Q: Just wanted to say I really appreciate your work. I’ve been reading it for a few months and I’ve learned quite a bit. As a former technical analyst at a bulge bracket firm I impressed that you pull a ton of data and disciplines together to put the picture together and of course place price action in a prominent place in your analysis.
Any books that you’d recommend someone to read, especially for fundamentals, market valuation ? Also, what’s your daily routine? I know you touched on it a bit in regards to Twitter but just curious how you find all this data?
I look forward to reading and learning from your analysis in the coming bear market.
J: Thanks for the kind words. A few of my favorite books are the “Market Wizards” series. Howard Marks’ “The Most Important Thing” is fantastic. After that, I like “Reminiscences of a Stock Operator,” “Being Right or Making Money” (Ned Davis), “Deep Value” (Tobias Carlisle), Peter Lynch’s books and all of the Buffett Berkshire letters.
Q: What is your opinion about KITE and the like in crspr cancer research? It always seems to have wide bid-ask spreads…possibly manipulation or just enthusiasm? Or possible buying for larger stake by funds? Might outperform sector just because it is new technology?
And just a trading question… what does it mean when you consistently see a bid price with just one share asked and an ask price with just two shares offered? Is that an indication someone is trying to manipulate the price? Something to warn you off?
J: Re: KITE, I have no idea. Sorry. As for the latter, could be spoofing. I really don’t know. Wouldn’t really bother me, I guess.
Q: This may be a silly question but if you think that we are in a bear market for equities, wouldn’t gold mining companies be taken along for the ride?
J: That’s certainly possible but if gold goes up at all these stocks will likely go up much faster as they are highly levered to the gold price.
Q: Could you comment on using mutual funds like PSSAX, GRZZX, SOPIX, or RYURX? I was surprised to see no comments on these on your site, esp. given that you’re convinced that the market has topped. Is it simply that these are mutual funds and you favor ETFs like SQQQ, SOXS, etc? Or is there more to it? I am really curious as to your opinion on these bear market mutual funds.
J: I know nothing about those funds but I generally prefer ETFs for two reasons: First, you can trade intraday and being nimble is one key to successful short-selling. Second, you have control over your capital gains and they’re not just distributed to you (albeit, this is not as important when it comes to short-selling).
Q: Exciting times indeed! I don’t really have the courage of my convictions so I’m pretty much in cash right now waiting to see which way trends break, especially gold miners.
A ‘devils advocate’ question regards leveraged loans: I haven’t been able to discover the composition of the US Leveraged Loan 100 Index which BKLN is derived from. However, is it possible that the Energy sector is disproportionately weighted in debt markets vs equity given Energy stock prices have already fallen so far, and thus the disconnect between the S&P500 vs BKLN:IEI as an indicator of risk is not as great as it might appear?
Keep up the great work; I always look forward to my weekend update.
J: Good question. Leveraged loans actually have a much smaller exposure (low single digits) to energy than high yield or even the S&P 500. What’s going on there is not due to the oil crash.
Q: Not sure if this is how to ask a question or is there a place on blog?, but anyways, you are shorting into resistance and using technical, market internal dynamics and fundamentals to shape your thesis to be short, but what is your exit based on, price level breach or change in fundamental picture? New highs on major indices? Improvement in breadth or credit market improvement. Curious your thought process on how you plan on handling this move, when to cover, what you’d look for to reshort. These moves are frustrating to me and wanted to gain an insight on how you handle it strategically. To me it’s new highs but I think that’s a fairly obvious level.
J: I would have to see improvement in the credit markets and breadth, yes. Right now both are are going south suggesting the floor could fall our from under stocks at any time. Even approaching the highs from early this month, though, would probably have me reducing exposure. I’d just have to see how the market is acting at that point. I think most of the strength this week was due to the oversold condition from a week ago, traders front-running seasonal strength and option expiration, which has been consistently bullish lately. That said, shorting is EXTREMELY difficult and requires much more patience than going long.