The Bigger Picture - Asset Markets
Today I will be attempting to explain and predict the future trajectory of U.S. asset markets.
*FULL DISCLOSURE*
>My current investments include PUT options on full market ETFs such as ARKK, funds, and treasury bills (TLT). My investments also include call credit spread options on many Cryptocurrency stocks and portfolios with expirations within 1.5 years. I do not trade on margin, and I do not work within an investment agency that specializes in providing advice to non-investors.
>Investments are risky and subject to considerable losses. Please perform your own research or speak to a trusted advisor before engaging in any type of investment.
PREFACE
*The US markets have currently embarked on one of the greatest bull runs in history, with access to capital and stimulus being at the highest peak in decades if not a century. When the COVID-19 pandemic first began, markets panicked as future uncertainty gave way to extreme volatility by means of unprecedented risk factors. As the markets fell, and halts were triggered, investors had to make risky decisions on how to trade in an environment completely foreign to them. Scaling lockdowns, decreased employment, and society on the verge of mass hysteria led to complete and catastrophic withdrawal from markets everywhere. This, of course, led to tantalizing prices at the bottom of the fall once stimulus was expected to come in the following months. Companies knew that with citizens now flushed with cash (that many may not have even needed in the first place) would lead to an excess in spending and an increase in prices. At the bottom of the selloff cycle, BOLs (buyers of last resort) stepped in and saved the market. It was then that the bull market of 2020-2021 began.
EXPLANATION OF POSITION
*Once a market bottom was triggered, it was off to the races. Of course investors knew that while outlook would improve, there was no way that corporations were going to be able to maintain steady future growth during this volatile time with respect to past profits. My assumption remains that the drastic turn from bear to bull market was not from the expectations that company profits would skyrocket beyond previous years, as this would be illogical and historically false. The idea was to sell hope. To sell "growth". To sell potential. Ideas like "growth" and "potential" when used as a measure of a companies value are inherently risky indicators, but extremely intelligent to market. After all, if you can take a new company with no historical balance sheet data and create a narrative around it, there are no arguments against it as one cannot prove that significant growth will not occur in the future. Similar tactics were used during the dotcom boom of the late 1990s-2000. If there are no fundamental aspects of a company yet to be analyzed, investors cannot make informed decisions about the future solvency of the company. This is a perfect investment scheme, as theories surrounding the future outlook of a company can neither be proved nor disproved as there is no data available for unprecedented circumstances.
FUTURE PREDICTION
It is my belief that we have reached a point where all capital that can be utilized to purchase assets has been expended. Narrative and sentiment is historically retrospective, and only months after a bubble has burst will we see the effects. My prediction is that the bubble burst late October-mid November. Like a rocket that has launched from earth, the burners turn off before the rocket ever loses momentum. I believe that momentum is starting to fade. My chart notes a few significant indicators. Healthy corrections are market by drawn elipses and "thumbs-up" symbols. The trend that signals an abnormal correction and potential peak is marked by a red flag. Media outlets will have you believe that the reason for rises and falls in the market somehow pertain to the current pandemic, but this is false. The market only cares and operates under one concept. Money. Who has it? Who is spending it, and on what? Is there a low supply or high supply flowing into markets? The pandemic has changed the rules on how and where money is spent, but not significantly. Retail investors are most likely seen by investment firms as sources of income instead of valued opponents within the market. As retail trading volume falls, Investment firms previously working in tandem to feed off of unsuspecting consumers investment capital, will soon begin to feed off of each other as retail investor capital dries up. Corporate cannabalism, stripping each other of funds through the same manipulation they used to strip retail investors of theirs. When this happens, the market experiences significant volatility (imagine Godzilla and Optimus Prime fighting each other, destroying an entire city as they battle). In the end, the city will be the market and the citizens will be the ones that pay the price. Below are my current official predictions.
1.) We are currently experiencing a fall in asset prices due to the FEAR of FUTURE rate increases. This will pale in comparison to the ACTUAL EVENT of rate increases, solidifying it in reality.
2.) Global markets will endure significant turmoil as spillover from various foreign economic crises reach domestic soil. (China credit crisis and real estate failure)
3.) Because monetary policy has already been pushed to its limit, the FED will struggle to find new tools to maintain equilibrium in a time when the market begins crashing while rates are already near 0. This is an extremely dangerous place to be.
4.) Sentiment will shift to negative extremes and the suspension of disbelief will be broken as investors scramble to their exit strategies in a market that has locked all doors out.
5.) The NASDAQ will fall below 9,000 and find support, only to trend sideways for years.
6.) IPOs and SPAC mergers will fail and create a significant credit crisis as the US government does not have the funds to bail out so many failing companies at once during a time when our debt ceiling is already at its limit.
7.) Markets will (in future months/years) return to normal functioning, however, with significantly decreased volume and sentiment.
We are all audience to a magnificent orchestral performance. Now, the piece is reaching its final crescendo. As the players stand and take their bow, the greatest fools will be revealed, and we may find that the fools look a lot like ourselves.
*FULL DISCLOSURE*
>My current investments include PUT options on full market ETFs such as ARKK, funds, and treasury bills (TLT). My investments also include call credit spread options on many Cryptocurrency stocks and portfolios with expirations within 1.5 years. I do not trade on margin, and I do not work within an investment agency that specializes in providing advice to non-investors.
>Investments are risky and subject to considerable losses. Please perform your own research or speak to a trusted advisor before engaging in any type of investment.
PREFACE
*The US markets have currently embarked on one of the greatest bull runs in history, with access to capital and stimulus being at the highest peak in decades if not a century. When the COVID-19 pandemic first began, markets panicked as future uncertainty gave way to extreme volatility by means of unprecedented risk factors. As the markets fell, and halts were triggered, investors had to make risky decisions on how to trade in an environment completely foreign to them. Scaling lockdowns, decreased employment, and society on the verge of mass hysteria led to complete and catastrophic withdrawal from markets everywhere. This, of course, led to tantalizing prices at the bottom of the fall once stimulus was expected to come in the following months. Companies knew that with citizens now flushed with cash (that many may not have even needed in the first place) would lead to an excess in spending and an increase in prices. At the bottom of the selloff cycle, BOLs (buyers of last resort) stepped in and saved the market. It was then that the bull market of 2020-2021 began.
EXPLANATION OF POSITION
*Once a market bottom was triggered, it was off to the races. Of course investors knew that while outlook would improve, there was no way that corporations were going to be able to maintain steady future growth during this volatile time with respect to past profits. My assumption remains that the drastic turn from bear to bull market was not from the expectations that company profits would skyrocket beyond previous years, as this would be illogical and historically false. The idea was to sell hope. To sell "growth". To sell potential. Ideas like "growth" and "potential" when used as a measure of a companies value are inherently risky indicators, but extremely intelligent to market. After all, if you can take a new company with no historical balance sheet data and create a narrative around it, there are no arguments against it as one cannot prove that significant growth will not occur in the future. Similar tactics were used during the dotcom boom of the late 1990s-2000. If there are no fundamental aspects of a company yet to be analyzed, investors cannot make informed decisions about the future solvency of the company. This is a perfect investment scheme, as theories surrounding the future outlook of a company can neither be proved nor disproved as there is no data available for unprecedented circumstances.
FUTURE PREDICTION
It is my belief that we have reached a point where all capital that can be utilized to purchase assets has been expended. Narrative and sentiment is historically retrospective, and only months after a bubble has burst will we see the effects. My prediction is that the bubble burst late October-mid November. Like a rocket that has launched from earth, the burners turn off before the rocket ever loses momentum. I believe that momentum is starting to fade. My chart notes a few significant indicators. Healthy corrections are market by drawn elipses and "thumbs-up" symbols. The trend that signals an abnormal correction and potential peak is marked by a red flag. Media outlets will have you believe that the reason for rises and falls in the market somehow pertain to the current pandemic, but this is false. The market only cares and operates under one concept. Money. Who has it? Who is spending it, and on what? Is there a low supply or high supply flowing into markets? The pandemic has changed the rules on how and where money is spent, but not significantly. Retail investors are most likely seen by investment firms as sources of income instead of valued opponents within the market. As retail trading volume falls, Investment firms previously working in tandem to feed off of unsuspecting consumers investment capital, will soon begin to feed off of each other as retail investor capital dries up. Corporate cannabalism, stripping each other of funds through the same manipulation they used to strip retail investors of theirs. When this happens, the market experiences significant volatility (imagine Godzilla and Optimus Prime fighting each other, destroying an entire city as they battle). In the end, the city will be the market and the citizens will be the ones that pay the price. Below are my current official predictions.
1.) We are currently experiencing a fall in asset prices due to the FEAR of FUTURE rate increases. This will pale in comparison to the ACTUAL EVENT of rate increases, solidifying it in reality.
2.) Global markets will endure significant turmoil as spillover from various foreign economic crises reach domestic soil. (China credit crisis and real estate failure)
3.) Because monetary policy has already been pushed to its limit, the FED will struggle to find new tools to maintain equilibrium in a time when the market begins crashing while rates are already near 0. This is an extremely dangerous place to be.
4.) Sentiment will shift to negative extremes and the suspension of disbelief will be broken as investors scramble to their exit strategies in a market that has locked all doors out.
5.) The NASDAQ will fall below 9,000 and find support, only to trend sideways for years.
6.) IPOs and SPAC mergers will fail and create a significant credit crisis as the US government does not have the funds to bail out so many failing companies at once during a time when our debt ceiling is already at its limit.
7.) Markets will (in future months/years) return to normal functioning, however, with significantly decreased volume and sentiment.
We are all audience to a magnificent orchestral performance. Now, the piece is reaching its final crescendo. As the players stand and take their bow, the greatest fools will be revealed, and we may find that the fools look a lot like ourselves.
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