The issue isn't liquidity. As I already mentioned the fiscal put is in place so liquidity right now isn't the biggest risk and the federal reserve in the US is ALL over the banks. There is no debt ceiling until 2025 so I am not too worried that if panic in these sectors arise they will be all over it.
In 2021 inflation costs were able to be passed to consumer to protect margins but in 2024 that is not going to happen. Only option now is to cut bottom line costs to protect the margins which will ramp up layoffs.
For corporations though, Tesla just fired 10% of their workforce and that can only give a signal that further revenue decline is coming. Last I checked they're part of that whole MAG 7, yeah? NVDA has 13% of their annual revenue coming from ONE distributor. There is one indirect customer that bought from multiple NVDA distributors (including that one distributor) that totals 19% of their revenue so there is some decent risk here. As layoffs ramp up, which they have, how confident do we feel for a META (that gets majority of revenue from advertising)? META has grown 308% since January 3rd, 2023 so do we really see intrinsic value at $508/s right now?
I see enough signs that we're reaching the top of this current cycle. Commodities rising, gold rocketing, DXY rising, white collar job loss piling up, bond yields up, inflation showing signs of life, deficit out of control, companies like SMCI issuing new stock & convertible notes, crypo spam and ICO's, FIRNA showing margin debt growing again.
Also, is it a bear trap if I already shared data with this thread that the S&P likelihood of a 20% drawdown is at its lowest since 2007? Kinda shows the opposite. Where is the trap exactly? The real things above are actually taking place.
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As for strategy I am now looking at oil and also some index puts to dip toes into. Defense stocks also look to still be a decent option given tensions brewing globally, I don't see much appetite for deescalation right now. The situation this weekend, while minor from a damage standpoint, still cost $1B for defense.
Either way, Harshu, capital preservation comes first and capital growth second. I see no need to risk chasing small upward gains when the risk downside is much greater.
This is a bear thread after all....
-Sean |
