Despair and capitulation – invest.ch

When I started writing these stock columns, it was 17 years ago (or almost). We were in a wonderful world where markets were just growing and where we began to think that work was no longer just an opportunity, but making money in the stock market became a way of life. Two years later, we discovered the SUBPRIME concept. For many of us, it was an absolute mystery, but the market collapsed, and I remember a special moment when we saw Lehman traders leave their offices with their boxes, a moment when a customer told me, “I will never buy again. promotions! it will NEVER return !!! “.

Audio from June 14, 2022


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666

We were more or less at level 666 on the S & P500. We are still far from where we are in the US index. And this despite last night’s apocalyptic closure. Yes, the S & P500 is in a bear market. This has been on our faces for some time, and doubts about inflation, fears about raising rates and the fierce “hawk” of the Fed, which expelled all the pigeons from the circle of communication at the FOMC meeting, were justified. investors who began to show the first signs of capitulation.

I must say that we will not be spared. First of all, it was the CPI activists who continued their long work on blasting. We must believe that the whole weekend, as well as Friday afternoon, will not be enough to digest the fact that the peak of inflation was not yet this month. So we spent most of the day thinking that the Fed really had no choice but to pull out heavy artillery to curb inflation once and for all – but then, all of a sudden, how about growth ???? Is the recession approaching us? We could ask questions.

In addition, we asked ourselves …

Return of experts

And we won’t be the only ones to ask, because all the financial stars, investment dreamers and Merlin, the Wall Street wizard, almost EVERYTHING, I quote: “REVIEW YOUR EXPECTATIONS FOR THE Fed.” Yes, because it would still be unwise to look like idiots tomorrow night, because we weren’t aggressive enough about what Jerome Powell was going to announce. Last Friday we were completely immersed in the concept of “PEAK OF INFLATION”; Twice in less than 5 days, it will not help her for year-end scores and bonuses.

So yesterday, whether it was JP Morgan, Goldman Sachs or Jefferies – and I forgot that some of them, all came to announce with one voice, one mind; that the Fed may well raise rates by 0.75% instead of 0.5%. So a 1% increase would be a real surprise. It is interesting to note that everyone set themselves up “expecting a big rate increase from the Fed”, while six months ago we were told that Powell’s job was to raise rates moderately and delicately. And suddenly the steam roller is welcomed, because we panic only at the thought that inflation can go so fast that we will never catch up. It is clear that what was microsurgery with a laser scalpel, became a real massacre with a jackhammer and a mechanical shovel.

Pannnniqqqqqqqueeee

That is why we are panicking. Whether it’s on the side of investors who finally seem to be in the liquidation phase – even if volatility remains very (too) low – or on the side of the Fed, which gives the impression of spending its day breathing a bag of paper to prevent anxiety attacks. In any case, the FOMC meeting will start today, so the discussions will go well, and keep an eye on the PPIs that will be released this afternoon. It would not be enough for the latter to be as strong as on Friday, and JP Morgan, Goldman Sachs and Jefferies will arrive tonight to let us know that they expect the rate to rise by at least 3% as we are confident that inflation will not increase. more and more, and economic growth will be just a concept from another time when you weren’t driving through Australia on a Ford Interceptor to get petrol.

Be that as it may, yesterday we were in the “bloodthirsty” mode and nothing happened. The S & P500 index ended its session in the bear market area – and since then we can no longer open the newspaper without coming across graphs, tables and explanations of the sequence of events and the possible definition of the “bottom”. We forget that after the panic phase there is a phase of capitulation and discouragement. Only then can we begin to tell ourselves that we are finding the bottom. We will still be depressed, we will not believe it, but it will start to grow – but the client will still be in the mode “I WILL NEVER BUY PROMOTIONS !!!”. “And that will only be until his friend the dentist tells him that he earned 35% in three days by buying a biotech company that is developing a drug to get the paralyzed to go and multiply bread again.

A glimmer of hope

Therefore, the markets exploded again, and May support jumped. Whether on a Nasdaq or whatever. European indices have not gone unnoticed, and we understand this in many ways. Yes, because even from the United States we are interested in what the ECB is doing to raise homeopathic rates, while the Fed is panicking because they are losing some control over inflation.

Madame Lagarde seems to be “refining her strategy by working with the sophistication of a flower-pollinating bee,” and the Fed is cleaning up the economy with an antihydrant. Suddenly, CAC and DAX erased the pillars and destroyed the similarity of the bullish trend, which took them three months to create. This morning we see damage only when we think about when it will rise. Another good reason not to get carried away. As for me, I think that by Thursday morning I will be sitting idly by and meditating so as not to try to enter this market too early, which constantly shows that it can be worse. Much worse.

Asia and the rest

This morning in Asia, we see only harm and acknowledge that Americans will have no choice but to watch rates rise much faster than expected, and that this time Powell will also do whatever it takes, but that will stop inflation. Any blows will be allowed, even tackle above the knee, see above the thigh, in the genital area. Now Japan has fallen by 2%, Hong Kong – by 1.2% and China – by 1.6%. US futures, however, rose 0.7%, but given that we caught our eye, this is closer to a “dead cat bounce” than anything else. Especially before PPI and FED, less than 28 hours.

If you want to talk about capitulation, liquidation, there is a sector you have to look at; it’s a crypto. We will not go there by four paths. If yesterday’s fall in US indices was violent, it has nothing to do with the prison that bitcoin or the airwaves and all their cousins ​​and friends were hit. Bitcoin is currently trading at $ 22,000, and this morning we were below $ 21,000. The cost of airtime is 1160 dollars, at least – 1075 dollars. I’m not painting you, but we will say that there is a strong panic and that everyone goes outside, and suddenly it becomes very interesting to buy 10 years with a yield of 3.35% – no more dreams of greatness and Bugatti Chiron painted in camouflage color. Anyway, for now. It should be noted that the fact that certain institutions in the ecosystem have blocked the possibility of withdrawing or transferring funds did not fully motivate investors. It should also be noted in passing that Microstrategy – which has a “business plan” to buy bitcoins and all – was literally beheaded yesterday and lost 25%. Not to mention that the guys borrowed money to buy bitcoin. Ippi.

On the other hand, the only thing that is getting more expensive is oil. After feeling weak last morning, the WTI returned above $ 120, and the gold, which I recall is the HEDGE OF INFLATION, has just risen from $ 40. Think, Charles.

News of the day

In the news of the day, we will clearly remember that all the newspapers and other media agreed to give us a course on the bear market, how long it will last and what it will take to “get out”. This is the only thing you will find in today’s news.

Well, that’s not quite true, we’re also saying that bitcoin is being wiped out, that Binance is suspending bitcoin withdrawals, and that the Terra / Luna case is suing the platform (however, it looks like it’s working again). We are also discussing the issue of EXCELLENT quarterly figures published by Oracle, which recovered by 15% after closing. There are also banks that are financing Ilona Mask for his takeover on Twitter, wondering if it would be better to finance him to terminate the deal and leave Twitter instead of stubbornly wanting to pay $ 54 for something when you can find him on Ali-Express for $ 36. When Musk announced his intentions, the Nasdaq grew by 25%, and without that, I believe Twitter would have traded for $ 25. Another figure in the interesting events of the day, as we lost a market capitalization of $ 9.3 trillion. We lost 9.8 trillion during the COVID crash, and we recovered 18 between imprisonment and the peak of the year. Similarly, if it continues to fall, one may wonder what the purpose of monetary infusions will be, if not to get inflation out of control. Another funny number to remember; In a recent survey (a survey conducted on this full moon night), we learn that 91% of investors plan to buy cryptocurrency within the next 6 months, so we have not yet fully capitulated. There is even a hedge fund manager who estimates that bitcoin could “easily” reach $ 100,000 over the next 24 months. Hey, it’s Christmas now … Or in two years.

The side of numbers

Today, from an economic point of view, we will have the CPI in Germany – just to see what Lagarde is going to do with his homeopathic pills to fight the beast. There will also be ZEW in Germany and Europe, not forgetting, of course, about PPI in the US. The FOMC meeting will start today, Powell will talk to us tomorrow, and instead of assuming that the Fed can do this or that, we will have specific information, but let’s remember two things this morning, two HITS:

1) The Fed will raise rates by at least 0.75% from tomorrow
2) Oil will rise to $ 180, so the Fed will raise rates by 1% in July.

At the moment, futures are gaining momentum, showing openings of 1% – but yesterday expecting 4% of most commercial banks, which claim that we will all die, and BlackRock, which announces that it is too early to buy shares, we have not yet left inns at the bottom of the pit, deep in the woods.

Despite the atmosphere worthy of the first Crazy Max, remember that in 2009 at 666 on the S & P500 the guy told me: “I will never buy shares again!” it will NEVER return !!! “.

Have a nice day and see you tomorrow!

Thomas Veylet
invest.ch

“We need to understand, first, that there are market failures; and second, that there are things like asset bubbles and irrational wealth. There are periods of boom, bubbles and mania. These things, if left alone, can lead to accidents, ruptures, panic.
– Nouriel Roubini