Newsletter - 11/16/2024
It's quiet. It's too quiet. After the most anticipated and wild POTUS election cycle in modern history am I the only one who expected something a little bit more after the winner was announced? I mean, with the exception of two Soros sponsored protests there has been nothing. While I was not expecting there to be riots in the streets if Trump were elected, I am surprised that the only noise I hear is whimpering. This is NOT the POTUS Election party that existed before the votes were counted.
Even more interesting: as Trump is naming candidates to fill out his administration, sometimes picking what the "other side" views as a person who is THE embodiment of evil, there again has been silence. When Trump reaffirmed his commitment to forced deportations on Day 1, there was zero outcry. When Trump announced each candidate, the response was: nothing. I mean there were the usual parties of the MSM prostituting themselves but there were no threats of ANY kind. No threats of lawsuits. No threats of marches and civil disobedience. But most striking is the complete lack of any judgmental statements attacking anyone who voted for Trump or Trump himself.
I have spent a considerable amount of time pondering this issue and have arrived at the following as what I think are the most probable reasons the losing party has been so uncharacteristically, normal?
The Democratic Party has Learned
It is possible that the results of the election were so shocking that the Democrats really are in a state of existential crisis. It is possible that the Dems have decided to tell Obama to hit the road. It is possible that the MSM has realized that being a mouthpiece for any party is stupid. It is possible that as a result of the election the Democratic Party has decided to unify under Trump.
None of these are probable though.
While the possible "triggers" for a serious counter response to Trump being elected have lessened, I do not believe the hatred for Trump has. I do not believe that all of a sudden the Democratic party is going to view Trump supporters as anything but rural bumpkins that need to be led and managed. And I do not believe that the Deep State is just going to roll over.
No, I don't expect a drastic change in messaging from the Dems. This is the least likely reason for the silence.
The Democratic Party has Accepted Defeat
So a party that was the original establishment that transformed into the party representing the little guy that morphed into the party that was the party of rebels that then morphed into its' latest iteration; so that party has accepted defeat? Cmon.
Is the Democratic party licking its wounds? Yes. And there are a lot of them. Their ideals were largely rejected up and down the races. But getting over getting your ass kicked is different than accepting defeat.
COULD the Dems move away from some of their more radical members and ideas? Sure. In some areas they will be forced to but in most it would require a complete gutting of the party's platform. That's not going to happen, and the Democratic Party has not accepted defeat.
The Democratic Party is Waiting
Perhaps the Dems are planning what their response will be. Perhaps they are not shellshocked by Trump's appointments. Even when Trump floated the idea of putting Congress into recess after he is confirmed so that he can use recess appointments didn't elicit a peep. So, either one of the above two possibilities are correct or the Dems are waiting for the right time to do SOMETHING.
Do I think that all of a sudden, the MSM, the Dems, Corporate America, Campuses - that they all have "seen the light??" No. I don't think that's possible. No more than Trump's supporters all of sudden waking up to a Kamala victory would all of a sudden see brilliance in their first female President.
I think those in power want to stay in power and they will do anything they can to insure this. Therefore, I believe that the closer we get to the Inauguration, the louder the opposition will be and the higher the probability for an outlier event.
Possible Effect on the Markets
Depending on how the opposition to Trump's election manifests itself and to what degree the possibility for the process itself to be interrupted rises will drive how the market reacts. The market has already "moved on" as is evidenced by the Trump Rally, although that too appears to be in danger. The market is now operating on the basis that there will be no interruption to the process itself. It is assuming that the transition will be smooth, and if we are to believe the Dems, it is something they want also. Whether or not you believe that is immaterial: what matters is that the market is NOT pricing any possibility. Because the market has taken this position, any risk to this outcome will probably be met with a spike in volatility. IF something were to happen, the longer it drags on the worse the market will react.
Finally, remember that none of this takes into account the risks in the financial markets.
Where Are We?
With each passing Newsletter I will update if one of the important dates has passed. I will also comment on any predictions that I made before the election to see what I got right and what I got wrong.
As I write this it is my view that the risk that there is a challenge to Trump or the process will rise into the inauguration. Therefore, each of the following dates are only possible "trigger points" for action if Trump is going to be opposed before he is inaugurated.
November 5 - Election Day
Be prepared for reports of widespread fraud and voter intimidation, by both sides. Also, I expect reports of lawsuits at the local level that will embroil State Election Officials. I will be watching for acts of violence.
I was completely wrong about this. While there were a few reports of voter intimidation, no widespread accusations of fraud or other monkey business occurred. Perhaps the reason has to do with the fact that the margins were not close enough (2 to 4%) that attempts at manipulation would even work. Also, TwitterX has created hundreds of citizen journalists that were watching and reporting.
December 11 — The Appointing of Electors
This is a big deadline: it's when each State certifies their Presidential Election Electors. If there is going to be an attempt by a State party machine to manipulate the vote, this would be the time. I will be watching for any attempt to NOT certify (the Governor is the default "certifier") a State's electors because it would delay the next deadline which can only happen six days after the Appointing of Electors. And that next deadline is:
December 17 - The Meeting of Electors
Each State's appointed electors will meet in their respective state capitols to cast their votes for the candidate that won that State's votes. This is what is referred to as the "Electoral College." Since the location of the meeting is a public location, I will be watching for acts of violence to prevent the electors from meeting.
December 25 - The Arrival Of Electoral Votes
The president of the Senate and the national archivist must receive the electoral certificates of each state by the fourth Wednesday in December.
January 3, 2025 - The New Congress is Sworn In
The new Congress has to be sworn in before they can count the POTUS electoral votes. I will be watching for a delay.
January 6, 2025 - Congress Counts the Electoral Votes
Following the effort to overturn the 2020 election, the Electoral Count Reform Act introduced a series of reforms to this joint session, such as clarifying that the vice president's role (as president of the Senate) in overseeing this count is "ministerial," and raising the threshold for objections to a state's electoral slates to one-fifth of each chamber. (from NPR)
January 20, 2025 - Inauguration Day
If you honestly believe we will arrive at Inauguration Day without the market having gone down due to something to do with the election, then you can stop reading now.
What are the odds that the market exits January 20th, 2025 unscathed? Now what are the odds that NONE of the other possible risks to the market don't pop off between now and January 20th?
Trump Winners & Losers
I have purposely taken time to think about which industries or regions might do well under Trump and which are at risk of being seriously negatively affected by Trump's proposed policies.
As I often do when I have a thesis that is more macro than technical, I have reduced the possibilities to those that I think are most likely.
Tariffs - Losers
Any company or business that has a significant portion of their revenue cycle dependent upon a supplier/producer/manufacturer located in China, Mexico, Vietnam or Canada is going to be affected by Trump tariffs. To what degree will be dependent upon how each of those regions respond to Trump tariffs.
In addition to watching when the right time is to short China, Mexico and maybe Vietnam and Canada ETFs, I also believe that WMT stock and company are at a very high risk of being "repriced." In addition to sourcing a great deal of products from Mexico and China, WMT is also trading at a 46 PE. In my experience when the market runs out of reasons, and steam, for it to continue to go up, there is a fast pivot to valuing companies and stocks based on their fundamentals and actual performance instead of pie in the sky projections.
Do you think the market is going to continue to push WMT up if there are tariffs? How about if consumer spending craters and unemployment spikes? How about if interest rates spike?
Every single time a correction occurs I hear this outcry from investors that the "market is rigged" because all the big money got out early. This is often said in the context of "if they had known they would have done something." I call bullshit. Because the following has been going on since March. And not just WMT. AMZN, AAPL, META and many more have been aggressively sold by insiders and management. Buffet has sold all of the banks he owned except for the rest of his BAC.
"I would rather be 4 months early than 4 months late in almost any market environment." - MrNotAdvice
Tariffs - Losers (contd)
Container shipping companies will see their rates drop and the longer the tariffs go on, the worse it will be for the shipping companies. Additionally, the currencies of those countries targeted by the tariffs will weaken, perhaps meaningfully so shorting raw materials companies in affected industries and / or geographic regions offer exposure.
Tariffs - Winners
The obvious answer is any US based company that has manufacturing capabilities. However, it might surprise you to learn that the US is third in manufacturing in the world. Here's a list of companies that I will start with:
Drug Companies - Losers
If Kennedy is confirmed as the head of the HHS, he will have the authority to follow through on his threats. What threats you ask?
Big pharma are obvious targets, especially those involved with Covid. I will be looking at individual companie that I think are at particular risk as well as ETFs.
Generic Drug Companies - Winners
Trump has repeated his promise to bring drug manufacturing, particularly generics drugs, back to the US then US based generic drug manufacturers should rally.
Government Consultants - Losers
If the DOGE (Department of Government Efficiency) actually is able to get proposed cuts enforced than those bloodsuckers, I mean companies, that get fat off the government teet better find a new business model soon.
Defense Contractors - Winners
Just because Trump hasn't started a war doesn't mean he will be willing to cut defense spending. On the contrary, he believes the best defense is to be the biggest, baddest, craziest you know what on the block. Agree with that or not, Trump will be very good to defense contractors. Taking the thesis a step further, I am researching UAV and drone manufacturers.
War on Drugs - Winners
Additionally, if Trump follows through and declares war on the Mexican Cartels by classifying them as Terrorist Organizations, I would be looking to short Mexican Banks on the off chance that Trump really drops the hammer and freezes the Cartel's assets and prevents any bank that does business with a Cartel from accessing the global banking system,
Private Education Providers - Losers
If Trump follows through on his threat to shutter the Department of Education and return the power to each individual state, I cannot imagine the regulatory mess these providers would have to navigate. Additionally, any provider that receives substantial Federal Dollars via contracts with public schools could be hit.
On the other hand, if any of the following companies "pivot" to providing homeschooling materials and curriculum AND Trump followsthrough with this promise to provide a large tax credit for homeschooling families.
Final Comments
Each of the above are candidates. I will watch for developments out of DC and in the market before deciding to take a short or long trade. Even after that I will wait for the best time to enter the trade. Having said that, I know that Trump continues to threaten tariffs and government waste. They will be the first candidates I will be watching.
On the other hand, if any of the following companies "pivot" to providing homeschooling materials and curriculum AND Trump follows through with this promise to provide a large tax credit for homeschooling families.
Where Are We Going?
I see a few possible paths for the market, all of them are WITHOUT an outlier event occurring, geopolitical, economic or otherwise. In the event that one of those triggers they will act as both a trigger and an accelerator, to the downside.
Scenario 1: The Bounce
If the 584ish level holds then I could see a rally through the end of this year. How high? Maybe another 5 to 10%. But with ever tick higher, risk will increase exponentially. I will just short higher.
Scenario 2: Bear Trap
In this scenario, the market does not hold and drops further, sucking bears in before it reverses and rallies into the end of the year.
Scenario 3: Bull Trap
If the market bounces, makes a new high and then reverses, that will tell me that the bulls might be getting trapped. Remember that the market loves to punish one sided trades. The current market's euphoria and disregard for risk definitely qualifies.
Scenario 4: The Start
Even though the market is short term very oversold, it can get even more oversold. If price does not hold Friday's lows on a close, the market could start to "accelerate" to the downside. Even then, I would not be ready to say the big move has started as long as the SPY is above 500.
My Choice?
My top choices are #1 or #2. Both scenarios see the market rising into the end of the year. Again, this is barring any outlier event. The reason why I believe it is more likely we go up into the end of the year has a lot to do with seasonality and the market structure. The following images provide some examples and context. Click image for slideshow.
Investor sentiment has swung sharply positive. (BofA)
There are still sectors that have room to run.
In addition to the $6b/day of corporate buybacks, retail has joined the party. Hugely. The top is close.
Investor sentiment has swung sharply positive. (BofA)
What About Your VIX Trade?
Since I think the odds are that the market turns higher you probably are wondering what I am doing with my VIX trade. I had planned on looking to roll them to February VIX calls but then today happened: SPX down 1.32% and VIX up 12.79%.
Therefore, I am waiting until Monday to see if the VIX will continue upward AND gain momentum. If it does not do both, I will look to roll Tuesday, maybe even Monday end of day if the market reverses hard.
As for what I got wrong? I underestimated the amount of support Trump had which led to a margin of victory that is all but manipulation proof. I do not think I got the timing wrong but instead the possible triggers just did not occur. In the simplest terms, the odds did not work in my favor this time.
Also, remember that this is an All or Nothing Trade that I am willing to lose 100% on. Even still, I want to be able to buy more time, at least out to February 2025.
As for closing it for a loss with the odds favoring the current "Peaceful, Easy Feeling" to be shattered by something between now and the Inauguration?:
What About BAC and CRE?
To refresh our memory, I have only a starter position in my SPY puts and a 8% position in BAC. I have always stated that I would wait for the Weekly to confirm trend before I go up to 40% of my total. I now will be using 2026 puts (thankyou market) and I will be executing at a much higher price.
If you are looking at the current p/l of the trade and that is causing you to question whether or not you should sell or hold what you already have, you are doing it wrong. You are not sticking to the original thesis or the original plan. There is a reason why I did not commit all of my intended capital when I started executing on this thesis: because I always knew price could go higher for longer than anyone could believe. Well, that's happening now.
If you have a valid fact-based thesis as to why the economy is not in fact worsening but is getting better, then that would be the only reason to sell.
A couple of other things:
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I am very bad at what I call "hand holding." It is why whenever I got a new client, I told them the deal was that they had to do everything I said for at least 12 months, without any questions. Because I am terrible at "trade empathy" sometimes.
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I also am not very good anymore at understanding the fear of losing. Not because I do not lose but because I do not give it any more weight than it deserves: it is part of the process that leads to outsized returns.
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I am teaching the entirety of the tools I used as a professional. In this case position sizing, sticking to one's thesis, emotional control, and patience come to mind.
EOSE
The current slow decline in EOSE is due to the delay in the DOE financing. I am of the opinion that once that is announced as closed that other announcements will follow shortly thereafter. MY logic for this is: since the DOE loan is a significant part of the capital structure of the company no less than the investment and loan by Cerebrus was. Cerebrus became involved a little over 4 months ago and during that time they have made an additional investment.
But that's not all. Cerebrus went to EOSE and suggested waiving the next two Milestones. Cerebrus had the opportunity to increase their ownership AND raise the interest rate of the debt, and they did not. Any further questions about Cerebrus and whose interests they are aligned to should be put to rest for now.
Returning to the DOE loan: EOSE stated that they expected the loan to close by the end of the year. The reason the stock is drifting down is because the longer it takes for the announcement the more fear will grow that there won't be an announcement. I believe that the stock could trade as low as 1.25.
If DOE is Delayed?
If this happens I would expect the stock to test the low end at 1.25. And depending on the reason for the delay and the expected length, I would not expect the stock to recover until the DOE is announced OR a new customer order of size. I think there is less than a 10% chance this happens.
What's My Plan?
First I have to see if price bounces at current levels. If it doesn't. I might open a Swing Short. THE CURRENT WEAKNESS IN SHARE PRICE DOES NOT CONCERN ME. In fact, I would prefer the weakness now as it reduces the likelihood of a "Sell the news" event - if the stock is down there is less to sell into.
Patience. Patience. Patience.
Newsletter Changes
One of the strengths that I bring is all the analysis and study that I do behind the scenes so to speak. With the increase in hours that I started three weeks ago, I found myself mentally tired and lacking energy. After a long discussion with "Doc" (our very own Trading Psychiatrist - Quadrivium) I have decided to take some more off time. That means I will only be doing this Newsletter twice per month. I do not want to get to the point where I am struggling to write the Newsletter every week because I am already mentally drained nor do I want the quality to suffer.
Market Close Live Podcast
Starting this Monday, I will be doing a one-hour live podcast starting at 15 minutes after the close, every Monday and Wednesday to start. If the demand grows I will add more days. This first week will be fore Duscord members only as I work out the kinks and such.
The easiest way to listen live AND participate by asking questions via text or joining live on air is to use the Podbean app. Alternatively, you will also be able to listen to the recordings here:
The MrNotAdvice LIVE DAILY Market Close Podcast
I hope to also broadcast live to TwitterX and Youtube and maybe even my Discord channel after I work out the technical requirements.
Price Increases & VIP Changes
Due largely to demand as well as the fact that I am the ONLY former trading professional with 30 years experience that is willing to mentor one on one AND teach everything I know I am raising Membership Prices December 2, 2024. I did a survey and there is one other provider that charges $50k for one month of 2 hour sessions three times per week. And he lacks the experience and from what I can tell, the credentials.
The details:
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VIP Monthly Memberships will increase to $599 per month.
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VIP4Life Memberships will remain by pre-approval only; the price will increase to $9,999.00.
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TraderOG Memberships will increase to $199 per month.
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The VIP 6 month and Annual Memberships will no longer be available.
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All current VIPs and Traders will continue to pay their current rate.
Current VIPs who are not VIP4Life and want to avoid the price increase AND receive a $1000 discount should DM me that you would like to be considered. Anyone interested must contact me by December 1, 2024. Since I am aware of the time of year I also am willing continue to allow VIP4Life Memberships to be paid over months and not all at once and I will also allow new VIP4Life Members to start paying in January, 2025.
Starting January 1, 2025 only VIP4Life Members will be able to schedule 2 meetings per week with me. All other VIPs will revert back to the original 1 meeting per week.
New Live FREE Session
Thursday, 11/21: 4pm EDT
Join me this week as I share how I can take any investment thesis and use the same process to analyze it and create both a long term and a short-term trading plan using long Calls, short Puts and LEAP calls. I will teach the steps that I do with every single trade idea that I have. from inception to trade execution and management. There is no need to sign up.
https://meet.goto.com/MrNotAdvice/freeliveteachingsessionmyprocessfromstarttofinish
Upcoming Podcasts
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The Doc returns to talk more trading and headshrinking.
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A current Banking expert and C-suite executive as well as a bank owner will be joining me to talk about the current state of banking, with a special focus on the #CRE market outlook.
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Mr. Greg Reyes returns to discuss BYON, EOSE and ENVX.
USDJPY
Tick tock. The Yen has hit the danger zone (150 to 160 USDYEN) and barring an aggressive intervention by the JCB, the Yen will continue to rise and breach the "all hell breaks loose" level of 170 (I increased this from 160 based on last week's price action, and then Friday happened.) I will update next newsletter.
$SPY
From last week: "This is easy. Unless the SPY and the QQQs both take out the huge century levels acting as resistance, the top is in. The fact that they have both tried and failed makes it even less likely that a blow off top will occur. Watch the Mag 7 - they will need to lead. Banks and other Trump trades will try to lead also."
Well they tried, and they failed. so until price proves me wrong, the top is in. Regardless of what I think will happen.
This is a BIG DEAL. A reading over 1 indicate extreme positions,
The current reading is 1.9.
$QQQ
From last week: "500 is the line in the sand."
Guess what. It hasn't changed.
$RUT
The RUT lead the market higher and it now is leading the market lower. If the RUT closes below 2300 on the weekly, it's probably over.
Also, a second attempt to break to highs won't be as easy since so much money has already been spent on the first attempt.
$ENVX and $EOSE
EOSE commentary above.
If ENVX fails to hold the 8.10 to 8 level, the May 1, 2024 gap will close. The Fireside Chat and more news failed to lift the stock last week. The stock is being sold and does not have any thing supporting it if the 8 level does not hold.
The good news is that letting the gap close now would be much better for future possible up moves.
I remain cautiously optimistic the tech, neutral to sell the stock, on a short term basis.
THIS AND THAT
Either the above GDP estimates are too low (stimulus) or too high (recession gathers steam). Goldman's outlook is within their normal distribution of outcomes. They have a blind spot.
Again, GS is not factoring in any monetary or liquidity shocks.
A little weakness in the 10 year might add fuel to equities this week.
Since the election the Healthcare sector has been hit, but not equally. There is still plenty of fat left in HC to short.
Doom
Anti Doom
PODCAST:
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Paid Memberships:
Look, there are a LOT of scammers out there on FinTwit. 99.99% of them care only about selling packages of crap. SOME OF THEM ARE CHARGING AS MUCH AS $5,000 PER MONTH! None of them include what helped make me a better trader: having a mentor. Having someone who will be your PERSONAL TEACHER, COACH AND ACCOUNTABILITY PARTNER. A Mentor that has over 90,000 hours of screen time. That by itself is invaluable.
People ask why I charge. First, I want only VIPs that are committed and "having skin in the game" guarantees this. Second, because my time is valuable.
See what others are saying:
Don't forget the Discord live chat is STILL FREE but it will be closing to new members soon. In fact, we have already started removing non-active members.
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In the meantime, come and join us - its the best community out there: Discord.
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Also, be sure to check out the new page for Daytrading on the website, run by the fine gents @BaconTurkeyClub and @Juggernaut. If you ever wanted to learn or just watch two pros daytrade live, they are at it every day here: DiscordFuturesChannel.
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Finally, be sure to check out VampireTrades and his amazing penny stock trades.
Thankyou Family!
theBoss
Nothing above is investment advice nor should it be construed as investment advice. It is offerred for entertainment purposes only. Always consult your advisors before investing any money. Do not "follow" or "mirror" any trade ideas provided. Mr.NotAdvice is not a licensed or registered investment advisor. Do your own research.