Adjusting to the Insanity

This isn't an easy market to trade from the short side.  Even during the craziness of the EV parabolic rise in November or the biotechs in December, the pumpers still dumped a decent amount.  Starting from late December, the pumpers just didn't dump.  They went up, had a very small pullback, based, and blasted off again.  And these blast off moves aren't off of small up moves.  Some of these stocks were already up 300% in a month, and then it would go up another 150-200% in a few days.  

These are breathtaking moves, no wonder the retail investors are in a frenzy, because most of the ones driving these stocks higher aren't used to winning so much.  Its like the casino gambler who is on a hot streak, winning over and over again, completely different than what would normally happen to him.  That feeling of euphoria you get at a casino as you win on almost all of your bets is what these retail traders trading these $1 and $2 stocks are feeling now.

This probably keeps these retail traders in the markets for the long term, turning into post bubble bagholders, but that's a bridge to cross in the future.  That will be bring on another set of opportunties later.

With the insanity of the parabolic rise of so many of these crappy, speculative penny stocks, on top of the multi billion institutional darlings have made it tough to hang on for longer term shorts.  There are so many names right now that are grossly overextended and ripe for a sharp pullback that it is hard to choose the right ones.  I am sure most of them will all go back down together, as they mostly went up together.  The plan for swing trades is to stay away from the heavily institution owned pumpers (PLUG, FCEL) and focus on the heavily retail owned pumpers (BNGO, FTFT, etc). 

With the coming $2000 stimmy checks coming soon, I am sure a lot of that money will pour into these crappy stocks.  Rumors are that the Biden stimulus package will be $2T, which is absurd, since its on top of the already $1T spent just in the December stimulus bill that passed.  And I am almost completely sure that even if the economy gets hot, there will be no desire or ability to raise taxes.  With just a 50-50 split in the Senate, its highly doubtful that all Democrats will be on board for a tax increase, especially since some of the moderates will vote down any meaningful tax hike. 

So most of the Rona stimulus will end up in pork pet projects solely for the benefit of campaign donors and those with politiical connections.   It is a huge transfer of wealth from every holder of US dollar assets (not taxpayer, since none of this will be paid for with taxes) whose dollar holdings will be debased through money printing to fatten up the leeches in Washington DC. 

The reason gold is not keeping up with all the other weak dollar plays (energy/commodity plays, foreign stocks, bitcoin, etc) is because it has gone up quite a bit over the past 2 years due to the Fed rate cuts and QE.  And gold which used to primarily be an inflation trade (from 1970s to 2000s) is now mostly a monetary stimulus trade.  Monetary stimulus doesn't really help the economy much, but it does help boost gold, but fiscal stimulus actually will boost the economy, albeit a sugar high from stimmy cash raining down on Main St. and partially due to the pork trickle down effect.  And a hot economy leads to so many winners that gold ends up going out of favor, even with rising inflation.  

Bitcoin is basically a high beta play on a weakening dollar + rising stock market, so its more of a fiscal stimulus trade than a monetary stimulus trade.  Also, with so much retail involved in bitcoin, a lot of stimulus cash will end up going into further bitcoin speculation.  

It is no longer Rona stimulus.  These pork filled stimulus packages are now Russell 2000, SPAC, and Bitcoin stimulus packages.  

Biden will be announcing his pork package today.  It is rumored to be around $2 trillion, so anything less will be a disappointment.  I am sure when the dust settles, it will be even bigger than forecast as more pet projects get added on in order to win votes.  

We're getting close to a good short opportunity, have been waiting for that one last push higher to all time highs before going into an SPX short.  Thought there would be a run up to the Biden stimulus announcement, but the bitcoin correction's contagion effect kep the stock market in check this week.  So not easy to short here, although I still may take on a very small starter short position with plans on adding higher if we get that extra push higher after inauguration.  Not that exciting to short here, you almost need a perfect pitch to get short this market profitably so being careful.