Why I’m Not Selling – The Bear Case (Some Confirmation Bias to Help Bears Sleep At Night)

by TimThyTurtle

To start this off I want to say I’m just some kid who thinks he’s the next Michael Burry but I am actually just retarded without the genius part. My Puts are down quite a substantial amount since purchasing but these are all the reasons I could come up with for the Bear case and why I am buying more Puts

TLDR: Buy longer dated Puts retards

Election Year –

It’s getting increasingly more likely Biden wins due to Trump’s depreciating approval rating and if he does win the market will inevitably tank. On the flipside if Trump happens to win the Democrafts will lose their fucking shit and maybe we see something pop off that tanks the market anyways who knows.

Massive Debt Bubble –

This one is rather obvious but a government debt to GDP ratio of 110% isn’t supposed to be healthy. Obviously there will be long term consequences from this obsessive debt how long that takes to become relevant who knows, but it is important to be aware of it.

Corporate debt also stands at record levels compared to GDP at around: ~75%

Consumer Debt is higher than it was in the 2008 bubble

2008 household debt 14.7 trillion

2020 household debt 15.8 trillion

Overly Optimistic Lockdown Openings –

Lockdown dates haven’t officially changed at all yet, in fact LA was extended to May 15th. Lockdowns are going to vary WIDELY between states and even counties. So even if we are able to open parts of our country up we wouldn’t be running at full capacity anyways so why is the market pricing like we will be back to normal.

This also doesn’t consider the fact that there is a very real possibility of having another outbreak by loosening restrictions too early.

Lifestyle Changes –

The fact is people will start to live a very different life then they did pre-Covid. Schools are already closed for the rest of the school year and if we don’t figure out a way to stop schools from being Covid hotspots then they will stay closed or go online. This would mean parents either have to stay home or pay a stranger (who they probably can’t afford anyways) to take care of their kid in the middle of a health pandemic.

People aren’t going to be wanting to go traveling, concerts, sporting events, large gatherings anymore, not for the rest of 2020 at least. Unless we get a vaccine or miracle drug, which experts say is minimum 10 months out, then people simply aren’t going to be living the same lives anymore.

Uncertainty –

The US economy relies on consumers buying shit they don’t need. No matter how optimistic Trump is no one is going to be 100% convinced Donald Trump did the impossible and cancelled the looming Global Depression so we can go out and spend money like normal. They will start to save because of uncertainty. Uncertainty/Fear is the only reason people sell and become frugal. There are so many things to be uncertain of right now and no one who means anything in the market is going to ignore that. There’s still many unknowns about the virus, the ramifications of unlimited QE, the effects of buying junk bonds, future relations with China and other nations, if policymakers and government will actually come together and work effectively, no one knows this is all our first runs. Relations with China are going to be shaky at best in the coming months to years, possibly saying goodbye to the cheap labor market.

Unemployment –

The big one people believe we are flattening the unemployment curve yay! What these autists don’t realize its not flattening we are seeing the maximum amount of cases that can be processed daily. We had a holiday last friday

6.62M unemployment cases that came out last week divide that by 5 working days = 1.32M a day

5.25M unemployment cases that came out this week divide that by 4 working days = 1.31M a day wouldn’t that be quite a coincidence huh?

Unemployment is projected to be worse than the Great Depression also businesses that are currently learning how to operate with less employees will realize they don’t need as many employees to run the business as they thought and they won’t suddenly want to add on extra expenses in these uncertain times if they dont have to.

Uncertainty leaves people frugal. Even tech industries that are thriving in this environment like Google are cutting back on hiring because they are”uncertain” of the future. So we are supposed to believe the companies that are closed right now will reopen ready to hire their whole workforce back?

Disconnection of Fundamental Investing –

Companies are no longer being traded at reasonable P/E levels, pretty much every single company is leveraged to the tits

Stocks go up and down but they’ve only been going up for the past 10 years

There hasn’t been any fundamental relation to the market valuations anymore they have been pumped by QE, excessive share buybacks, and absurd investor growth expectations and speculations

GDP decelerated from 3.6% in 2018 to 2.9% in 2019 yet in 2019 the SP500 saw 30.43% growth.

Warren Buffet has been sitting on a mountain of cash because he is waiting for prices he doesn’t think these are bargain prices yet and I have to agree.

The Printer Go BRRRRRRRRR –

We make memes about the printer going brrrrrr but realistically the Fed’s only job is to maintain financial stability and they are aware of hyperinflation. I am not saying they aren’t going to print a shit ton of money but they too know that there is a limit because if they overdue it then they also screw themselves over by collasping the US dollar.

Even if Powell somehow prints us out of a recession and we escape unscaved, the rest of the world is still screwed and not gonna have a miraculous recovery like us. I bet you autists didn’t even know 40% of the SP500 revenue is international so even if we fully recovered there is no reason for us to suddenly start trading at prices like there was no coronavirus.

Stimulus Money Is Running Out –

Money for the SBA loan program has already run out and how many of us actually know people that got the money and will be able to use it to successfully turn around their business. The demand is insatiable because it’s literally free money, they didn’t budge enough for the plan and they let it be first come first serve. Congress isn’t exactly happy with Trump at the moment and they are hesitant to allow another bill pass as rushed as the last one was.

Possible Mortgage Crisis –

Nearly ⅓ of U.S. apartment renters didn’t pay april rent

Forbearance requests grew by 1,270% between the week of March 2 and the week of March 16, and another 1,896% between the week of March 16 and March 30th.

You expect me to believe that once all the forbearance payments are due in one lump sum the homeowners will have enough money to pay it?

Only 40% of Americans are able to cover an unexpected $1,000 expense such as an Emergency room visit.

Debt Cycle –

There are two debt cycles a short term debt cycle which happens ever 10 years or so and the long term debt cycle which takes about 100 years to go through.

According to the theory we should be due for another depression like downswing which would match up with the timeline of the great depression roughly 9 years ago.

Ray Dalio explains it very well.

Logic –

At this point SPY is at $287 which is actually closer to our ATH of 339.08 than our “bottom” at $222.95

Unless you believe we are going to new ATH soon then there’s much more room for downside than upside in the short term, switching to calls would seem in layman’s terms retarded

Conclusion –

Stocks go up and they go down. But I believe we will see another bottom. The problem is when? To be honest I have no clue. The best I can do is pick something far but reasonable. I have Puts dated all the way to October

 

 

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.