Market/Economic Analysis: The Good News And The Bad News After Today’s Market Melt-Down

First off, I’ll mention that in the hedge fund, I did nibble some more Intel INTC yet again. I nibbled some call options on GOOG and META, dated out to next week and/or into late October, mostly with strike prices about 10-20% out of the money (10-20% higher than today’s closing price). I opened up a little more long exposure to NVDA by covering some short calls I had. I sold quite a few puts and covered some index shorts, although I still have quite a few puts in the hedge fund. Sat tight in the personal account. Let’s dig into some analysis…

Well, I tried to start this article off with: “Well, the good news is that…” and then I struggled to think of the good news for investors. Maybe the fact that it’s hard to think of a silver lining on a day like today is the good news. Let’s think of other positives right now though, at least for a mental exercise:

1) Ukraine’s winning the war, at least for now, at least that what it seems. You know that the only thing I know about this war and every other war is that we don’t actually know what is going on and everybody in the government (ours and every other government that’s at war) and in the media has a vested interest in tainting how a war is going on, if only for the sake of helping their (our?) side win.

2) A lot of stocks get to be cheap when sell-offs like this occur and if you’ve been patient and waiting for new names to add, this is a good time to start digging in on some.

3) Even some high growth stocks that aren’t outright cheap right now are going to be much higher in three and five years from now and that’s another reason to start looking for some new names and nibbling on some existing names.

4) After decades of the government and the Fed working to keep rates artificially low, we are finally starting to see some normalcy in the debt markets. Governments and corporations shouldn’t be able to borrow money at artificially low rates because it creates terrible distortions, bubbles, crashes and misallocation of capital. People should be able to get a return for lending governments and corporations money and that’s now happening again for the first time in a very long time.  Unfortunately, rates, even now with Treasuries yielding 3-4% and mortgage rates at 6%ish, are still below natural levels (oops, that’s a negative, I’ll repeat it below.)

5) The Space Revolution is continuing to accelerate and in ten years, people will be on Mars and none of them will be talking about the 5% stock market crashette day of September 13, 2022.

So that’s good…

1) On the other hand, the economy remains in a fragile place with the kind of volatile inflation that I’ve been warning about.

2) The stock market isn’t extremely oversold or wildly undervalued.

3) Estimates for earnings are still sticky and probably too high.

4) There’s still a consensus of a soft-landing and a new Kickoff Bubble-Blowing Bull Market and that  consensus will, as usual, probably turn out to be wrong.

5) Most analysts still the Fed will soon pivot and somehow get back to QE, cutting rates to even lower below artificially low levels that they are (still) currently at and that’s not just realistic for a time line that could stretch into at least a couple years or so.

5) I’m not sure retail investors have given up on the high-growth stocks that are down 70-90% and I’m not sure the markets can bottom until that happens.

6) We still need to see a bunch of SPAC stocks and other penny stocks go to zero and delist and I’m not sure the markets can bottom until that happens.

7) We just had The Most Epic Blow-Off Top to The Most Epic Bubble Blowing Bull-Market in modern economic times and it’s unlikely that the economic and stock market cycles are inherent to this Bubble-To-Crash economy and market paradigm that we live in will let this cycle end without more economic pain and the downside in the inherently reflexive market cycle that feed on themselves. Then again, the Kurtzweil Rate of Change that makes our current cycles go faster than ever before might mean we’ll get to a bottom in the economy and the markets, well, soon-ish.

And that last comment is back to being a bit of good news to end this article on. I’m sorry I don’t have any easy answers and I wish I was able to feel good about pounding the table and loading up on longs after today’s big sell-off. But I can’t say that.