DesmondMilesDant OP t1_j9hvtpc wrote
Reply to comment by Moist_Lunch_5075 in Wall Street Newsletter S02E07 : Why is there such a disconnect b/w Stock and Bond market? by DesmondMilesDant
Sir in all of this part 1, part 2 , part 3 series why do you think that i just randomly made things up like 1-2 months ago and said SPX will go $3200. This thesis is basically my stagflationary thesis back from summer of 2022 when i said :
March 16 bottom -> April top -> June 15 bottom ( turned out to be June 16 swiss franc bottom ) -> Aug 15/16 top ( nailed this one ) -> Oct 2nd week bottom -> Nov 2nd week top ([Nov 4th week) and then we have a Q1 disaster where Jan will be high Vix and bottom by March. It turned out to be a giant mistake in my calculations but i am still optimistic for some kind of lower lows in Q1.
That's it. Now fundamentally you can debate with me no this has changed or that. Or how Fed will never let markets crash. Or how there are sufficient bank reserves. I totally get it. I might agree with most of your pts just because i am not really from the economics side. I am just a simple Flutter developer who just fell in love with stocks and crypto. I never read a book on economics nor did i learned any trading skills although i may have taken just one class on Ecom but i totally fell asleep. So of course you know better than me.
Everything i learned about finance is from watching interviews of Peter lynch, Warren buffet, Soros, Napier, Minerd, Drunckenmiller, Templeton, Eisman, Grantham, Dalio, Chanos, Ichan, Tepper, Paulson, PTJ, Ackman, Einhorn and so many other legendary investors. I even made a compilation video of them speaking about economic slowdown and how everyone should just follow it instead of watching some Yt or Twitter expert or anyone else.
So whenever i say Q1 disaster its just because i am biased. I cannot change my stance because that would be a huge disrespect to all of the people who have faithfully watched this series since last yr. So if i am wrong so i be wrong but i will try everything in my power to atleast make an attempt for lower lows in Q1 itself. No matter how bad the odds are. My recession playbook will be shared when i see lower lows in SPX. Only then will i decide should we go to ATH and then crash -50% with stag route or should we go deflationary bust route to $2500 and lower. Right now if you ask me i will take the stag route to S&P5000 and then crash -50% for recession 2024 but again before it happens i want Q1 disaster.
So good luck to you sir! Have a great trading week. Regards Desmond
Moist_Lunch_5075 t1_j9i5mc9 wrote
To be absolutely clear, I don't think you were making anything up.
I've been doing macroeconomics for well over 20 years and the reality is that this stuff is very hard to understand, and even the best of us can only scratch at the surface because we're talking about the entire, irrational history of human individual and collective interaction.
That means that it's very easy to let limited information and biases influence our positions.
I'm well aware that you've been making these predictions because I've been reading your posts. They're not bad... they're decent. That's why I'm engaging. I'd say in the solid +20% of interesting posts on here.
So I'm not trying to rob you of being right, but rather suggesting that there's a reason why sometimes predictions don't go as expected.
And that happens to all of us. The market has a way of making us all look like fools. To be clear here, I'm not saying you or I are fools, just that the market proves us all wrong.
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It's easy to predict the market will go down while it's going down. In November of 2021, while my bias was still largely bullish for 2022, I was engaging with people on here saying I could see the market correcting 20% in 2022.
I thought that would happen in the first half and we'd be up a bit for the 2nd half. I thought the inflationary whipsaw would slow down sooner, and I think without Ukraine I would have been mostly right. At the time, everyone was screaming "crash!" and I was saying "I think it'll be an orderly correction."
My predictions then were... mostly right overall. 20% was correct, more or less. That it wasn't a crash but rather a correction was correct. That inflation pulled back on both the MoM and YoY comp was correct.
I knew that the math on inflation would bring the comp down. I also knew that a revision of relative valuations with a de-leveraging wouldn't crash the market like people suggested. I knew that said de-leveraging wouldn't cause banks to implode.
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So it wasn't random for me, either, but it's just impossible to get every bit of understanding right and you can't see the future.
While the times we were right mattered, they don't eliminate the impact of the times we were wrong. I could have run away from those things, but I didn't... I did research, I observed patterns, I did a ton of chart work to learn to trend things I couldn't see. A lot of that came out to some really darn good predictions last year myself that predicted SPY movement in many cases down to the dollar. With good, solid technicals, you can do that... but it didn't work every time, and that's OK.
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It's OK to get something wrong, that's how we learn. And all of those people who you listed off? I've seen some of these videos and they would ALL say that learning from our mistakes and our biases and expanding our view is the superior outcome.
I had a chart last year that said that SPY 320 was on the table... then the bullish reversal trend change happened. So I get that 3200 wasn't random. I saw it in the chart in Q3 last year. So I'm definitely not saying you made anything up, just that there are probably things you're missing, like all of us.
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>So whenever i say Q1 disaster its just because i am biased. I cannot change my stance because that would be a huge disrespect to all of the people who have faithfully watched this series since last yr. So if i am wrong so i be wrong but i will try everything in my power to atleast make an attempt for lower lows in Q1 itself. No matter how bad the odds are.
There's a difference between having a conviction and holding onto a bad play.
I would say your position right now is still a conviction, but this isn't a team sport. You don't generate the crash by selling your theory of it, and you can't will it into existence. Crashes mostly happen because the underlying mechanics of the market fall apart.
Sometimes those mechanics are economic, but usually they influence the financial system. That was true in the 10s, 30s, in the 40s/50s... in the 70s and 80s, in the 2000 and 2008 crash... in the end, they all have the unifying factor of the bottom falling out of the liquidity system.
Recessions played a part in those crashes, but not all recessions resulted in liquidity crises.
After lots of work on trending the market, I strongly believe in planning both sides of the trade.... so I say continue planning for your crash and what you would do, but also plan on what happens if you're wrong. How do you avoid loss if you're wrong? How do you profit on the other side?
I have skin in that game. Last year, in Q3, I rode end of the year SPY 330 puts thinking 320 was on the table, hoping for a big payout. I kept dumping money into the position because I was sure we were on the pattern for another leg down, and it really looked like it a couple of times... but that money just wasted away because it doesn't always work the way that we think.
I stuck to the bad play, and lost money as a result. Don't stick to a bad play if you can avoid it. And you don't owe your fans blind conviction in these plays... again, it's not a team sport. The team is "me" and the game is "gains."
What you owe your fans is honesty, sincerity, and thoughtfulness.
And I honestly think you do that. I think what you just said takes a lot of guts and integrity. I get it. I understand the urge to hold onto the idea.
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I just hope I've brought you to think about some things as possibly being more complex than maybe you were considering, or even just brought you to think of something a little differently. In fact, I hope we both did that for each other. You did it for me... and if this all made us think and reassess, then it's all been worth it.
DesmondMilesDant OP t1_j9ijx1s wrote
Wow 20yrs. I cannot even imagine the craziness you went through dotcom when Erp went below 0 towards negative.
And yes i agree. Market can remain irrational. I thought the top in SPX was done around $4k back in Nov. But god it went sideways and then to $4.2k. Lot of my friends who trusted on my Jan high Vix got rekt coz they had puts not etfs like me. I still feel sad because of it.
And yah you're right. Ukraine war just dragged the inflation higher due to supply shocks. Otherwise fed funds of 3.4% would have been sufficient enough with QT. Enter Zoltan pozsar. Had i not come across his newsletters about structural inflation due to multipolar world i would have been left holding bonds. He was the only one suggested back in summer that we need fed funds at 5-6% and mortgage loans 9-10% and hold them for entirety of 2023.
Just like you, i did research as well back in summer. I was putting like over 10+hrs and learning all sorts of stuff. Everything was new to me at that time considering i had no economic background. I had to learn from watching podcasts and interviews heck even news and process how can i use this or that. And then every single sat-sun with a can of beer i was writing these crazy eternity long letters so that later i can come back and check what was my thought process.
And yah i totally get why you thought SPX $3200 looked more likely at that time around in sept-oct.
So yes i kinda get what you're trying to teach me. There's a high possibility that $3200 aka Q1 disaster does not happen and we could pretty much rally up here. So like whats my backup plan in case this doesn't play out. But i am being arrogant like nah no back up. It's like knowing there's a possibility you're car could end up in accident somewhere in the future but still not trying to get a car insurance.
Tbh i don't know what to do. I will think about it and write such newsletter.
So thank you for educating me and giving your precious time. And yes this was all helpful sir. 😃
Have a great week!
p.s. Why do i feel like i had this conversation with you before or maybe its just a Dejavu.
Moist_Lunch_5075 t1_j9lw22o wrote
I think we've had this convo before but I feel like this one was more productive. I don't remember specifics from before, but now is what matters hehe.
Yeah, this game is hard. We can all learn from each other with an open mind.
Let me know what you come up with for an alternate plan. It can result in cognitive dissonance to plan both sides, but the stress is a LOT less when you have an exit plan.
The trick is to put enough risk on the table so that you don't get shaken out easily, but that's a process that people have to go through to find their own appetite for risk. If you just want to put everything on the table and say "down or bust," cool... but just be aware that "bust" is a real possibility. LOL
It's really about being honest about the risks that we're taking.
And my advice is to be critical and check everything. Including what I say. Don't trust ANYONE in the market. Everyone's playing their own game.
You're a good dude, and I appreciate this conversation and your honesty.
Have a great weekend!
Moist_Lunch_5075 t1_j9i6vwz wrote
And for the record, I really do appreciate the exchange, your drive to improve, and the thought you put into all of this.
I've spent a lot of time studying trading structures in both directions, so if you want to talk about how to build risk-defined positions, I'm glad to share what I know.
But I also want to say that my goal wasn't to get you to acquiesce to me. It's not about who knows more, it's about sharing ideas and exchanging thoughts, and I think this exchange has been wonderful for that.
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Good luck to you, too, and I hope you also have a great trading week!
DesmondMilesDant OP t1_j9ikjyo wrote
Sure i would definitely love to.
And yah i totally get it. It's about ideas and not who knows more and then its rest upto the markets to decide whether it agrees or not.
It's been a pleasure to talk you sir. Thank you. ✌️
Moist_Lunch_5075 t1_j9lwdoc wrote
Likewise!
I'll try to put something together on how I think about trades. There are lots of trade structures out there, I could probably spend the rest of my life experimenting with all of them, but have done enough to have a decent understanding.
Where are you starting from? What kind of trades have you done and what were your best ones?
DesmondMilesDant OP t1_j9mmj41 wrote
I used to trade crypto. Longed the 30k dip and then shorted 60k. And then utilized the profits to long at 33-34k again and then shorted the 48k. Then like a poker addict i went all in at 33-34k hoping for a 100k "The dream". But got rekt holding Elon bags.
Then i switched to stock market. Rode all the rally up with crypto stocks and other high betas and then bought the inverse etf for the way down. Rinse and repeat until nov 2nd week.
Then there were many naked option plays here in my country nifty stock market as an arbitrage for usa-india play using timezone. Also tried to play legendary 7yr shmita cycle and Yen carry trade.
Wbu sir ? What were your best plays?
Moist_Lunch_5075 t1_j9ndx8q wrote
My first options trade I made $3600 playing AMD calls after predicting the August 2021 post-earnings run (post in my history). I made some decent money with puts on Zoom back then, too. Then I got happy and lost a bunch of money playing into September thinking I couldn't go wrong LOL.
That set me straight and I started really spending serious time learning to trend the market. That brought me to the place where I could detect weakness in the trend change and liquidated all of my individual equities in December 2021, detecting the decline. I then shifted to a buy and accumulate strategy against S&P sectors to ride out the storm but that wasn't doing what I wanted, so I began running a hedge strat using a combination of SPY puts and SPY/SPXU and QQQ/SQQQ trend cover strat where I accept risk when we go long and cycle the short when we have high risk periods, mostly using the EMA 8 high and low as a trigger.
I've found I'm pretty good at trending on the 1Y SPY chart and correlating that with movement against individual equities.
In January I made some decent cash playing calls post AMD earnings riding the overall market wave. Basically scalping IV and value expansion during the run. My ideal play is based in Cup & Handle structures which display solid risk and play expectations for me and I've gotten pretty good at playing them.
In between I had a number of decent wins and losses. Played towel stock and made money.
When I have planned plays, I do really well. My weakness is largely around degenerate gamble plays but I'm getting better at avoiding them. LOL
I've found that one of the structures that works for me as far as trade structures is concerned are spreads. Very limited return, but they're cheap and they can be positioned just barely out of the money.. within the pay range so they have a higher chance to hit... my problem is I win a bunch of them and start playing naked calls or puts and then overleverage. One of my rules now is that I avoid leveraging into a play.
Anyway, that's an unstructured discussion on strats... I'll see if I can write something up on my favorite hedge plays.
One structure I recommend playing with is calendar trades. They're good ways of limiting cost on options but maximizing potential return.
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