*Investors Blog*

[SC Maintenance]

Been reading a bunch about 0DTE options, and market vol.

Thoughts are that it adds liquidity on up days - the brokers that sold the 0DTE's buy the stocks on the way up to hedge there losses. Hence volatility is lower.

No such buyers on the way down, as most of those options are long.

Net result might be a real big down day could be a long fall - no buyers?

Anyone else following this phenomenon? I am thinking of buying the VIX?

 

[Dave Hess]

“ Anyone else following this phenomenon? “

I mentioned it a few weeks ago…

 

[SC Maintenance]

“ Anyone else following this phenomenon? “

I mentioned it a few weeks ago…

I was likely not smart enough to understand what you were saying back then

You trading 0DTE or just observing like I am?

 

[Bill7]

It looks like markets are finally realizing we will have more interest rate hikes and also that a recession is coming (possibly in 2024).
Historically, the broad market typically drops about 20% during a recession.

Strategic patience in a high yield very safe money market fund can protect you from a huge loss when markets crash, and also provide available cash to buy investments at deep discount prices after the crash.

 

[Dave Hess]

I was likely not smart enough to understand what you were saying back then

You trading 0DTE or just observing like I am?

I only watch the 0DTE manipulation.

My style of investing is extremely conservative and boring. I like LOW risk.



July 22nd I posted this:
https://www.cnbc.com/2023/07/22/too-risky-retail-bets-on-zero-day-options-are-growing.html

 

[SC Maintenance]

It looks like markets are finally realizing we will have more interest rate hikes and also that a recession is coming (possibly in 2024).
Historically, the broad market typically drops about 20% during a recession.

Strategic patience in a high yield very safe money market fund can protect you from a huge loss when markets crash, and also provide available cash to buy investments at deep discount prices after the crash.

Most of what I hear agrees. There saying the expected recession was simply pushed out a year, due to:

-- At the same time the fed was tightening, the treasury was running its balance sheet down due to debt ceiling.
-- Now the Treasury will be borrowing $1.9T yet this year - basically the opposite of above
-- The fed injected $400B directly into the system due to SVB. A lot of this was with fed open window actions that took underwater treasuries from banks at face value. Those loans are up in March
-- Not least - the lag affect of the interest rates. Most zombie companies are still sitting on debt at 3%. When that money rolls over they will be closer to 7 or 8%. That starts happening in 2024. Note Zombie company is defined as a company that needs to borrow more money to pay their interest payment - they don't have enough cash flow to do that. Something like 11M people work for zombie companies. Not good.

Most of what I hear is 2024 Q1 or Q2 - based on above - is their best guess.

Might still be a stock melt up till then - so might still be money to be made.

 

[Bill7]

Most of what I hear agrees. There saying the expected recession was simply pushed out a year, due to:

-- At the same time the fed was tightening, the treasury was running its balance sheet down due to debt ceiling.
-- Now the Treasury will be borrowing $1.9T yet this year - basically the opposite of above
-- The fed injected $400B directly into the system due to SVB. A lot of this was with fed open window actions that took underwater treasuries from banks at face value. Those loans are up in March
-- Not least - the lag affect of the interest rates. Most zombie companies are still sitting on debt at 3%. When that money rolls over they will be closer to 7 or 8%. That starts happening in 2024. Note Zombie company is defined as a company that needs to borrow more money to pay their interest payment - they don't have enough cash flow to do that. Something like 11M people work for zombie companies. Not good.

Most of what I hear is 2024 Q1 or Q2 - based on above - is their best guess.

Might still be a stock melt up till then - so might still be money to be made.

Thanks for that insight. I agree with all of it.

I honestly think any stock melt up be short lived and be followed by the recession and large downturn we all know must happen.

My thinking is that by Q2 2024, the recession will be here, and the S&P will be in the 3800 range.
If that does indeed happen, I'll be carefully waiting for a further drop perhaps to 3400-3600, and then I may begin buying.
I have a list of 60 over priced growth stocks that have already dropped a lot, but it would be nice to wait to get even lower prices should there be panic selling.

Michael Burry shorted the S&P in a big way last quarter, but he is usually too early but his predictions do come true eventually.

I honestly believe that valuation always matters and agree with Warren Buffet/Charlie Monger/Jeremy Grantham on that.
I believe all overvalued things will revert to their historical mean.

I completely disagree with some investors "new" approach to investing (Ex: Cathy Wood), where the thesis is valuation doesn't matter,
and the thinking that bubbles will never burst.

 

[Dave Hess]

Bill7 and SC Maintenance,


I agree with both of you.

Things in the economy are getting bad but the media will not acknowledge a recession until after the election.

The puppets at National Bureau of Economic Research (NBER) won‘t mention a peep about this recession.

https://www.dailyjobcuts.com/

 

[SC Maintenance]

A couple podcasts worth listening to - if your interested in the lag affect theory on the recession.

Wealthion - Michael Gayed - a global margin call in the making. This is actually how I found Wealthion because Michael Gayed has an excellent podcast series himself on investing.

Wealthion - Michael Pento - a hard landing

 

[Pablo]

One thing you can bank on is the PTB will have maximum juice up to the election

 

[Dave Hess]

PBTB ???

 

[Pablo]

PBTB ???

Powers That Be - bus fingered it

 

[Dave Hess]

I was trying to find that ticker symbol….

** Edit **

Wolf Street does have good info.

https://wolfstreet.com/

 

[Pablo]

I was trying to find that ticker symbol….

These clowns may not have much ammo left though!

 

[Warstud]

My thinking is that by Q2 2024, the recession will be here, and the S&P will be in the 3800 range.
If that does indeed happen, I'll be carefully waiting for a further drop perhaps to 3400-3600, and then I may begin buying.

Where did you come up with those numbers ? Are those someone elses numbers or do you know T/A ?

 

[SC Maintenance]

One thing you can bank on is the PTB will have maximum juice up to the election

These are my thoughts exactly. However I have questions?

Will the fed be part of it? Both likely candidates have said they won't re-appoint Powell. There is also rumors that Yellen / San Franciso fed orchestrated the SVB bail out, and much of the rest of the fed wasn't happy about it. East Coast / West Coast soap opera. Will an independent fed emerge again - stick to their guns on inflation. Somehow I doubt it, but its possible?

If the fed chooses not to monetize it, who will buy the governments stimulus debt?

Might get a preview in the coming months with all the government auctions coming up shortly.

I am sticking to oil stocks, might buy some VIX, and keeping a lot of powder dry.

 

[Dave Hess]

I was looking at TMF.

 

[SC Maintenance]

I was looking at TMF.

oof. 3X lever to Long bonds? You obviously think a flight to safety is imminent?

 

[Dave Hess]

oof. 3X lever to Long bonds? You obviously think a flight to safety is imminent?

TMF will keep dropping and I’ll eventually buy a little.
Will see what happens when Fed starts to cut rates.

I have a little bit of ‘casino cash’ dedicated for inverse and leveraged junk, paper gold and silver.

 

[Bill7]

Bill7 and SC Maintenance,


I agree with both of you.

Things in the economy are getting bad but the media will not acknowledge a recession until after the election.

The puppets at National Bureau of Economic Research (NBER) won‘t mention a peep about this recession.

https://www.dailyjobcuts.com/

The media is painting a rosy picture when the truth is inflation, oil prices, fed policy, recession, unaffordable housing market, mounting credit card debt, all other markets are flashing red warning signs. It's obvious why they are doing this. The sad thing is a lot of people will buy based on that inaccurate rosy picture and get hurt later once those red warning signs come to frution.