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On January 25 2022 02:05 Vivax wrote:Show nested quote +On January 25 2022 01:35 LegalLord wrote:
Of all my purchases throughout 2021 - gold seems to be the best performing, lol. S&P500 erased about the last 6 months of gains in the past week and a half, so I suppose that's not rare. But perhaps a bit unluckier than average.
Foreign stocks seem to be getting hit harder than US all across the board. Doesn't seem based on anything more than a panic, so I might toss some money at those at prices that are less unsettling than 2021 ones. Yeah I'm quite happy with the performance of gold myself. Slow and steady as it should be. 'Goldsplosions' usually only appear when something goes awry. What do you mean by foreign stocks?
Mostly "X Country/Region ETF" stocks that I'm watching that index something non-US. EU is down more than US, I guess Japan is slightly up, most other countries I'm looking at are -6% today and took a beating twice that hard last week. I'd open a big position in China if I weren't afraid of their completely opaque financial system - those prices look like a bargain.
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So the market got a smidge of further decline today. No surprise when the expectation is interest rate hikes in the near term, but also kind of interesting is the big-ticket drops over the past few months that mostly went under the radar:
1. GME, AMC, etc. are well below their peak. Still several multiples of their pre-crisis value, but have recently taken a beating.
2. The big players in iBuying and/or "real estate tech" - Zillow, Opendoor, Offerpad - all lose 50% or more of their value as it becomes clear that iBuying wasn't particularly profitable. Housing itself hasn't declined, but it's certainly leveled out.
3. Vendors of meme assets - Robinhood and Coinbase for example - lost a lot of value. So did for example Bitcoin, but who knows whether it'll go down or recover spectacularly at this point. Peddling them to consumers doesn't seem like the hypergrowth strategy it once was though.
4. SPACs as an asset class seem to have lost most of their appeal. A lot of mediocre and very few good companies taken public this way.
5. Funds like ARK and even Nasdaq as a whole haven't done that well this past year.
6. A couple of big acquisition fails to include NVIDIA/ARM and Lockheed/Aerojet. If Microsoft is lucky, it'll have an acquisition fail on its list as well instead of a highly questionable $75 billion boondoggle.
Not to say that "the bubble has collapsed / is about to collapse" or anything - these companies are still largely well above a reasonable market value - but those are the kinds of pullbacks that make financing a whole lot more difficult. For those of the listed companies that are run by incompetent businesscritters, they might just have trouble raising money to cover their failures.
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You might find this of interest, LegalLord:
https://alphaarchitect.com/2022/01/25/implied-secular-regime-change-evidence-from-relative-sentiment/
Conclusion
The weight of the evidence suggests we recently exited a secular bull market driven by high real earnings growth and have entered a secular bear market driven by high inflation.
Future expected equity returns are at levels last seen at the top of the dot-com bubble. Assets that one would expect to outperform during inflationary secular regimes have begun outperforming. And inflation itself is outright high—year-over-year inflation in December 2021 was higher than the annualized inflation from 1965-1982.
Moreover, and perhaps most tellingly, correlations between equity returns and long bond returns have become positive (at monthly horizons). This is the same type of behavior observed during previous secular periods of high inflation (1965-1982) as well as during secular periods of disinflation (1982-2000).
Similarly, the correlations between equity returns and the component z-scores of the SMI have also changed signs—from negative to positive—which is what their polarity was from 1988-2000 during the last secular cycle driven by inflation.
If we take this regime change into account when computing the SMI, we observe forecasting behavior since the pandemic is more in line with its behavior prior to the pandemic and also more in line with other relative sentiment indicators (that don’t rely on equity/bond dynamics to quantify relative sentiment).
The takeaway is that while investors have become highly conditioned to buy the dip, the current dip is occurring with relative sentiment significantly bearish (i.e., retail likes equities more than institutions). Historically, that has not been a great time to buy equities.
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On January 26 2022 12:14 3FFA wrote:You might find this of interest, LegalLord: https://alphaarchitect.com/2022/01/25/implied-secular-regime-change-evidence-from-relative-sentiment/Conclusion Show nested quote +The weight of the evidence suggests we recently exited a secular bull market driven by high real earnings growth and have entered a secular bear market driven by high inflation.
Future expected equity returns are at levels last seen at the top of the dot-com bubble. Assets that one would expect to outperform during inflationary secular regimes have begun outperforming. And inflation itself is outright high—year-over-year inflation in December 2021 was higher than the annualized inflation from 1965-1982.
Moreover, and perhaps most tellingly, correlations between equity returns and long bond returns have become positive (at monthly horizons). This is the same type of behavior observed during previous secular periods of high inflation (1965-1982) as well as during secular periods of disinflation (1982-2000).
Similarly, the correlations between equity returns and the component z-scores of the SMI have also changed signs—from negative to positive—which is what their polarity was from 1988-2000 during the last secular cycle driven by inflation.
If we take this regime change into account when computing the SMI, we observe forecasting behavior since the pandemic is more in line with its behavior prior to the pandemic and also more in line with other relative sentiment indicators (that don’t rely on equity/bond dynamics to quantify relative sentiment).
The takeaway is that while investors have become highly conditioned to buy the dip, the current dip is occurring with relative sentiment significantly bearish (i.e., retail likes equities more than institutions). Historically, that has not been a great time to buy equities.
It might just be past my bedtime but between the strange use of vocabulary and the statistics that were hard to follow I mostly glazed over it. Feels like the general take is "the upcoming investment environment is going to be more favorable for non-equity assets" which is reasonable in that it's hard to imagine an awful lot more upside to equities relative to "max stimulus max debt minimum interest rates." But some of the conclusions off of that - e.g. "money market and bonds are the way to go forward from here" - don't really make sense. Those kind of assets would do best either when interest rates are high (you can buy them and collect big payments) or dropping (existing high-interest rate notes have higher present value) - neither of which is true. Yes, you might want to deleverage from overpriced stocks (probably only for the "short term" since in the long run stocks will outperform the other options), but that ain't the way to do so.
I read this article fairly recently, which had a similar enough premise. The recommendation there was to buy gold, which seemed like a reasonable read on the situation assuming things do play out as predicted for that thesis. I'm clearly sympathetic enough to that view given that I have mentioned that I bought a decently large position in gold last year. I think it odd that the article you linked didn't even mention precious metals as an asset class of interest - in the management of inflationary pressures, you'd be remiss if you didn't talk about gold.
Still, there's no guarantee of what will actually happen and all these theses are contingent upon what kind of post-transitory-inflation economy we get, so I mostly just hedge it. Cash, gold, US stock, foreign stock - if the assets are sufficiently independent in which scenario they cover, maybe some of them will still be worth money when the dust settles. Maybe I'm just missing out on the next big trend, but it feels like a time to protect against the highly uncertain nature of however the current financial mess will eventually unwind.
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To me the Marijuana companies in USA have been interesting for the last few months and I've taken some positions since they are down 80-90% from their highs. I can see those taking off if its legalized on Federal level and Im kinda betting on that to happen since it can be a good source for taxes.
Gold and other precious metals are fine and I have positions there, but I view those as a hedge rather than something to make money off of. Miners on the other hand, especially those that are down significantly from their highs are far more attractive.
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On January 26 2022 23:04 FreakyDroid wrote:
To me the Marijuana companies in USA have been interesting for the last few months and I've taken some positions since they are down 80-90% from their highs. I can see those taking off if its legalized on Federal level and Im kinda betting on that to happen since it can be a good source for taxes.
Gold and other precious metals are fine and I have positions there, but I view those as a hedge rather than something to make money off of. Miners on the other hand, especially those that are down significantly from their highs are far more attractive.
Yeah as an American I wouldn't expect that to happen for more than a decade at least, even more if we slip into a fascist dictatorship like we're looking to at the moment.
Not to mention the difficulties the companies have with competing against "gray" market products that offer better quality and lower prices. You'll see some companies have success but I doubt you'll see anything more than a few handful of states legalize in the coming years.
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I'm not sure what the appeal of marijuana stocks are in the long term. Yes, the whole "dude weed lmao" aspect is obviously going to get people high on their own hype and juice prices in the short term, but it's not exactly that lucrative a business. The fact that illicit marijuana is strongly price competitive with just growing them legally should be a clear sign that there's not much fruit on that vine.
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What you two are saying maybe true, but Im looking at it more from a risk perspective for the long term. That and the fact that some of them are generating lots of cash in this environment gives me confidence that they will at least continue to perform and it will be just a matter of time before other speculators catch on. Very few are looking at that market at the moment and that's when I'd like to get in. Kinda similar to how I took position in Uranium 3 years ago and that paid off in spades, so I follow the same logic on the Marijuana stocks. Of course, I could be wrong, just because it worked one time, doesn't mean it will work again, but at the end of the day I see much less downside risk than the potential upside reward.
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Looks like oil just hit $90. Gas and coal are as always stratospheric due to energy crisis; I'm sure other reliable fuels are in the same boat. I suspect elevated prices are here for at least several years; all the attempts to lower prices have been failures and it will take a while to ramp up supply. Maybe if the Fed raises interest rates to 20% they could balance the markets again, but there's too much debt in the overall economy for that to even be an option at this point.
Hyped for the energy crisis!
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Makes me wonder if the crypto bros keep track of the energy cost of their investments as the situation unfolds.
Any company specialized in solar powered laptops with integrated routers?
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United States44275 Posts
Crypto has always been closely linked to energy costs. Iceland with its cheap geothermal power and Nicaragua with a combination of renewables have historically been crypto farm locations. Countries with subsidized electricity sold to consumers below cost (but not to businesses) have also run into issues with individual consumers running crypto farms as a business, China if I recall correctly.
The reality is that a lot of crypto is mined at a loss and the "profit" comes from holding the crypto long after it is mined. In those scenarios they would have been better off just buying it on the market and holding it. The cost to crypto is mostly energy and energy costs vary significantly worldwide.
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heh... who knew preventing trades would have such a negative impact.
Commission-free brokerage Robinhood Markets Inc on Thursday posted a $423 million net loss in the latest quarter, and its shares tumbled as much as 15% in after-hours trade even as revenue edged past analysts' estimates.
Robinhood reported a net loss of $423 million or $0.49 per share in the three months ended December. A year earlier, which was before its IPO, the company posted net income of $7 million or $0.01 per share.
Shares of Robinhood sank as much as 15% to $9.98 in extended trading following results. The share price at its IPO in July last year was $38, and its record high in August was $85.
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On January 27 2022 02:27 KwarK wrote:
Crypto has always been closely linked to energy costs. Iceland with its cheap geothermal power and Nicaragua with a combination of renewables have historically been crypto farm locations. Countries with subsidized electricity sold to consumers below cost (but not to businesses) have also run into issues with individual consumers running crypto farms as a business, China if I recall correctly.
The reality is that a lot of crypto is mined at a loss and the "profit" comes from holding the crypto long after it is mined. In those scenarios they would have been better off just buying it on the market and holding it. The cost to crypto is mostly energy and energy costs vary significantly worldwide.
El Salvador is also volcano mining as a part of its pivot to crypto over IMF loans.
It comes back to the critical issues of energy consumption, storage and transmission. If we had some sort of way to store and transmit electricity efficiently climate change could be ended tomorrow.
Hawaii would be the largest energy producer in the world. Smack dab on top of an incredibly defensive and fortified position. It would be the new great sin of America to evict and transplant the natives living in the area but when has that stopped freedom from getting spread.
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Bot edit.
User was banned for this post.
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I'm so hyped for how well coal is doing in our new, green energy economy:
It even seems to be replacing natural gas for electrical power generation lately. Good stuff.
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So if you did the opposite of what Cramer told viewers/members then you are in better position than where he currently is.
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The Justice Department is collecting a trove of information on dozens of investment firms and researchers engaged in short selling as part of a sweeping U.S. hunt for potential trading abuses, according to people with knowledge of the matter.
The Federal Bureau of Investigation seized computers from the home of prominent short seller Andrew Left, the founder of Citron Research, in early 2021, some of the people said. In more recent months, the Justice Department subpoenaed certain market participants seeking communications, calendars and other records relating to almost 30 investment and research firms, as well as three dozen individuals associated with them, the people said, asking not to be identified discussing confidential inquiries.
Many on that roster -- a veritable who’s-who of the activist short-selling realm -- said they haven’t been contacted directly by the government, leaving some exasperated about being left in the dark. Reached for comment, Left also said he’s frustrated.
“It’s very tough to defend yourself when you haven’t been accused of anything,” Left said. “I’m cooperating and I have full faith in the system and the First Amendment,” he added, referencing protections on free speech.
The long list of names underscores the breadth of the Justice Department investigation first described by Bloomberg in December and shows how authorities are trying to map out alliances and understand how short sellers handle research and arrange bets that stocks will fall. It remains unclear which, if any, of the names mentioned in subpoenas might be targets of the inquiry or merely have ties to other people or entities of interest.
SEC Scrutiny
The Securities and Exchange Commission also has sent some requests for information, people with knowledge of those inquiries said. Spokespeople for the Justice Department and SEC declined to comment. No one has been accused of wrongdoing, and in many cases, the opening of a probe doesn’t lead to anyone facing charges.
Prominent firms and their leaders mentioned in the Justice Department’s requests to some market participants include Melvin Capital Management and founder Gabe Plotkin; Orso Partners and Nate Koppikar; Sophos Capital Management and Jim Carruthers; as well as Kerrisdale Capital Management. The list also includes well-known researchers such as Nate Anderson and his Hindenburg Research, as well as Fraser Perring and his Viceroy Research.
Representatives for most of those firms -- Melvin, Orso, Sophos and Hindenburg -- declined to comment or didn’t respond to messages seeking comment.
“We haven’t been contacted by DOJ, SEC or any governmental authorities about any investigations,” Kerrisdale’s chief investment officer, Sahm Adrangi, wrote in an email. “We literally haven’t spoken to anyone at the government in many years.”
Viceroy’s Perring said his firm also hasn’t received requests for information.
“We will always cooperate with any such investigations and are happy to assist regulators in carrying out their duties,” he said. “All our reports are based on information that is publicly available, sourced from records that anyone at any given time could research or find. Our most recent contact with the DOJ was in assisting an investigation into the fraud at a company that we had researched.”
Firms in the Dark
Bloomberg had noted in December that Anson Funds, Marcus Aurelius Value, Muddy Waters Capital and Citron are part of the probe.
Other firms mentioned in requests include Atom Investors, Bonitas Research, Connective Capital Management, Falcon Research, GeoInvesting, Gotham City Research, GrizzlyRock Capital, J Capital Research, Oasis Management, Park West Asset Management, QKM, Sabrepoint Capital Management, Silverado Capital, Spruce Point Capital Management, Valiant Capital Management and White Diamond Research.
Representatives for many of those firms -- among them Falcon, GrizzlyRock, J Capital, Oasis, Valiant and White Diamond -- said they hadn’t been contacted by investigators. “It’s hard for us to comment on something we don’t know anything about,” said Taylor Hall, a representative for Oasis.
Valiant “has a long-standing policy of cooperating with any inquiries it receives from regulators and other government bodies,” but is not aware of being involved in the short-selling probe, chief compliance officer Michaela Beckman said in an email. “Compliance with securities regulations has always been a point of significant emphasis at the firm since inception and we have not been subject to any regulatory action regarding insider trading or short-selling in our 13-year history.”
“Ethics are a key part of my work, and I wouldn’t do anything unethical or untruthful,” said White Diamond’s Adam Gefvert. “I may write negative things about a company but I wouldn’t embellish anything. Everything is backed by proof.”
Not all of the firms enter into public battles with companies. Atom invests in short-selling hedge funds. And GrizzlyRock isn’t an activist short seller, founder Kyle Mowery noted, adding that he’s glad the Justice Department is looking into that space.
Representatives for the rest declined to comment or didn’t respond to messages.
Pressure on DOJ
Short selling often involves borrowing and selling shares, in a bet that they can be bought back cheaper later to lock in a profit. Investors may also use derivatives such as put contracts.
The Justice Department and financial regulators have faced a growing number of calls in recent years to dig into short sellers and their research partners. Corporate executives including the world’s richest person, Tesla Inc.’s Elon Musk, have decried short sellers, accusing them of maligning businesses for profit.
The Justice Department’s probe is being run by the fraud section with federal prosecutors in Los Angeles and there’s no public signal that authorities have drawn any conclusions. As Bloomberg previously reported, they’ve been examining trading in dozens of stocks, as well as relationships between funds and researchers, looking for signs that they manipulated markets or broke other laws to profit.
Tough Times for Shorts
The U.S. probe adds to a treacherous period for short sellers. Some bearish funds threw in the towel as government stimulus drove equity markets, a situation exacerbated during the pandemic. The pressure intensified during 2021’s meme-stock frenzy, when retail investors banded together to bid up shares of popular short targets, inflicting losses on hedge funds and other traders. By late January of last year, Citron vowed to give up short-selling research and focus on long bets.
Some of the loudest short-selling critics include executives at companies that were later found to have engaged in malfeasance. But legions of small investors have also expressed outrage over stock slumps, especially during last year’s wild trading. Amid the complaints, members of Congress started demanding more government scrutiny.
Researchers make money in a variety of ways beyond placing their own bets. Some sell insights to subscribers, or make arrangements to give clients, such as hedge funds, ideas in exchange for a cut of the profits. Paying customers often get to see research alleging problems at publicly traded companies before publication.
One area of focus is how investors set up their bets that stocks will decline. Investigators have been looking, for example, for signs that money managers might try to engineer startling stock drops to induce selling by market makers or other investors, or engage in other abuses, such as insider trading, people familiar with the matter have said.
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Kinda weird that only short sellers are put in the spotlight, as if it doesn't work the other way around. Any type of market manipulation works both ways. Looks more like an attempt to distract investors than anything else.
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EPT
