I think the learning curve for "Buy The Dip." has flattened to near a 3 degree grade since 1987. That being said, because of the mkt cap weighting of two indices in particular, that dip is not quite "in" until the majority of excess leverage in those 7 stocks has been pulled. There are SO many spread variations off of those 7 that getting clarity from paired moves will take a bit, including old stand bys like 10 yrs, and US$ Idx. Individual pick offs are definitely ready for catching when those babies go out with the bathwater.
Last note, we are still trading in an mkt environment governed by what some of us call "The Corzine Rule".
"There will be NO EXCESS MARGIN left in any account, at any time."
What does that mean? Since Jon Corzine's theft and use of client Excess Margin for personal trading went unprosecuted, any firm can no longer be trusted with any Excess Margin, if you have fiduciary responsibility to large institutional funds. In simpler terms? If you have a loser in one position, you'll be forced to sell winning positions to cover the loss or margin call. Collateral leaving the system exacerbates this phenomena.
Trying to race headline reading trading bots doesn't work well, unless the wrong bias has been coded in, But, will provide opportunities if there's no corrective code adjustments.
Messy mkts are good, because they're very, very cleansing. Nothing more entertaining that a "Fast Market", just don't let it become a "Personal Fast Market".
I developed a unique system that on one hand has never been caught long on a major break, but on the other hand, issues about five sell signals for every bona-fide top. Still, like a broken clock, I was short from Feb 20 to March 11th. I re-shorted on 3/25 and unfortunately covered the next morning when $SPX traded higher on the day, a situation that lasted just long enough for me to cover in front of a zillion point break. Ugh, I never got back in. But, yesterday, I shorted some short dated OTM put spreads and got out on today's open. Sometimes being careful is a curse, other times a virtue.
I have NO IDEA what comes next, but I've been of the mindset for quite some time that 6100 in SPX, 40k in the Nikkei and 23k in the Dax are major, major resistance levels. (not for psychological reasons but based on my technical work) If I had to take a lame guess, I'd opine that we're in a new era of wild, choppy markets where $SPX prints 5000 every year for the rest of our lives.
I agree with Jeff's "comments on credit" but with the level of outstanding global sovereign debt, and the never ending pipeline of new debt, I think there's a one out of three chance of a complete, systemic bond collapse. "The Idiot's Guide To Central Banking" was published before we had $350 trillion in debt. And, because fixed income is the ultimate free market transfer system, those interest payments are in themselves inflationary.
So, I'm not a huge bear on anything that's priced in fiat currency but I couldn't be a bigger bear on the fiscal future of the developed world.
I've been sitting on a large pile of cash for quite a while now waiting for this. It's like a Black Friday sale except for stocks.
A guy has to decide if an up day is a sign of the bear market weakening or just taunting you. Bear markets are typically irregular beasts that taunt with up days like today before continuing the downward pressure. They eventually weaken.
I buy the dips, a bit here, a bit there. Much of the drop was focused on oils, so I paid attention to a few of them because they're always important and they pay dividends.
A voice of reason. Truly appreciated. I'm a long-time reader of the WSJ. They, both their leftist news pages and "free-market" editorial pages, have been crying about how tariffs are inflationary. I was taught, and firmly believe, that inflation is a monetary phenomenon.
You say the tariffs could ultimately be deflationary. I view them as a consumption tax.
I'd love to get a better understanding of how they could be deflationary. By the way, it's kind of fun watching all the nattering nabobs of negativism. I'm just watching and eating popcorn. Good suggestion on loading up on index funds. Thanks Jeffrey.
Tariffs are frictional. They will slow things down. The full price of the tariff won't be passed 100% on to consumers because markets are competitive. Deflation, not inflation.
Short term, I think tariffs blow up external financing schemes, like heavy, heavy subsidization. Same with shipping scams like what caught Lex Greensill, but he had a global fraud as his chief client. Wipes out the scammers, like cheap, subsidized Chinese steel, which is SOO overbuilt capacity wise that even after tariffs of the last 9 years, it's STILL cheaper for US oil and gas to order fault ridden drill pipe, in volume, from China, and ship it all here, than it is to buy local US. 104% rips that apart, and the subsidies are fully, and 100% wasted. Poof. Guaranteed Higher prices, or artificially suppressed prices adjusting? (This is my overlap with our host, on higher prices, as this is where they appear, IMOO). Higher yes, but more honest accounting going in to that supply and demand curve.
China manufacturers some cheap stuff which is a huge headache. This will sound "boooougie". I bought a new golf cart windshield. Cheap Chinese stuff....injection molding etc. Directions were 1000% percent unclear since the person writing them didn't speak English (you could tell). Cracked after one round of golf. Can't get a refund without a "process". Ordered a new one off Amazon which I am sure is a cheap Chinese one too but at least I am dealing with Amazon on a return.
I bought an Enjoybot lithium battery for this stupid golf cart. The thing is 100% unreliable and they won't honor the warranty. I tried it because it's 1000 bucks versus paying 3900 for a golf cart company in Vegas to put a new system in. I wound up paying the Vegas company, and I am stuck with a piece of shit battery made of lithium that I cannot throw away due to the toxic nature of lithium. Fortunately, my friend wants to give it a try and I will give it to him for free.
Had a friend who manufactured a doodad for railroads that measured some particular faults that saved millions in maintenance costs via early detection. It required a field spot welder to tack it to rails in the field. He designed one for the Chinese railworkers to use that fired off a capacitor circuit, as his work visa was short lived, he left the welder on site for them to finish the install job. Upon return, he asked for it back. They sent him one made out of wood, but painted to look like the original. Design was in his head, so no big deal. The slick part of his operation was all the data from his detectors, raw, was sent back to his US based "server barn" (one wall of his car collection garage) so he could read, and return a detailed analysis of the data, for which the contract that got him paid was based, that report. Knowing that the data was going to be hacked and his contract would be attempted to work around the instant his flight lifted off from China, he made a very specific design decision for his "server barn". They were all Apple II PCs, too slow to remotely hack, but perfect for collecting squirted data over phonelines from his sensor array across China.
Not sure why, but I found this extremely amusing. Not laughing at your expense, but your experience. I think, and hope, we all can laugh at the cheap trash we've purchased, all made in China.
The problem is that it may take a few years to figure out that the cheap Chinese trash we've purchased is unreliable or inferior in some way, and by that time, the US factories making the same products have been driven out of business, so the only choice you have when, for example, you go to the hardware store, or purchase an item online, is the cheap Chinese crap. That's not something to laugh about.
I buy imported cotton work shirts. Carhartt. But they're from India. Pretty well made. I hope India is smart enough to make a deal with trump. Comparable American shirts are twice the price and no better made. Once upon a time I was 'buy American' as far as trucks go. Been driving a Ford one ton Diesel 350 for 16 years. If I ever buy another truck It would probably be a Toyota. I won't live long enough to see America regain manufacturing preeminence.
We had to spend quite a bit to replace crummy Chinese made bolts and screws on a long pier several years ago.
Lots of cheap stuff exported to us in huge quantities.
Wonder how WalMart will fare with these tariffs. I read that they are pressuring suppliers...but not sure even domestic suppliers can make up for 104% tariffs.
Well Said as always @Jeffrey. We have to remember, there are a lot of powerful people with Trump and now Musk derangement syndrome. They will further flavor their convictions and this includes the mainstream media.
Trump needs lee-way to establish a stronger negotiating posture, and not being predictable, is an important aspect of it. I am not sure who said it, but its always easier to work with a potential or prospective partner when they are a little off-balance. If their feet are steady on the ground, its not easy to get them to travel in a different direction. This makes many people uncomfortable. But it works, especially when everyone's goals are the same, or should be, like our democratic allies. Thank you.
Per your suggestion, I went to your bio page to join the Lund Group, where I was prompted to your X handle and to your LinkedIn bio. And it here it is, on substack, that I thought I had somehow cleverly discovered you. Ha!
So much for the rally, looks like we are set to close on the lows of the day! Not a bad thing, as another layer of weak longs is flushed out and so far yesterday's lows have held. Listen up China, Trump is not going to back down and it's America First time!
Park McDougald at Tablet says Trump's entire tariff action is political; a pre-emptive offensive to keep China from taking complete control of the retail world economy. A more reasoned analysis than the usual stock-market fear-mongering.
First, and just to get it out of the way, if someone was to hold a gun to my head, and being from Chicago yes that has happened to me, I would say we are much more likely to have a w shaped bottom than a v-shaped one.
Second and far more important, part of the end game is to build back industry in this country because we cannot afford to have China be a manufacturing giant at more than double the rate (damn near triple) we are manufacturing today. Bring back high paying skilled labor jobs into socioeconomically impoverished communities in this country. When you combine the deportation of illegal aliens with creating a business environment that makes it more unfavorable to buy foreign products and favorable to invest in manufacturing here and then buy American made products, you will see the noticeable gains with increases in the participation rates of our workforce and the increases in manufacturing numbers on the non-farm payroll days on the first Friday of each month and that will be your truest indicator, or one of them or in this case two of them, over the next 18 months and that is remarkably fast compared to any Administration in history. It has already started.
Play the long game and don't worry about day trading your 401k LOL.
Do I still day trade? Of course, but I don't take it seriously; I just focus on making money in short-term fluctuation.
I think there was one before the Great Depression. Turned out to be a dead cat bounce because dead cats don't bounce. As a random guess the only one who sort of saw this coming seems to be Buffett, which is why he is sitting on a pile of cash and was before any of this started.
The question I have; what is Trump's end game? If he has a plan or a goal he hasn't explained it well or poorly, or at all. Everyone seems to know but what everyone knows is different from what everyone else knows. It doesn't seem to be just about tariffs, nor about import duties and probably not only bringing jobs back to America. Maybe all three or two out of the three. You pick the ones you like. I think it's also something else that isn't clear yet.
One complaint was Australia wasn't allowing American beef to be imported. If you take shipping distances and rates maybe it's the cost and not only protectionism. One of the reasons Americans started to buy Japanese cars wasn't just the price. It was because they were better made. When Nikon and Cannon reached the same quality as Leica but were less costly people started to buy those cameras. It's not just costs, it's getting what you pay for.
It's one thing to say don't buy their crap, buy our crap. Another to say don't buy their well made stuff, buy our poorly made stuff instead because we make it here.
“However on down days, if your powder is dry, you might find some decent values for companies that you think are great business that you want to hold in your portfolio for a very long period of time.” Jeffery I think I have heard that somewhere before, let me check my notes from a prior Woodstock for Capitalists….. I think Uncle Warren said it first. :-) :-) :-)
"Watch the news". Question: What 'news'? All I can find is propaganda.
you have to sift for that yourself by looking to original sources; full context
Or alternately, different POVs to help suss out the truth.
Here's the thing -- it's not just tariffs; it's also non-tariff barriers to trade (NTB). Probably more important.
The big losers will be the countries that try to retaliate when the others zig and zag.
Keep your eyes on the 70+ countries that are in play.
https://themusingsofthebigredcar.com/non-tariff-barriers-to-trade-because-tariffs-are-not-enough/
Cheers.
JLM
www.themusingsofthebigredcar.com
yup, linked to that in the piece
Yes. If I recall correctly, Vietnam has a trivial tariff but it was the NTBs that were the problem.
Similarly the EU. Their claim that 0% on industrial goods is a legit offer is not too credible. Apparently Trump rejected that offer a while ago.
Well said Mr Minch
I think the learning curve for "Buy The Dip." has flattened to near a 3 degree grade since 1987. That being said, because of the mkt cap weighting of two indices in particular, that dip is not quite "in" until the majority of excess leverage in those 7 stocks has been pulled. There are SO many spread variations off of those 7 that getting clarity from paired moves will take a bit, including old stand bys like 10 yrs, and US$ Idx. Individual pick offs are definitely ready for catching when those babies go out with the bathwater.
Last note, we are still trading in an mkt environment governed by what some of us call "The Corzine Rule".
"There will be NO EXCESS MARGIN left in any account, at any time."
What does that mean? Since Jon Corzine's theft and use of client Excess Margin for personal trading went unprosecuted, any firm can no longer be trusted with any Excess Margin, if you have fiduciary responsibility to large institutional funds. In simpler terms? If you have a loser in one position, you'll be forced to sell winning positions to cover the loss or margin call. Collateral leaving the system exacerbates this phenomena.
Trying to race headline reading trading bots doesn't work well, unless the wrong bias has been coded in, But, will provide opportunities if there's no corrective code adjustments.
Messy mkts are good, because they're very, very cleansing. Nothing more entertaining that a "Fast Market", just don't let it become a "Personal Fast Market".
I developed a unique system that on one hand has never been caught long on a major break, but on the other hand, issues about five sell signals for every bona-fide top. Still, like a broken clock, I was short from Feb 20 to March 11th. I re-shorted on 3/25 and unfortunately covered the next morning when $SPX traded higher on the day, a situation that lasted just long enough for me to cover in front of a zillion point break. Ugh, I never got back in. But, yesterday, I shorted some short dated OTM put spreads and got out on today's open. Sometimes being careful is a curse, other times a virtue.
I have NO IDEA what comes next, but I've been of the mindset for quite some time that 6100 in SPX, 40k in the Nikkei and 23k in the Dax are major, major resistance levels. (not for psychological reasons but based on my technical work) If I had to take a lame guess, I'd opine that we're in a new era of wild, choppy markets where $SPX prints 5000 every year for the rest of our lives.
I agree with Jeff's "comments on credit" but with the level of outstanding global sovereign debt, and the never ending pipeline of new debt, I think there's a one out of three chance of a complete, systemic bond collapse. "The Idiot's Guide To Central Banking" was published before we had $350 trillion in debt. And, because fixed income is the ultimate free market transfer system, those interest payments are in themselves inflationary.
So, I'm not a huge bear on anything that's priced in fiat currency but I couldn't be a bigger bear on the fiscal future of the developed world.
And just like that, pop-a-roo!
61 handle SPX was and is significant
Good post.
I've been sitting on a large pile of cash for quite a while now waiting for this. It's like a Black Friday sale except for stocks.
A guy has to decide if an up day is a sign of the bear market weakening or just taunting you. Bear markets are typically irregular beasts that taunt with up days like today before continuing the downward pressure. They eventually weaken.
I buy the dips, a bit here, a bit there. Much of the drop was focused on oils, so I paid attention to a few of them because they're always important and they pay dividends.
A voice of reason. Truly appreciated. I'm a long-time reader of the WSJ. They, both their leftist news pages and "free-market" editorial pages, have been crying about how tariffs are inflationary. I was taught, and firmly believe, that inflation is a monetary phenomenon.
You say the tariffs could ultimately be deflationary. I view them as a consumption tax.
I'd love to get a better understanding of how they could be deflationary. By the way, it's kind of fun watching all the nattering nabobs of negativism. I'm just watching and eating popcorn. Good suggestion on loading up on index funds. Thanks Jeffrey.
Tariffs are frictional. They will slow things down. The full price of the tariff won't be passed 100% on to consumers because markets are competitive. Deflation, not inflation.
Thanks. Stellantis is proof of that, already. The company said it would swallow suppliers' tariff costs.
Plus, the tariffs are only on one component of a product, typically.
Not to mention that imports are a small % of our GDP.
Short term, I think tariffs blow up external financing schemes, like heavy, heavy subsidization. Same with shipping scams like what caught Lex Greensill, but he had a global fraud as his chief client. Wipes out the scammers, like cheap, subsidized Chinese steel, which is SOO overbuilt capacity wise that even after tariffs of the last 9 years, it's STILL cheaper for US oil and gas to order fault ridden drill pipe, in volume, from China, and ship it all here, than it is to buy local US. 104% rips that apart, and the subsidies are fully, and 100% wasted. Poof. Guaranteed Higher prices, or artificially suppressed prices adjusting? (This is my overlap with our host, on higher prices, as this is where they appear, IMOO). Higher yes, but more honest accounting going in to that supply and demand curve.
China manufacturers some cheap stuff which is a huge headache. This will sound "boooougie". I bought a new golf cart windshield. Cheap Chinese stuff....injection molding etc. Directions were 1000% percent unclear since the person writing them didn't speak English (you could tell). Cracked after one round of golf. Can't get a refund without a "process". Ordered a new one off Amazon which I am sure is a cheap Chinese one too but at least I am dealing with Amazon on a return.
I bought an Enjoybot lithium battery for this stupid golf cart. The thing is 100% unreliable and they won't honor the warranty. I tried it because it's 1000 bucks versus paying 3900 for a golf cart company in Vegas to put a new system in. I wound up paying the Vegas company, and I am stuck with a piece of shit battery made of lithium that I cannot throw away due to the toxic nature of lithium. Fortunately, my friend wants to give it a try and I will give it to him for free.
Had a friend who manufactured a doodad for railroads that measured some particular faults that saved millions in maintenance costs via early detection. It required a field spot welder to tack it to rails in the field. He designed one for the Chinese railworkers to use that fired off a capacitor circuit, as his work visa was short lived, he left the welder on site for them to finish the install job. Upon return, he asked for it back. They sent him one made out of wood, but painted to look like the original. Design was in his head, so no big deal. The slick part of his operation was all the data from his detectors, raw, was sent back to his US based "server barn" (one wall of his car collection garage) so he could read, and return a detailed analysis of the data, for which the contract that got him paid was based, that report. Knowing that the data was going to be hacked and his contract would be attempted to work around the instant his flight lifted off from China, he made a very specific design decision for his "server barn". They were all Apple II PCs, too slow to remotely hack, but perfect for collecting squirted data over phonelines from his sensor array across China.
Trust but verify is not a punchline.
Not sure why, but I found this extremely amusing. Not laughing at your expense, but your experience. I think, and hope, we all can laugh at the cheap trash we've purchased, all made in China.
The problem is that it may take a few years to figure out that the cheap Chinese trash we've purchased is unreliable or inferior in some way, and by that time, the US factories making the same products have been driven out of business, so the only choice you have when, for example, you go to the hardware store, or purchase an item online, is the cheap Chinese crap. That's not something to laugh about.
I buy imported cotton work shirts. Carhartt. But they're from India. Pretty well made. I hope India is smart enough to make a deal with trump. Comparable American shirts are twice the price and no better made. Once upon a time I was 'buy American' as far as trucks go. Been driving a Ford one ton Diesel 350 for 16 years. If I ever buy another truck It would probably be a Toyota. I won't live long enough to see America regain manufacturing preeminence.
We had to spend quite a bit to replace crummy Chinese made bolts and screws on a long pier several years ago.
Lots of cheap stuff exported to us in huge quantities.
Wonder how WalMart will fare with these tariffs. I read that they are pressuring suppliers...but not sure even domestic suppliers can make up for 104% tariffs.
Well Said as always @Jeffrey. We have to remember, there are a lot of powerful people with Trump and now Musk derangement syndrome. They will further flavor their convictions and this includes the mainstream media.
Trump needs lee-way to establish a stronger negotiating posture, and not being predictable, is an important aspect of it. I am not sure who said it, but its always easier to work with a potential or prospective partner when they are a little off-balance. If their feet are steady on the ground, its not easy to get them to travel in a different direction. This makes many people uncomfortable. But it works, especially when everyone's goals are the same, or should be, like our democratic allies. Thank you.
Per your suggestion, I went to your bio page to join the Lund Group, where I was prompted to your X handle and to your LinkedIn bio. And it here it is, on substack, that I thought I had somehow cleverly discovered you. Ha!
So much for the rally, looks like we are set to close on the lows of the day! Not a bad thing, as another layer of weak longs is flushed out and so far yesterday's lows have held. Listen up China, Trump is not going to back down and it's America First time!
104% will do that to headline bots.
Park McDougald at Tablet says Trump's entire tariff action is political; a pre-emptive offensive to keep China from taking complete control of the retail world economy. A more reasoned analysis than the usual stock-market fear-mongering.
https://thedailyscroll.substack.com/p/april-7-the-trade-war-is-about-china
Everybody gets to describe their part of the elephant they're touching, since we're all blind. I'm just hoping I'm not still holding the tail.
Great piece, Jeff. The stock market does not reflect real markets out here, just for the financialists.
First, and just to get it out of the way, if someone was to hold a gun to my head, and being from Chicago yes that has happened to me, I would say we are much more likely to have a w shaped bottom than a v-shaped one.
Second and far more important, part of the end game is to build back industry in this country because we cannot afford to have China be a manufacturing giant at more than double the rate (damn near triple) we are manufacturing today. Bring back high paying skilled labor jobs into socioeconomically impoverished communities in this country. When you combine the deportation of illegal aliens with creating a business environment that makes it more unfavorable to buy foreign products and favorable to invest in manufacturing here and then buy American made products, you will see the noticeable gains with increases in the participation rates of our workforce and the increases in manufacturing numbers on the non-farm payroll days on the first Friday of each month and that will be your truest indicator, or one of them or in this case two of them, over the next 18 months and that is remarkably fast compared to any Administration in history. It has already started.
Play the long game and don't worry about day trading your 401k LOL.
Do I still day trade? Of course, but I don't take it seriously; I just focus on making money in short-term fluctuation.
Sage advice. You're no dummy
I think there was one before the Great Depression. Turned out to be a dead cat bounce because dead cats don't bounce. As a random guess the only one who sort of saw this coming seems to be Buffett, which is why he is sitting on a pile of cash and was before any of this started.
The question I have; what is Trump's end game? If he has a plan or a goal he hasn't explained it well or poorly, or at all. Everyone seems to know but what everyone knows is different from what everyone else knows. It doesn't seem to be just about tariffs, nor about import duties and probably not only bringing jobs back to America. Maybe all three or two out of the three. You pick the ones you like. I think it's also something else that isn't clear yet.
One complaint was Australia wasn't allowing American beef to be imported. If you take shipping distances and rates maybe it's the cost and not only protectionism. One of the reasons Americans started to buy Japanese cars wasn't just the price. It was because they were better made. When Nikon and Cannon reached the same quality as Leica but were less costly people started to buy those cameras. It's not just costs, it's getting what you pay for.
It's one thing to say don't buy their crap, buy our crap. Another to say don't buy their well made stuff, buy our poorly made stuff instead because we make it here.
What's the destination?
“However on down days, if your powder is dry, you might find some decent values for companies that you think are great business that you want to hold in your portfolio for a very long period of time.” Jeffery I think I have heard that somewhere before, let me check my notes from a prior Woodstock for Capitalists….. I think Uncle Warren said it first. :-) :-) :-)