MSTR In the Nasdaq Now -Add Bitcoin and AVGO Now in the MEGA8s
New Subscriber Tracker for our market sentiments
Ok guys, just wanted to get the subscriber note out there today with some updates, we have rolls in the foreign currencies for our settles and we have a new subscriber only futures market sentiment indicator to share. This indicator is one of the tools we use for our new program we are launching on January 1st. This indicator is our market sentiment indicator for the futures markets that we follow. Also our subscriber only discount is now a thing of the past our new data and our work is properly priced in accordance to what we believe it can deliver to you in regards to trading and investing logic. We realize that we have been undercutting ourselves and either people will pay for it or they won’t and if they can they will, in either case, this is the world we live in.
Alright so let’s start off with a little bit of chart work from Goldman, this chart clearly demonstrates the ongoing record risk taking by all of retail in regards to equities:
When we look at this chart, we can’t help but think this is a direct product of peoples perception of having to take on risk just to compete with inflation. This quite often portends that an exogenous event will eventually cause a massive rebalance. This isn’t on the radar of any investors at this point and it never is until it happens. The problem is, when it does begin to happen, the exits are small and then the real discomforting concern starts to develop. This time will be no different than any of the other market tops in history, yes eventually the market does top. There are three basic arguments that we quite often here,
Investors don’t care about short term market movements and they care more about their long term return, 10 to 20 year time horizons
Timing the markets is impossible
The central banks will always bail everything out in the end
Well, lets break these down and here is our rebuttal to each:
While investor time horizon is important, it is not important as your yearly total REALIZED yield. What we mean by this is if you NEVER take any profits or pull money off the table, all you have is UNREALIZED gains. We often talk about the fact that not everyone can monetize at the same time, but that doesn’t mean you shouldn’t have an exit plan. There is nothing wrong with taking massive profits and moving into dry powder, case and point Berkshire, holding $330bn in cash
Timing is impossible, but what isn’t impossible is setting up a plan to sell small percentages at various target levels. It is best to do this on the way up and not on the way down. Even if you can afford 80% equity risk, if you haven’t taken any profits on anything, then your just risking everything and gambling. Anyone can do that, what you should do is pick a target level of equities and price targets and exit them without hesitation. We think its prudent to reduce as the market rises as a proper investment strategy. The risk of outperforming in the long run by staying long only till your ready to cash out isn’t a strategy, that is pure risk. Rather be smart and sell for profit till you get to a more prudent long term level of holding and no we don’t care how old you are, this strategy is across the board.
The central banks, yes they will always come to a rescue, the problem is the losses have to be so substantial that if you did hold the whole way down, then your just fighting to get back to prior levels. Remember and here is a simple chart of returns to get back to even after a given % loss.
So basically if you are long the SP500 index at 6100 and we have a 40% drawdown, you will then need a 66.67% return on the SP500 just to get back to even.
Even worse is this generation has never really seen a prolonged protraction, which is a direct result of both 10% annualized FOMC asset increases and fiscal govt deficits policies. Yes those two will always be there, but as our base numbers get larger, the efficacy of those policies becomes impotent. They generally morph capitalism into a quasi communistic/socialistic oligarchy because any stimulus eventually filters through the commoner to the asset holders…
Ok that is our rant for now, take it for what you will. Alright, in today’s news we have MicroStrategy now added to the Nasdaq Index and added another round of Bitcoin purchases. They are now up to 439,000 BTC which cost them $27.1Bn and now come with the dollar cost average price of $61,731. There Bitcoin per Share moved up .003% to 0.18%:
The stock is up on the news +$7 trading $416, but well off its highs at $437.61:
So let’s take a look at our MicroStrategy stock and option call strategy, this data includes Friday’s market close. As far as today the option hedge this week is the $450 call at $10:
Ok let’s move to the MEGA8s where we have now moved BroadCom into the top 8. This weeks hedge will work is the 541 Call at 3.00:
The Market Cap chart is still up near the highs:
Ok let’s move to the Settlements Page where we rolled the Nikkei, Dollar Index and Currencies
As far as the rolling trading day changes Energies continue to perform well, with the long end of the bond market the weakest link:
Here is our new tracker for our subscribers, this is taken from our CTA database and its our market sentiment indicator:
We are adding this data to our subscriber offering because we believe it may give you some value as to how CTA’s look at individual markets and sectors. Now our strategy is a long/short cross sector relative value methodology, but may give you insight as to how view the current markets trend. Anyway we hope you find it insightful..
The last chart we wanted to show you is some data on a home for sale down here in Florida, we broke this down to try and see what the homeowners break even level is. We don’t believe the general public ever considers adding interest in taxes into their overall breakeven cost of their home. Most homeowners blindly and simply take what they paid and what they sold it for as their basis. This is inherently wrong when it comes to actual cost and quantifying their real equity value. This home was sold for nearly $600k in August of 21 and is listed for sale for $785k today. We assumed a general 20% down payment and a 2.625% 30Y fixed. Obviously just an estimate but its relevant for the 2021 avg rate. This would be our base case analysis and provide the minimum breakeven. Obviously if the rate was higher or if the down payment was lower, then the Breakeven would be much higher than our base case. However for this exercise, our goal is just trying to truly inform you as to how to correctly analyze something as important as the sale of your home:
Anyway we have concluded that the minimum breakeven price for a home like this is $712k. Anything less and the realized return will be negative. Now how many people look at this scenario this way? Not many, but as is our goal all the time, to truly give you the right tools to look at everything you do in life in the correct manner!
Anyway that is it, we thank you to all of our subscribers and we hope you continue to support our work, to share our work or at least give it a like and follow! Till next time, cheers.
DISCLAIMER: For educational purposes only. This is not a solicitation to buy or sell commodity futures or options. The risk of trading securities, futures and options can be substantial and is not for everyone. Such investments may not be appropriate for the recipient. The valuation of futures and options may fluctuate, and, as a result, clients may lose more than their original investment. Nothing contained in this message may be construed as an express or an implied promise, guarantee or implication by, of or from Magnelibra Capital Advisors. Magnelibra the Commodity Trading Advisory and its proprietary long/short commodities, futures and options managed accounts may hold long and or short positions in the various futures and markets that Magnelibra covers. We will never claim that you will profit or that losses can or will be limited in any manner whatsoever. Past performance is not necessarily indicative of future results. Although care has been taken to assure the accuracy, completeness and reliability of the information contained herein, we make no warranty, express or implied, or assume any legal liability or responsibility for the accuracy, completeness, reliability or usefulness of any information, product, service or process disclosed. If you are interested in opening an individual managed futures and options account to compliment your overall investment portfolio you can visit our website at https://magnelibra.com for more information. We are implementing a new trading program launching at the start of the new year, which will include access to Bitcoin futures and options. Please contact or make inquires directly to our introducing broker Capital Trading Group, please contact Nell Sloane at nsloane@capitaltradinggroup.com
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