The Q-Trap

To Buy or To Sell?

An inordinate amount of time is spent debating — with maximum consternation — whether to buy or sell. The charts that guide us on our journey depict the emotional roller coaster a group of humans travel in their quest for profits.

Big Bad Tech

Justified or not, the market lumps crypto and big tech in the same cesspool. The Nasdaq 100 Index (NDX) represents big tech.

Free Monay!

Roaul Pal makes a very convincing — and I believe, at least on a long-term basis, correct — argument that computers and the internet ushered humanity into an exponential age. In this age, valuation is based not on discounted future cash flows, but Metcalfe’s law (a principle that says when it comes to networks, users = value).

Ski Boots

The most important piece of equipment to own outright when skiing are your boots. They are the direct connection between your body and the ski. Back in the day when I was a young lad, I raced, and my ski boots were excruciatingly painful. I can now afford comfort and performance, and my feet aren’t crying out for help on every turn.

China Can’t Save You

In the aftermath of the 2008 Global Financial Crisis, China stepped up to the plate and re-inflated the world. China embarked on one of humanity’s biggest quests to print money and build stuff, regardless of whether that stuff generated real economic value for its citizens. If you pay people to dig holes, fill them back up, then dig again ad infinitum, that is a perpetual GDP growth machine. Yippie! That is what China did on a colossal scale. Bridges to nowhere, empty apartments– anything to goose growth and employ folks. The externality was a massive jump in indebtedness at the sovereign level.

Kuroda-san’s Bazooka

Japan already reflects the rest of the world’s tomorrow. (As an aside, I highly recommend reading Professor Werner’s book, “Princes of the Yen”. I have watched the documentary, but have yet to read the paperback book.) The BOJ flails at windmills in an attempt to generate inflation to rectify the fact that couples don’t want kids.

  1. Borrow JPY cheap. The JGB’s 10-year yield is 0.24% vs. the UST 10-year yield of 2.58%. You have picked up 224bps of yield for 10 years– that’s huge.
  2. Sell your borrowed JPY, purchase USD. But do not hedge the currency risk (you hedge on the left-hand side), as JPY is freely convertible. The forward points are negative because of covered interest rate parity. (Google is your friend if that is all Klingon to you).
  3. Buy US-listed stonks, preferably some big tech names.
  4. You have now funded your stonks with cheaper money.
  5. If JPY strengthens, you lose money, but that’s not your problem if you are a fiduciary. When this blows up in your face, just ask your pliant central bank for a bailout. But you already got your bonus — YAHTZEE!

Technical Analysis for Dummies

If the chart and the fundamentals line up, then technical analysis has value. Otherwise, I mostly believe it’s a convenient tool for confiscating money from traders who are desperate to find a blueprint for making cash money as quickly as possible. Unfortunately, there is no easy “profits” button.

It’s Time for the Percolator

When War Over?

Any mass media produced during wartime by any flag’s pliant news organisations is mostly propaganda. Instead, I rely on paid research publications whose goal isn’t to influence my opinion, but rather to help me make informed investment decisions based on objective facts.

Crypto Crash Helmet

Let’s put it all together.

  1. Bitcoin and Ether are highly correlated to the Nasdaq 100. If the NDX tanks, it will take crypto down with it.
  2. NDX, like all long-duration assets, benefits from falling interest rates.
  3. Unprofitable tech, such as ARKK, got smacked as UST 2-year rates rose. Big tech (NDX) has been saved for now by a few profitable names, but even it has traded lower.
  4. The Fed and all other central banks are fighting inflation, and must therefore tighten monetary conditions, not loosen them.
  5. Japan, even though it is pursuing accommodative monetary policy, can’t save the world’s risk asset markets because its bazooka is a pea shooter when compared to the Fed’s.
  6. The NDX bounce failed at the 61.8% Fibonacci Retracement level, and will continue lower towards and below 10,000.
  7. The Fed put is not based on equities but on US corporate credit markets, which are still healthy-ish… Watch the BBB 2s / 10s spread for a sign the Fed is about to abort the mission and juice the markets higher once more.
  8. Global growth will decline on higher commodity prices driven by the continuation and possible escalation of the Russia / Ukraine war. This, in absence of accommodative central banks, will also weigh negatively on stonks.
  9. Ipso facto, NDX will fall, and so will crypto.

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Arthur Hayes

Arthur Hayes

Co-Founder of 100x. Trading and crypto enthusiast. Focused on helping spread financial literacy and educate investors.