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May 31, 2025
JUST BECAUSE THE WHITE HOUSE WANTS STOCKS TO GO
HIGHER
DOES NOT MEAN THAN THEY WILL
JUST BECAUSE COMPANIES ARE MAKING MONEY
ALSO DOES NOT MEAN THAT STOCKS WILL GO HIGHER…
I VIEW THE RECENT 2 MONTH RALLY
AS A FINAL OPPORTUNITY TO SELL…
Last fall I began to express an opinion that, “EVERYBODY
IS LONG EVERYTHING…Stocks (chips, NVIDA and AI in particular), Gold,
Crypto, etc.”, that in essence, “EVERYBODY was IN,” which, in this giant
mob psychology investment game, suggested to me that the next BIG move
would be down…And this DID become the case in Stocks and Crypto…but
ultimately, their sell offs were followed by fairly stout recoveries, with
Bitcoin even making it all the way back to its old high…while Gold did keep
climbing into April before making what I believe will prove to be its high
for many years to come…Nevertheless, my current view is, that if
anything, EVERYBODY IS EVEN MORE LONG THAN THEY WERE BEFORE…AND I CONTINUE
TO RECOMMEND BEING SHORT ALL OF THESE MARKETS.
Aside from my belief that Trump’s scorched earth
approach to economics and world trade will have disastrous consequences (It
is HIGHLY significant that a recent survey showed that America’s CEO’s now
have the lowest confidence in 50 years), I find it astounding that
during the stock market decline and ensuing rally, individual investors
(the public) were actually buying stocks like never before…as is reflected
by this news excerpt from April 4th, the day after Liberation
Day when the Dow had one of its biggest down days ever:
”Individual investors (yesterday) bought stocks and ETFs at a
record pace. Individuals
made $4.7 billion worth of net equity purchases on April 3,
meaning value of shares they bought outpaced the amount they sold by $4.7
billion. This is the highest daily inflow
over the past decade…Retail investors' purchases were
nearly evenly split between single stocks ($2.3 billion) and ETFs ($2.4
billion), with Nvidia
and S&P 500 ETFs (SPY) among the top assets acquired.”
And then there was this (at last week’s top tick since
the rally began):
“Retail
investors on May
19 plowed $5.1 billion into US stocks, according to data
from JPMorgan Chase. That’s the
largest daily inflow into stocks from retail investors on record since data
collection began in 2015.”
In other words, in this investment GAME, in which 62% of
Americans own stocks, and are probably now more long than they have ever
been, not only have they been hanging on to what they already owned, but
they have actually even been BUYING MORE in the face of an economy that is
clearly endangered by the absurdity of 150% tariff threats, job
liquidations, policy flipflopping, etc.…And yes, they have been rewarded
(so far), but I’d
offer that the last 30-40 days have NOTHING to do with where the market
will be 3-6 months from now, and it is my guess that by year’s end,
individual investors, who DO have an endless history of periodically
getting “reamed” by Wall Street’s Banks and Brokerages, WILL find
themselves having lost massively on just about everything they own, or have
bought, up here at the market’s all-time highs.
On a specific note, it’s been a long time since I’ve
seen one company, which was relatively unknown to the public just 2 years
ago, so dominate the headlines…almost to the extent that New York and all
the talking heads are equating its performance to what the whole damn stock
market is going to do…and that is Nvidia…With that in mind, I’d say that
ANY time any one name becomes so popular that it’s seemingly 90% of the
financial news every day, it’s quite possible that, “everybody who would
ever buy it, already has done so,” meaning that all the hoopla and “good
earnings” in the world won’t be pushing it higher. And so when I look
back at that May 19th “record daily inflow” excerpt above, noting “Nvidia and
S&P 500 ETFs (SPY) among the top assets acquired,” all I can think
is…one more time…EVERYBODY IS ALREADY IN.
MY RECOMMENDATION IS TO SHORT ANY, OR ALL THREE, OF THE
STOCK INDEX FUTURES SHOWN ABOVE...WITH MY MINIMAL OBJECTIVES BEING NEW LOWS
FOR THE YEAR IN EACH OF THEM.
GET SHORT GOLD
THE MARKET
TO BUY?
US TREASURY BONDS
Of late, I note that maybe 98 out of
every 100 Wall Street’s genius “strategists” are squawking about “too much
US debt,” which is the same bearish argument I periodically heard from them
for 40 years…from the Treasury market lows in 1980 until the all-time high
in 2020…Beyond that, be assured that all of the recent chatter that, “The
world has lost confidence in the USA and nobody is going to want our
Bonds,” is absolute hogwash. Aside from the fact that our 30 Year Treasury
has the second highest government backed yield on the planet, UNITED
STATES TREASURY PAPER IS STILL INTERNATIONALLY REGARDED AS THE SAFEST
SOVEREIGN DEBT THERE IS…AND FACT BE KNOWN, EVERY TIME WE HAVE A TREASURY
AUCTION, FIXED INCOME BUYERS LINE UP TO BID
ON IT. PERIOD.
All that being said, in the paper investment world, I’d
remind you that there ARE two major instruments that are traded in the
billions every single day…Stocks…and BONDS. Neither is going to
disappear…and funds are CONSTANTLY flowing in and out of both of them as
these two asset classes fluctuate in value…and quite naturally, there ARE times when their
values, relative to each other, DO reach opposite extremes…and that, I
firmly believe, is where we are now…that STOCKS ARE
EXTREMELY OVERVALUED RELATIVE TO BONDS…AND IN THE MOST BASIC SENSE OF, “BUY
LOW, SELL HIGH,” RIGHT NOW IS WHEN YOU SELL STOCKS…AND BUY BONDS.
Still Short Cattle
And yeah, this idea has beaten me to death…and I’ve repeated myself
over and over…but I do not lose sight of what the 50 years of history
indicate…that this market DOES go from bullish to bearish, virtually
overnight on NO specific news event whatsoever…and when it does, the
collapses ARE typically 20-25% within 2-3 months’ time…And with a
move like that meaning something like 60-70 cents, or $30,000+ per futures
contract, I WILL NOT BE OUT OF THIS TRADE…ESPECIALLY WHEN, LIKE RIGHT NOW,
WE DO HAVE EVIDENCE OF A TOP TICK HAVING BEEN MADE…And yes, I have made
that same observation before, and been wrong, BUT that does not mean I have
it wrong again…
One
more time…I will not be out of this as I KNOW, that literally from one
trading day to the next, this market can suddenly be down 8-10 cents and
rapidly on its way.
Still Recommend
Short Corn and Soybeans
My impression is that the whole ag world is convinced
that bottoms have been made in both Corn and Soybeans. With massive crops
are coming in both hemispheres, bullish farmers STILL hold tons of both
crops from last fall (that DO represent a LOT of future selling)…and
the backdrop of the destructive tariff situation, I SEE ANOTHER NEW LEG
DOWN IMMEDIATELY AHEAD AS HEAVY SELLING COMES FROM EVERYWHERE.
Still Recommend LONG COTTON
Counterintuitively, Cotton often moves opposite
the other major row crops…and I continue to see Cotton as having made a long term bottom. I still believe the July
contract could have a big surge heading into expiration
but our July Calls now have only 14 days to expiration, and I am now moving out in to
the December contract…where I regard the calls as being dirt, dirt cheap
relative to the fact that Cotton bull moves are typically no less than 30
cents in size.
Have Exited All Long Canadian Dollar Positions
I think that’s enough for
one weekend…Thanks if you actually waded through all this…And I do
URGE you to NOT ignore the opinions in Cattle, Corn and Soybeans as they
all DO look primed for big moves…obviously especially in the Cattle puts,
which aren’t cheap (but that, I think, is because of the enormous move they
are about to make). As for Bonds, Gold and the Stock Indices, I
definitely see them as fantastic big potential trades…but 45 years in this
chair has taught me that very few people seemingly EVER want to Short Gold,
or the Stock Indices…nor do they ever want to be Long Bonds (THE contrary
opinion market), even on those occasions when their 40 year bull market
made for incredible long trades.
Ring me up if you want to
do any of this…or just want to tell me you think I am wrong.
Thanks,
Bill
770-425-7241
866-578-1001
All
option prices in this newsletter include all fees and commissions. All
charts, unless otherwise noted, are by Aspen Graphics and CRB.
FUTURES
TRADING IS NOT FOR EVERYONE. THE RISK OF LOSS IN TRADING CAN BE
SUBSTANTIAL. THEREFORE, CAREFULLY CONSIDER WHETHER SUCH TRADING IS SUITABLE
FOR YOU IN LIGHT OF YOUR FINANCIAL CONDITION. PAST PERFORMANCE IS NOT
INDICATIVE OF FUTURE RESULTS. THERE IS NO GUARANTEE YOUR TRADING EXPERIENCE
WILL BE SIMILAR TO PAST PERFORMANCE.
The author of this piece currently trades for his own
account and has a financial interest in the following derivative products
mentioned within: All of them
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