Friday, September 25, 2020

Disney Markets For The Fall

Never before has traditional investing advice been more lethal than right now...

Any questions?

The cornerstone of today's investing advice is predicated upon data mining the past. Specifically, the past 90 years since the onset of the Great Depression. A period that coincidentally spans world's greatest investor Warren Buffett's entire lifetime. The inherent assumption is that the next 100 years will be the same as the last. Never before has that been a more asinine assumption.

Suze Orman continually tells people that that they need several million dollars to retire, even though she knows full well that the number of people who ever reach that goal is a rounding error. She typifies an entire investment industry that is constantly telling people to skip the double latte each morning in order to retire a millionaire 40 years hence. In other words, don't bother being happy while you're young, wait until you're 65 for life to begin. This ideology puts money ahead of life, as a strategy, making people feel guilty for enjoying the here and now. 

It's crap advice.

To quote Arthur Schopenhauer:

"Money is human happiness in the abstract: (s)he who is no longer capable of enjoying human happiness in the concrete devotes himself utterly to money"

The best investment strategy is the one that lets you sleep at night. Remember sleeping at night? After the DotCom bust AND the housing bubble, I could no longer be a buy and hold investor. I could see where this was all heading and I knew that given enough time in Disney markets eventually my unrealized gains would turn to pixie dust. I couldn't sleep at night. So I became a market timer, which brings it's own set of challenges, but it gives me full control. Arguably the best strategy is to do what Warren Buffett does (not what he tells people to do i.e. buy and hold an index fund). Which is to maintain a core position in stocks, for example 50%, depending upon age. And then increase allocation of stocks into declines and reduce on rallies. Using a fixed set of price targets e.g. each 10% move, allocate or de-allocate 5% of the portfolio into/out of stocks etc. Dollar cost averaging 101 is still the best strategy for risk management. Incidentally, Warren Buffett is sitting on record cash right now, as he does not see "value" in pandemic bubbles.

Nor apparently do corporate insiders:

"A group of investors who correctly timed the stock market’s bottom in March isn’t bargain hunting yet during the current selloff. Instead, they’re stepping up sales, flashing an ominous signal to any dip buyers.

Corporate executives and officers at S&P 500 companies were busy unloading shares of their own firms over the last four weeks. The selling picked up so much versus buying that a measure of insider velocity tracked by Sundial Capital Research pointed to the fastest exit from stocks since 2012."

Who would be better market timers than the CEOs of major companies? They bought their stocks at the bottom and sold them on the way up. 

However, for those playing the trading range, there are reasons to believe that central banks are about to lose control over Disney markets in a way that tests confidence in printed money. As hard to believe as that may seem. At the same time, many of today's major companies are facing potential bankruptcy. Exxon and Boeing just two of the well known companies that are over-extended. Add in all airlines, hotels, chain restaurants, cruise lines, mall REITs, office REITs, and the entire fossil fuel energy sector. All are now potential landmines.

Of course in an S&P 500 index fund one is getting automatic "diversification". Nevertheless, we know that Tech is massively cap over-weighted in the S&P 500. Much worse is the fact that Tech stocks account for ALL of the year-to-date stock market gains. The rest of the market is in a bear market, as one would expect during a pandemic depression:

All of which means that when the Tech bubble final explodes, reality is waiting far below this Disney market. As I write on Friday, Skynet is defending the year-to-date Maginot Line at all costs.

The 50 day moving average was defended with two rallies visible on the daily chart. Each time the February high was resistance. Now the year-to-date breakeven level is in its second rally with the 50 day now resistance:

This is the wave count vis-a-vis Momentum stocks - a double zig zag two weeks in a row. Leaving the momo stocks still overbought (top pane). 

And confounding bulls and bears alike:

I decided a long time ago that I don't want anything to do with con jobs and pump and dump schemes. It's one reason I don't give financial advice, because I don't want to be just another Dave Portnoy monetizing a base of devoted followers. Always informing them how well he's doing. At their expense. For some reason always seeing prices both on the bid and ask that are far better than every johnny-come-lately into the same trade. This week his devoted followers got monkey hammered by a surprise secondary stock offering at their expense.

Speaking of massive pump and dump schemes, it was six years ago this week that Alibaba imploded the stock market with history's largest (over-priced) IPO:

September 22nd, 2014:

For this new IPO of the Ant Fintech subsidiary, instead of listing in the U.S., they are going to dual-list in Shanghai and Hong Kong, the two weakest markets on the planet; the same markets that crashed global stocks in 2015.


Good times.