Market Update & Going LIVE

FYI, I plan to go LIVE today at 12:30PM ET, so tune in!

Also, an intense back and forth of bullish and bearish views have been bouncing around in my public WhatsApp room (The Money Mark Free For All). Unlike the invite-only Pro Research Room, entry into the Free For All room is on a first-come / first-serve basis. At last check, there were about 50 spots remaining, so if you’ve wanted a taste of the research that happens behind the scenes, join us here — https://chat.whatsapp.com/FpseBLXjoYa19Za0cYHtsR

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Changing how I go LIVE!

My LIVEs have been petty popular (averaging about 700 views per video vs. just 1,700 subscribers).

However, they’re admittedly too long for many folks.

To address that issue, I’m going to start doing shorter, single-subject YouTube videos to go along with my normal 1-2 hour LIVE show.

Friday’s short (done from the remote hills of Portugal) was a big success. The signal cut out after a few minutes, but not before I could deliver the goods. The video drew 1OOs of views and generated great profits for those who took action on the names I discussed. Here’s a pic of Friday’s performance:

Not bad for a day’s work… but you had to be there to profit! So, get notified of new appearances by hitting the Subscribe button and the Notification bell on my YouTube Channel.

FYI, I plan to go LIVE today at 12:30PM ET, so tune in!

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Stock Market Update

An intense back and forth of bullish and bearish views have been bouncing around in my public WhatsApp room. Appropriately weighing all of the available data points is near-impossible, due the near-infinite number of moving parts that impact the global economy and stock market.

That being said, experience continues to tell me that when something stretches above a Risk/Reward line, it’s reversion to the mean almost necessitates and overcorrection. Indeed, popping above its long-term risk/reward ceiling is what precipitated my Yellow Alert last April (a point from which the Russell 2000 has fallen a nauseating 29%).

20+ year chart of the Russell 2000

Sometimes, it’s not necessary to know WHY the market is going to fall. Indeed, last April, I didn’t… but when stock prices get too high, it’s not hard to guess that they’ll eventually fall.

As for now, I am erring on the side of being bullish in the very short term. On a short-term basis, the market is “oversold”, sentiment is incredibly negative (which is usually a good time to buy), and financial institutions and experiencing end of month money flows (which HAVE TO immediately go to work in the market).

For the record, though, I remain bearish overall.

However, I will be hesitant to get net-short going forward.

With a longer-term view, the market is approaching its 50/50 Risk/Reward level (see pic above), which is generally a good time to at least have some long exposure. That longer-term view is buoyed by a generation of boomers who are retiring later than expected and Millennials who are just starting to enter their economic prime.

Accordingly, I’m working my way toward being 20% net long (by buying stocks without hedging).

As a reminder “net long” means I own more stocks than shorts/hedges. The Yellow Alert rules say to carry lots of hedges to protect your investments. I have favored RWM, which goes up when the market goes down (like a good hedge is supposed to do)… and RWM is up 30% since November. Nice.

To be “net long” the size of my RWM position needs to be smaller than the TOTAL of my investments (longs). So, when I say I want to be 20% net long, I can do that by having 60% in my longs (like SMSI, TPCS, etc.) and “only” 40% in RWM.

I DEFINITELY believe the recent market and economic volatility will continue for the next couple of years. However, the amount of money consumers have left in their bank accounts leaves the door open for a soft landing.

I know that sounds crazy. I was hard for me to even consider it as a possibility, but I can’t ignore the confluence of facts.

So far, people are absorbing higher prices, albeit with highly negative sentiment. Meanwhile, prices are showing signs of cracking from demand destruction… and the China supply chain (responsible for an estimated 35% of our inflation rate) is starting to reopen.

My concern with that last sentence is that China reopening will represent demand re-creation IN CHINA. The “end” of COVID around the world (where most DIDN’T have mandatory in-home lockdowns) resulted in massive demand re-creation. So, what should we expect to happen as China finally allows its people to come outside (aside from a massive spike in the divorce rate 😭)?

Ask for a collapse in corporate earnings, I believe that’s the most likely scenario, but I’m not totally convinced. Inflation in the absence of extreme demand instruction can be very bullish.

Think of a company with $100 million in revenue and $50 million and expenses (resulting in $50M of profit). If their costs and prices both rise 20%, revenue rises to $120 million and expenses rise to 60 million (resulting in $60M in profits, a 20% INCREASE)… assuming unit demand is not hurt by the increase in price.

So, demand destruction is the key term. How does the benefit of inflation vs. the pain of demand destruction balance out? If not for strong consumer bank account balances, it would surely be negative. As it stands, I can guess “still negative”, but I really don’t know.

Finally, filling the hole created by banning Russia from the global economy should ultimately be bullish for companies worldwide, because buying less from Russia means buying more from everyone else. Hashtag “market share”.

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BOTTOM LINE: we’ve reached a point where there are a lot of intermingling bearish AND bullish data points. Further, R/R is near 50/50. However, it should overshoot to the downside as discussed above.

Netting it all out, I remain bearish and believe the market will most likely make a 10% lower low. But I also believe I’d be crazy to position my entire net worth for that bias (because nobody short of God knows how this is going to play out — a view shared by Buffett, Icahn, and dozens of other people over whom I cannot claim intellectual superiority).

So, the best play is obvious. Find great longs and buy them. ALSO, find great shorts and short them. If I do a good job of that, the rest will take care of itself.

As for my Yellow Alert, given the flip-flopping nature of my sentiment toward the market, I finally find myself pondering whether its time to end it… but only pondering.

So the Yellow Alert remains in place, as do the associated rules. Be sure to check out my recent YouTube videos if you’re not familiar with them.

Catch you at 12:30PM ET

Cheers!

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2 thoughts on “Market Update & Going LIVE

    1. I only discuss those things in public via a LIVE, so everyone finds out at once.

      I’ll only say that I’m looking at DOZENS of companies and most won’t make the cut. Those that do will start to be presented soon.

      Like

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