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Market on the Edge of a Meaningful Breakdown 10/28/22

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I think most of that money which runs away from Chinese stock market goes into US stocks. That gave additional firepower for the rally.

The monthly candle in the Dow is just sick.

We could run to 4100/4150 in the S&P, but above that the bear is finito. In fact that area would be a good level to short, decent R/R play.

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56 minutes ago, SiP said:

share of bigtech to precovid levels

20221030_082628.jpg

The ratio is simply a reflection of rising interest rates. Since all portfolio managers use more or less the same Discounted Cash Flow and Value at Risk models. That ratio above would be even more dramatic if you would conpare high beta wirh low beta.

The stuff is simple: When interest rates rise (fast), you sell all tech (preferably the highest beta ones) and small caps.

When interest rates sink (not when they pause!) you buy high beta tech crap on margin. Why margin? Easy: Cause when interest rates sink your own cost of capital sinks too.

All you need to know is DCF and VaR and that all Fartpolio Managers use it. Both models have some flaws and limitations, especially VaR, but that‘s not relevant, as long as Fartpolio Managers use those models. They move the market.

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18 minutes ago, SiP said:

Put call options suggesting low

IMG_20221030_092201.jpg

If that chart would have a log scale it would be better. One sees not much on linear scale when it comes to prices 20 years ago. If I remember correctly the Put Call ratio was sky high in something like June 2002, after that the market did fall another 30% (roughly). But yes, we were at extremes 1-2 weeks ago.

As I said the other day: This bear becomes either a 2000-2003 bear when it comes to its duration or THE low (not A low!) is already in. The 2008 scenario is dead.

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Regarding 2008 - Im investing since 2004 and I must say that Ive seen 100000 charts with analogies and 99% didn't work, especially crash calls :)

nevertheless i think that a bounce till end of 2022 is possible and my main scenario but i dont know what will happen next.

I follow some guys who are sayin that we will have small sell off till around 18 nov but then strong BMR.

In terms of 2023 - if this really is a bottom then EM would be agreat buyin oopportunity

I have to admit that I would be surprised if nothing big goes wrong in this cycle. The dollar is so strong, the yields are so high and still i dont see any crashes. Of course i know about china developers but as a whole nothing broke. this would be really different cycle. Im missing this to state that we reached the bottom.

 

but lets not forecast anything and just play the charts based on r/r. After so many years i think thats the best option, you just act in specific moments and try to catch the trend. Nothing more.

20221030_112449.jpg

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6 hours ago, SiP said:

Regarding 2008 - Im investing since 2004 and I must say that Ive seen 100000 charts with analogies and 99% didn't work, especially crash calls :)

nevertheless i think that a bounce till end of 2022 is possible and my main scenario but i dont know what will happen next.

I follow some guys who are sayin that we will have small sell off till around 18 nov but then strong BMR.

In terms of 2023 - if this really is a bottom then EM would be agreat buyin oopportunity

I have to admit that I would be surprised if nothing big goes wrong in this cycle. The dollar is so strong, the yields are so high and still i dont see any crashes. Of course i know about china developers but as a whole nothing broke. this would be really different cycle. Im missing this to state that we reached the bottom.

 

but lets not forecast anything and just play the charts based on r/r. After so many years i think thats the best option, you just act in specific moments and try to catch the trend. Nothing more.

20221030_112449.jpg

If you wait for a shock due to US bsnks or US Real Estate you can wait long. The banks are due to regulatory stuff much better capitalized than in 2008. We have much much less ARM loans than in 2008, so no shock in Real Estate. Some builders could and most likely will go bk, but thats not a shock. We know that will hsppen. RE dives down and somewhat crashes so some builders will go out if business. Easy. But that‘s not Lehman.

The UK pension fund thing was big. That was a shock for the markets. Don‘t underestimate that. Blackrock did ring the bell, so that whole UK thing is on the radar screen, also UK Real Estate which is heavily in ARM‘s and fixed short term (2-5 years) RE loans.

See the thing is easy: Blackrock simply has to call Poopwell and say:“Jay, we have some problems“. In the very next second the FED would start to reverse course.

People can‘t imagine how systemic Blackrock is. Against them Lehman was flyshit.

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Fully agree with you FxFox on UK/pension problem.

 

In the context of what follows, I think of the Fed and one important analogy. Someone told me that there has never been a period in lifetime when the markets started a bull run while the Fed was raising rates. So at least this thing we are missing to call a new bull.

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In terms of potential crisis i keep thinking about dollar pegs like Hong Kong or UAE. Just take a look at HSI (Hang Seng). What a selloffs! Something really terrible is happening in China

- yields on RE dev are absurd like 80%

- renmimbi keep losing steam

- there is no copper for refinancing and asset backed financing

- China is massively faking gdp data

 

 

I know that all of you read in the past that China is broke (like 1000 times, heard about HF big bets (shorts)) but this time it is really fishy.

IMG_20221030_201904.jpg

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