We’re increasingly of the view that we may now be approaching a rough patch, possibly even the end of the road in terms of this economic cycle (March 2020 to fall 2024??). In our careers, near the top, every investor always says something baggy like…
Given the “Project Zimbabwe” framework at play, that fall may be quite short, but also quite steep as very investors few seems prepared (look at VIX, Put/Call, skew, margin balances, etc.). They’re all now convinced that fiscal fixes everything—even if the signs are starting to add up that things are getting a bit wobbly on the economic side.
We’ve been unabashedly, and irresponsibly long at KEDM since the lows in March of 2020. We have dialed up and down our exposure, playing the zigs and zags (sometimes). We called bullshit on the recession bros back in 2022, and we went pretty much max long housing. Look at BLDR, which we mentioned a few times on this site in the $60s (read KEDM Issue 65). Why didn’t we hold it longer?? (F/D We got spooked by the CEO change and missed this upswing)
In any case, we were proven right, the recesionistas got ran over. Now it seems that they’ve joined us on fiscal island, and it’s getting crowded.
For the past few issues, we’ve been telling you that it’s Harvest Time. At first, it was just a gnawing feeling that things didn’t seem right. There were lots of divergences (you know how we love those). Was the economy rolling?? Or was this just a case of PMs selling every CUSIP to buy more NVDA?? Now, the data is starting to pile up. We’re not making a call to short, or expecting a crash. We really don’t know what to expect. There’s tons of liquidity out there. There’s tons of fiscal that still needs to be spent. There may be a bid under things for a while. That said, we keep selling.
We rarely pull up big broad index charts—that’s for the FinTwit bros. But there’s two charts that grabbed our attention this week.
SPY
QQQ
We’ve always believed that new highs should be accompanied by expanding volume, or at least constant volume. Instead, volume is trailing off. We know that MAG7 became MAG3, then became NVDA. We see record divergences between MAG7 and the other 493. RSP is failing vs SPY.
Once again, we don’t know if it’s gonna fall apart, or just chop wood. We don’t care. We are cutting back and doing it far more agressively than we’ve done on prior occasions. In particular, we want to cut the illiquid names. We think we’re finally entering the Great Macro Dreamscape. We want to swing hard and trade Macro products—not bet if 5 of 7x EBIT is the right multiple.
As with all contagions, you don’t know anything is even happening, til credit wakes up. Below is the chart of HY OAS that’s been making the rounds. Shit’s happening…
Zooming in…
We remain convinced that this eventually is resolved with investors rushing into gold (as one of many safe-havens). Hence, it’s good to see that Joe Retail has continued to sell to China all year—while buying more fantasy tech. We think there’s going to be another chance on gold (among many other themes), once some RSI gets worked down. We want to swing the bat again…and have the liquidity to do it..
We don’t usually make market calls in KEDM. And we’re definetly not making a market call here. We’re simply noting that KEDM is pruning in a VERY aggressive way. We’re keeping the core themes but little else unless it’s a very short term ED with a hard catalyst. This market just feels spooky…
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.
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This Market Feels Spooky…
A low frequency but juicy strategy where the edge is government incompetence.
Let’s dig in…
We’re increasingly of the view that we may now be approaching a rough patch, possibly even the end of the road in terms of this economic cycle (March 2020 to fall 2024??). In our careers, near the top, every investor always says something baggy like…
Given the “Project Zimbabwe” framework at play, that fall may be quite short, but also quite steep as very investors few seems prepared (look at VIX, Put/Call, skew, margin balances, etc.). They’re all now convinced that fiscal fixes everything—even if the signs are starting to add up that things are getting a bit wobbly on the economic side.
We’ve been unabashedly, and irresponsibly long at KEDM since the lows in March of 2020. We have dialed up and down our exposure, playing the zigs and zags (sometimes). We called bullshit on the recession bros back in 2022, and we went pretty much max long housing. Look at BLDR, which we mentioned a few times on this site in the $60s (read KEDM Issue 65). Why didn’t we hold it longer?? (F/D We got spooked by the CEO change and missed this upswing)
In any case, we were proven right, the recesionistas got ran over. Now it seems that they’ve joined us on fiscal island, and it’s getting crowded.
For the past few issues, we’ve been telling you that it’s Harvest Time. At first, it was just a gnawing feeling that things didn’t seem right. There were lots of divergences (you know how we love those). Was the economy rolling?? Or was this just a case of PMs selling every CUSIP to buy more NVDA?? Now, the data is starting to pile up. We’re not making a call to short, or expecting a crash. We really don’t know what to expect. There’s tons of liquidity out there. There’s tons of fiscal that still needs to be spent. There may be a bid under things for a while. That said, we keep selling.
We rarely pull up big broad index charts—that’s for the FinTwit bros. But there’s two charts that grabbed our attention this week.
SPY
QQQ
We’ve always believed that new highs should be accompanied by expanding volume, or at least constant volume. Instead, volume is trailing off. We know that MAG7 became MAG3, then became NVDA. We see record divergences between MAG7 and the other 493. RSP is failing vs SPY.
Once again, we don’t know if it’s gonna fall apart, or just chop wood. We don’t care. We are cutting back and doing it far more agressively than we’ve done on prior occasions. In particular, we want to cut the illiquid names. We think we’re finally entering the Great Macro Dreamscape. We want to swing hard and trade Macro products—not bet if 5 of 7x EBIT is the right multiple.
As with all contagions, you don’t know anything is even happening, til credit wakes up. Below is the chart of HY OAS that’s been making the rounds. Shit’s happening…
Zooming in…
We remain convinced that this eventually is resolved with investors rushing into gold (as one of many safe-havens). Hence, it’s good to see that Joe Retail has continued to sell to China all year—while buying more fantasy tech. We think there’s going to be another chance on gold (among many other themes), once some RSI gets worked down. We want to swing the bat again…and have the liquidity to do it..
We don’t usually make market calls in KEDM. And we’re definetly not making a market call here. We’re simply noting that KEDM is pruning in a VERY aggressive way. We’re keeping the core themes but little else unless it’s a very short term ED with a hard catalyst. This market just feels spooky…
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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.