Optimal Portfolio Positioning In Q4
Before the bulls dump a cement mixer full of concrete onto the lurid bearish arguments being carelessly bandied about since 2019 kicked off, it's time to review optimal portfolio positioning moving forward. To be clear, apart from the frustrating short-term fluctuations that have more than achieved the markets intent to fry the brains of participants, the 2900 range we have been fluctuating in for some months now is as good a buying opportunity as late-December when Zenolytics was begging investors to load up on technology while ALL of Wall Street was purchasing a permanent plot in the market cemetery for the current secular bull market. Let's review what has happened in 2019: The S&P is up 20% The SOX is up 40% Home construction etf ITB is up 46% QE4 has kicked off, meaning that the Fed has the markets back in a big way and it's not planning on backing off Long-term rates are as accommodative as when QE1 kicked off in 2009 The S&P has been consolidating near all-time highs in as a brilliant a bullish range as possible Pessimism by some measures is the same as during the 2008/2009 crisis Money markets are at record cash levels, meaning there are latent bids galore out there that will come into the market with each successive new high All the meanwhile, the favorite topic remains recession and all the rubbish arguments that have accompanied recessionary fervor since the middle of last year. That's right....nearly 18 months of recessionary arguments. All the meanwhile the markets are cow tipping their way up to new highs, telling investors a completely contradictory story to what the media and a majority of Wall Street analysts are selling. You can take advantage of a market that is screaming from rooftops to embrace market risk in two ways: Sell short safe haven assets, including bonds (we are short), gold (we are short), bitcoin, consumer defensive sectors Go long risk: Semis (we are long), SaaS (we are long), banks (we are long), anything having to do with a mortgage (we are long), anything having to do with building a house, anything having to do with non-recessionary prosperity Positioning for Q4 is simply a matter of allocating away from consensus, media and institutional led fear into what has been and will continue to work in 2019 and well beyond. ...
6 Ways To Deal With The Bouncing Around In A Padded Room Wearing A Straight Jacket Market
We've all dealt with varying levels of market insanity over the past several years. Going back further than that, if you were around for the financial crisis or dot com debacle, you know how crazy markets can get. While the market of 2019 doesn't possess the same levels of blood lust you find in bonafide bear markets, the current market environment has a perversity all its own that is unique to this time period. As investors we are dealing with sets of fundamental, event-driven circumstances that are instantaneous in their delivery through various social media outlets. We are witnessing policy decisions being made on the fly and announced on a whim. We are subject to varying degrees of political and geopolitical crisis that change by the day. It's no wonder then that investors have simply given up on gaming what the market will do from here. It has become an exhausting process that continually leads into a brick wall of nowhere. How does an investor then deal with such a prodding enigma? Fluid approach Situational awareness Understand the dynamics of risk/reward well Tend towards buying into strength as opposed to buying into weakness Stop trading or you will get churned Take everything you hear and see with a grain of salt except for the fact that we are in a bull market. You need a fluid approach to deal with a consistently evolving market. You need situational awareness to deal with the fact that whatever rules or systems you think are solid right now will be turned on their head at some point in the near future. You need to understand the dynamics of risk/reward well because there is nothing else. If you don't understand how much risk you have in each position and perhaps more importantly, how much risk there is in the overall market, then you know nothing. You need to buy into strength because this is a market that runs with what has been working and obliterates what has been not. Just look at all of those poor souls who kept shorting bonds this year thinking that rates couldn't go any lower. Conversely, just look at all those poorer souls who keep shorting the markets, thinking that it can't go any higher. Chumps. Don't be a chump. The market has been going sideways for two years now. In that time, there have been pockets of months where you could trade the markets well within a definable price structure. In the pockets of time when the market puts on a different bullish or bearish mask everyday, simply stay away. It's not bull markets, it's not bear markets....sideways...
From A Pure Demoralization Standpoint, The Market Has Now Gone Demonic
As it stands currently, there isn't an investor in the markets that isn't replaying Q4 2018 in their minds after the market decided to don its face paint, grab a metal spiked club and pummel investors into complete submission. It did this through the obscene act of moving up near the psychologically important resistance level of S&P 3000 in order to not only fail at resistance, but take out the key support level of S&P 500 2945 at the close....all done, by the way, in one sitting. The market managed to get the bulls excited in the first half hour of trading and then proceeded to spend the rest of the day sucking their hearts out through their brain in a steady fashion for the remainder of the trading session. One can't blame investors then for having post traumatic stress syndrome of Q4 2018 almost immediately as the market is going out of its way to remind investors that it can be ruthless in its disdain for sustainable profitability while investing. Of course, the simplest explanation that is being offered for today's dramatic reversal is that the ISM number sucked, we are moving into a recession and all of us are doomed. However, this line of thinking is well understood already. We have seen economic numbers over the past few months that have reinforced the most bearish of economic theses, followed by economic numbers that have reinforced the most bullish of economic theses. In other words, the random vacillation in economic numbers leads an astute investor nowhere fast. It would seem that the economy is just as confused as the markets or is it that the markets are confused because the economic numbers make little sense? I digress. The most important message of today's market is not shocking economic weakness. Rather, the most important message of the market today is that it is going out of its way to reinforce that it hates investors. It has done everything in its power in one single trading session to shoo away investors for fear of being bit for the umpteenth time over the past 18 months. Recently I was watching a video on psychology from Jordan Peterson. I'm quoting loosely from memory here, but he discussed the fact that in his younger years he would frequent bars and met a guy who would come to bars for the sole purpose of getting into fights. The gentleman that pursued bar fights as a hobby found that almost invariably, whenever a bar patron would invite him outside to partake in fisticuffs, there would be no fight. All the bluster took place within the...
Here’s Why Central Bank and Stock Market Hedonism Won’t Be Stopped For At Least Another Decade
We are currently in year 6 of the current secular bull market. Let that fact sink in. The secular bull market that started in 1982 and ended in 2000 went on for 18 years, with the S&P 500 going up 10x in that time period. As it stands now, from the beginning of the current secular bull market, defined as the breakout of the S&P 500 to new all-time highs in 2013, the S&P is up less than 100%. Very simply put, bears are, at a minimum 12 years early with the various pieces of analysis they are continuously throwing at the market wall, hoping something will stick. On top of that, central bankers worldwide are more dependent on equity markets appreciating in value in order to sustain economic growth than ever. While its very easy to understand the bearish argument of all the economic moral hazard this entails, it doesn't mean that the global economic system will collapse on itself tomorrow. Quite the contrary, it means that global central bankers are more incentivized than ever to keep this train going at warp speeds into the edge of infinity and beyond. These guys are getting together begging the inflation gods for asset appreciation while juicing their respective economies with every bit of monetary and now fiscal stimulus measures they can think of. You want the big story of the next economic decade? It's fiscal stimulus measures gone crazy as world governments borrow money cheaply to build everything they have ever dreamed of, creating an endless stream of job growth, economic prosperity and glittering cities the world has never seen. All funded by artificial stimulus measures that keep the cost of money next to the zero. If the long end of rates starts getting out of control they cap rates. They are going to tinker, modify and create economic Frankenstein monkeys that are going to have traditional students of economics doing Exorcist like tongue dances and neck twists. Central bank hedonism won't be stopped. Invest accordingly. Zenolytics now offers Turning Points and ETF Pro 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...
The Latest In A Long String Of Bearish Billionaires You Shouldn’t Listen To
The current secular bull market has been masterful in its ability to keep the vast majority of market participants completely off-balance for the entirety of its inception. Whether due to macro misinformation, geopolitical calamity, unprecedented economic events or downright disbelief in a market that has done nothing but move up, the number of so called "smart money billionaires" this market has punched in the face with its persistence on the upside has been epic in scope. Add another to the growing list. Well, actually, let's walk that back. Paul Singer has been a vocal bear on U.S. equities for a number of years now. Just today a headline came out about Singer hedging against an imminent market crash. The type of market crash that, according to Singer, will be brought on by excessive global debt paired with an imminent global economic slowdown. These types of blurbs from bearish billionaires has been a hallmark of the current secular bull market. Every month another billionaire decides that the wealth effect of an unstoppable bull market has gone on long enough, citing any number of economic statistics one can grab to justify their bearish stance. And every month, the market has caused these billionaire investors to walk away bowlegged and sore from its persistence in a single direction....UP. The number of bearish billionaires will only continue to grow as the market prepares for a near unprecedented move up in the coming months, built on the back of global QE, ultra-low interest rates, generally good earnings, massive misallocation of capital and an investor population that is clueless as to the power of this bull market, forcing investors to play catch up the longer it goes on. Keep the ear plugs intact. Invest accordingly. Zenolytics now offers Turning Points and ETF Pro 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...
Markets Going Nowhere Over The Past Month Has Created Two Camps Of Investors
What follows is a portion of yesterday's premium note. Almost exactly one month ago, the S&P 500 was trading at 2900. As we open September, the S&P 500 sits at 2906. We have gone exactly nowhere over the course of one month. All the meanwhile, we have seen a ratcheting up of every negative expectation one could have desired to witness over the past month. Everything from recessionary expectations with respect to the global economy, to the worst fears of a complete stalemate with U.S. and China trade talks. We have seen it all. The economic environment, at least from a headline perspective, has gone from hopeful to downright dreadful. Of course, with pessimistic headlines, economic data and zero hope for a trade deal comes the accompanying pessimistic sentiment. Here is one illustration of how investors are dealing with the markets going nowhere while headline risk blows up. Investors are buying puts. This is the 5 and 10 day moving average for the put/call ratio. Notice the ratcheting up of pessimistic sentiment expressed via put buying in early August that has sustained all the way up until today. Investors are preparing for a worst case scenario into the fall months by buying insurance. It's not just put options that are popular. Investors want insurance in numerous forms. Safe haven assets such as precious metals have become some of the best performers in the markets. And it's not just gold. Silver has taken on a parabolic trend to the upside in what is investors scrambling to catch up to what has been a missed opportunity to get into gold earlier this year. In fact, it wasn't too long ago that we discussed silver being a catch up trade for investors, as the latter stages of metal bull runs see speculators piling into more and more volatile asset classes. Investors are all-in on metals, with silver leading the charge, by far. The only thing in the markets that looks remotely close to silver, other than gold obviously, is the ultimate safe-haven asset play: U.S. Treasuries. And it's not foreign countries or institutions that are leading the charge, as detailed in the Wall Street Journal recently, it is individual investors who are the biggest hoarders of U.S. Government debt at this point in time. All the meanwhile, the S&P 500 is going nowhere. Let's go over that last point one more time for clarity: Everyone is seeking safety in the face of a symphony of negatives and stocks are allowing investors a cushy exit, just a few percent off all-time highs. It's almost as if equities are trying to convince investors to...
Three Reasons Getting Long Equities In August 2019 Will Come To Be Seen As A No-Brainer In The Future
When looking back at this time some years from now when the Dow is at 60,000, inflation is screaming and the Federal Reserve has been replaced by an algo that perpetually pumps the economy with fresh hits of QE in various shapes and forms, investors will in hindsight point to several things as being no-brainers for getting long equities in August of 2019 and staying long. When looking back here is a list of items that will be seen as no-brainers, to avoid having to ask "how did I miss getting long stocks in August of 2019?": Stock dividends are yielding more than the 30-year Treasury bond for the first time in a decade. Not since pretty much the exact bottom of the financial crisis has this taken place. What does this mean? Without mincing words, it means that the current generation of mostly institutional investors are the biggest imbeciles in the history of Wall Street. It also means that they will be exposed like an episode of Cheaters in the coming months and years, with their investors chasing them out of fixed income securities much like many of the spouses chased mistresses out of cheap motel rooms with camera crews in tow. We will not have the privilege of camera crews, but will certainly witness the effects through observing how far up equities shoot in response. The Federal Reserve and all global central banks for the matter are cornered. This is perhaps the least discussed yet most relevant reason to be bullish here. Remember the old adage "don't fight the Fed?" Well, just imagine "don't fight the Fed" when the Fed and all of their buddies from Japan to Europe are fighting for their lives. They have to prove their relevance. They have to make sure they pull every string possible to ensure that developed economies don't fall into a recession. Why? Their toolbox becomes increasingly limited the further into a deflationary spiral we go AND there is so much disdain for global central banks at this juncture that they may well be burned at the stake, replaced by algos and CEOs of the top global banks, if the economy goes into a really dark place. This is the era of "don't fight the Fed when it has rabies and is about go into a roid rage" phase. They are going to do everything and I mean absolutely everything to boost the economy and the markets. Everyone is worried that everything is on the verge of collapse. Markets function on psychology PERIOD. It's why economists teach at universities and appear on CNBC a dozen times per day instead of...
Macro Induced Chaos and A Tweet Happy President
There isn't a person on Earth who has experience in this type of market. It doesn't matter if your great great grandfather is 120 years old, having traded RCA and Standard Oil during the 1929 crash. It makes zero difference if you've binged on 72 hour runs of trading Dollar/Yen through JGB interventions until you passed out onto a desk with cocaine residue, empty Red Bull cans and five Quotreks. This market is brand new for all of us. None of us truly know how to deal with it. All we can do is to adapt as best as possible. Here is a portion of what I sent to my subscribers and investors this weekend as we prepare for continued Twitter driven financial market pandemonium in the week ahead: How does an investor mitigate this newfound reality of trading in 2019 where one single Tweet can, without any warning, completely change the investment equation over the short-term? While the conditions may seem less than optimal given the unpredictability of the players involved, there are always adjustments that can be made: Expectations for what constitutes acceptable amounts of volatility must be increased Position sizing must be reduced Diversification in one form or another must be employed Dry powder must be kept in order to capitalize on sudden dislocations News events must be ignored as everyone is reacting to the same bits of information in the same way If the market has demonstrated anything in 2019 with some consistency it's that the initial reaction it has to trade related dilemmas isn't necessarily the right reaction. The markets have become caught in a vicious cycle of initial emotional reaction to a tweet or a press conference, followed by intelligent dissection of how the overall macro picture is shaping up with the initial emotional reaction seeming a lot less relevant upon careful consideration. This has caused huge moves down to get reversed in a too fast, too furious fashion to borrow a term from the President who happened to borrow that quote from a movie title. Nevertheless, it's an accurate way to describe the reversals that investors have witnessed in 2019. Meanwhile, each time one of these fast & furious moves take place in the market, negative sentiment gets ratcheted up significantly. This isn't short-term negative sentiment either. The increased volatility in the markets is creating an entire army of bearish investors who are concretely resolved to remain in the bearish camp indefinitely. This type of short-term, news driven volatility, equaling long-term bearishness dynamic is an extremely bullish underpinning for the markets. It creates the necessary wall of...
Risk On Investments Are Set To Come Alive, Act Accordingly
When we last left off in the perpetual saga of the U.S. equity markets, a clear statement of the fact that investors had become overly fearful led us to conclude that "this remains a market to take advantage of rather than run from." This was the final sentence of a note titled Buying Equities Here Involves A Simple Yes or No Answer To A Simple Question. The direct and blatant truth of the matter is that investors are being led down an overly-pessimistic path of the global recessionary boogie man that every investor, analyst and trader is now clinging onto in an act of despair. It's almost as if the constant barrage of misinformation has caused investors to tap out from pure mental exhaustion of the repetitive recession sirens blaring for the entirety of 2019. If one didn't know any better, judging purely from the headlines of 2019 exclusively, you would think that the S&P is negative on the year. Instead, we are up about 15% in the face of an overwhelming penchant for negative sentiment towards equities throughout this year. Following this risk reset in the markets, investors are being given yet another opportunity that a majority will miss to accumulate equities at advantageous prices. The risk on trade is set to come alive in a big way as we enter Q4, fed by a near historic misallocation away from equities into any instrument that absolves asset managers of taking responsibility for putting on risk. In other words, professional investors are way too afraid of losing money and they have become stupid in their decisions as a result. The markets punish stupidity without fail. They especially punish stupidity when it plays into a narrative of misallocation that can then allow the markets to do what they do best: create a counter-intuitive, momentum driven march forward that mentally runs counter to even the most outlandish scenario a majority of investors were expecting. As a result, investors want risk on, correlated assets here. There is a time to run from equities that correlate to the markets and then there is a time to embrace them. This is a time when investors should be giving them a bear hug with everything they have. The biggest and brightest mega-cap tech names...buy them. The leading real estate and construction related names....buy them. Semiconductors: NVDA, AMD, AMAT...have to own them. What investors don't want to own is anything remotely associated with risk off. With this said, ETF Pro subscribers were told to liquidate their GDX position that has been held since Q2 and SLV for gains of 40% and 14%, respectively. In fact, we...
Buying Equities Here Involves A Simple Yes or No Answer To A Simple Question
We are now beyond the point of fears related to China and the ongoing trade war. This is news that has been more than factored into both U.S. and international markets. Where we are now in the grand cycle of financial boogie men hiding under every bed and occupying every closet is the after effects of this trade war. Specifically, investors have now moved onto the recession boogie man. Being that markets are always looking forward, the current extreme volatility is a symptom of investors debating whether a recession is going to begin within the next 6-12 months. Simultaneously, economists are ratcheting down their estimates for the economy as they KNOW a recession is coming. What this creates is a potential springboard effect for the markets to the upside, while the bar is being lowered for the economy to the point where even slight glimpses of growth will create a sustainable uptrend. All the meanwhile, investors continue to be so poorly positioned for equity appreciation that a move up from here will force money from the sidelines in what could be a historic fashion into year end. Is the economy going to be bad enough over the next several months to justify the greatest fears of investors while disappointing estimates for growth that have already seen substantial reductions? That's really the only question investors should be asking here to decide whether they are buyers or sellers. Given the recent history of markets getting the economy wrong, led by the bond market especially, this is simply a micro replay of December 2018. Investors greatest fears are rarely realized, especially when they are as vivid and scary as they are at the present time. This remains a market to take advantage of rather than run from. Zenolytics now offers Turning Points and ETF Pro 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...