* Another "funny"

* And another great backdrop for the opportunistic trader

I have read many headlines similar to this one: "It just looks like a bit of relief rally following last week's heavy sell-offs," said MUFG analyst Lee Hardman.

Apparently MUFG is Mitsubishi Financial. Guidance from them is probably the recipe to end up like Japan, which actually may not be a bad outcome compared to where we might be headed.

Personally, I would rather have the Japan problem than the Venezuela problem, but maybe I am missing something. 

Anyway, as far as references to last week's "heavy sell-offs" or a "market rout" in response to the Fed's fake surprise lip-service hawkish in theory BS announcement, as best as I can tell the Friday scoreboard was:

* Bonds rallied and then gave it all back today.

* The S&P was down all of about 1.5% before today's snapback which gets almost all of it back.

* The Nasdaq (viewed as longer duration growth) was UP 50bps, and is now up more (by 62 bps).

* The Dow was down about 2% on Friday and is also getting most of it back today.

There are also headlines like this:

"Last Week's Volatility Is A Sign That Fed Tightening Could Be Over Before It Even Began"

"Powell Just Launched $2 Trillion In "Heat-Seeking Missiles": How The Fed Started The Next Repo Crisis"

Pretty simple.

If the markets can double, then sell off about 1.5%  -- it has been all of a few days and nothing else has really happened. Friday caused a mini freakout and the Fed is walking everything back (cue Neal Kashkari and the forehead powder to cut the glare)... well Venezuela it is!  

It would be somewhat less elegantly worded, but a drug addict would react the same way if their daily heroin dose was threatened to be marginally and insignificantly cut back at some indeterminate point in the future.

I suppose that apparently equities are now viewed as risk-free AAA rated securities.

So, what are those stupid banks thinking by holding/hoarding cash? (Hint; they are smart)

Thanks for reading my Diary today.

Enjoy the evening.

Be safe.

Subscriber Comment of the Day (And MY Response)

sbickley • 6 minutes ago

The more the "Boomers" keep showing their ignorance and lack of knowledge around BTC the more confident I am that BTC is accomplishing its intended purpose. Cramer and Dougie are both smart as hell and rich as shit. Hell, even Cramer jumped on the crypto bandwagon for a minute, but he is full of shit. Said he was on it as an alternative the USD. Really? Then why do you care what China is doing? As TN pointed out and anybody with a Google machine can figure out, the algorithm adjusts, remaining miners make more money and life goes on in BTC-land. Oh, wait, now Cramer is concerned about the US gov. response...really? Like you didn't know this was controversial? He actually said "I don't think this was the first ransomware payment made in BTC", referring to Colonial - no shit sherlock - its been known and happening for years...it also comprises a miniscule percentage of commerce on the blockchain.

Yes, it is not a traditional investment, nor is it intended to be. The vast majority of us messing around in this space should view it as an asymmetric risk/reward vehicle, that if it succeeds will be massive in fiat terms. If not, its a zero. Can we all agree on that? If so, can we just stop with all the BTC noise? Leave it be.

• dougie kass sbickley • a few seconds ago

  Bitcoin and digital currencies (in total) have large multi trillion dollar market caps.
  As such there is merit in discussion about the asset class - something more than bitcoin noise.
  So, riddle me this and please respond to my core anti bitcoin argument (second paragraph):
  As I have written:"The problem with fiat currencies, like the U.S. dollar, is that monetary authorities can create an unlimited amount of new dollars or other currencies - making it look, to some, like a Ponzi scheme.The problem with cryptocurrencies, like Bitcoin and Ethereum, is that anyone can make an unlimited number of new cryptocurrencies- making it, too, look to some like a Ponzi scheme. Ponzi schemes and scams are only visible to those that have no sense of history or want to believe in magic.I believe cryptocurrency is like Tinkerbell's light - its power source is based solidly on enough children believing in it."

No likey, here.      

So much for the supposed double negative day pattern around the June expiration. The market seems unable to keep things in line. 

We will get out the compass and the astrolabe and see if we can figure out what course we are taking next. 

Whenever you find the key to the market, they change the locks. 

Have a great afternoon. 

Arthur

I had to run out for a few hours to address a dog issue.

Again, little consistency from day to day, in a basically trendless market. 

Great for opportunistic traders.

From Charlie, here.

I have written a lot about MicroStrategy's (MSTR) suboptimal and potentially dangerous strategy in buying more and more Bitcoin since last August - most recently in my Diary last week. 

Not surprisingly, this morning, the company announced the acquisition of more Bitcoin - using the recent money raise as a source of funds. 

Given my negative view of Bitcoin I see MSTR as a continued investment short. 

* Consensus is sometimes the negative of thinking, logic and knowledge

* Stop nodding your investment head in agreement

* As a contrarian investor, I often relish and find opportunities in rejecting consensus

* Thoughtfully going against the consensus can be profitable

"Try to see it my way
Do I have to keep on talking 'til I can't go on?
While you see it your way
Run the risk of knowing that our love may soon be gone
We can work it out
We can work it out"

- The Beatles,We Can Work It Out

Whenever you hear the confident and broad consensus of opinion - you should consider reaching for your wallet because you are likely being had. 

To me, when consensus is reached, thinking often stops. 

Consider the recent core consensus expectations that have been obliterated and proven faulty: 

*Stocks should be bought/owned when economic and profit growth are recovering (e.g. 2Q2021). Equities are long-dated assets that discount the future. Stocks typically respond to rate of change and not to absolute change. Bull markets are borne out of bad news (March, 2009 and March, 2020) and bear markets are borne out of good news (September, 2007 and June, 2021. Peak rate of change?

* Bitcoin and other digital currencies are "going to the moon." The price of bitcoin has halved in the last few months and has plunged further over the weekend. The amount of leverage has been underappreciated.

* Interest rates will move lower. The 30 year has just fallen below 2% and the 10 year US note yield is down by nearly 30 bps in the last few weeks to 1.43%.

*Lower interest rates imply higher price earnings ratios. Just the opposite is now occurring - valuations and rates are both dropping.

*Staffing shortages will be short lived. Worker shortages are actually accelerating. See American Airlines (AAL) cancellation cancellation of hundred of flights over this past weekend.

*The price of oil will be in a never ending spiral lower. WTI Crude touched almost $72/barrel this morning. Goldman Sachs sees over $80 in the next few weeks, reflecting a strong demand feature, small speculative positioning, underinvestment and lower inventories.

*Fossil fuels are uninvestable. Energy stocks have soared since last fall.

* The Federal Reserve believes inflation will moderate. Last week the Fed woke up to the risks of higher inflation.

*The Federal Reserve can manage inflation. It can not.

*Moderates won't be able to influence policy. They can.

* Value stocks have "value" - pivot from growth. Caterpillar (CAT) and other value stocks like bank stocks have traded consistently lower. Meanwhile, investors have recently pivoted back to growth, e.g. Alphabet (GOOGL) and Amazon (AMZN) .

* Tesla will maintain its lead in the EV market - fueling further stock gains. Tesla's (TSLA) share price has barely had an uptick since reaching $900/share in February).

* AMC and GME are overpriced. These gewgaws, (AMC) and (GME) , have shot up in price in May and June.

*Traders in the Robinhood and WallStreetBets/Reddit communities are money makers. Based on the steep corrections in former speculative gewgaw faves (MAR) , (CAN) , (PLUG) , etc. - we cannot be sure that the Apes have profited. See Jim "El Capitan" Cramer's column this morning, The Iceman Cometh - Beware the Bad Stocks Pickers of WallStreetBets

*Price is truth. It is not - see  above bullet point regarding the significant reversal lower in the briefly popular gewgaws.

*Hedge Funds and large institutional investors are smarter than retail investors. See: Archegos and Melvin Capital.

*The office will remain the epicenter of corporate organization. Nope, that is changing, poste haste - as workers prove to be more productive at home.

Here are my Top 10 columns written this year that have highlighted, rejected and shown a way of profiting against "group stink": 

More Rants About Transitory Inflation

Fading the Foul Odor of Group Stink

Time To Be Fearful When Fin TV is Getting Greedy?

Speculation Has Reached an Interplanetary Level

Shallow Thinking Is Getting Punished

I Remain A Non Consensus Bitcoin Bear

I Am Not Buying What Chairman Powell Is Selling

More On "Group Stink"

Extraordinary Popular Delusions and the Madness of Crowds

An Old Man Writing About 'Games Traders Play' - Blinded By a Sense of History

Bottom Line

Though many consider me a short seller, in reality, I am not.

Rather, I am a contrarian.

At times betting against the consensus can provide a big payoff.

Always be independent in view.

Here is a great summary of the market's status from the smart folks at Evercore:

Uncertainty Takes Hold

SUMMARY: Mobility measures in the U.S. still indicate strong growth and COVID tail risk continues to recede as inoculations spread, but concerns over the Delta variant are having an impact on reopening sentiment and threatening COVID progress in Europe. This mixed backdrop of reopening, opaque data, and an apparent shift in monetary policy is contributing to a mean reverting backdrop where the sector and factor winners from one month tend to be underperformers in the following month. Pricing in a persistent hawkish shift by the Fed is a mistake and talk from Fed officials going forward (Williams and Powell this week) will help reinforce their commitment to an inflation overshoot, but as we noted yesterday it will take time for confidence in the Fed and reflation in general to come back. That makes the oversold condition in Value (Value had a 2 standard deviation move lower relative to Growth last week. Same with small caps relative to QQQ) and Cyclicals difficult to time.

Two Things To Keep in Mind For July: 1) Both Value vs. Growth, and Cyclicals vs. Defensives have been mean reverting as the economic outlook and market narrative have been volatile. Continued uncertainty suggests mean reverting trends should continue. 2) Technology and Discretionary have seen a sharp increase in Growth exposure while Financials have become even more exposed to Value, increasing potential style rotations around narrative shifts. It could also lead to more persistent outperformance of Growth if trends don't reverse. Hedging some beta or macro risk in Financials, Tech and Discretionary is prudent is macro uncertainty remains high.

Peter asks, 'Is there ever a right time?' 

Notwithstanding what many in the Reddit crowd thinks, trading and investing are not easy and with a monetary tightening ahead in the coming years, it will get even more challenging. No matter how slow the Fed goes, no matter how much they 'communicate' what they want to do, there is no avoiding the potholes of reversing extraordinary easing. I'm stating the obvious but when markets and the economy have been addicted and medicated for so long on low rates and QE, there will NEVER be the right time to ease up and NEVER a smooth way of doing this. I say 'obvious' because just look at the history, particularly over the past 10+ years when each QE program ended and when the Fed was raising rates. If Mike Tyson is going to punch someone in the face, no matter how much notice he gives them and no matter how prepared they think they are, it is still going to really hurt. And finally, what makes this time even more unsettled is the direction of inflation from here will be predominantly driving things rather than the Fed's own volition.

I say this ahead of a slew of Fed speak this week, particularly from Jay Powell tomorrow where inflation is not just a Wall Street topic of pontification. It is a Main Street story now and that means the questions from politicians should get more pointed as their constituency speaks up in frustration.

As for the commodity pullback in some raw materials, here are some charts to put it into perspective. One is the CRB index, highly influenced by the direction of energy prices (which I expect to go higher), another the CRB raw industrials index which I believe is very important to watch because it includes commodities that don't trade on a futures exchange and thus do not get pushed around by speculators. It also doesn't include energy. This index was down just 1.6% last week, and the same amount off a 10 yr high and includes resin, tallow, burlap, rubber, wool, hides and print cloth that you can't trade on the CME or LME. The 3rd is the food index where you have to take a microscope out to see the recent pullback off at ten yr high. I remain bullish on most commodity stocks as we have a global reopening and recovery to look forward to and it won't be just US consumers driving things here.

Shifting to the data, South Korea, a key exporter of semi's and auto's, said exports in the 1st 20 days of June rose 29.5% y/o/y but that is down from a 53.3% increase in May for a similar time frame (full month gain in May was 45.6%). Exports to China slowed to 8% y/o/y but were up by 41% to the US, 49% to the EU and 33% to Japan. Imports were higher by 29.1% y/o/y vs 36% in the month prior. South Korea is now an industrial powerhouse and thus this data should be considered bellwether. The Kospi closed down by .8% as most indices in the region were red on the heels of the US action on Friday.