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Weekly rollup | March 06-12 2023

Stocks Mentioned: Wheaton Precious Metals (WPM), Microstrategy (MSTR), NVIDIA Corporation (NVDA), Exmar (EXM)

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March 06 2023

Who is bullish?

The chartists. The market technicians. Jeremy Siegel and the index fund houses who believe stocks always go up. The statisticians who say the market seldom has two down years in a row. The seasonality believers who think the third year in a presidential cycle is the best year to be leveraged long stocks. The Fed pivot guys who think we get a rate cut in March or at least a pause followed by rate cuts later this year.

Who's bearish?

Anyone who's following the Fed and taking Powell seriously when he says he wants to cause a deflationary collapse to destroy inflation expectations, raise unemployment, lower wages and take a hatchet to home prices.

The quantity of money theory followers who see G7 central bank balance sheets contracting and deduce that it'll lead to deflation and falling velocity of money.

Any fundamentalist who has studied market history and knows that once a bubble has been pricked, there will be no reversion to the mean but a trend change, that the bigger the bubble the harder the fall.

Anyone who believes in valuation influencing prices, who thinks stocks of companies with revenue de-growth don't deserve 100 PE and that the Nasdaq can fall a further 80% without getting oversold. Especially so if earnings are only now beginning to trend lower.

Anyone with a working understanding of Austrian business cycle theory who knows that the end of inflation brings with it a deflationary depression. That the central banks will choose this alternative over hyperinflation.

Who's right?

The chartists are fickle. They'll flip flop. Today's inverted head and shoulders breakout is tomorrow's failed move leading to a fast move in the opposite direction.

When the bears turn out to be right, the chartists will take a loss on long positions, flip short, and lose out on the first 20% of the move. Which is fine because they find getting whipsawed is superior to using their brain to think through the fundamentals of a trade. And to be fair, sometimes fundamentals lead you astray as well so those losses are part of the game.

If the bulls turn out to be right, then we can draw two inferences:

  1. Money supply and interest rates don't matter to stock prices, that QE forever had no impact on rising asset prices since 2009 and higher rates plus QT don't prevent stocks from always going up.

  2. That charts do a better job of both explaining the past and predicting the future than any other method. Like a perpetual motion machine, investors behavior in the past, as captured by the charts, is reflexive and trends in motion will continue forever until infinity.

There are many ways to make money in the market and depending on your mindset, you can make money whichever method you choose. But for me, I'll stick to objective facts and inferences from those facts than follow the herd and trust the collective wisdom of part-time investors buying fractional shares of prior market darlings through their Robinhood account.

Friday's bullishness probably carries over to the open today. January was a short squeeze built on start of year fund inflows. February saw the end of the short squeeze and the beginning of distribution. The first two weeks of March will likely be a sucker's rally, before the FOMC fear sets in and the bottom falls out of the market as "higher for longer" finally gets priced in. The bond market has sniffed this out already. I'm tactically trading around my short positions so I don't get squeezed, but I'm betting that by the time we close out this month, the bears would have gotten it right.

March 08 2023

That didn't take long. WPM got stopped out yesterday. Taking these hits is necessary when trying to catch bottoms.

Approximately 40k BTC from wallets associated with US Government law enforcement seizures are on the move.

Of these, the majority appear to be internal transfers (so far), however approximately 9,861 BTC seized from the Silk Road hacker have been sent to our Coinbase cluster.

Bitcoin price might move if the US govt starts selling.

March 09 2023

Silvergate Bank is going to get liquidated, which means Microstrategy (MSTR) is facing a gigantic margin call. If you're still long bitcoin, get out before the market wakes up to this. Ideally, just hit the bid right away.

Use today's misguided optimism to short NVDA.

March 10 2023

If you made (or lost) money from any of my calls, do send me a thank you note or some hate mail. Feedback is appreciated.

Sell Exmar (EXM)

Fear is going to smack everything down. Time to book the win and ride the doom and gloom profitably with our short positions and put options.

March 11 2023

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