Thread: Bullitt's Account Talk

Finally a little bit of excitement in the markets after watching AAPL and NFLX grow to the sky the past 2 years. Chanos can finally sleep at night, but he started shorting China 5 years ago, so his timing was way off.

The fed is in trouble now. I'm sure there were a few banks and hedge funds running to the fed lending window this afternoon asking for free money to cover losses in whatever they thought was a good investment in China. Raising rates in the slightest will bury anyone holding foreign debt with higher payments in USD. I'd imagine many Chinese 'investments' from 'sophisticated investors' are locked up and inaccessible at the moment. Better them than us in that predicament.

Will this week bring a 50 on the VIX? Long term 40-50 have been great buying opportunities except in the case of 2008 which was a crash.

Being down almost 12% from the high makes this an opportune time to re-balance the portfolio. Diversified portfolios are able to weather bear markets as long as one re-balances during opportune times.

- Set a diversified portfolio and forget about CNBC.
- Rebalance periodically and make sure dividends are reinvested in personal accounts.
- Set realistic savings goals and contribute (if you aren't already) to your a rainy day fund until you're comfortable.

TSP: 65 SCI / 35 FG.

Animal spirits are showing up. Been a lot of talk amongst co-workers the past 2 weeks about "timing the TSP" and "beating everyone else". Not only is it those I work with every day, but also by a few that I only talk to periodically from other offices that have been bragging about their fabulous "market gainz".

With nosebleed sentiment levels (FOMO on the next AAPL or TSLA), markets keep marching higher on hundreds of billions in liquidity from China and the US combined. It's not different this time. Indicators serve as early warning and are always clear in hindsight.

Breadth has been pretty lackluster during this Corona bounce. Equity PC ratios show call buying hand over fist. Bond prices continue to make higher lows. VIX still above the 50DMA.

Don't forget about distribution days. According to the IBD method, 5 distribution days in a 4-5 week period is a sign of institutional selling.

SPX has four.

SPX 4 distro.png

NYSE has six.

nyse 6 distro.png

Good stuff Bullitt, glad to see you posting again!!smileydance.gif

Originally Posted by Bullitt

Animal spirits are showing up. Been a lot of talk amongst co-workers the past 2 weeks about "timing the TSP" and "beating everyone else". Not only is it those I work with every day, but also by a few that I only talk to periodically from other offices that have been bragging about their fabulous "market gainz".

With nosebleed sentiment levels (FOMO on the next AAPL or TSLA), markets keep marching higher on hundreds of billions in liquidity from China and the US combined. It's not different this time. Indicators serve as early warning and are always clear in hindsight.

Breadth has been pretty lackluster during this Corona bounce. Equity PC ratios show call buying hand over fist. Bond prices continue to make higher lows. VIX still above the 50DMA.

Don't forget about distribution days. According to the IBD method, 5 distribution days in a 4-5 week period is a sign of institutional selling.

Not too worried about the corona virus, but am starting to notice articles about personal debt levels that don't look too wonderful

I think the market still has some catching up to do after 2008 - that was a way overdone 'correction'. In fact, looked at singularly last year was Clintonesque and waiting for a correction. Taken as a three year span of the Trump Presidency we are looking at S&P500 gains averaging 15%/year. That is, a little bit above normal - but not outside of expectations.

It is ALWAYS a concern when normal plebes are market timing. ALWAYS...

I might move my allocation to my conservative blend sooner than I want. I think we are about 20% below where the market should be - thus, the 15% annual gains rather than 10%. But, that does not mean that there cannot be an internal, short term correction to blow the wanna be speculators out of the game. Why be 'Buy and Holding' if the market is ready to correct?

And, if the goobers are buying it is best to be selling

Originally Posted by Boghie

corona virus

The virus is worse than China is reporting and they are showing the world that they truly are a third world country in how this mess has been handled. We see the small percentage that live wealthy lives. We don't see the ones living on mice, bats and snakes.

The Chinese government panicked and injected a record amount of liquidity into markets. Nothing more than a shot of caffeine. Oil and copper might be finding a floor here, but I'm not ready to call a bottom.

saupload_2020-02-06_20-04-34.jpg
https://seekingalpha.com/article/432...ity-injections

US is doing the same thing to support money markets - inject massive liquidity. This was only supposed to be temporary. I don't see how markets decline much before this money market operation ends which is around May I think, but remember, a light doesn't go off at the top.

Screenshot from 2020-02-12 14-07-08.png
https://www.zerohedge.com/markets/an...liquidity-woes

Eventually we have to stop printing money to shore up the economy. If a recession does hit we are in trouble because the interest rates are to low to balance things out. It's also becoming unsustainable to manage trillion dollar budgets. With all the major storms lately how will we pay for the recovery of all these cities and communities?

Not the kind of breadth I want to see when markets are hitting new highs. This little rally is being driven by only a few stocks. In addition, volume has been declining the past 2 weeks while markets continue their march.

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Markets are pulling in as many foolish TSLA, AAPL and MSFT speculators as they can. $SOX index has been a leader the past few months or even years. Not doing much leading here, kind of like the $RUT. Nice MACD divergence there too.

Capturee.JPG

The extreme bearish sentiment just keeps piling up - a little here, a little there. From Jason: "Traders have bought to open more than 200 calls for every 100 puts* for the past two days. That hasn't happened for almost 5 years, in April 2015."

Banks not really leading the charge either. With all this free money floating around, shouldn't the banks be trending higher?

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Regional banks diverging. Not benefiting at all from the federal lubricants.

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I'm not calling for the death of Ferdinand (at least not yet), but I am expecting a bigger correction than most think is possible - especially one that wipes out all those freshly purchased calls on margin + newly minted bulls and their high flying tech stocks.

TLT positioning itself at resistance. Long term and short term setups below.

Daily could be double top.

daily.JPG

Weekly could be a giant cup and handle forming.

week.JPG

TLT turned out to be more of the cup handle, but now it's well past it's buy point. Was that the final ramp up?

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Hopefully most already had a long term plan in place and weren't sitting at their computer this week thinking, "Oh my god I've got to make a move", or even worse, "I'm going to go 100% S today hoping for a dead cat bounce tomorrow." Are either of those sustainable long term plans? I liken both to gambling.

If you don't have a financial plan, it's time to sit down and figure one out. How much of a drawdown can you afford? Can you sleep at night with your current allocation? Do you have other accounts outside of TSP with similar or different goals?

Those with 10 year plus time frames need to look at this as a chance to continue buying stocks at somewhat sensible valuations. S&P 500 is some 20% below the 200 DMA which historically has always been a good time to invest - as long as you have the discipline to do so. Problem is you need to tune out the news in your financial decisions.

I did use today's collapse as an opportunity to rebalance my TSP which was off by over 5% due to market fluctuation.

Currently 60 CSI / 40 F G.

Originally Posted by Bullitt

Those with 10 year plus time frames need to look at this as a chance to continue buying stocks at somewhat sensible valuations. S&P 500 is some 20% below the 200 DMA which historically has always been a good time to invest - as long as you have the discipline to do so. Problem is you need to tune out the news in your financial decisions.

I have been telling all the young'uns in my family this same thing. This is a gift! Take advantage of it!

A hedge fund blowing up in a bull market can't be a good sign. It brings back memories of Bear Sterns in 2007.

https://www.wsj.com/articles/SB118252387194844899

Anyone remember that guy Jerome Kerviel who, in 2008, took on massive risk and nearly blew up Societe Generale?

https://www.bloomberg.com/news/artic...0-000-in-court

As far as those stocks that got buried last week in the forced selling, they are all very overvalued in their own mini-bubbles. Everyone is caught up in the streaming craze and looking for anything they consider "cheap" to pile into. It's a very low-margin business with leader Netflix looking for any possible way to eek out profits.

Some day TSLA will see a crash of 20%+ and it will take down all those ESG/innovation stocks with it. So will bitcoin/crypto. Good-bye to all those paper millionaires buying 3-second video clips of a guy slam dunking a basketball.

I did a re-balance last week to maintain my allocation, which is rare for me since it's not needed very often. (65/35 stocks to bonds for those wondering) Re-balancing is means to manage risk, not so much maximize gains. If you were to re-balance in March 2020, you'd surely have had to re-balance again up here as stocks have run so far. That's pretty much where I'm at. Allocations were off by 5-10%, mostly due to the run in S fund, and the rise in bond yields.

It seems right now that risk here is high. A $3T spending package doesn't help matters. What if in 10 years it doesn't work out? Maybe it will, but that's a ton of responsibility to manage. What happens if there is some kind of financial crisis in the next couple of years? Will there be enough money (bond market demand) to bail out banks again?

All tail risks for now, but many times, tails are fatter than you think.