So, the market is going to crash harder than a Boeing without updated software soon. It doesn’t really matter what awesome thing you think you’ve stumbled onto, it’s going to go down, hard.
The Fed has put the market on easy mode ever since the COVID crash, but that’s coming to an end soon. So if you don’t want to lose all your tendies in the coming storm, listen up.
Oh, what’s that you say? There won’t be a market crash? Hang on, lemme drop a little knowledge on you.
- the RRP numbers. RRP is the Reverse Repo Program the fed runs where banks and other institutions park money at the fed overnight in exchange for Treasuries, then swap them back the next day. This usually spikes at the end of quarters and the rest of the time is super low. Over the last few months it’s been skyrocketing to all time highs. It hit $991 Billion this quarter end, then after the Q2 checks ended it fell all the way to.. $731 Billion.
Why is this bad? It means the banks either need collateral so bad they’re putting this much up overnight to get it, or they’d rather get an annualized return of 0.05% than anything else, at a time when inflation is officially running at around 5%, and unofficially as much as twice that. This means they “the smart money” think a guaranteed loss of 4.95%/year is the best they can hope to do.
2) The housing market is about to go boom in the bad way. Right now we’ve got increasing prices, tons of supply under construction, combined with decreasing sales. That’s basically the perfect indicator of a bubble about to pop. Also, the end of the eviction moratorium is still waiting around the corner to dump millions of houses on banks that really don’t want them and will be very “motivated sellers”. This should have already happened, but when Team Sleepy Biden got a look at the amount of doom coming, they quickly punted the ball, and emergency extended the eviction moratorium by another month to the end of July. Kick that can all you want, it’s still there and just getting bigger.
3) The commercial housing market is basically in the same place today as the residential market was in 2008, and banks are loaded to the tits with bad CMBS products. If you’re confused how this could happen, again, only a few years later, it’s pretty simple, all the guys who did the MBS nonsense in ’08 didn’t face any penalties, so they moved over to CMBS and started inflating the income of the businesses renting properties. Now, what has the pandemic done more than anything else? Killed the small businesses and retail stores that make up the majority of tenants in said CMBS loans. So you’ve got a bunch of companies that Amazon just put out of business not paying their rent anymore, which means the places they were paying rent to are no longer paying their mortgage. Combine that with many companies reducing their office footprints with hybrid work from home setups, and… CMBS go BOOM in the bad way.
4) The signs, they are the everywhere. Every company that can is going public right now, regardless of whether they make money or not. This is one of those classic “the top is in” signs. Retail is fomoing into the market in a big way. Remember the line about how a guy knew the market was done when his shoeshine boy had stock tips? Now it’s your Uber driver and Pizza delivery guy.
5) Margin debt is around $860 billion right now. And that’s just what’s disclosed. Remember Bill Hwang lost $20 billion and even more for Credit Suisse and Deutsche and Nomura? Yeah, none of that leverage was disclosed because it was all in swaps. You think he’s the only family office out there pulling stunts like that? And don’t even get me started on how much margin is tied up in the funny internet money. Hell, Binance lets people margin at 100 to 1. That’s beyond insane. So yeah, huge amounts of margin mean whenever things take a turn for the worse, they spiral really, really fast.
6) When in doubt, zoom out. We’ve had people posting hundred year and twenty year charts and the stock markets channel for months now. They all show the top of the channel that makes the bad bounce down happen is being touched. Elliot Waves and other kinds of TA all show the same thing, we’re about to go down, way downtown, like 1929 down.
7) All time highs, but 50% of stocks are under their 50 day moving average. That’s happened in six of the last seven trading days. It’s never happened in history more than 3 out of 5 days before, and every single time was shortly followed by a massive, massive crash. The crash has already started for the smaller fish, but the indexes are being propped up by the big names because money is de-risking by fleeing to them, hoping they’ll survive.
8) Student loans. The moratorium ends on September 30. Meaning that in October all of a sudden the people most likely to spend money in the economy (young, mid to low level disposable income) will see that spending ability completely wiped out all at once. This is tens of millions of Americans who immediately won’t be spending money at businesses. And you know what the most common month for financial crashes is? October, which is right after September.
Finally, you don’t just have to take my word for it. Here’s a list of some prominent financial types calling for doom soon.
- Dr. Michael J. Burry
- a whole bunch of other assholes who don’t have his track record but are echoing it
So how you do make money on the collapse of the market? Don’t try to pick companies and buy puts, if you do that you have to root on stuff failing. Buy calls on SPXS, SQQQ, and SDOW, then you get to root for things going up. I don’t do posts very often, but my first DD on the oil markets made a whole lot of you a bunch of money. Here’s another chance to do it again.
Positions:
10x HYG 7/23 80p
10x SPXS 7/16 40c
10x SPXS 7/16 55c
Honestly I don’t know if these will print or not. But on the day they expire I’ll just roll them or buy more another month or two out and will continue to do so. If you want to just buy and forget, Jan 2022 calls are the safest thing I can think of. Maybe this can gets kicked out past the summer, but there is no way it makes it past this fall and the student loan spending cliff.
EDIT and TLDR: Market go boom in bad way. Bet against market to make tendies. Money printer no work no more, printed too much money make liquidity trap – RRP evidence of liquidity overload.
Disclaimer: This information is only for educational purposes. Do not make any investment decisions based on the information in this article. Do you own due diligence or consult your financial professional before making any investment decision.