Turning to the market for a quickie, it sure feels like we’re living through a fever dream here…
Yes, the RRP is gushing liquidity everywhere… Yes, the economy is booming… Yes, the inflation is accelerating… Yes, Fiscal is gonna be like 8% of GDP in 2024 (elections need stimmies)…
…and amazingly, the Fed is talking about cutting rates. Seriously, they have a few thousand economists costing taxpayers a few billion a year, and this is their plan???
Which brings us to Eiffel Towers… (sorry, we’ve never been to Paris, but this feels directionally correct)Which brings us to Eiffel Towers… (sorry, we’ve never been to Paris, but this feels directionally correct)
Look at a chart of SMCI (if you’re thinking that Super Micro Computer sounds like the name of a bubble stock from bubble past—like the 2000 bubble—you wouldn’t be incorrect). Tell me that chart doesn’t have a Frenchman looking down at you, while you try to pronounce something on the menu. That is an Eiffel Tower to us:
Eiffel Towers tend to happen near the end of a market move. They are exhaustion charts. One Eiffel Tower can be an isolated event, a handful of them in a week or two, is indicative. It shows that the fever dream is finally burning off. Guys are wondering what the hell they’re doing long YOLO calls after a 20x move. They want to party like it’s Q1/2021, but that RRP only has about 2 months left to it. Markets are supposed to be forward looking (they’re not anymore). When the RRP stops draining, liquidity conditions will change. Those chasing their AI dreams, will suddenly have a cost of capital again.
So, KEDM is an Event-Driven rag. Let’s tie it all together with how we are thinking about it. You’d be ludicrous to short a parabola on the way up. That’s how you get run over. Rookies take the bait. Pros know to watch, feel their pain, but stay out of the arena…
Runaway charts can keep running for longer than you can remain solvent. However, after the break comes, you can shoot them in the back. Now, this takes some experience.
What’s a break, instead of a pullback?? We can’t tell you. But when we see a big engulfing bar on high volume we load our guns. So, do we short the stock??
We know that these things can re-ignite. Instead, we tend to sell long-dated calls in a basket. We want that premium to pad our risk (Theta and Vol) so that if it starts running again, we can roll up and out. Or book it without too much pain. In our experience, after running over the dealers with a Gamma squeeze, IV stays elevated for a while. That’s a mispricing in our view, because the Fever Dream has broken, yet everyone is still having flashbacks. …but, we’re playing these trades small as we also have PTSD. We also don’t want to get chased out on the inevitable test of the top.
In our experience, these things break hard, then chop a bunch of wood, testing the highs, before slowly drifting off to fair value…
Look at TLRY back in 2018 to see how this tends to work….
Except, TLRY was an isolated event, there’s multiple parabolas going on today. We think they’ll peak around the same time. So, you have our battle plan on the Event-Driven side…
After there’s a few Eiffel Towers in a row, we expect to see the Naz wobble. Look at the divergences in MAG7—it’s already starting. We expect some wild and whippy ranges, just like March of 2000. Then, we expect a massive rotation, a rotation back into inflation assets. That’s our roadmap. We’ve been waiting for it to play out. It seems like we’re finally in the ending innings, and it will line up roughly with the RRP hitting zero. Which brings us to oil…
Yeah, we’re oil bulls. We’ve become awful lonely over the past year. But the charts are setting up. Meanwhile, we get the sense from Prime Broker positioning data, that no one is long. The 13Fs just dropped from the top firms and they sure aren’t long (except for Warren). They’re hiding in MAG7 and 2nd tier MAG7 assets. We think they’ll once again get the commodity itch. Just as soon as their names melt…
Well, have more on oil and oil services as we work through earnings next week but in the meantime, onto the events…
Kuppy’s Event Driven Monitor (“KEDM”) is not a financial or investment advisor and the information contained in this publication is not intended to constitute legal, accounting, or text advice or individually-tailored investment advice and is not designed to meet your personal financial situation. The investments discussed in this publication may not be suitable for you. You are required to conduct your own due diligence, analyses, draw your own conclusions, and make your own investment decisions. Any areas concerning legal, accounting, or tax advice or individually-tailored investment advice should be referred to your lawyers, accountants, tax advisors, investment advisers, or other professionals registered or otherwise authorized to provide such advice. KEDM makes no recommendations whatsoever regarding buying, selling, or holding a specified security, a class of securities, or the securities of a class of issuers, and all commentary is for educational purposes only. The investment examples noted are intended to provide and example of the events and data KEDM flags each week and is not representative of typical returns generated by each event or any future returns.
Save your cart?
x
We save your email and cart so we can send you reminders - don't email me.
Eiffel Towers and “Tons of Liquidity”
A low frequency but juicy strategy where the edge is government incompetence.
Let’s dig in…
Turning to the market for a quickie, it sure feels like we’re living through a fever dream here…
Yes, the RRP is gushing liquidity everywhere… Yes, the economy is booming… Yes, the inflation is accelerating… Yes, Fiscal is gonna be like 8% of GDP in 2024 (elections need stimmies)…
…and amazingly, the Fed is talking about cutting rates. Seriously, they have a few thousand economists costing taxpayers a few billion a year, and this is their plan???
Which brings us to Eiffel Towers… (sorry, we’ve never been to Paris, but this feels directionally correct)Which brings us to Eiffel Towers… (sorry, we’ve never been to Paris, but this feels directionally correct)
Look at a chart of SMCI (if you’re thinking that Super Micro Computer sounds like the name of a bubble stock from bubble past—like the 2000 bubble—you wouldn’t be incorrect). Tell me that chart doesn’t have a Frenchman looking down at you, while you try to pronounce something on the menu. That is an Eiffel Tower to us:
Eiffel Towers tend to happen near the end of a market move. They are exhaustion charts. One Eiffel Tower can be an isolated event, a handful of them in a week or two, is indicative. It shows that the fever dream is finally burning off. Guys are wondering what the hell they’re doing long YOLO calls after a 20x move. They want to party like it’s Q1/2021, but that RRP only has about 2 months left to it. Markets are supposed to be forward looking (they’re not anymore). When the RRP stops draining, liquidity conditions will change. Those chasing their AI dreams, will suddenly have a cost of capital again.
So, KEDM is an Event-Driven rag. Let’s tie it all together with how we are thinking about it. You’d be ludicrous to short a parabola on the way up. That’s how you get run over. Rookies take the bait. Pros know to watch, feel their pain, but stay out of the arena…
Runaway charts can keep running for longer than you can remain solvent. However, after the break comes, you can shoot them in the back. Now, this takes some experience.
What’s a break, instead of a pullback?? We can’t tell you. But when we see a big engulfing bar on high volume we load our guns. So, do we short the stock??
We know that these things can re-ignite. Instead, we tend to sell long-dated calls in a basket. We want that premium to pad our risk (Theta and Vol) so that if it starts running again, we can roll up and out. Or book it without too much pain. In our experience, after running over the dealers with a Gamma squeeze, IV stays elevated for a while. That’s a mispricing in our view, because the Fever Dream has broken, yet everyone is still having flashbacks. …but, we’re playing these trades small as we also have PTSD. We also don’t want to get chased out on the inevitable test of the top.
In our experience, these things break hard, then chop a bunch of wood, testing the highs, before slowly drifting off to fair value…
Look at TLRY back in 2018 to see how this tends to work….
Except, TLRY was an isolated event, there’s multiple parabolas going on today. We think they’ll peak around the same time. So, you have our battle plan on the Event-Driven side…
After there’s a few Eiffel Towers in a row, we expect to see the Naz wobble. Look at the divergences in MAG7—it’s already starting. We expect some wild and whippy ranges, just like March of 2000. Then, we expect a massive rotation, a rotation back into inflation assets. That’s our roadmap. We’ve been waiting for it to play out. It seems like we’re finally in the ending innings, and it will line up roughly with the RRP hitting zero. Which brings us to oil…
Yeah, we’re oil bulls. We’ve become awful lonely over the past year. But the charts are setting up. Meanwhile, we get the sense from Prime Broker positioning data, that no one is long. The 13Fs just dropped from the top firms and they sure aren’t long (except for Warren). They’re hiding in MAG7 and 2nd tier MAG7 assets. We think they’ll once again get the commodity itch. Just as soon as their names melt…
Well, have more on oil and oil services as we work through earnings next week but in the meantime, onto the events…
Start your 28-day free trial
Kuppy’s Event Driven Monitor (“KEDM”) is not a financial or investment advisor and the information contained in this publication is not intended to constitute legal, accounting, or text advice or individually-tailored investment advice and is not designed to meet your personal financial situation. The investments discussed in this publication may not be suitable for you. You are required to conduct your own due diligence, analyses, draw your own conclusions, and make your own investment decisions. Any areas concerning legal, accounting, or tax advice or individually-tailored investment advice should be referred to your lawyers, accountants, tax advisors, investment advisers, or other professionals registered or otherwise authorized to provide such advice. KEDM makes no recommendations whatsoever regarding buying, selling, or holding a specified security, a class of securities, or the securities of a class of issuers, and all commentary is for educational purposes only. The investment examples noted are intended to provide and example of the events and data KEDM flags each week and is not representative of typical returns generated by each event or any future returns.