September 2024 DDD

[ducati916]

Friday is the big one with U/E.

Mr fff:

It Ended OK! Up We Go​

Dr. Fly Fri Aug 30, 2024 4:09pm EST Leave a comment


Let’s just say I am happy with the close, so happy I will drink some gin to celebrate. So you know, I do not ever drink whilst angry or walking the black dog. I drink to celebrate and only associate that feeling with success.

I closed the session +85bps and possess 10% cash into Tuesday. Markets are closed on Monday to celebrate “Labor Day.”

On Sunday I depart for Boston to move my daughter into her apartment for her final year of college. It is a bitter sweet occasion, sweet only because I am proud of her and want to see her succeed and chase her dreams.

I closed the month +2.84%, better than all indices, but way below my own quant of +6.2% It was a unique month for the quant, as it was perfectly positioned in financials and stocks that really held their own the entire month.

At any rate, a new quant will be allocated into Stocklabs on Tuesday, as I always do, and I look forward to dealing with the pangs, and also the horrors, of what September is for traders.



Quick note on my prospective return to the business: I have your emails and will schedule you for a call when time permits. I have been overwhelmed by the response and will likely only accept 150 clients. If you were fence sitting about having Le Fly manage your vast sums of money, I suggest you quit doing that, post haste. Contact flybroker @ gmail for inquiries.

Any number of blogoland's contributors are pointing out that September (late) and October are bad months for the market. We also have the long awaited rate cuts (supposedly) happening in the Sept. meeting. The data on that has also been studied. In fact, past data on any type of event has been studied and a chart produced on the probabilities of that event and outcome playing out statistically again.

The data on what happens after a rate cut doesn't look too promising.

A rate cut should:

(i) weaken the USD
(ii) reduce the yield on a UST (increase the price).

Good for gold.

A weaker USD is inflationary. Stocks are inflationary hedges in as much as nominally they gain and in real terms they tend to stand still. Of course this depends very much on what the rate of inflation actually is.

Of course the rate cuts will help the Treasury reduce its level of interest payments on the compounding debt, fast approaching $36 Trillion. But what are we talking about in terms of cuts? 25bps, 50bps would be a bit of a panic inducing cut and 75bps could see a really bad reaction in the stock market as the message could be construed as very negative.

So the cut will not, in all likelihood, help Yellen and the Treasury that much. The Treasury to inflate the debt away will need much higher inflation (much weaker USD) to make inroads into the debt. That is assuming that tax revenues, almost 100% dependent on stock market returns, do not fall off (need a high and moving higher market) as government spending is increasingly crimped by the growing interest payments.

This is a sovereign debt crisis.

The only way that it stays afloat is through constantly rising asset prices.

How much higher can asset prices go (stocks, housing, bonds) when they are already exceeding historically nose bleed valuations and are in bubble territory?

The deficits will explode if UE rises. Hence the paranoia around this number and the BS numbers that are being generated each month.

Currently here in NZ post boxes are being robbed for anything of value, which if you are posting a letter, includes them stealing the stamps. Petrol driveoffs are out of control as are supermarket thefts. It is a sign of economic stress. Hardly the strong economy mooted by the politicians and their bureaucracy.

A friend of mine recently travelled the US and he goes pretty much every year, said that it is currently the worst that he has ever seen it for poverty and lawlessness.

Obviously you can't be short this market (only very selectively). The early August panic was very dangerous in that the whole BTD was massively reinforced. If we do see a bear collapse, the early stages will be perceived as another BTD, which then collapses lower.

So currently you must be long. You must be very alert to a bear collapse and be able to differentiate it from a BTD opportunity (which is why blogoland is parsing the data endlessly looking for the statistical answer) which is incredibly difficult this time around.

The last 2 big collapses, 2000 and 2008 were collapses of markets that were not initially perceived to effect damage on the government. Obviously once they realised their error, they jumped in.

This collapse is already recognised as threatening the stability (survival) of the government. Hence the interminable BS economic numbers. The constant bailouts of banks, well anyone that threatens a market collapse, constant new ways of adding liquidity while saying liquidity is being removed. The manipulations, distortions and fraud are at levels that are off the charts.

Shoot first, ask questions later.

jog on
duc

 

[divs4ever]

Currently here in NZ post boxes are being robbed for anything of value, which if you are posting a letter, includes them stealing the stamps. Petrol driveoffs are out of control as are supermarket thefts. It is a sign of economic stress. Hardly the strong economy mooted by the politicians and their bureaucracy.

interesting

( i hold shares in several NZ-based companies )

thanks for the heads up

( i haven't talked/communicated with my rellies over there since 1972 so i don't get much news from them )

am unaware of post box looting in Australia , but ram-raids on commercial shops is a problem over here ( and they use stolen vehicles .. obviously )

cheers

maybe this is 'the new cashless trend ' transitioning in

 

[Smurf1976]

Currently here in NZ post boxes are being robbed for anything of value, which if you are posting a letter, includes them stealing the stamps.

Stealing postage stamps?

They'd be worth what, a bit over $1 I assume?

That's getting pretty extreme if people are stealing things of such low value.

 

[divs4ever]

Stealing postage stamps?

They'd be worth what, a bit over $1 I assume?

That's getting pretty extreme if people are stealing things of such low value.

well if you are emptying a mail box , those extra dollars ( stolen ) add to the profit

and after working as a ( temporary ) mail sorter decades back you never know what you will get ( stuff like lottery tickets , cheques, valuable information for hackers/scammers/fraudsters )

 

[ducati916]

Pretty long, but worth the watch:



Highlights a number of issues with systems.

jog on
duc

 

[Chipp]

Pretty long, but worth the watch:



Highlights a number of issues with systems.

jog on
duc

Great Listen , these guys talk fast , i normally listen to pods at 1.5x but 1.25 was plenty quick enough . Jack is sharp AF for a guy approaching 80 . I have many of his books and this has prompted me to reread a couple .

“Either go at it full force or don’t go at it at all. Don’t dabble.”​

― Jack D. Schwager

 

[ducati916]

Start with BTC:



Full: https://www.economist.com/united-states/2024/08/27/why-texas-republicans-are-souring-on-crypto



Seemingly retail has jumped from TSLA to NVDA.



They are out and out gambling. Gambling without any plan.



Making money is easy.

Keeping it can be a little trickier.



Everyone and their granny are pointing out the seasonal issues with Sept/Oct. Should that be a concern?



Interesting.



I hold RTX which is a defence stock. There is of course a defence ETF: XAR





Pretty well balanced. All sit at about 5%.



Some thoughts on 'Edges', inspired by the Schwager video and Mr Chipp's 2 posts.

A true edge can be articulated in 1 sentence.

If you need a paragraph or more, likely it is something else.

The strength or sustainability of your edge resides in whether you could disclose your edge to the market and have it continue to work or you need to keep it secret and disclosure or recognition eroding it.

The difference is that one trades against the current market, t'other trades with the current market.

The difference I find fascinating. Through the years I have come across so many traders that describe themselves as contrarian. Very few actually are. Contrarian traders tend to be contrarian in life also, it's simply who they are, not an assumed position simply for trading/investing.

Your edge, once you find it needs to sit very comfortably with you. It can't be a fight. If it's a fight....TFA, thoughts, feelings, actions will see you fail eventually. You'll have a big loss that might even be a blow-up. TFA has to be in harmony.

Where to find your edge.

1. Be a mathematical genius. I do mean genius. There have been a few. This is Quant. territory. Goes past tough.
2. Read widely. Ideas either borrowed or possibly variations on, possibly original, will come to you.
3. Systems. Not really my area, but again, read widely if this is of interest. Testing systems is a skill in of itself.
4. Seat of the pants, aka, money management. This is how I started trading. Tried to hold the winners, cut the losers (fast). TFA issues.
5. Technicals, closely related to #4 and the two are often conflated.
6. Fundamentals at micro level, very tough area.
7. Macro investing, also a tough area.
8. Sheer luck. Can't be beat.

There are probably others.

jog on
duc

 

[divs4ever]

regarding the deletions , paragraph

investing in deletions CAN be nice , BUT you need to be rigorous in selecting which ones are selected , some are smelly mutts where the breath-freshener is failing ( say BNPL stocks in general )

but the forced sell-down/out by index funds creates an automatic short-term opportunity in these stocks ( even when the funds hold less than 1% each , it doesn't take much to trigger some stop-loss events

 

[divs4ever]

Contrarian traders tend to be contrarian in life also, it's simply who they are, not an assumed position simply for trading/investing.

it works for me , and pairs nicely with my jaw-dropping bouts of luck

i see opportunity from a different angle to most

two examples when the vaccine strategies were announced i bought PFP ( @ $3.00 in December 2020 )

when Russia entered Ukraine i bought BIS ( @ $1.47 in February 2022 )

these ideas do not always work out , but at least i am not chasing a train leaving the station.. desperate to get on ( over-paying for a ticket )

also during 'the pandemic recovery] i was reducing PSQ @ $3 , as sales/revenue went up as patients returned to dental clinics ( and added more in late 2023 @88.5 cents as sales/revenue declined from the previous artificial peak demand )

now sure there were other ways to play the pandemic but dental clinics were a relatively uncontested area ( i also played with the now taken over One Thousand Smiles at that time )

 

[ducati916]

regarding the deletions , paragraph

investing in deletions CAN be nice , BUT you need to be rigorous in selecting which ones are selected , some are smelly mutts where the breath-freshener is failing ( say BNPL stocks in general )

but the forced sell-down/out by index funds creates an automatic short-term opportunity in these stocks ( even when the funds hold less than 1% each , it doesn't take much to trigger some stop-loss events

Mr Divs,

I actually quite like this idea, particularly if the company has a larger market cap. XOM for that jobs site or whatever it was. I think the issue is finding enough trades to keep you busy.

Worth further investigation.

jog on
duc

 

[divs4ever]

Mr Divs,

I actually quite like this idea, particularly if the company has a larger market cap. XOM for that jobs site or whatever it was. I think the issue is finding enough trades to keep you busy.

Worth further investigation.

jog on
duc

i normally 'nibble small ' and hold long , some of my more illiquid stocks take up to 4 months to fill an order ( from first few stocks until the order is filled , and up to 4 transactions to do so )

in fact in two holdings those orders were the only two trades in that stock that year ( but they weren't index deletions just rarely traded stocks
but stocks bumped out of the top 100 or top 200 are still liquid enough for real traders ( and might move enough )

stocks that participate in multiple indexes ( say top 200 and ASX 200 financials ) tend to move move more as two ETFs products are forced to reduce in the same issuer, this seems to give VAS an edge here as they can reduce gracefully

 

[ducati916]

First trading day in Sept:



Oil News:

Crude production in Iraq’s semi-autonomous Kurdistan region continues to increase as industry organizations have stated output surpassed the 350,000 b/d mark in recent weeks, the highest since early 2023.

- Iraq, the largest overproducer within OPEC+ that pledged to cut 1.44 million b/d of output over the next 12 months as part of a compensation plan, has now vowed to confront Kurdish authorities over surplus production volumes.

- International oil companies operating in Kurdistan have been expanding into new projects for the first time since the 2023 pipeline closure to Ceyhan, with DNO mobilizing a rig to drill a new well in the Tawke license and Gulf Keystone starting round-the-clock trucking operations.

- Baghdad has threatened to withhold the Kurdish Regional Government’s share of the federal budget if it does not reduce its production to a mere 46,000 b/d and cut back on a widespread net of smuggling to Turkey and Iran.

Market Movers

- The co-founder of US offshore producer Talos Energy (NYSE:TALO) abruptly quit the company without providing a reason for the move, believed to be linked to the company’s languishing stock performance.

- The US Commodity Futures Trading Commission has fined TOTSA, the trading arm of French energy major TotalEnergies (NYSE:TTE), for attempting to manipulate European gasoline futures, setting a $48 million fine.

- Energy major Shell (LON:SHEL) signed a 10-year term contract with Turkey’s Botas to supply up to around 4 billion cubic meters per year starting from 2027, diversifying Ankara’s options after a recent 10-year deal with ExxonMobil.

Tuesday, September 03, 2024

Libya’s upstream segment has gone almost completely haywire with 60% of production shut in because of a nationwide oil blockade, but that story has by now been overshadowed by wild speculation over OPEC+ policy. The eight leading OPEC+ producers are expected to start unwinding voluntary output curbs with a 180,000 b/d boost in October, sending oil prices tumbling with Bent plunging toward the $73 handle.

Chinese Crude Imports Recover After July Debacle. According to Kpler, China’s crude imports averaged 10.5 million b/d in August, up almost 1 million b/d compared to the 18-month low of July, however they remain well below any monthly average in February-June.

Libya Restart Unclear in Summer Fog of War. According to several sources, Libya’s Sarir, Mesla and Nafoura oil fields have received instructions to resume production amidst an ongoing oil blockade by Field Marshal Haftar, however, only to feed local power plans and small refineries in the east.

Houthis Strike Again, Almost Hitting Saudi Tanker. Houthi militias have almost hit the Saudi-flagged tanker Amjad operated by the state-owned shipping firm Bahri (TADAWUL:4030) as they attacked the Blue Lagoon I vessel that was sailing next to it, carrying fuel oil from Russia.

North Sea Tax Hikes to Drain UK of Revenue. According to industry group Offshore Energies UK, the Labour government’s windfall tax hikes on North Sea oil and gas producers would lead to a $16 billion drop in state revenue in between 2025 and 2029, whilst also accelerating the UK’s production declines.

Power Blackouts Return to Venezuela. Venezuela experienced a nationwide blackout on Friday, blaming the disruptions in power supply on a cyberattack on the Guri hydropower dam, with operations at the José export terminal as well as crude upgraders disrupted for one day.

Teck Revamps Corporate Structure After Glencore Deal. Canadian mining giant Teck Resources (NYSE:TECK) will restructure its assets into two regional business units in North and Latin America after its $7 billion divestment of metallurgical coal assets to Swiss-based trader Glencore.

Nigeria’s Megarefinery Starts Gasoline Production. Nigeria’s 650,000 b/d Dangote refinery has started producing gasoline after several months of commissioning works, with the plant’s declared goal of ending the African country’s costly dependence on fuel imports now being within reach.

Qatar Doubles Down on Fertilizers. QatarEnergy has announced its 2030 target of doubling the production of urea, a key component in fertilizers, from 6 million tonnes annually to 12.4 mtpa, finding additional ways of refining natural gas into higher-value products.

India Mulls Building a New Refinery. India’s state-controlled refiner Bharat Petroleum (NSE:BPCL) and upstream firm ONGC are jointly exploring building a new refinery as the country’s demand continues to rise strongly and refining capacity is set to reach 9 million b/d by 2030.

Chevron Hopes to Solve Its Cyprus Conundrum. US oil major Chevron (NYSE:CVX) has amended its production plan for its long-delayed 3.5 TCf Aphrodite gas field in Cyprus and submitted it to Cypriot authorities, with costs rising to $4 billion as it seeks to build an offshore floating production unit.

Indonesia to Build Its Own SPRs. Indonesia wants to set aside some 10 million barrels of crude to create a strategic petroleum stock in a country that usually refines 800-900,000 b/d, with new government regulation also stipulating the creation of a 10-million-barrel gasoline reserve inventory.

ADNOC Taps into Bond Market. ADNOC, the national oil company of the UAE, has started an international roadshow as it is looking to raise 5-, 10- and 30-year debt, believed to be linked the upcoming purchase of German chemical market Covestro in a deal worth $13 billion.

China’s Sinochem to Quit Permian JV. Chinese state-run oil company Sinochem is planning to quit its 40% stake in the Permian-focused upstream joint venture Wolfcamp that it operated jointly with US oil major ExxonMobil (NYSE:XOM), currently producing around 44,000 boe/d of which 75% is oil.



Rug pull:



Just too much bullishness. Time to move lower.

Not helped by bad numbers:



The question will be: is this like the early August swoon another buy the dip opportunity?

It will be bought early by some retail, they are now conditioned to do so. In fact, that is probably taking place right now on the above chart.

If there is follow through tomorrow and stocks trade lower, we could have a bit of a market break. The BTD crowd have zero patience, they like to jump in real fast. The dry powder from retail will likely be almost gone by tomorrow if we have further downside.

The difference is that August was a Hedge Fund(s) blowing up due to being backwards on the Yen trade. They were obviously bailed out. This is just a correction broadly. Probably won't attract the Fed's bailout team currently. A few more days lower and we might see some panic.

Blogoland has been calling this seasonality play for at least a week.

A few more days of hard selling would suit me perfectly.

jog on
duc

 

[peter2]

Good short on NVDA. How about doing the same with AVGO (Broadcom)? Earnings this week.

Edit: After seeing the prior post. I'm short the US and not thinking about buying this dip until it's done.
However I may start buying oil (ETF - OOO.asx) tomorrow.

 

[ducati916]

Good short on NVDA. How about doing the same with AVGO (Broadcom)? Earnings this week.

Edit: After seeing the prior post. I'm short the US and not thinking about buying this dip until it's done.
However I may start buying oil (ETF - OOO.asx) tomorrow.

Mr Peter:





My preference is to short when it's trading high, not on down days. Today it's down almost 6%.

Generally if I'm going short I like 'opinion' to be sky high bull. The chip bulls are probably a bit nervous currently. I'll pass on this one.

Re. general market, well overdue a correction. We'll see.

jog on
duc

 

[UMike]

Blogoland has been calling this seasonality play for at least a week.

A few more days of hard selling would suit me perfectly.

jog on
duc

If I sold some more Banks yesterday it'd suit me as well.

On the fence for this one.

 

[ducati916]

Now this reminds me of the overcapacity that was part of the dot.com era.



Getting up there.




China's capital account is open via gold.

This is actually a much bigger deal than is broadly appreciated.



Moving back towards PUT buying.

Rather suggests that the market may have further to fall.



Looking meh currently.




I like to make decisions at PPs.

Still a little more for the bears before I would reassess the odds on a bounce or further declines. Could we see S1 levels? Sure. If we break the P level it could be on.

jog on
duc

 

[ducati916]

Along with SMCI, Deckers Outdoor (DECK) was also added to the S&P 500 on March 18th. Since being added, DECK is down about 1%. Averaging out DECK and SMCI gets you to a decline of about 30% for the two names added to the S&P.

So who did SMCI and DECK replace? Whirlpool (WHR) and Zions Bank (ZION). Since being taken out of the S&P 500, WHR has fallen about 6%, while ZION has risen roughly 19%; an average gain of 6.5%.

Remember when Super Micro Computer (SMCI) went from less than $300/share at the start of the year to nearly 1,200/share by mid-March? Then the stock was added to the S&P 500 on March 18th. Well, since being added to the S&P, shares are now down more than 60%.






PUT buying accelerating.



Getting close to the PP.

Do we flippe-floppe?

The yield curve is now un-inverted (just). Historically has been a very bad thing. The rate cuts if they materialise will further drive this.

The POO is important.

The reason that you cannot have too low of a price in the POO is that US shale oil needs at least $70/bb to make it economically viable to produce. If it falls below and they close down production, you lose reserves from the fields when you open them back up. It's not an on/off switch.

If production is closed down, POO will jump back higher pretty smartish, but supply will lag, pushing POO higher. Far better to keep it in a range of $75/$90. Takes co-operation. Thin on the ground atm.

Index adds/deletion strategy.

Defensive sectors (Utilities/Staples) outperforming. Not a great sign.

jog on
duc

 

[ducati916]

So I forgot to post Mr fff

Rectified:



From the Ritholtz RIA's:

What the Dollar Stores' Collapse Says About the Economy​ And Other Alternative Economic Indicators​

​ ​ ​ ​

I pulled into the train station parking lot this morning and experienced something that hadn’t happened in a long time. I had to drive all the way to the end to find a parking spot. Inside the train was the same story. I sat next to somebody in a two-seater for the first time in what feels like a lifetime. People were standing in the aisles!​ As somebody who thinks of most things through the lens of markets, I can’t help but wonder, what’s the signal here? Is the economy so bad that people must physically go to the office?​ I’m kidding, that’s not at all what I thought. But this type of nonsense has been popping up a lot lately. People are calling them “Alternative economic indicators,” and they’re always signaling a warning. For example, Business Insider (and others) recently ran a story that said strong sausage demand might indicate that the economy is slowing. They pulled this from a respondent in the Dallas manufacturing outlook survey. Mmkay.​ This one is a real knee-slapper, via the St. Louis Beige Book: “Marina owners in Kentucky noted that boat rentals were lower, and customers were anchoring boats in coves and swimming instead of cruising the lake to save on gas.” Swimming is bearish. Got it.​ Most recently, we’ve got what I’ll call “The Dollar Store” indicator. Dollar General reported miserable earnings last week, with same-store sales rising by just 0.5% during the quarter. As a result of their….results, and their dreadful guidance, the stock had its worst day ever, falling 32%.​ Dollar Tree, its largest competitor, also didn’t have anything great to say on their call one week later. The stock fell 22%, its worst day since December 2000!​ In the last two and a half years, these two stocks have seen their combined market cap collapse from $98 billion to $31 billion.​ ​ On their conference call Dollar General’s CEO said:​ “We believe the softer-than-anticipated sales performance in Q2 is at least partially attributable to a core customer that is less confident of their financial position. I want to provide some additional context around what we're seeing and hearing from our customers. The majority of them state that they feel worse off financially than they were 6 months ago as higher prices, softer employment levels and increased borrowing costs have negatively impacted low-income consumer sentiment. As a result, our core customer who contributes approximately 60% of our overall sales comes predominantly from households earning less than $35,000 annually.”​ What does this say about their customers and, more importantly, the economy? I don’t think a whole lot. Today and always, dollar stores serve a financially stressed consumer. These people never feel great financially. So maybe, just maybe, their quarter says more about dollar stores than their consumers and the economy.​ To his credit, the CEO said the softer performance “is at least partially attributable to a core consumer,” and I buy that. I don’t know if it’s 15% or 50% responsible for their performance, but I think it’s more that their core customer is choosing other options. Walmart is the biggest retailer in the United States and their stock is at an all-time high. I know Walmart isn’t a dollar store, but it’s also not Louis Vuitton either.​ I don’t want to act like I’m super plugged into the dynamics of the dollar store market. I don’t know if some adjustments can get them back on track or if the category is in secular decline. But I do know that the alternative economic narratives are completely ridiculous. Let’s get back to basics.​

I used to quite like (respect) the Ritholtz team. Not so much.

Context.

Look at what else is going on. Staples are in retail and trading higher. Discretionary is in a bit of a bear. Why is that?


jog on
duc

 

[divs4ever]

So who did SMCI and DECK replace? Whirlpool (WHR) and Zions Bank (ZION). Since being taken out of the S&P 500, WHR has fallen about 6%, while ZION has risen roughly 19%; an average gain of 6.5%.

Remember when Super Micro Computer (SMCI) went from less than $300/share at the start of the year to nearly 1,200/share by mid-March? Then the stock was added to the S&P 500 on March 18th. Well, since being added to the S&P, shares are now down more than 60%.

now we ( members ) have talked about how ascending to a major index forces index funds ( and some other managed funds) to buy a proportionate amount of that stock , which usually boosts the stock price ,at least short term

now Vanguard ( at least in Australia ) declared that share holdings ( in the various funds ) are available for lending ( which would allow traders to short-sell them )

are the larger long-only funds ( not just Vanguard ) lending out shares where are selectively short-sold after ascending to a major index ?

 

[ducati916]

Full: https://www.bloomberg.com/news/articles/2024-09-05/stock-market-today-dow-s-p-live-updates

and

https://www.reuters.com/markets/europe/global-markets-view-europe-2024-09-06/

So the UE data is tomorrow. It needs to be at expectations, ie. not too hot, not too cold, but just right.

jog on
duc