Thread by @dmoses34

I rarely tweet "threads" on the markets but I feel compelled to at this moment; mainly so I can clear my own head but also b/c I hope by sharing my thoughts I may help some other investors; I would normally do this recording @OnTheTapePod but this is a stream of consciousness
1/

as bearish & prepared as we were at FrontPoint in 2006 we were shocked at the depths/reach/contagion of the financial crisis; not nearly as shocked as the regulators/govt but shocked how little they understood about the leverage in the system and how caught off guard they were
2/

the programs the #FED/Treasury threw at the crisis (TALF/TARP/PPIP/QE/short bans) stopped the bleeding but prevented assets from clearing at free market (natural) prices & created the moral hazard that has led us to this moment, with QE2 (2010)/QE3 (2012) adding more fuel
3/

you can curse Powell all you want but it was Bernanke that acted (kept acting) in a manner that has led us here; the majority of investors don't ask questions when markets are rising, they only look for excuses & to lay blame on somebody other than themselves when markets fall
4/

there is no classroom/textbook/formula that can accurately teach/measure behavioral finance; leverage was encouraged, stocks traded as risk free instruments, hubris ran wild & it all helped create a generation of investors/traders who were never forced to do bottom-up research
5/

while the "rating agencies" were massive enablers in 2005-2008, the "auditors" have helped fuel some of what we are dealing with today; yes, it's up to investors to question the quality of earnings (GAAP/Non GAAP/EBITDA/Adjusted EBITDA) & make their own determination but
6/

independent auditors should scrutinize their clients accounting practices more & not just be able to collect $$$ & add legal jargon @ the bottom of every 10Q 10K that shields them from any liability;the "quality" of EPS/EBITDA(or lack of) is not appreciated enough by investors
7/

companies issue press releases & include certain words/phrases knowing the algos/HFT world will plug them into their machines: "growth in Adjusted EBITDA" "share buyback" etc.& have become prisoner to the passive (ETF) investment world & with that cater less to active managers
8/

the growth in both equity & fixed income ETF's have led to complacency among investors and a false sense of diversification; at the same time, the growth in Hedge Fund assets forced some funds to run more "net long" and become "asset gatherers" rather than stock pickers b/c
9/

you can't have meaningful positions (on the long or short side) in companies with smaller market caps when you are managing $30-$40-$50 Billion; and what we call "alpha" usually exists in companies that aren't covered by 30 Wall Street analysts (most are conflicted anyway)
10/

there is a lot more to discuss but let me try and bring this back to my current market thoughts; I try not to focus on how much the market or a particular stock is down from it's highs but more on what is the fair value of that asset today;I never thought the rally in Q4 2021
11/

was warranted as I was seeing inflation rear it's head but I under appreciated the amount of money that still found it's way into the markets; the majority of investors didn't want to believe that the #FED would actually do anything. Why would they? It was "transitory"
12/

Fortune 500 companies were already telling us the impact that higher costs were having on their businesses but investors wanted to believe these were temporary and/or the #FED would be there for them;(part of the moral hazard problem)not since before the financial crisis have
13/

investors had to underwrite stocks/bonds while using risk adjusted discount rates; #memestocks are/were the poster children of this cycle & while I don't want to make this thread about $TSLA, I'll know we're near the market bottom when it finally cracks(we are getting closer)
14/

final thoughts:
*Don't rely on the #FED blinking at these levels as a long thesis
*If the #FED does anything soon it will be in the "Pause QT" arena
*look at stocks based on current valuations/prices, not on how much they are off their highs (most didn't deserve to be there)
15/

*pay attention to how markets react (don't react) to things such as #BOE intervention (short-lived)
*while I believe Powell is too aggressive & overshooting (tightening),it has exposed the fragility in markets & that can't be unseen or ignored
*geopolitical risk mispriced
16/

*debt/leverage is almost always at the root of every financial crisis & we have lots of it at the sovereign/corporate/consumer level
*the ability of Central Banks to just "print" their way out of problems is now behind us as investors look at the underlying fiscal health
17/

*hard not to be bullish on GOLD (whether or not the #FED blinks)
*everything has it's price (for a select few companies that price is $0 but there will be great buying opportunities that will arise for quality)
*FOMO HODL are killers in this type of market (stay disciplined)
🙏