Tchir: A Few Quick Long Weekend Thoughts

Authored by Peter Tchir via Academy Securities,

On the bright side, it seems difficult to believe that the second half of 2022 can be as difficult as the first half was (difficult, but not impossible).

“Seasonal” Flows

There had been a lot of chatter that there was going to be large month-end and quarter-end rebalancing. That did not seem to materialize, and I’m not sure how many people are stuck long betting on that? I suspect the number is high, as many like to bet on start of month flows (often positive) and bet ahead of long weekends (often positive).

I was surprised that both TQQQ and ARKK had outflows yesterday. Both of these funds had seen reasonable inflows and yesterday seemed like an “ideal” “buy the dip” sort of day. If investors start to capitulate from these more volatile trades, we could see more pressure on markets (I am fixated, for better of worse, on these, when looking for capitulation.

I started hearing the 401k chatter yesterday. I am not sure how many people only look at their investments on a monthly or quarterly basis, especially in this type of market, where the moves are daily headlines, but if there is anyone who only looks at periodic statements, they could be in for a rude awakening.

Long Duration Assets

While I’m constructive on bonds (because I think the economy is decelerating faster than is being picked up in the current data, and far faster than “straight line extrapolation” models can register).

Having said that, I think buyers of “long duration” assets will be much more circumspect this time around. Cash flows, barriers to entry, etc., will impact what assets catch the long duration bid.

Which brings us to bitcoin.

I have 3 Rules of Bitcoin.

Rule #1, that “Bitcoin is smarter than me” is something I’m questioning as we see firm after firm being exposed, by, what seems to me,  to be incredibly poor risk management. 

But I’m really focused on Rule #2, “There are No Rules”. Yes, one of my 3 rules is that there are no rules, but I think that is particularly important right now.

Yesterday felt a bit like some sort of institution(s) who didn’t want to report bitcoin holdings on their quarterly report, got out. The overnight trading looks exactly what I’d expect if someone was trying to manipulate a market higher. Find a period of less liquidity (overnight, on quarter end), push hard to reclaim “support” levels (no purchase since late 2020, that was held, is in the money) and try and create some “buzz” around the bounce. That overnight trade is already fading, and I do not see where new adopters come into this market, at least not until it becomes clear that the risk of one firm locking access, does not spread any further. That some of the questions about stable coins get more definitive answers.

When I think of “long duration” assets, I currently do not think of bitcoin, and I think it is extremely fragile here and the risk of another rapid drop from here is extremely high!

Long Weekends

Enjoy your long weekend and if you missed Academy’s latest Around the World, I highly recommend it for a quick catch up an a variety of important geopolitical topics!