You notice how investors often like to overstay their welcome?
The people throwing the party give them plenty of opportunities to get out. The music stops playing. The food is already gone. The lights even get turned off.
But some people still choose to stay, almost as if they have no where else to go.
And then they sit around wondering what happened?
“Oh, the DJ going home meant the party was over?”
“What do you mean they’re not ordering any more food?”
“Who turned out the lights?”
These are what we call “Bag Holders”.
They’re an important part of the market cycle, because these are the people who are buying all the shares that the rest of us need to sell, so we can head over down the block to the much better party. The one that’s just getting going.
In life, you need these sorts of people.
We should not make fun. We should not troll. We need to be thankful.
It’s people like this who provide the necessary liquidity for the rest of us to dump our shares on.
We couldn’t be more thrilled to see the Nasdaq selling off. We hope this continues, and in a perfect world it gets much worse.
Here’s a good chart showing the recent bounce in Large-cap growth relative to Value NOT being confirmed when you look down the cap scale.
These are massive tops.
I was taught to buy smiley faces, not frowny faces.
We’re looking to cover our Nasdaq shorts in $QQQ down near 275.
That hasn’t changed.
And if anything, the recent data has just confirmed that this was a good idea and we should stick with that plan.
Look at credit spreads. Treasury Bonds are outpacing Junk Bonds for the first time since Q1 last year. Remember, this was a big part of the reason we got so bearish stocks in late January 2020, well before any pandemic. The bond market was the signal.
The bond market is smart. We don’t want to ignore this.
And again, it shouldn’t be surprising. The stock market breadth has been deteriorating for some time, particularly in the Nasdaq and Small-caps.
So now the Bond market is deteriorating too. Makes sense.
And speaking of buying smiley faces, there are still some good opportunities on the long side with very favorable risk vs reward propositions. You can find all the stocks and ETFs we like on the long side here. We always update this list when we add new names.
Another set of smiley faces comes from Monero and Cardano.
Look at these bases:
I understand some brokers don’t allow their customers to buy these. Just keep in mind, many of these brokers, particularly the publicly traded ones are not in the business of making your life easier. They are in the business of increasing shareholder value.
And there’s nothing wrong with that. As a publicly traded company, that’s their #1 responsibility. And in most cases, it’s in their best interest to keep you in stocks and bonds, and away from crypto.
Again, that’s their duty. Shareholders come first. You, as a customer, are far from the priority, no matter how much they try to convince you otherwise.
So if you find yourself in a position where your broker does not allow you to buy bases like the ones you see above, I would encourage you to find yourself another broker.
It’s one more step. So what?
The Nasdaq hasn’t been working for almost 3 quarters now. So this isn’t anything new.
Follow the music. That’s how I learned it.
This is where you’re going to find the party, the food, the booze, etc.
Right now the party isn’t it the Nasdaq. People have moved on and the bag holders are sitting around wondering what happened?
This isn’t your problem, though. It’s not my problem either. It’s just what it is.
We want to buy smiley faces. That’s what’s important.
If Cardano is above 1.48, we want to be long with a target near 3.40. If Monero is above 470, we want to be long with a target near 740. These are $54Billion and $8Billion market-caps respectively. That’s equivalent to buying a large-cap stock and a mid-cap stock that’s about to graduate to large-cap.
Maybe your broker doesn’t see it that way.
But it’s not that they’re blind. It’s just that in many cases, it’s against your broker’s shareholders best interests for you to buy cryptos instead of stocks and bonds.
They’re not here to serve you. They only exist to increase shareholder value. And to be clear, there’s nothing wrong with that. But it’s important to understand how the world works.
You may not like that. It may not be how you think the world “should” work. But no one cares what you think “should” happen. We need to live in the world that actually exists.
And if you don’t like that, you’re welcome to take your ball and go home. You have that right.
You can also find all the stocks & ETFs we want to buy here.
What’s on your radar?
Anything interesting catch your eye?
We’re always looking for new ideas.
Fire it over. Let’s take it a look!