The diary of a messed up market day.

Well. Well Well. Or ‘three holes in the ground”, as my uncle used to say. That was a day.

The last two weeks have so far seen

Meltdown Monday
Turnaround Tuesday
We'll be OK Wednesday
Thumped Thursday
Found a base Friday
Make up your mind Monday
Trying Hard Tuesday

and today?
WTF Wednesday

I have to say that today was a hero to zero day for me in equity land. I played the CPI figure perfectly as stocks decided that the inflation story really. really is a concern. Until it isn't. And that ‘until it isn’t’ occurred about 15 seconds after maximum 'it is a really, really big concern'. That was when perfection vanished in a puff of humility and the ‘natural bounce up off the lows'  spent the rest of the day grinding higher up to new highs.

I am not too shy to own up to the stock shorts costing me money. I hate grinds, they are worse than sharp moves mostly because sharp moves engulf your emotions in one hit, whilst grinds tie you naked to a chair and beat your bits with a knotted rope until you are finally put out of your misery by the pistol to the head of a stop loss.

I think I might have been watching too much McMafia. Actually, that James Bond and Le Chiffre reference stemmed from a picture I saw of Macron in a Bloomberg article this morning and it just struck me how much Macron looked like Le Chiffre from Bond’s latest Casino Royale.

But I JUST KNOW that  US stocks will now tank. But if I don't understand why equities are going up then I must get out. Understand? That where your narrative fits whatever it is you want it to fit, but unless someone takes a 3ft pipe bending machine to the current narrative of ‘it’s inflayshun innit’ to make it fit with today’s moves then I am afraid this narrative is broken

We are getting through narratives faster than plates at a Greek restaurant.

I fell for that inflation one I really did. I even thought about what would do well in an inflationary world and thought.. hmm stocks could do well in an inflationary world because they hold tangible assets that are inflating so the value of them must go up against a deflating USD. Unless they own large amounts of debt and the cost of funding that goes up faster than the inflating asset values. I then thought this is getting complicated as I'll need to know the debt levels of the companies and if they are fixed or floating against which benchmarks and which currencies and where their manufacturing vs sales is and and ...  and then I stopped. It was all too much.

I'd wandered into this because my favourite dodgy high beta oil stocks that went to cash like everything else on the 12th Jan, might be worth buying again as I think we might be near the end of the oil dump. Have you noticed how correlated it is to SPX price moves?

But the problem with my dodgy oil stocks is that they have large loads of debt and funding that, relative to where rates were a month ago, would mean that oil will have to be a lot higher than its last recent peak. So I haven't bought them. I just bought oil instead. It’s always worth remembering that if you think something is going to go up or down, instead of getting clever with correlated stuff, just buy or sell the thing you think will go up or down. For example, with oil, don’t mess around with NOK/JPY FX thinking you are being clever, just buy oil.

The only consolation was a ‘that doesn't look right' enlarging of my long gold positions in the low 1320s and I did buy gold mining stocks, including some very dodgy ones. I even bought an ETF of gold miners (an ETF? In this environment? Are you mad?). It would be great if someone could inform all the goldbug loons of yesteryear, who took their evangelistic crusade to crypto-land, to come back because their one true Messiah is risen again. I never thought I'd miss them but we should point out that burying your gold coins in the backyard of your log cabin leaves your assets a little more accessible than down a phone wire that those pesky government agents, who you are sure you saw spying on you in the woods, could cut.

So that's been my day. I have ended it by kicking myself for not standing true to my initial beliefs that led me to eject all my positions in mid-January ahead of Martin Luther Turn Day. as defined in my post 4 days ago. 

1- Markets take off in January en masse in the direction set by all those ‘2018 trades of the year’. This sets consensus.
2- The week after Martin Luther King day, or Martin Luther Turn Day as I prefer to call it, together with the first expires, can often trigger a turnaround.
3- The start of February sees a peak crisis in something - EM, Bank Balance sheets, whatever.
4- This causes first round damage in the assets associated with the assumed crisis.
5- This causes losses which need countering by selling other assets that are in profit
6- This sees a cascade unwind in anything that is leveraged and heavily positioned.
7- Narratives chase price moves but are usually later proven to be incorrect.
8- These February washouts of the consensus trades of the year slowly settle down and reverse, leaving March as the time to really put on your trades of the year.

Good luck out there, I've had as much adrenaline as I can take for a fortnight. It made the skiing holiday look tame.