Rounders Grind It Out 10 25 18

Its kind of amazing how at certain points in time, things happen and they tend to be a wake up call – that is if we just open our ears and listen. We have talked at length about our disdain for the likes of the big investment houses like Fidelity, and their pitching of zero fee fund management products. We no doubt will look back and point to such lunacy and say, yes people actually thought you could get something for nothing. The only thing you will get is left holding the bag, the bag of empty promises. Its easy to pitch such ideas that you can blindly just buy an index fund and wait and watch. What this should tell you is that the market has reached such idiotic proportions that the big houses now have to give things away for free to continually attract AUM. Why do you think they do things like this? Because in order to maintain status quo, the financial system needs a constant IV drip of funds and yes, we know these big houses manage trillions…we get it. However, if markets take a turn for the worse, asset prices fall and in the gigantic ponzi house of leverage, well, cash is king, always has been always will be. Well, we like gold too, but that’s a topic for later, as we believe the shiny metal is setting up for a much larger move above $1300.

Anyway and as our last few letter have pointed out, the net present value is about to put a heavy discount on markets. As rates rise, so too does the cost of playing the game and if you don’t have your house of cards in order, well, you are in for a very rude awakening. If you haven’t seen the movie Rounders, we highly suggest you do. So much of what goes on in the movie relates perfectly with managing the psychology of our financial markets. The battle not only against the market forces, but inter-personal forces as well. The movie was highly underrated and well before its time, needless to say, we love it! We believe you will gain a greater appreciation for knowing not only the game and how its played, but how well you understand your own-self and what motivates your decision making process.

So many have been lulled to sleep by the somber music of sir maestro central banks who have played everyone for the greater fool in thinking rates can rise without nobody noticing. We certainly have noticed and we have warned all of you, but lucky for you this market topping process will take years to play out. The FED has warned us time and time again, it will not stop until neutral is reached. We told you where neutral lies and its somewhere at parity with the US 10yr rate or near 3%. How we get there is simple, consecutive 25bp hikes, when do we get there, sometime around next June, what happens in the mean time? Reversion and discounting future values. That’s really it in a nut shell. So without further adieu let’s take a look at the damage shall we.

Let’s first just end the argument right now that equities are cheap, they aren’t no matter how you slice it, now we don’t care about forward SP500 earnings expectations. What we do care about is this chart right here:

The only reason this chart looks like this is because of the 5x growth in Central Banks balance sheets, now if you think this is going to be replicated anytime soon, then go ahead gamble, we would rather just wait for a better opportunity. Remember its not about what you buy necessarily, but rather, WHEN YOU BUY it, that makes all the difference.

As far as the why, look no further than the US Govt 5s30 yield spread which has exploded higher and has now reached the peak from last may:

As far as every investor’s favorite index the FAANG loaded NASDAQ down over 12% from its highs a few weeks ago:

The SP500 Index put in a decent low at 2652 and not sure we are going to test it again tomorrow as it is backed up by the .786 fib at 2634 as well, Bulls need above 2701:

The Russell has reached Feb low support zone:

As for the DAX well, it opened the dam when it broke the 7-month long trend channel:

As far as the FANGs go, they are all down double digits from their highs:

Looking at the Euro Currency we can see the dollar’s strength has pressured it back down toward its August lows:

Crude oil has broken down as we warned a few notes back and now sits at pivotal trend channel support:

As far as gold, well we continue to see it as constructive and it seems to be continuing the path of least resistance vs its counterpart silver:

Ok, that’s all we have for now, stay tuned for me, expect more whipsaw action as those players late to the game continue to buy in hopes for a bounce. Trust us the market will bounce, but there will be plenty of sellers looking for a decent exit. We know that the market conditions are ripe for heavy volatility and with that opportunity so stay nimble and quick and do not get married to positions. If you like something dip your toes and see how it goes…damn we should coin that…Cheers!

DISCLAIMER: For Educational purposes only. This is not a solicitation to buy or sell commodity futures or options on neither commodity futures nor an endorsement for the purchase and sale of an ICO, Cryptocurrency or any digital asset and should not be construed as such. 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 the author Mike Agne owner of Magnelibra Capital Advisors LLC (MCA) and the website blog, which can be found at www.econemotions.com. All rights are reserved and encompass MCA and The Crypto Corner Newsletter, we will never claim that you will profit or that losses can or will be limited in any manner whatsoever. The Crypto Corner logo and name is the sole right and property of (MCA). 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, (MCA) makes no warranty, express or implied, or assumes any legal liability or responsibility for the accuracy, completeness, reliability or usefulness of any information, product, service or process disclosed.

DO NOT COPY OR FORWARD INTELLECTUAL PROPERTY WITHOUT PRIOR WRITTEN CONSENT AND OR APPROVAL