Two days ago, I stated:
… speculators celebrated by rushing to buy at prices far higher than just days prior. Most of them are likely to be facing major losses before too long.
Headlines yesterday:
Fed’s Pivot Is Forcing Stock-Market Skeptics to Become Believers
Investors dreaming of interest-rate cuts continued to push stocks higher
More Americans Than Ever Own Stocks
Today:
62% Of Americans Live Paycheck-To-Paycheck
Margin Calls & Massive Put-Buying - Did the Goldilocks narrative just die?
The World Is Sitting On A Powder-Keg Of Debt
I had a close friend who was not at all the subtle sort. Sadly he passed far too young and early, and today I had a poignant reminder of something he’d do.
We’d hang out with mates who were best avoided when they’d had too much to drink, which was often. When it was clear that the fun was probably over, I’d shoot him a quick look and roll my eyes toward the exit; trying to be discreet.
He’d sabotage my attempt at subtlety by blurting out “IS THAT THE SIGNAL!?”
Here’s a 5-day Dow chart:
As far as I’m concerned THAT’S THE SIGNAL, and there’s nothing subtle about it.
When this epic speculative debt binge finally ends, it’ll be ugly and quick. Margin clerks and lenders will not be discreet about calling in debts.
No maybes. A 1-year chart will look a lot like the one above.
However long this mania rages on, it won’t end well or with a “soft landing” nor will most portfolios.
Consider today’s action akin to when violence flares up at a raging party. It may not yet be time to leave, if you really can’t bear to drag yourself away, but you know the risk/reward ratio has tilted heavily against you and soon enough the sun will rise and sobriety will fall upon everyone; it’ll be painful and reveal some truly ugly wreckage, so best to secure your assets and be near the exit.
11 months ago I offered a few high-dividend ideas.
Qurate Retail 8.0% Fixed Rate Cumulative Redeemable Preferred (NASDAQ: QRTEP) at the time was paying a yield over 18%, reflecting its highly speculative nature.
Factoring dividends, QRTEP is down 4.7% vs. my entry and I’m closing it out.
I’m adding another 1/4 position of Tesla short via TSLQ.
TSLQ closed today at $31.94
My average cost is $37.64 and topping this up to a full position will bring my average lower, to around $36.22
I’m closing out of LL Flooring
2 of my 4 positions were recently sold, both up 17% in just 3 weeks.
At this stage of the market cycle I’m no longer willing to wait for a potential buyout at a potentially much higher price, as the potential for a major market top is much too present.
Average cost on the remaining 2 positions is $3.33
At today’s close those are up over 11% in just 9 weeks.
I’m restoring a hedge position via TZA for one and done #7 - Hedging.
TZA closed today at $21.43
Despite markets going parabolically higher the past year, my original TZA position was held for 7 months yet still closed profitably.
Several other shorts and hedges netted considerable quick gains, including a 2nd TZA:
2 of my 4 GROY are up just over 10% after holding only about a month.
I’m closing out of those most recent 2 GROY, sticking with the first 2 GROY entries and the recent additions of 2 GLCC positions for one and done # 4 - Gold.
I suggested TFIN a month ago, which has already gained as much as 13%.
FCX has been up as much as 16% in the month since suggested, BHP 9% and GLCC 7%.
With anything, be very long-term minded or set tight stops. Complacency is widespread, as I detailed a couple days ago, but widespread panic looms ahead.
Am I bearish?
No. Prudent. Proactively preparing.
Indecisiveness is anathema to success, and I’m getting cashed-up to take advantage of fire-sale prices after the inevitable implosion.