WM 4 June 2022

Quotes

To the Fed

Imagination = I 'm agi n ation

Lessons & Thoughts

Short category = bubbles going bust

Bubbles and antibubbles

50% loss = 100% gain required to recover. Cut loss quick

“…at the end of the day, the most important thing is how good are you at risk control. Ninety-percent of any great trader is going to be the risk control.” PTJones

“The elements of good trading are: (1) cutting losses, (2) cutting losses, and (3) cutting losses. If you can follow these three rules, you may have a chance.” Ed Seykota

Five to one means I’m risking one dollar to make five. What five to one does is allow you to have a hit ratio of 20%. I can actually be a complete imbecile. I can be wrong 80% of the time, and I’m still not going to lose…PTJones

Walk

Effort, Success, Progress

What did I put forth quality effort today?

What success did I have due to my effort?

What progress did I make as a result of my effort?

Macro news

Money

Fed decision to hike rates just as the economy is on the verge of collapsing is the admission that money printing during Covid was a mistake. Giving free money just as supply stopped due to lock downs was plain wrong. The Fed can do nothing to change the supply side, so it is trying to destroy demand.

Skyscraper Index: Saudi Arabia planning tallest building in the world

Generational wealth

GDP: timber!

EMs: growth does not mean profits

How to invest in a recession (according to GS)?

Here are the four things Goldman highlights from past recessions:

1. Index: "Across 12 recessions since World War II, the S&P 500 index has contracted from peak to trough by a median of 24%. A decline of this magnitude from the S&P 500 peak of nearly 4800 in January 2022 would bring the S&P 500 to approximately 3650 (11% below current levels). The average decline of 30% would reduce the S&P 500 to 3360 (-18% from today)."

2. Earnings: "Since 1948, S&P 500 earnings have dropped from peak to trough around recessions by a median of 13%. EPS have recovered by a median of 17% four quarters after troughing."

3. Valuation: "The S&P 500 forward P/E multiple has contracted by a median of 21% between its pre-recession peak and its eventual trough. During the typical recession since 1980, the index P/E multiple peaked 8 months in advance of the onset of a recession and declined by 15% between its pre-recession peak and the beginning of the recession."

4. Sectors: "During the 12 months before a recession, defensive sectors and 'quality' factors have generally outperformed. Across 5 recessions since 1981, the average experience saw Energy (XLE), Consumer Staples (XLP), Health Care (XLV), and Utilities (XLU) outperform the index."

Inflation: first sign of easing, just as Saudi Arabia announces oil production increase to lower price of oil

The last shoe to drop? Super bad feeling some say. Tesla and Salesforce cutting staff

Precious metals

Crypto

With Solana (once the 3rd largest crypto currency by market cap) exchange stopped for a few days just a week after the collapse of Luna, the message should be clear for crypto aficionados: game over.