Thread by @Darky999

Let's dive into some bull vs bear dynamics in the markets, what are the key themes, opportunities & risks

This isn't an exhaustive list, i'd love to hear your thoughts on what is missing

As always, please always DYOR before trading

1/N

'Fed Put' is the overriding narrative for equities, although the actual Fed Put is with Treasuries, and Corp Bonds - as they are actually directly buying both of these

However, there are ways for newly printed money to enter the real economy and end up in stock markets...

1/N

...whether by stimulus "big checks" (and Robinhood etc) or the PPT, or other mechanisms, there is clearly a bid on certain risk assets, most notably the 'secular grower' tech stocks (MSFT, APPL etc)

The put:call ratio is way under 0.5 for S&P which is just like March 2020

2/N

It is probably reasonable to believe that the Fed will keep going, whatever it takes, they won't suddenly stop and say they have a new strategy, they just don't think like this... And there is currently no political will to stop them (even tho 4 months from election)

3/N

So whether you love or hate the 'Fed Put', it's here to stay

Price action, and put:call ratios on stocks like $TSLA bear all the hallmarks of a top, when getting on for 10m new retail accounts are opened are in a few trades only, and parabolic price action ensues...

4/N

This can go on for much longer, shorting cult stocks is really best left to professional short sellers

What gets talked about less in the MSM is that QE puts a pseudo-infinite 'bid' under Treasury pricing (and Corp Bond to some degree, but insolvencies could wreck this)

5/N

So whether you are a bull or bear, there seems to be an asymmetric opportunity with duration Treasuries as the Fed simply won't let the long end get out of control (and when it wobbled 1-2 weeks ago the banks bought $100B of T's too...)

6/N

Whether this asymmetry applies to Corp Bonds, especially HY Bonds is a more difficult question; we may be entering the insolvency phase, not just in Energy, but across the board, and if so, the Fed might have to get even more creative (which we should not say is impossible!)

7/N

Equity bulls would also say TINA, There Is No Alternative, and this is why Tech stocks that pay a nice dividend are the 'new bonds' (as are Utilities), and there is good logic to this, money has to be deployed SOMEWHERE, as institutional managers can't hold tons of cash...

8/N

...as if they do they lose their job, & job preservation is a very important psychology, & when this is across many Institutions it leads to Lemming-like behaviour that reinforces TINA loop, and gets amplified by the new surge of retail investors thinking 'stocks only go up'

9/N

So whilst 'stock prices make no sense', it's more subtle as the long-suffering value lovers will attest to :)

No one can know where the US stock market is heading over next 3-4 months, but it's fair to say that near ATHs (or >ATHs for QQQ) means it's pretty pricey

10/N

Multiples, especially in the tech growers are thru the roof, at 2000 levels, uncertainty is super high, volatility remains elevated, the list of bearish things is far far longer...

But money DOES have to be deployed somewhere; and a good slug will be deployed in equities

11/N

So maybe Commodities are a better bet? Commodity super cycles tend to be extremely long, 50 years or so, and we have been testing long term lows recently, and if you believe in a weakening USD, and stagflation in US, then commodities should perform great...

12/N

...but the age old problem is how does a retail investor get exposure to commodities? U can't moor an oil tanker in your backyard, & u don't store grain in your shed

As USO holders found out, roll yields can be brutal, so pick carefully if you can't trade Futures yourself

13/N

One idea I like is Agricultural commodities (e.g. $DBA, disclosure I do own it), as inflation has been happening in food, and it's likely gonna get less globally sourced and more expensive to produce locally

But this is a tiny position for me, don't bet the farm 🤓

14/N

...as commodities can be brutally volatile too - recently OVX went to 300 (!), which made even #bitcoin blush 😳

However, if your have a longer term view of weaker USD this is an area to look into

15/N

The resurgence of COVID in US could also mean another leg down for commodities as the economy semi-shuts down again...

USD would likely be strengthening in this scenario, so this is by no means a one way trade, there is lots of risk in it

16/N

Surely all roads lead to Gold tho? With out of control Central Banks globally, #fiat money must eventually blow up, and the 50 year experiment (since 1971) put to bed?

This is possible, but everyone knows about Gold, and it has 180,000 net long contracts at the mo...

17/N

And when everyone 'knows for sure' an investment is a sure fire bet, then Mr Market tends to wreck them all in a spectacular squeeze...

So whilst I would say having a 10-20% allocation of liquid assets to gold is sensible, it has risks too...

18/N

...e.g. a Government could just tax gains in gold at a 90%+ rate if they so desire, most of the population WON'T have exposure to it, so it might be a popular tax...

Silver is an industrial metal, and it's incredibly hard to trade, roll the dice if you want to!

19/N

This neatly leads to #bitcoin, we all know 'bitcoin solves this' is one of the more annoying memes 🤠

However, $BTC is no joke, 11 years of history and in it's 3rd (or 4th depending on your view) cycle; it has not done a tulips, or sea shells and just gone away

20/N

And #goldbugs and #bitcoiners should really be agreeing with 90% of their argument against fiat money, they just prefer to argue about why they are correct, and the other 'side' is wrong

This is really extremely pathetic 😬

21/N

But there is a 10% where they differ, and this should not be swept under the carpet either (BTC could also get taxed highly)

With CBs printing near-infinite money globally this should be 'THE' scenario for gold & BTC, & in a world where most things have become digitised...

22/N

...it doesn't make sense to me to just dismiss it as 'magic internet money'. The $ you use every day is also magic internet money remember...

It's currently at a very low volatility too, BVOL is 28, and the VIX is 29; so $BTC volatility is below the S&P right now...

23/N

This never lasts long with BTC, it will likely have a violent move up or down soon, it likes to coil up & unleash the energy at an impossible to predict moment...

It's a tough market to trade, please risk manage appropriately <----- really please do this!

FIN