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August 31, 2020

Back Stories 8/31/20

Stupid is Knowing the truth, seeing the truth, but still believing the lies. Everyone knows the MARKETS is a bubble. Yet, the market is never wrong when it comes to your P&L

Here is what I see

“It’s All One Big Trade”

Click here to view the original web page at “It’s All One Big Trade”

“According to BofA’s Jared Woodard, the crowded trades – growth vs. value, large vs. small, US vs. EAFE, market cap vs. equal-weight, USD vs. EM FX, Treasury bonds – stay crowded because there is no alternative in a world of shrinking returns on capital.”

“…Meanwhile, the Fed keeps injecting more and more liquidity even as growth is scarcer and scarcer. As a result of this maximum liquidity in a world of scarce growth. the Fed has created an ever-larger series of asset bubbles.”

“…And when real interest rates are negative as they are now, there is every incentive to chase low-probability, high-impact upside according to Woodard. In short, any vehicle with a chance at large returns becomes a cheap call option.”

Just two examples: in 2020 investors are once again pouring cash into “blank check” IPOs or Special Purpose Acquisition Companies, just as they did in the summer of 2007. As we first discussed several weeks ago, SPACs have no operations but simply raise funds for undetermined future acquisitions. At the same time, one bitcoin costs more than $11,000. That’s more than the average US household makes in two months.

“…today a record 79% of the S&P 500 offers dividends greater than the 10-year Treasury yield.” 

Back Stories 8/31/20

Contrary Thinker sees their conclusion as being the problem with the “got to be in it to win it”  point of view:

“In summary, “stagnant GDP, deepening inequality, and the threat of policy failure make us bullish on the things we don’t want to buy (growth, large caps, US) and bearish on the things we want to own (value, small caps, EAFE) because, without an economic transformation, any reversal in the ranks of market winners & losers can only last a season.”

Going into 2018 along with geopolitical risk Contrary Thinker envisioned a major constitutional risk.  Here are a headline and content from my January 18, 2018 letter.  It also fits into the 45-year cycle publicized in a recent MarketMap.  But it is gaining more traction from the press today.

The Constitutional Crisis of Trump Undermining the Election

Those of us who blogged right through to the end of George W. Bush’s presidency had already heard enough from John Yoo, thank you, before he decided to become a volunteer legal defender of President Trump. If you aren’t familiar with Yoo, his Wikipedia page is accurate and gets straight to the point.

Yoo is upset that some conservative intellectuals have been harshly critical of Trump’s suggestion that perhaps the presidential election should be delayed:

Donald Trump’s tweet last week that the possibility of mail-in voter fraud might justify postponing the November elections renewed claims that his presidency is a threat to the Constitution. Conservative commentator Henry Olsen, often a stout defender of the administration, wrote in his Washington Post column that the tweet “is the single most anti-democratic statement any sitting president has ever made.” Steven Calabresi, a conservative Northwestern law professor and co-founder of the Federalist Society, declared in the New York Times that “this latest tweet is fascistic and is itself grounds for the president’s immediate impeachment again.”

But Yoo assures us that threatening to do something unconstitutional is not problematic if you lack the constitutional power to justify the threat. This is like saying that robbing a bank is not possible because robbing banks is against the law. The Constitution is there to deter and punish, but it cannot prevent unconstitutional acts.

We know from the Roman example (of which the Founding Fathers were acutely aware) that ordinary venality can be as dangerous to a republic as grandiose political ambition; and, as it turns out, in our own case that kind of thing is sufficiently destructive without our having to imagine Trump as an aspiring Caesar. This isn’t an opera, and it does not have to be operatic.”

The above is only the tip of the iceberg, it will become worse are the election day gets closer.

Great and Many Thanks,

Jack F. Cahn, CMT

Contrary Thinker since 1989,
Copyright 1989-2020

Contrary Thinker 1775 E Palm Canyon Drive, Suite 110- box 176 Palm Springs, CA
92264 USA. 760-459-4681 OR

25/1 Poinsettia Court Mooloolaba, QLD Australia 4557 614-2811-9889

— Contrary Thinker does not assume the risk of its clients trading futures and offers no warranties expressed or implied. The opinions expressed here are my own and grounded in sources I believe to be reliable but not guaranteed.

— Pricing is subject to change without notice. My indicators and strategies can be withdrawn for private use without notice, at any time.

–Trading futures and options involve the risk of loss. Please consider carefully whether futures or options are appropriate for your financial situation. Use only risk capital when trading futures or options

 

 

August 29, 2020

Volatility Reports 08/31/20 Stock Market

Fed’s Bullard says the recession is over but rates will ‘stay low for a long time’

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Short volatility investors, fully invested asset allocation bulls, would find this news from the Fed over the weekend comforting. Bullard also believes reports on the economy will be “one of the best quarters ever for economic growth in the U.S.” The market’s optimism is in gear with his thinking.

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August 25, 2020

Volatility Reports Stock Market 08/25/20

The foresight from the 2016 election, the crashes (2) in 2018 (aka volatility regime change) have implications for today’s market, the election in November 2020 and the 2021 markets

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Literally every advisor/content provider being shared and re-broadcasted in the various forms of media are focus on reporting the new highs, the continuation of the uptrend, and the record-breaking market experience from March 23, low.  This background sentiment has been clear for the last 4 weeks.

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August 19, 2020

Volatility Report USD August 20, 2020

Expected Currency Wars. Here are the whys and what for with some ideas on how to play it.

It’s an old story that everybody with even the smallest amount of experience knows that the monetary policy helps inflate an asset bubble, rather than constrain one. Have a look at the history back in the 1920s and again in 2008. Today central banks around the world are reluctant to fight inflation when growth investments provide great returns.

The problem is that such periods are typically interpreted to be productivity booms, which they are not. Rather they only provide a positive feedback loop for investors to leverage up and buy more investment assets.

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August 16, 2020

Volatility Reports 08/17/20 Bond Market

Debt ratios had been looking bad before the pandemic, and today it’s worse. Inflation, which has been a nonstarter for decades may be on the verge of a comeback in a world awash with fiat currencies.

So the credit markets are starting to appear spooked. Volatility Reports sees a number of cracks in the bonds across all ratings. Here is a more complete picture.
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August 15, 2020

In search of Crisis Alpha for its Clients

Shortest bull markets in history based

The risk markets are experiencing epileptic seizures. From erratic and violent outbursts up and down and windmill swing of 12% up and 12% down by the Euro/Dollar. We have witnessed the shortest bear market in history lasting five weeks, knocking off 37% in profits from high to low by the S&P. Followed one of the quickest bull markets since the 1930s lasting five months from the low to date and recovering all of the previous bear moving higher by 38% on average, pushing new highs.

And there is more with the great bull run by the gold of 42% in four months followed by a four-day 10% selloff. Contrary Thinker is expecting Bitcoin to be next on the big swing.

Advisors and capital managers are witnessing the most frequent run-ups in long VIX interacting with CB interventionist policy, responding to an economic and financial crisis. The unwinding of the pre-emptive monetary policy will not end well. They never do, and it is merely because there is no way to grow out of this amount of debt.

According to Ray Dalio, there are seven factors that the trained eye can see that rings the bell for a pending bubble ready to burst at the most straightforward outside event. Here is the checklist allowing you to check off on all the reasons WHY the markets should go into a bear market – both bonds and risk assets, if there is a difference anymore.

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August 13, 2020

MarketMap 2020 Issue #14

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August 11, 2020

Crude Oil Tracing out a Bearish Wedge

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August 8, 2020

Middle-class prosperity is an illusion

But everyone has an iPhone!

This is more than likely the greatest threat to our nation, our free markets, and capitalism. When the middle class is unwittingly held back for an extended period, it is like an earthquake ready to heave.

Over the last twenty years, America’s promise of upward mobility has become a lie. The lie is so bright and blatant that several billionaires and intelligentsia point out that if something is not done about the “wealth inequality,” there will be massive social unrest.

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August 7, 2020

Volatility Reports 08/7/20 Stock Market

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