I have a friend – let’s call her Susan – who, like many of you, is clinging on to a large part of the pandemic playbook; clinging on to the belief that this market will in short order go back to all-time highs and irrational exuberance. And although the market overall does tend to do that, it’s not going to happen for quite some time.
Most analysts and pundits have embraced this new reality. And given the rhetoric, I don’t see how anyone can be in stocks right now, at least not growth or high-PE ventures. Just a few excerpts:
- Equities are in a lose-lose scenario no matter where the economy goes, says Cantor’s Eric Johnston (cnbc.com)
- Fed’s Going Pedal to the Metal
- The Fed Is Making a Mistake—and the Stock Market Will Pay the Price | Barron’s (barrons.com)
- Expect a ‘Santa Claus’ rally until year end, then a drop in January, says Fairlead Strategies Katie Stockton (cnbc.com)
It is irresponsible for any money manager or analyst to be advising stocks at this point. Steve Weiss: “This is the easiest market we have ever seen …” Followed with Don’t Fight the Fed. In summary, sell this market. Steve is short. Katie Stockton (last clip) has been nailing it for the past few months. We are due for a significant drop in the next month or two. Easy, easy money.
As Steve also said, “I can get it cheaper in the next few weeks or months.” And that is the point. Why would you buy (or hold) something now that you can get significantly cheaper a month from now? You don’t need to put these stocks under the tree for Christmas. You can wait. Sell now, look for buying opportunities in Q1.
Get Out of Big Tech
It’s not too late to get out of your big tech positions. It’s not too late to hedge or get outright short this market. We have at least 10% downside from where we are now and, of course, significantly more downside with individual names. The playbook has been the same for a year now (Edit Post “Don’t Fight the Fed” ‹ The Philosophical Trader — WordPress) and, yes, I am bored of it too, but I am not bored of making money for myself and my clients.
With Apple and Microsoft PEs (as well as most others) still in the mid-20s, tech still has the farthest way to fall. I have almost 75% of my money in SQQQ and TECS, 3x leveraged Tech Shorts. So, yes, my money is where my big, big mouth is. I am up almost 30% in the past week. This bear market is not done. Please take advantage of it. Again, if you can’t (i.e., won’t) sell out of your positions for tax or other reasons, please hedge them.
I am holding nearly all of my short positions for ~25% more upside which would imply 8% or so downside in the overall market (Nasdaq around 10,000, a new low). I will gradually sell them after that.