What is truth
Even if a man should have the chance to tell the most complete truth, he does not know it himself; All things are wrapped in appearances.
– Xenophanes, 500 BC Chr.?
Perhaps the most difficult question to answer has been asked a thousand times and answered in a thousand different ways. I know I asked before. In fact, I have asked you in this past and will no doubt ask you again. What is the truth? How broad is the truth? Is there a public truth as well as a private reality? We see it all the time … those in charge of governance or managing both finds and / or reputations are really just explaining what they have to do. Is truth the highest form of knowledge, a level of spiritual awareness to strive for? Or is the truth far less glamorous? Instead of the idealistic level of reality, maybe the truth is nothing more than the dumpster fire of both social acceptance and rejection? Strange how our market, often driven by both greed and deception, forces us to ask this question when both Passover and Holy Week begin and less than two weeks before Ramadan. Strange, not funny.
As interpreted by our faint minds … was the broad rally in domestic equities on Friday afternoon that culminated in the most intriguing real-time collapses in the last 70 minutes of that day’s regular trading session? A rush to convert cash into stocks a short week ago that is expected to be more volatile than most?
The truth is best illustrated by the mega-large container ship “Ever Given” that went ashore in the Suez Canal and blocked the passage for about 12% of all world trade for almost 12 days before finally partially and then allegedly tidal again got up on Sunday evening / Monday morning in Egypt? The revelation there is simple. Although such a passage has not been bothered in more than a century, there is now a massive traffic jam that now needs to be “unscrewed” while other ships still have to choose between going online or “cruising around”. Twelve percent? How fragile? Fragility. Now we’re on to something. For what is truth if not fragile? I think we just found what a lot of people have been looking for their lives. Truth has many noble qualities, but its own fragility could be its last line of defense. Because through systemic fragility, honesty is imposed on civilization at some point. You know I could propose a thesis on the relationship between monetary and fiscal policy at this point, but this is Monday morning. I will spare you
Those I love I blame and discipline, so be zealous and repent.
Speaking of fragility in the method that reveals an ugly reality … it wasn’t just a few months ago that a coordinated group of supposed retailers (yes, right) with the help of high-speed algorithmic trend-setters (don’t fool yourself) are forcing you Maybe the most epic short squeezes I’ve seen playing this equity game in my now rather long career? This high-speed hunt for meme stocks brought at least one hedge fund to its knees, but, more broadly, took in many victims. Now that?
Most of us noticed the sudden collapse of Discovery (DISCA), ViacomCBS (VIAC) as well as a number of Chinese internet-based companies like Vipshop (VIPS), Baidu (BIDU) and Tencent Music (TME) for a few days to play, but apparently came to a head on Friday too. There was talk of broken markets, mainly from those directly affected. The spared just felt relieved. On Friday night we were all detectives trying to find out who or what had failed. There must be money to be made when this obvious price and time insensitive fire sale was over? Was it over Oh, and just for your information … if the old model of the open outcry auction market had still been around, higher commissions would have been paid on the trades, but the lows for these stocks would have found a much higher lows. Much higher. Think differently? Fight me We were better than whatever that was. Much better.
We did this crazy thing called homework. If we had a very large sell order (millions of stocks plus) we actually found out which funds had bought the stocks earlier in the week before we wiped the stocks out. Someone paid more than $ 100 for ViacomCBS last week. Someone else sold the shares for nearly $ 40. Are there still brokers or dealers? Hi? I don’t know … maybe call the man / woman who paid $ 100 and ask him or her if they have an appetite, say … $ 75? Is there anyone else who knows how to do this job? Because if not, then I know a few hundred traders / brokers who probably never graduated from college but do. Has the urgent need for human involvement in the pricing process ever been more evident? That is “truth”. You chose speed over quality. You chose the Ivy League over Queensborough Community College. Well done slick. Now the consequences are suffering. I will bring the five guys named “Vinny” over this cluster plug anytime.
Hot dogs on the beach
Isn’t leverage great? Underfunded and you’re a fool. Overfunded? How could you? Of all the whales, the beluga has always been my favorite. I am not a fancy kid. The beluga wasn’t my favorite because it was a particularly large whale, but mainly because I grew up on the outskirts of New York City and some of these belugas were on display at the New York Aquarium (Coney Island) on Brooklyn’s South Shore. They were smart, sometimes playful, and a trip to the belugas usually included family time and a trip to Nathan’s Famous for lunch. As a professional, I have liked far less the kind of whales that roam our turbulent seas, for they often stay below the surface, shrouded in apparitions, truth that most do not know, until an ugly twist of fate forces a more complete revelation.
What we need to find out now is whether or not this whale was a villain. We all know that whales often swim in family units known as pods. The amount of “Wall Street bets” only hit one hedge fund for a loop, but this affects several large investment banks / broker-dealers. We all know that many hedge funds copy each other. Is there more such exposure. Maybe there is a lot more. I told you Friday morning that if I were given an “up” day, I would shave my winners. I don’t know if I was right. You know, I feel pretty “okay” with that decision at twelve thirty on Monday morning.
What is the whole truth? We all know that we may never know the depth of “what is” my friends. I suspect only a few dominoes fall without knocking down the next one in line. Let’s all hope that this most epic margin calling is the one domino that falls in isolation. We already know that there are multiple victims.
Hard to believe
It’s hard to believe I got this far without mentioning Bill Hwang or Archegos Capital, but you all got along well. It is hard to believe that Archegos translated from Greek can be called a leader or a pioneer. I am not a theologian, but I believe the word is used twice in the Bible. Once in every testament … in Hebrews 2, where the word is used to note “the author of our salvation,” and in Acts 3, where the Christian Redeemer is referred to as “the archegos of life.” Hwang just thought, who the hell was this guy thinking? What we do know is that he used to run the Tiger Asia Hedge Fund and got stuck in a traffic jam in 2012 that cost him $ 44 million in fines. Over time, Hwang has opened a family business … “Archegos Capital”. The rest is history.
Why did Goldman Sachs, Morgan Stanley, Credit Suisse, Deutsche Bank and Nomura defy him? For commissions? For the “block trading” opportunities that this “customer” brought with it? Yes how does that work We know these forced sales will have a significant impact on the performance of Credit Suisse and Nomura (through a subsidiary) as these two banks have told us so. The other parties involved seem less affected. We believe. We know the underlying issues have resulted in a market cap of up to $ 35 billion.
We don’t know if there is more. We don’t know who was similarly exposed. We don’t just know who was suddenly exposed in the course of this fire sale. We know Wells Fargo reduced ViacomCBS from Equal Weight to Underweight on Friday morning.
The week ahead …
1) It’s still Jobs Week and Friday is still Jobs Day even though stock markets are closing. Consensus says this should be a sucker.
2) President Biden is expected to split his expenses in half and address the first part of this week in Pittsburgh. Part one will involve rebuilding the infrastructure to include many green energy initiatives. Part two comes later in April and will focus more on social issues like health care and childcare.
3) The earnings and sales forecasts for the first quarter have increased. According to FactSet, the consensus for the S&P 500 is assuming a profit increase of 23.3% over the previous year from 21.8% a few weeks ago. The consensus on sales growth is 6.3% compared to 6% a few weeks ago. The S&P 500 is now trading at 21.6 times expected profit for the next 12 months. Now think about … that the predictive PE ratio is deceptive. Most of those who watch DC these days expect taxes to rise, especially corporate taxes. Goldman Sachs’ David Kostin estimates that increasing the corporate tax rate from its current 21% to 28% would lower the S&P 500 total by around 9%. The market may not be as overvalued as you think it is.
4) Opening day is this Thursday for Major League Baseball. Last but not least. Your buddy is excited to say the least. All-time favorite New York Met: Tom Seaver. All-time favorite Yankee: Bobby Murcer.
economy (All Times Eastern)
10:30 am – Dallas Fed Manufacturing Index (March): Expect 1/15, last 2/17.
The Fed (All Times Eastern)
11:00 – Speaker: Reserve Board Governor Christopher Waller.
Highlights of today’s earnings (Consensus EPS expectations)
Before opening: (REST) (.06)
After closing: (SEER) (-.31)
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