Something interesting I noticed, if you trade futures you know we’re in the December contract but it expires on the 15th and we move to the March contracts. In terms of ES the March contract (ESH2023 vs ES) is trading 30 points higher, which could be seen as a somewhat bullish sign for mid December onwards, although this could also be common, just another piece of the puzzle.
Note, I am biased towards searching for any evidence of the elusive santa rally.
Probably wrong thread, but wanted to post real quick before I forgot to. Are we discussing the loss of the us petro dollar and possibly reserve currency status anywhere? The Saudi China cooperation is alarming in my view. Delete or move if wanted, but this is a major currency shift unfolding along with BRICS and the belt and road initiative. Major implications if China gets a functional bond market going or introduces a digital currency and a market for it that attracts inflows.
Basic article but it gets the points: China wants to buy more oil from Saudi Arabia – and that could eat away at the dollar, a think tank strategist says (msn.com)
another article - shanghai exchange to use yuan for energy purchases: China to use Shanghai exchange for yuan energy deals with Gulf nations - Xi (msn.com)
Two interesting data points on where the market go in the long run.
First, S&P valuation still seems quite high:
Second, here’s grid showing what SPX’s fair value would be, given any fwd P/E and fwd EPS number. Current P/E is ~ 19, and 12 month fwd P/E is ~18. EPS over the next 12 months is expected to be ~205. This puts SPX around 3700.
If there is anything more than a mild recession, difficult to see how these EPS numbers persist:
Forward P/E will move with bonds - higher bond yields will result in lower P/E multiple and vice versa.
Between estimates of EPS revisions and where bonds will go, one can thus choose their favorite SPX target for 2023 
Wanted to speak on FOMC & CPI for a moment considering these movements bring a lot of volatility and (hopefully) profitability.
Something to remember is that statistically speaking, CPI is MORE LIKELY to drop at this stage of the game and with every passing month becomes more and more likely to do so. If you’re betting based on chance, the bet is cool. As I said in VC night, it’s not exactly linear, but dropping is definitely in the cards sooner rather than later.
As @Kryptek said in VC, these are pretty “mechanical” processes at play and as such, there are “phases” of these movements. Inflation is only one piece of the puzzle which I think is often forgotten. Saying that inflation is going to come down is not an innately bullish statement, it’s just one phase. The “destruction” that has been permitted comes after that phase as the forces that brought inflation down are felt in corporate earnings releases and then the broader economy.
But knowing that we have to be nimble and admit that the market is retarded and will celebrate the passing of one phase, completely ignorant (in the near term) of the danger that awaits behind the next door.
Figuring in messaging from the FED and specifically JPOW at Brookings, it’s almost a certainty that we’re going to see a slowdown in rate hikes this time around. Couple with the fact that we’re also likely to see a cooler print in CPI (something bolstered by JPM):
So the cards here are landing biased towards “Slower & Lower”. Now this post isn’t a battlecry to load up on calls, it’s simply a reminder that riding puts into these things is a play with higher than normal risk at this juncture. Remember, it doesn’t matter that we know things are bad, we know the same things that are already known across the market, what matters is how the market will react to what is presented to it in the here and now.
The play here is to wait for these data points to drop and to play the trend thereafter. Gambles are perfectly fine but betting the farm either way is for fools.
In regard to higher inventory, I’m pulling data from my Reventure Consulting membership. All sources can be found on top of most of the chats btw. Also if I dont do a good job at sourcing just ask me i’ll find it again lol okay LETS DO THIS SHIT:
First let’s start with charts I got today 12/12/22
Okay where are we now?
Inventory Increase / Decrese by County YoY (Source: Realtor.com / Nov 2022)
ALABAMA:
ALASKA:
ARIZONA:
ARKANSAS:
CALIFORNIA:
COLORADO:
CONNECTICUT:
DELAWARE:
DISTRICT OF COLUMBIA:
FLORIDA:
GEORGIA:
HAWAII:
IDAHO:
IILLINOIS:
INDIANA:
IOWA:
KANSAS:
KENTUCKY:
LOUISIANA:
MAINE:
MARYLAND:
MASSACHUSETTS:
MICHIGAN:
MINNESOTA:
MISSISSIPPI:
TO BE CONTINUED…
Going to throw these in here before I forget. COFACE is a business risk management company that is used, sort of like DNB, helps with account receivables and credit risk for customers/vendors. They issue out periodical macro newsletters. Also haven’t read them either, so if anyone thinks they’re pointless lemme know and I will stop forwarding them. Thanks!
Although a success, ‘Black Friday’ does not mask
gloomy perspectives for the global retail sector
{e4d80900-fc79-4e87-b790-2b35ae86c599}20221202_Brief-_Black_Friday_does_not_mask_gloomy_perspectives_for_global_retail_sector.pdf|attachment (282.7 KB)
Oil price outlook unchanged despite the G7 price cap
{4ae2990c-c949-473e-97d8-001f92c4a791}20221206_Brief-_Oil_price_outlook_unchanged_despite_the_G7_price_cap.pdf|attachment (245.9 KB)
Posted on TF, will post here too:
First, and probably least important since it’s most likely already priced in, the rate hike decision. 50 bps is expected so if they decide to go for 75 (unlikely) then sell-off, and if they decide to go for 25 (also unlikely) then massive rally. Secondly, the actual release. You should be looking for anything remotely dovish if you’re hopeful on a rally from the 2:00 decision. Last time, that language came as the “lag” comment:
“In determining the pace of future increases in the target range, the Committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments.”
When it comes to the release, also take a look at the Summary of Economic Projections (SEP). This is the dot plot part of the release. I would be surprised if there isn’t at least one dot holding steady above 5% (or higher) as the terminal rate in next couple of years, as Bullard is still on the board. Bullard is most hawkish, followed probably by Powell imo, but since it’s Bullard’s last year as a voting member, will not have much of a say next year in terms of policy. Now, for the dot plot itself, look for how wide/narrow the dots are in terms of forecasting inflation and Fed Funds path to see if there is some sort of consensus inside of the FOMC (wouldn’t be surprised if there was tension since its starting to look like doves are growing restless with Powell, given the lag comment). Also, look for what looks to be consensus on the terminal rate and the longer run neutral rate. This would be area where most of the dots are concentrated in the dot plot forecast on Fed Funds rate path.
Lastly, the press conference. Is Powell dismissing dovish talk like last press conference? Is he more open to the lagging in policy? Are they sticking with their longer run inflation goal of 2% (likely yes due to credibility but talks of them changing the goal has risen so curious to see if reporters ask the question)? Is labor market still as strong as they say, or are there mechanics we can’t see but they have access to that worries them? Are they finally going to catch up with the full amount of QT roll-off, and how long are they going to conduct QT? Any forecast or guidance on the path of hikes/inflation in the short-run, and what are they most worried about with inflation (likely core services ex-housing, but look for any comment on inflation report)?
Lastly, keep an eye on markets, especially treasuries/bonds for any reaction from the release or press conference just in case you do miss any language that is dovish/hawkish.
Will be watching the 3950 level on the emini first hour of trading. It’s the key support level turned resistance now of a monthly range we’ve been in. Failure to break out and I’ll be riding puts to the downside. Currently in a call position to swing overnight but have most of my ammo to play with on this wonderful opex day.
MISSOURI:
MONTANA:
NEBRASKA:
NEVADA:
NEW HAMPSHIRE:
NEW JERSEY:
NEW MEXICO:
NEW YORK:
NORTH CAROLINA:
NORTH DAKOTA:\
OHIO:
OKLAHOMA:
TO BE CONTINUED
Another fascinating read from Zoltan Pozsar, the big head that other big heads in talking-head finance defer to with adulation. (Doc linked in this tweet.)
The juicy bits, though the whole thing is worth a read:
Macro outlooks from various banks
https://www.reddit.com/r/wallstreetbetsOGs/comments/103t59g/2023_outlook_summary_projection_links/
About Bank of America - Our People, Our Passion, Our Purpose
https://www.blackrock.com/corporate/literature/whitepaper/bii-global-outlook-2023.pdf
Q1 2023 Global Outlook | Barclays Corporate & Investment Bank
https://www.natwest.com/corporates/insights/markets/the-year-ahead-2023.html
https://data.stagingmag.nl/2763/issues/39432/494150/downloads/2209270_cs_io_2023_en_rgb_digital.pdf
https://docfinder.bnpparibas-am.com/api/files/37CB6B30-A48A-45F6-B2E4-CCC5927F434C
https://think.ing.com/uploads/reports/ING_global_outlook_2023_Dec_2022_OT.pdf
Home | Apollo Global Management
https://professionals.fidelity.co.uk/static/master/media/pdf/outlook/annual_outlook_2023.pdf
FWIW Morgan Stanley and Bank of America had the closest PTs for SPX 2022.
The Morgan Stanley outlook report described a possible market decline on Q1 earnings (what we’ve talked about in Valhalla) but are optimistic about a ‘soft landing’ on the bull side. They like the strong labour market combined with softening inflation.
Question: What would happen if Amazon lays off 50% of its entire staff? Would we looking at operating income at below $100?
Sorry it took so long 
(p.s. did this a few months ago)
FOOD
TOP FOOD PRODUCTS TO LOOK AT:
Meat (All Including chicks)
Mustard
Blueberries
Milk & Dairy Products
Almonds
Honey
Wheat
Cherries
Coffee
Cereals (Rice)
Wine
Potatoes
Vegetable Oils
Beer
Bananas
Sugar
Corn
Chocolate
Soybeans
Strawberries
Maple Syrup
Peanuts
Fish
Tomatoes
The heat and water level reduction in areas where our farmers are, is a serious issue. Prices will obviously go up.
Source:
These videos have been the drive behind all this research. I have added my own input, other articles as well as a list of stocks I believe are worth looking at. I feel like these plays would work better in the long run imo. I feel like adding historical research would benefit this as well, but it did add a lot more pages so I’m going to limit it as much as I can. Sorry in advance.
Prices amounts are 4x the normal amount. Also, knowing that countries are banning certain fertilizers, and some are reducing the amount of fertilizer they are using.
(May be a 4-year problem)
Here are some articles I found. Big problems for everyone worldwide, knowing this here’s a list of countries who use the most fertilizer. This could help me calculate who will hurt the most during these hard times. Which will probably help indicate higher export prices.
Stocks to look at:
Moving on, if we are having a hard time growing the food of our cattle/livestock the pain will only get worse in the months to come. As you continue to read keep in mind the low-income family impacts.
Seeing this also raised a lot of questions regarding the medical sector. How many crops being grown are also used for our medication. (Will get into this later on)
Beef/Pork:
I don’t see a lot of meat on the shelves currently. It takes years for cattle to get to a reasonable size to begin the slaughter but with demand being so high some farmers are forced to start the slaughter at a younger age 
. (I’m going vegan after this, ill have no choice lol). They are also forced to liquidate a lot sooner.
USDA expects tighter beef supplies for 2023 - Brownfield Ag News.
Chickens: (Bird Flu)
Serious issue here at hand. Sick chickens mean less laid eggs and death
This doesn’t look good for fast food chains, yes Dino nuggies for squishy . EVERYONE. I would list stocks, but I’d be here all day.
About 90% of household’s consumption. Bad news for them when we are hitting shortages. Since farmers are being forced to liquidate the breading process will take a turn for the worse and we won’t have as much going on. So, less milk cows.
Stocks to look at:
Bread is about to be super expensive due to the war obviously also if Ukraine doesn’t continue exporting it’ll get worse as we are currently seeing. To add more fuel to the fire the export bans aren’t helping either.
Stocks to look at:
Well, I fucking love rice so this is another shitty read. They say that if the weather continues to act as it is (too hot for example). Our farmers will have a difficult time growing… ovii. Demand may increase by 33%, and mase and rice crops are expected to drop by 51%. Stocking up might also be difficult.
Stocks to look at:
VEGETABLE OILS
Alrighty so we all know cooking oils are used for EVERYTHING! So, we may have an issue here boys and gals.
Stocks to look at:
• Climate change and a looming cooking oil crisis: Here’s what we can do
• Cooking oil shortage 2022: why is cooking oil running out around the world? | Woman & Home
• Oil Products Crisis: New Opportunities For Plant-Based Alternatives
ALRIGHT TAKE EVERYTHING WITH A GRAIN OF SALT (though that may cost ya hahahaa… lol sorry dad joke lmao)
TO BE CONTINUED… <3
The last two weeks have seen a significant shift in the market’s inflation expectations, since the payroll numbers came out. Jim Bianco lays out the important bits in this thread. Main points:
Apart from the impact on the stock market in general, what specific plays could we see out of this? Especially considering the fact that the equity market has not responded to this like bond markets have?
Great question, I am surprised the market keeps shrugging off inflation concerns. I’m still in long term SPY puts waiting on them to finally get it. Not sure they will in time. If there were a catalyst like China entering Ukraine war or JPow speaking super hawkish again, I believe it would drop significantly, but absent those, it seems like we chop along for a while.
I still am thinking the biggest drop comes after rate hikes finish (Hope chart). But that could be in late 2023 or 2024.
This is a great breakdown as always Ni!
One particular situation I’m looking to play out is directly tied to the wage inflation we safe skyrocketing last year that companies are now trying to unwind out of. There had been a ton of payroll kept on the books in order to maximize the tax incentives from PPP and Employee Retention Credit. Now that those are gone they don’t need to keep people on payroll.
I think we continue to see companies make calculated mass layoffs to certain sectors. With those layoffs, we also have “unprecedented” credit card debt. I believe these two will come to head quickly during the next rate hike or two. Your going to see some pretty nasty interest balances compounding on that cc debt…
“But but… my credit card debt identifies as student loan debt…!” (Wouldn’t that be nice lol)
This article came through my inbox, thought I might post it here to see some thoughts from those of you who this would be a little bit more relevant for; and because I can’t tell how much of this info is laid out straight vs. cherry picked and spun. All of the points laid out in this article interest me, starting especially with the bit about the interest earned on short SPX positions currently outweighing the dividend yield, the stuff on GDP growth and how that will affect the interest vs. dividend yields, and the apparent cracks showing in the bond markets. It’s Seeking Alpha, so it is very possible I have just wasted an hour looking over and posting this, lol. Here’s the links and most of the points pulled out into this post in case there is something to work with here-
https://seekingalpha.com/article/4579853-spx-another-great-shorting-opportunity
Gonna copy over a few snippets from the sections that I’m most curious about below, is there any important context I’m missing or that’s being left out or exaggerated by this author? Trying to see past the guy’s clear bearish bias (the same type of bias I’ve been tending to easier fall into myself the past year) and to sus out what if any of this info could be actionable and how much is just clickbait hopium aimed dead on at those of us who feel like the market hasn’t been doing what it ‘should have been doing’ lately. The top comment talking about the guy having a history of shorting bottoms definitely stands out as a red flag, but a few of these points do seem to be worth thinking about.
Alright, here’s text from the article, there’s a few Bloomberg charts that accompany these paragraphs but I’m on my phone and was not able to download the images directly from the archive site and screenshots I did try to snap to embed ended up jpeg-ed to illegibility before even trying to post them, but that’s why I made the archive-
Shorting The SPX Is Highly Cash Flow Positive (Is it actually though? Serious question/line of thought, there’s gotta be some bits of info or context that’s being left out in these headers, right?)
When shorting stocks, investors receive interest payments for lending the money to borrow the stock, and in return must pay any dividend payments that the stock makes. Currently, overnight USD libor is 2.9% higher than the dividend yield on the SPX, meaning that a short position will yield a steady positive return all else equal. As the chart below shows, the current spread is the highest since November 2007, following which short sellers made a killing. Chart-Overnight USD Libor Vs SPX Dividend Yield (Bloomberg)
Nominal GDP Growth Is Set To Collapse
While shorting the SPX generates positive cash flows as interest rates exceed the dividend yield, a key factor that must be taken into account is the pace at which dividends are likely to grow at, which tends to track the performance of nominal GDP. If nominal GDP growth exceeds 2.9% then shorting will likely generate losses assuming no change in valuations.
1-year breakeven inflation expectations currently sit at 2.9% and real GDP growth is likely to be negative over this period. The Conference Board’s Leading Indicator Index, for instance, sits at -6.0% which is consistent with negative real GDP growth over the next few quarters.
Chart- LEI Vs Real GDP Growth (Bloomberg, Conference Board)
Money supply growth is also pointing to a collapse in nominal GDP growth. M2 growth is often a good leading indicator of subsequent nominal GDP growth, and it is now in contraction for the first time on record. If CPI growth is faster than money supply growth as is the case at present, this suggests that real GDP is in contraction. I would not be surprised to see nominal GDP turn negative over the next 12 months, particularly if stock market sentiment turns sour and the demand for cash surges, but even if this does not occur, 2.9% seems optimistic.
Valuations Face Downside Risks
The rally in the SPX since the October lows has seen valuations rise back into extreme territory. The price-to-sales ratio is above any other point in history outside the past 2 years, and free cash flows are in decline amid intense downside margin pressure. The equity risk premium - the difference between expected returns on the SPX and expected returns on cash or bonds - may well be the lowest it has ever been from an ex-ante perspective.
Chart-SPX PE Ratio, PS Ratio, And Profit Margins (Bloomberg)
For instance, if nominal GDP growth averages 2.9% over the next 12 months and dividend payments follow suit, this would result in 4.6% total returns after taking into account the current dividend yield, which would be in line with current interest rates, meaning a zero percent equity risk premium. Considering that the long-term average equity risk premium is 5%, this suggests that stocks face major downside risks. The SPX dividend yield would have to rise to 6.7% in order for the equity risk premium to return to its long-term average based on the above assumptions, which would require a 75% decline in stock prices.
The Bond Market Is Giving An Early Warning Signal
Renewed upside pressure on US inflation-linked bond yields is putting pressure on corporate bond yields. In ‘normal’ economic conditions, rising real bond yields tend to coincide with narrowing high yield credit spreads as both are driven by improving economic conditions. However, the Fed’s increasingly restrictive policy is now occurring alongside a deterioration in economic conditions which is causing high yield corporate bond spreads to remain elevated. As a result, real high yield bond yields are rising and suggest renewed downside for the SPX.
Chart- SPX Vs Real High Yield Bond Yields (inverted) (Bloomberg)
I’m still holding three of those HYG puts, so the last portion talking about corporate bond yield spreads of course stood out to me, but I have also had issues separating out the chaff in the past, so I want to improve there…this is as good an opportunity as ever to learn a bit more about the actual mechanics of the position I’m in beyond the basic correlations. Is any of the stuff laid out in this article sounding like it holds water or am I just being pulled in by confirmation bias?
Opening long term short share positions on SPX is not quite something I’m involved with yet, how much of this, if any, can even really be applied to simple puts?
Along that train of thought and moving somewhat away from that article, a lot of the overall focus in the market feels like it’s switching to time, both in the sense of timing tops/bottoms with all these 0dtes as well as what feels like a shift more and more towards theta benefited strategies (and all that comes with those territories, either really really being on the right side of it all, or really really not, hah).
I don’t like trying to time bottoms or tops anymore, just hasn’t really ever worked out too well, and am not really in the position to be able to be playing some of the types of strategies I probably would prefer, but until I can I still want to capitalize and pull money from the market wherever I can…so yeah, all this just SA junk or any info we can work with?
