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  • Low unemployment is not the issue right now. Lack of people to fill existing job openings is.
    "For I desire mercy, not sacrifice, and acknowledgment of God rather than burnt offerings." Hosea 6:6

    "Theology can be an intellectual entertainment." Metropolitan Anthony Bloom

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    • Though it's not too difficult to predict the general long-term direction of the markets based on what the Fed does or doesn't do, it's still not a certainty the markets will move in the direction you expect because of the fact that the markets have become rife with scam-artists and just outright trading delusion (personally, I think this happened with the introduction of trading aps on your phone that made it easy for millennials to trade stock).

      Here's a funny article which lists a bunch of examples of why and how the markets have become an illusion of absurdity (WARNING: there is one obscene phrase in the article about what Elon posted on his twitter).

      The 'Absurd Market' Hypothesis

      Here's one bizarre example...

      CAPM, meet CAP MEME.

      1) In 2020, a zero-revenue, electric battery/hydrogen-powered semi-truck startup, Nikola Motors, went public through a reverse merger with a SPAC. On June 9th, 2020, Nikola reached a market capitalization of $31B, making it $3B more valuable than Ford.

      Nikola Motors was founded by Trevor Milton, a man with zero auto and engineering experience and a past filled with questionable entrepreneurial ventures.The company had no sales, no proprietary technology, and no working prototypes. It did, however, have a "gravity-powered" semi-truck and some computer-rendered images of a pickup, the Nikola Badger.

      Investors wanted to find the next Tesla so badly that they turned this JPEG into a $31B public company. The Nikola Badger was the original NFT.

      This company, whose founder was charged with three counts of criminal fraud for lying about “nearly all aspects of the business," is still worth $3B as a publicly-traded company with no product.
      "What am I doing here?" -- Joe Biden 2021

      Comment


      • Originally posted by seanD View Post
        This company, whose founder was charged with three counts of criminal fraud for lying about “nearly all aspects of the business," is still worth $3B as a publicly-traded company with no product.

        That's insane. Not that he committed fraud, but that the company still exists and is worth 3B.

        Comment


        • Originally posted by Thoughtful Monk View Post
          In NY, the environmentalist are trying to enact a two year moratorium on coin mining. Apparently mining takes a lot of electricity and they don't like the impact of generating it all.
          The Legistlature did pass the ban on some forms of bitcoin mining. I understand it is if the mining uses electricity from fossil fuels, it's prohibited. The bill is on Gov. Hochul's desk for signature.
          "For I desire mercy, not sacrifice, and acknowledgment of God rather than burnt offerings." Hosea 6:6

          "Theology can be an intellectual entertainment." Metropolitan Anthony Bloom

          Comment


          • Originally posted by seanD View Post
            The only bad economic news I expect to rattle the markets downward is if the CPI number comes out hotter than expected. If the CPI is lower, this will (or at least seem to) bolster the experts claiming inflation has peaked and thus give more reason for the Fed to back off tightening.

            Inflation hotter than expected. Bye-bye markets.

            "What am I doing here?" -- Joe Biden 2021

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            • So the talk now is that the Fed will perhaps go anti-inflation ballistic and, instead of a .50 basis point interest rate hike, they'll go with a .75 or higher raise. Some have even speculated a full 1.00.

              Personally, I suspect they're going to stick with the planned .50. The reason is because, since everyone is expecting a higher hike, sticking with .50 might result in a brief market relief rally, because the markets might get the impression the Fed is not really serious about fighting inflation.

              If the Fed does raise rates higher than .50, then I believe the market is going to continue to get slaughtered, because this will not only show the Fed is in fact serious about fighting inflation, but they perhaps are not confident in their abilities to fight it and are now panicking.
              "What am I doing here?" -- Joe Biden 2021

              Comment


              • Originally posted by seanD View Post
                So the talk now is that the Fed will perhaps go anti-inflation ballistic and, instead of a .50 basis point interest rate hike, they'll go with a .75 or higher raise. Some have even speculated a full 1.00.

                Personally, I suspect they're going to stick with the planned .50. The reason is because, since everyone is expecting a higher hike, sticking with .50 might result in a brief market relief rally, because the markets might get the impression the Fed is not really serious about fighting inflation.

                If the Fed does raise rates higher than .50, then I believe the market is going to continue to get slaughtered, because this will not only show the Fed is in fact serious about fighting inflation, but they perhaps are not confident in their abilities to fight it and are now panicking.
                So it's apparently .75

                Comment


                • Originally posted by Sparko View Post

                  So it's apparently .75
                  I am surprised. They're giving off a vibe of desperation and lack of control.
                  "What am I doing here?" -- Joe Biden 2021

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                  • Originally posted by seanD View Post

                    I am surprised. They're giving off a vibe of desperation and lack of control.
                    and surprisingly the market went up. At least for now.

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                    • Originally posted by Sparko View Post

                      and surprisingly the market went up. At least for now.
                      Well, it did the same thing last .50 hike. Market spiked and then it crashed the next day (or maybe even the same day I don't remember). There's no logical reason to assume that pattern won't follow here since the situation is much worse and the hike is bigger. But we'll see.
                      "What am I doing here?" -- Joe Biden 2021

                      Comment


                      • Originally posted by seanD View Post

                        Well, it did the same thing last .50 hike. Market spiked and then it crashed the next day (or maybe even the same day I don't remember). There's no logical reason to assume that pattern won't follow here since the situation is much worse and the hike is bigger. But we'll see.
                        You called it. The market is heading down, down, down.

                        Comment


                        • Originally posted by seanD View Post

                          I am surprised. They're giving off a vibe of desperation and lack of control.
                          Or they want to make it clear that they are serious about fighting inflation. How the public perceives their efforts makes as much of a difference as the efforts themselves, if not more.

                          The last time inflation got out of control, it took a recession to tame it. It'll hardly be surprising if the same is the case this time.

                          Comment


                          • Originally posted by Sparko View Post

                            You called it. The market is heading down, down, down.
                            Usually a market spike -- especially where it doesn't make any sense -- is the dumb money (likely Robinhood and phone app traders). The dumb money charges in for whatever reason, then the dip happens immediately after because the smart money takes advantage of the dumb money to get out at the peak.
                            "What am I doing here?" -- Joe Biden 2021

                            Comment


                            • Originally posted by seanD View Post

                              Usually a market spike -- especially where it doesn't make any sense -- is the dumb money (likely Robinhood and phone app traders). The dumb money charges in for whatever reason, then the dip happens immediately after because the smart money takes advantage of the dumb money to get out at the peak.
                              Literally.

                              "Retail investors" = dumb money.

                              The gist of the article is that the dumb money is keeping the stock market propped up (inflows) and preventing the crash (outflows) from being worse than it could (should) be.

                              They're also keeping the crypto market bloodbath from being worse than it could be, which isn't surprising in the least (the same investing morons that are piling into stocks while they're crashing would be the same morons that have been riding the bitcoin "to the moon" bandwagon)...

                              Despite Crashing Stocks And Cryptos, Retail Investors Just Won't Stop Buying All The Dips

                              Something remarkable is taking place in the markets: despite a near record 10 out of 11 weekly drops in the S&P500...

                              ... and a now unprecedented and record 11 of 12 weekly declines in the Dow Jones average...

                              ... retail investors are buying the dip, again and again and again and so on. And not only that, their buying gets more aggressive the lower stocks slide.

                              According to the latest EPFR data, investors plowed a whopping $16.6bn to stocks, all of it passive of course, with $32.3BN to ETFs offset by $15.7bn from mutual funds, bringing the YTD ETF inflows to $328BN vs $117BN in long-only outflows.

                              Last week also saw the 6th consecutive week of inflows into US equities, with a breakdown by style as follows: inflows to US small cap ($6.6bn), US value ($5.8bn), US large cap ($5.5bn); with only outflows from US growth ($0.4bn).

                              Broken down by sector, there were inflows into tech ($0.8bn) - the first in 9 weeks...

                              ... materials ($0.3bn), healthcare ($0.3bn), utilities ($0.1bn) while on the other side, there were outflows from communication services ($74mn), consumer ($0.2bn), energy ($0.3bn), real estate ($0.5bn), financials ($1.6bn), which has now seen outflows for 12 straight weeks, something which wouldn't happen if markets were expect anything but a stagflation.

                              Last week also saw the 1st inflow to EM equities in 6 weeks ($1.3bn), as well as the largest inflow to US small cap since Dec’21 ($6.6bn), to US value in 13 weeks ($5.8bn); meanwhile capital flight continued from Japan, with outflows from the past 4 weeks ($1.1bn) and Europe which has seen non-stop outflows for past 18 weeks ($1.0bn).

                              Meanwhile, as US equity inflows prove remarkably resilient, the same can not be said for credit, which just suffered the largest outflows since Mar’20 from junk bonds ($7.8bn), bank loans ($2.1bn), and munis ($4.9bn).

                              In fact, as BofA's Michael Hartnett calculates, for every $100 of inflow since Jan’20, there has been $35 of outflow from IG + HY + EM debt vs $0 from equities...

                              ... suggesting that the capitulation has been in credit...

                              ... and crypto

                              ... but not stocks – why we Hartnett is worried that equity lows are still not in.

                              The latest analysis from Vanda Research confirms that far from capitulating, retail investors continue to pile in with little signs of waning retail enthusiasm. VandaTrack data showed a robust buy-the-dip activity by retail investors last Monday as markets tumbled into a bear market, with the total net inflow reaching +US$ 1.8BNn on the day.

                              That said, the aggregate net buying appears predominantly driven by investors with a long-term investment horizon that are willing to continue Dollar-Cost-Averaging into a sliding stock market. Even so, Vanda believes that there must be a pain threshold for short-term losses – albeit it is proving more elusive than we initially thought.

                              Meanwhile, the impressive retail flow in the cash market has yet to show signs of capitulation, although as Vanda cautions, retail sentiment can change quickly, especially towards the last innings of a sell-off when the bottom usually sets in).

                              And until we wait, here are some more stats: first, the drawdown of the average retail portfolio is now -34%: larger than in any other recent sell-off episode, including March 2020!

                              One difference between now and prior sell-offs lies in the speed of the drawdown. During March 2020, for instance, the S&P 500 dropped by 30% in just over a month, while the current drawdown is in its 6th month (and counting). This slow-burn slide has two implications:

                              retail investors may take longer to run out of capital to invest as they keep collecting paychecks (assuming the labour situation remains stable) and,
                              losses are less “traumatic” as investors usually suffer from “short memory” bias.

                              All told, these two factors plus the expectation that the Fed will capitulate soon enough, contribute to retail’s resilience for now.

                              Outside the cash market, options flows still point to overall weakening sentiment as investors traded more put than call options in recent days (which is also one of the reasons selling pressure has been muted since so many are hedged). The difference in call-put premium traded by retail investors was relatively small at -$55MM on Monday. According to Vanda, those in the retail community engaging in the options market are primarily hedging themselves for any further downside via put options in Exchange Traded Funds (SPY, QQQ, HYG, etc.) however, the total option imbalance was mainly driven by institutional investors buying protection.

                              Despite continued buying pressure, there are days when selling overtakes demand. Case in point, the lack of retail demand likely amplified the large sell-off at the market open on Monday as most of the retail inflows into US equities were concentrated towards the end of the day. The sizeable net inflow at the close was still insufficient to drive a tactical rebound – unlike prior instance. However resilient retail investors have been this year, they could not overpower the institutional investor selling pressure following headlines of a possible 75 bps FOMC hike this week.

                              Another potential warning sign: the breadth of retail purchases is deteriorating again, though it is not flashing any red flags. The total number of US securities (ETFs and single stocks) bought vs. those sold is decreasing. This is a sign of narrowing market breadth due to retail investors directing their capital towards a more concentrated basket of assets. As a historical aside, the two weeks before any retail capitulations had witnessed approx. five days of negative breadth and the number of securities net-sold being -250 or less, on average. We’re not there yet.

                              Adding to the confusion, another of Vanda's favorite capitulation indicators is actually showing improvement signs: in a reversal of the trend from the past month, purchases of single stocks relative to ETFs have picked up again. In the past, when the going got rough, retail investors tended to rotate away from single stock purchases and direct capital towards broad ETFs. This behaviour tended to coincide with weak market periods where conviction in stock-picking abilities dwindled, and retail investors found refuge in more diversified instruments. Only when net selling in single stocks and ETFs concurrently happened did market bottoms form. As the chart below shows, using a 1-month rolling sum, we note that retail net flows sit well above prior key capitulation levels for both instruments.

                              One final sentiment indicator to track is retail participation crypto where once contrary to expectations, retail keeps piling in and providing exit liquidity to institutional investors dumping crypto proxy names. With BTC and ETH tumbling below $20K and $1,000 respectively, it is no surprise that publicly listed crypto-related companies are also experiencing selling pressure. However, the VandaTrack data shows that retail crowds are taking this opportunity to buy into crypto-related stocks and ETFs to the tune of $570MM over the past 10 trading days – a pace not seen since Jan ‘21.

                              There are currently a lot of moving parts in crypto land, with the latest panic selling likely triggered several big protocols and funds (Celsius/3AC) gating and blocking user redemptions or simply liquidating. But why does this matter? Well, we have recently highlighted how older cohorts of the retail community have started reducing exposure to riskier assets while younger and more speculative investors continue to hang on. Monitoring activity around crypto-related plays can give us early signs of capitulation as this is a highly speculative area of the markets.
                              "What am I doing here?" -- Joe Biden 2021

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                              • Contrary to what Fed said (bluffed) they would do in June, they're increasing their balance sheet, not decreasing it...

                                May 23:



                                June 13:



                                Just as I thought.
                                "What am I doing here?" -- Joe Biden 2021

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