Apr 10 • General discussion
The big casino
Where luck and genius often gets confused.
First, nobody KNOWS where the market is heading.
Just take a quick look at this Nasdaq chart. Or Tesla for that matter. Tesla was extremely expensive at $212 about 5 months ago. Despite a slew of negative news regarding competition, losing market share, tariff plans etc., it more than doubled in price to $488 in less than two months. Then for no new good reason it crashed to $214 the day before yesterday, only to bounce by 28% to $275, almost all the way back to its 200 daily moving average of $290 - despite being the most overvalued stock in the S&P 500 universe, and all the negative facts still in place about the world economy, plunging market share for Tesla, no new models, increasing competition, tariff war etc. still being in place, the future still being what it always was going to be.
I happened to make a handful of super lucky calls on a Tesla short this spring. A few of the first purchases earning me +1000%, and I had the unimaginably good luck in timing to get all out right at the final Tesla price trough before my short sell instrument crashed by 90%.
In any case, I THINK, I GUESS, have a HUNCH, we are at the YouAreHere point marked with a red arrow in the Cheat Sheet. The most intense rallies always appear in bear markets, as bears get squeezed, and the hopeful masses go bargain hunting too early and buy too much of their desired allocation right away.
The market is still expensive, the new US administration is still ham fisted and apparently intent on wreaking havoc by interesting trial and error moves befitting a new beta-testing software company. It's like they are marketing a government full self driving autopilot many years before it's ready for the road...
Unfortunately my guess is we will see much lower prices for the market and for many individual stocks before this is over. My best guess right now is that we are half way down from the peak, and 6-12 months from the bottom in terms of time. These are all GUESSES. I know just as little about the future as everybody else. But I do know cheap and expensive when I see it. Tesla is a super expensive (P/E >100 at peak profits that might not even increase for 5 years), ex-growth (0-15% sales growth), average margin (ca 10% net margin, currently 9%, could fall significantly with tariffs, competition...), aging car company with no new models on the way.
LVMH, Novo, Meta, gold miners, silver miners, COP, Altria, Volvo Cars, Atlas Copco, and many more that I keep mentioning in my posts and videos, are already good value and could be slowly accumulated over the coming year. However they are more likely than not to become even cheaper as negative liquidity and fear eats its way into market prices. These are guesses and hunches, not a detailed map of the future. All we can do is buy whatever becomes cheap enough on a certain day, month or year, and sell whatever in our portfolio stands out as our least cheap, or most expensive holding, in order to buy more of what has the best risk/reward ranking in our watch list.
Most of all, do not try to short stocks or the market if you are not absolutely confident in what you are doing, in particular not using leveraged bear certificates on out of control stocks like Tesla. You can't short stocks based on fundamentals, only technicals - although being expensive is a good help, a necessary condition for even attempting shorting.
MESSAGE: do not get complacent after yesterday's bounce - it has all the tell tale signs of a bear market written all over it. Yesterday a.m. was a day for bargain hunting, but today is a day for selling whatever you were thinking about selling during the downturn. Today's rally is a gift. Handle it with care.
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The big casino
skool.com/hedge-fund-investor-2065
In this community, I share my real-time investment process, shaped by years of managing a billion-dollar hedge fund.
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