often times is early in nature, in this circumstance, use it as a means of refraining from grabbing both of your nuts while you dive into the most high octane driven stocks, perhaps instead choosing to only grab one, while you shield...
Themes For 2021 and Beyond Are Emerging Early On
What if the virus crisis and the resulting global response, in terms of ongoing fiscal and monetary stimulus, was such an outlier, with such significant force, that it effectively reset the lifecycle of the economic expansion back to what is essentially 2010 again? What if the fiscal and monetary response are not just meant to stimulate the economy from a demand standpoint, but to actually destroy cash as an asset class in order to force asset prices to levels that will boggle the mind, while creating economic benefits that create the foundation for inflation led, government induced prosperity? What if $500 billion, trillion and $2 trillion dollar market caps are just the beginning rather than any conceivable end? If cash as an asset class is on its way to oblivion then the entire investment ecosystem of 5-10 years from now is an unrecognizable leviathan compared to where we are presently. It involves the complete economic destruction of anybody who does not possess investable assets that are deployed aggressively, preferably with leverage. It involves the restructuring of corporate balance sheets away from cash, into asset classes, whether stocks, precious metals or cryptos, that preserve the value of corporate earnings. This is a very raw concept presently because it is so early on. The eventual winners of this new age of the annihilation of cash as an asset class will shift multiple times over the next decade. What is absolutely certain is that all of those times that you heard "cash on sidelines is coming into the market" is no longer just a headline but an absolute force of nature. Global governments are destroying cash as an asset class because it's the only means of insuring an inflationary outcome that will then allow for any semblance of an unwind of stimulus over the long-term. If the first several days are any indication, 2021 is gonna be on another level completely. Zenolytics now offers Turning Points Market Intelligence premium service Click here for details. Disclaimer This website is for informational purposes only and does not constitute a complete description of our investment advisory services. No information contained on this website constitutes investment advice. This website should not be considered a solicitation, offer or recommendation for the purchase or sale of any securities or other financial products and services discussed herein. Viewers of this website will not be considered clients of T11 Capital Management LLC just by virtue of access to this website. T11 Capital Management LLC only conducts business in jurisdictions where licensed, registered, or where an applicable registration exemption or exclusion exists. Information contained herein is not intended for persons...
Here Is The View Of The Market From 50,000 Feet Up
Let's move up to 50,000 feet above this market in order to truly appreciate what we are witnessing presently. Here is the view from way up above: Everyone was convinced the world was ending just nine months ago. As the power of the Fed and the accompanying liquidity became known, the message went from "don't fight the Fed" to "let's make love to the Fed." As the momentum in equities, especially tech, grew increasingly powerful in nature, investors decided to completely ignore anything happening in the economy presently in order to focus on everything positive that lies ahead. As the perception of what lies ahead grew increasingly positive and powerful in nature, especially with a vaccine on the horizon, investors decided to leverage their positions. With increasing fiscal stimulus measures and a continuing lax monetary policy, the view of the Fed being all mighty and powerful has only grown. This rapid fire succession of evolving market psychology based on emergency economic measures has led to a psychosis among investors that involves complete allegiance to price appreciation without any consideration whatsoever for what can be on the other side of emergency fiscal and monetary stimulus, leading to a seemingly perfect landscape of picturesque meadows that the bulls have been given full permission to roam without boundaries. This seemingly perfect landscape is the greatest danger of all as we prepare to flip the calendar over to 2021. Investors have built up such expectations for perfection, in what has become a stunningly imperfect world, that the slightest slip of the narrative has potential to cause disproportionate reactions among the over-leveraged, over-exuberant masses. 2021 has become the year where the markets have been given no room for slipping. Everything needs to work. From the sick getting healed. To the economy reviving. To fear turning to optimism. To economic policies that have never been attempted working splendidly to the oohs and aahs of the desperate masses. It's a tall order to fill, which doesn't mean it will not be filled. However, to believe such an environment isn't fraught with danger is the peak of ignorance, or perhaps, excessive optimism that has turned into a full fledged mania. Zenolytics now offers Turning Points Market Intelligence premium service Click here for details. Disclaimer This website is for informational purposes only and does not constitute a complete description of our investment advisory services. No information contained on this website constitutes investment advice. This website should not be considered a solicitation, offer or recommendation for the purchase or sale of any securities or other financial products and services discussed herein. Viewers of this website will not be...
Revenge of the Nerds
In what can only be described as an interesting turn of events on Wall Street, anything that has been obvious past July of this year has turned into a bonanza of profits for investors. The less experienced the investor, the more probability of an extreme bonanza of profits, as inexperience has continually beat anything resembling market savvy. The more obvious the opportunity, the greater the upside. It is all around us. The markets have become a Chinese buffet with all types of deliciousness for anyone who walks through the front door. You will have a population of investors and traders who will refuse to participate in such circumstances, as they realize how all of this ends. That hardened type of belief, resulting in stubbornness of action is, however, a handicap in such an environment. While these contrarian pessimists are right in their analysis of blood and gore, with the splattered brains of once virile bulls being the eventual outcome of all this, the old saying that "the markets can remain irrational longer than one can remain solvent" can come in handy here. We are in the midst of irrationality, without a doubt. However, at the same time, that very same irrationality is all around us, not just in the markets, but in governments, populations and a culture that now sees fiscal stimulus a birthright. That combination of seemingly irrational fiscal and monetary stimulus for as far as the eyes can see has potential to deliver an entirely new frame of understanding to "the markets remaining irrational longer than investors can remain solvent." Irrationality may just be the new norm. It comes with a caveat, however. Investors must still remain paranoid that this can all flip at the drop off the hat. Just as irrationality works for optimism, the thin line that separates irrational pessimism remains ever present. During December we have upped our long portfolio dramatically, to our longest overall net exposure since March/April. Unlike that time, however, our time frame isn't measured in months. These are trades that are judged day by day and week to week, at most. Zenolytics now offers Turning Points Market Intelligence premium service Click here for details. Disclaimer This website is for informational purposes only and does not constitute a complete description of our investment advisory services. No information contained on this website constitutes investment advice. This website should not be considered a solicitation, offer or recommendation for the purchase or sale of any securities or other financial products and services discussed herein. Viewers of this website will not be considered clients of T11 Capital Management LLC just by virtue of access to...
Welcome To The Twilight Zone Of Investing
We are in the Twilight Zone of investing as we run into the final weeks of 2020. Being in such a peculiar spot has created a bifurcation of sorts, in that professional investors recognize how this story ends, with blood, gore and mayhem being the inevitable outcome. However, all the meanwhile, we are in the midst of a retail power play that has amateur option traders trouncing anything your Wall Street professional can conjure up. Even the tame side of the retail investment spectrum, who just decide to trade stocks, are making seasoned professionals on Wall Street look like newbies with investments in TSLA, NET, SPCE, SNOW and countless others. What it becomes is a question of approach as we move into 2021. There is a certain inevitability that a majority of us know is coming. However, in the meantime, performance in such a vibrant bullish environment demands investor participation. Balancing the inevitability of what is to come (bearish), with the performance demands of keeping up with the major market averages (bullish), will be the key to outperforming in the weeks ahead, as well as throughout 2021. What this means for investors is agile footing, as long positions should give way periodically to a market neutral stance when risk/reward dictates. A vast majority of those investors who have been perpetually bullish throughout Q3 and Q4, with little doubt in their thesis, will be the ones who suffer the largest drawdowns once the inevitable future of maniacal speculation becomes the inevitable present of a market that succumbs under its own weight. In order to avoid being in the vast majority, the attention of investors must be focused on risk, with a strategy towards hedging risk and possibly getting net short incrementally when price dictates that course of action. A singular minded focus on bullish excess, while being rewarding currently, must be tempered with a realization of the risks involved in a derivative driven market that has created a frenzy among investors. While we are net long presently, realizing that investors are being treated to a course on anomalous market behavior of the bullish kind, our focus remains on preservation of the capital gains created this year through a fine balance of opportunistic bullishness and tactical bearish operations, when the market dictates. Be like water, my friend. Zenolytics now offers Turning Points Market Intelligence premium service Click here for details. Disclaimer This website is for informational purposes only and does not constitute a complete description of our investment advisory services. No information contained on this website constitutes investment advice. This website should not be considered a solicitation, offer or recommendation...
Here’s The Thing About Mania Levels of Bullish Sentiment
Sentiment by itself is terrible as a reliable tool to judge reversals in the market. When combined with any number of other factors, the most important being technical patterns across important market averages and assets, you can typically come within striking distance of catching tops and bottoms. However, there are times when even the best patterns combined with all kinds of compelling contrarian evidence of a reversal punch you right in your dome, reminding all of us that markets can neither be caged or compelled to act in a way that is consistently predictable. What works one day will fail another. What works for a decade straight will rip your heart out in the next decade. Over the past couple of months our short positions in the market were obviously premature in nature. These positions were taken as a result of a combination of factors, including both technical and sentiment based. As we kick off the final month of the cage match that has been 2020, long positions across sectors have, once again, become the order of the day. With the markets at new highs, punching through all kinds of important resistance levels over the past week, the primary reason to remain bearish will be sentiment based. That's a real problem for bears. What most fail to realize is that mania levels of sentiment, whether bullish or bearish, have a tendency to act as a self-reinforcing mechanism in the direction of the mania. The trigger for what ends up becoming a parabolic run is a combination of mania levels of sentiment AND a market that breaks through all relevant resistance levels. While there are some minor resistance levels remaining in the market, the moves of the past week over resistance now create a scenario where all upside possibilities must be entertained. We're long small-cap finance, large-cap tech, with a smattering of names in between. Zenolytics now offers Turning Points Market Intelligence premium service Click here for details. Disclaimer This website is for informational purposes only and does not constitute a complete description of our investment advisory services. No information contained on this website constitutes investment advice. This website should not be considered a solicitation, offer or recommendation for the purchase or sale of any securities or other financial products and services discussed herein. Viewers of this website will not be considered clients of T11 Capital Management LLC just by virtue of access to this website. T11 Capital Management LLC only conducts business in jurisdictions where licensed, registered, or where an applicable registration exemption or exclusion exists. Information contained herein is not intended for persons in any jurisdiction where such...
Craters Ahead
The first few days of November have been a misdirection event unlike any in recent memory. The stampede of those individuals and institutions who feel underexposed to equities, while nervous bears cover their short positions for fear of new highs leading to a parabolic upside scenario, has caused one the craziest bars you will ever see on a weekly chart. As a very simple rule for understanding price, range expansions are reversal patterns while range contractions are continuation patterns. While there are no rules on Wall Street that are static, understanding the role of expansionary volatility and contractionary volatility at important market turning points is essential. What this week's move equates to is a 500 pound man doing back flips on the edge of a cliff during an ice storm. It's not a question of if he will fall, it's only a matter of when. Given that I have been bearish a majority of the time since the September highs, those highs must be viewed as a major inflection point. The fact that the market has wasted this much energy just to get close to those highs is a significant energy burn that leaves little in the way of new energy to take the market to new highs and beyond. This becomes especially true when you consider all of the event risk that lies ahead. From the elections likely eventually ending up with the Supreme Court, to fiscal policy being in limbo until next year, to an economy that is in desperate need of a functioning government, to the virus spiking, social unrest and so on. The event risk moving into the end of 2020 while the market is doing back flips on a cliff's edge is a potentially lethal combination. The slippage from here will likely be epic in scope when it arrives....and that should be soon. Extreme caution is not only warranted but fully encouraged. Zenolytics now offers Turning Points Market Intelligence premium service Click here for details. Disclaimer This website is for informational purposes only and does not constitute a complete description of our investment advisory services. No information contained on this website constitutes investment advice. This website should not be considered a solicitation, offer or recommendation for the purchase or sale of any securities or other financial products and services discussed herein. Viewers of this website will not be considered clients of T11 Capital Management LLC just by virtue of access to this website. T11 Capital Management LLC only conducts business in jurisdictions where licensed, registered, or where an applicable registration exemption or exclusion exists. Information contained herein is not intended for persons in...
Today’s Selloff, Election Angst and What To Expect Into Year End
You know that scene where a large tree stump gets shoved into the wood chipper and a mess of unrecognizable wood chips come flying out? That has been our October, with a handful of trading days left in the month. It's an impossible mission to go through any trading year unscathed. As it stands now, October has been the month to challenge our strategy as we have been continually whipsawed from the start of the month. The greater question, putting aside our relatively poor short-term performance, is determining where we will be creating returns into year end? We have had a great year, despite this setback in October. What got us here in the first place was catching a big move earlier in the year that few, if any, expected would come. Any recovery that we will earn into year end will come from catching an extreme risk/reward opportunity that offers up insignificant risk that is only apparent in hindsight. As it stands now, while it may seem like there is a lot of air beneath the market, there is a case to be made for the elections artificially compressing a Dow, S&P and Nasdaq that should have been much higher given the monetary stimulus that has seen the Fed balance sheet reach all-time highs last week and fiscal stimulus that, while being delayed in implementation, is sure to come in the weeks and months ahead. In other words, investors need to ask themselves where the markets would be if this wasn't an election year? There is a very real argument to be made that the September top and the resulting grinding price action ever since has been an effect of the angst caused by the elections being imminent. Once that angst is cleared away, irrespective of the outcome, the markets will be free to focus on what matters: earnings, economic recovery, monetary stimulus and fiscal stimulus. When all of these things are taken together, with very few if any investment alternatives to equities, there will be no choice but for investors to pile into the equity market into year end. The elections have impeded the progress of the markets from late Q3 into early Q4. That impediment is about a week away from being removed. Clarity will bring with it the incentive to act in a manner that favors progress, while putting the uncertainty that has been with us for a majority of 2020 in the past. This is a bullish catalyst in and of itself. The window for bears has closed. The bulls will rule the day post November 3rd. Zenolytics now offers Turning Points Market Intelligence...
One Single Sentence To Sum Up The Bullish Thesis Into Year End
To isolate this market into any box that resembles any correlation to the past is folly to the highest degree. In fact, since the very beginning of this rally, attempting to extrapolate any future results from the past has only been an exercise that would end in disappointment. Two once in a generation events made historical comparisons irrelevant from March onward: A once in a generation virus A once in a generation reaction by governments worldwide, involving both fiscal and monetary stimulus The situation has only been exacerbated by the realization that the data relied upon to make sure decisions may have been flawed from the outset. Where does that leave the markets? With record stimulus that is impossible to take back without inflation that can only be cultivated via an increase in asset prices. And there you have it: The thesis for being bullish since the March lows and continuing to be bullish past the elections in one single sentence. Enjoy your evening. Zenolytics now offers Turning Points Market Intelligence premium service Click here for details. Disclaimer This website is for informational purposes only and does not constitute a complete description of our investment advisory services. No information contained on this website constitutes investment advice. This website should not be considered a solicitation, offer or recommendation for the purchase or sale of any securities or other financial products and services discussed herein. Viewers of this website will not be considered clients of T11 Capital Management LLC just by virtue of access to this website. T11 Capital Management LLC only conducts business in jurisdictions where licensed, registered, or where an applicable registration exemption or exclusion exists. Information contained herein is not intended for persons in any jurisdiction where such distribution or use would be contrary to the laws or regulations of that jurisdiction, or which would subject T11 Capital Management LLC to any unintended registration requirements. Visitors to this site should not construe any discussion or information contained herein as personalized advice from T11 Capital Management LLC. Visitors should discuss the personal applicability of the specific products, services, strategies, or issues posted herein with a professional advisor of his or her choosing. Information throughout this site, whether stock quotes, charts, articles, or any other statement or statements regarding capital markets or other financial information, is obtained from sources which we, and our suppliers believe reliable, but we do not warrant or guarantee the timeliness or accuracy of this information. Neither our information providers nor we shall be liable for any errors or inaccuracies, regardless of cause, or the lack of timeliness of, or for any delay or interruption...
Portfolio Update: What Next?
In the perpetual, everlasting saga of of the equity markets adaptation is a key trait that often gets glossed over by generic rules like "never average down," "cut your losses short," "you never go broke taking a profit." The very simple saying of "adapt or die" is a much more fitting approach to investing than any list of so called rules that you see and hear on a daily basis. Adaptation means that you don't sit out on a historic rally because you believe the market is being propped up by the Fed, being prone to collapse at a moments notice. Adaptation is realizing that if it is true that the markets will collapse at a moments notice you will adapt to that scenario with equal efficiency as being long since April. Adaptation is not trying to sound smart by dismantling TSLA's balance sheet, income statement and product quality when the stock was $300 per share and sticking to those same arguments as it breaches $2000. Adaptation is not trying to flex your cerebral muscle by discussing useless economic statistics that are backwards looking and professorial in nature, at best. Adaptation is making money in the markets, plain and simple. When we last left off here on August 10th, I discussed our move to cash after putting together a double digit percentage gain to begin the month of August. The general stench emanating from in everything from software to FANGs at that time created some level of concern. What has happened since then has not just been one or two brutal fumbles by the bears, but nearly a dozen. The bearish camp, especially into the middle of this week, had every factor possible leaning in their favor to take the markets down, however temporary. Instead they completely gave up their position to the bulls, with a close a record highs for both the Nasdaq and S&P to close the week. Beginning Thursday in T11 and Zenolytics portfolios we began to systematically increase exposure. The increase in exposure for these portfolios will likely continue through the early part of the coming week. Simply consider this single fact: The S&P has taken from June to late August in preparation for this move to new highs. A generally tight consolidation, as the S&P digested its gains. This week it very calmly moved to a new all-time high as if it was a routine action, without cause for much of any attention at all. These subtle hints of underlying market strength should not be overlooked. Nor should it be overlooked that we are now at new highs, with very little left in the...