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Is This The Market's Biggest Bear?
John Fichthorn and his $500MM Dialectic Capital hedge fund may not be household names, but in a time when "fighting the Fed", i.e. trading on fundamentals and not on the Fed's balance sheet, is heresy, John may be the biggest bear around, maybe even bigger than Faber. He revealed as much in an interview earlier when he said that the current trading environment may be the shorting opportunity of a lifetime. To wit: "we think the [shorting] opportunity with any kind of reasonable timeframe now is really the best we've seen since starting our firm ten years ago, and really since i've been doing this since 1995, and i was a short seller in the middle of the internet bubble, and in many ways, this is more compelling because it makes less sense."
Fichthorn notes the obvious that "easy money drives bubbles, but here you have a bubble that is largely driven without fundamentals in certain areas, and so, you have this crazy bifurcated market where you have incredibly cheap stocks and incredibly expensive stocks, really inside the same sector. And when this easy-money period ends, and maybe even before, as we see the fundamentals starting soften, you'll have the opportunity to make a lot of money on the short side...seeing the lack of momentum is a sign that, you know, the ship is starting to waiver."
Some of Fichthorn's favorite sectors to short: 3D printers and solars: "this is a bubble that's happened three times in the past. This isn't the first time you've seen a 3D printing bubble. The industry has been around for 20 years.... We think the chinese solar companies and even some of the other ones are bigger shorts, although first solar will have its day of reckoning, as well. But the Chinese solar stocks, and the whole group, is up 300% this year. You know, this is a bubble that also, like 3D printing, has burst in the past. it blew up in 2011. And today, capacity is in the 60 gigawatt range and demand is below 40 gigawatts. You can't have a supply/demand imbalance like that and make any money and so, ultimately, the stocks will do exactly what they did in 2011, and they're going to correct again."
He is right, of course. The only problem is that many other shorts have been right positionally, but were off by a month, or a year, and ended up blowing up. And in the new normal, in which shorting a stock, an industry or a market is also betting against the insanity of a few delusional academics with a money printer, the odds have never been higher.
At the end of the day, however, only one thing matters for people like John and his peers: the P&L at the end of the day, the month and the year. We wish him the best of luck.
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He will be toast by 2015 - and SnP beyond 25xx.
Until he defines "reasonable timeframe" this advice is worthless.
This is the best short piece ever: http://www.citronresearch.com/wp-content/uploads/2013/11/vjet-Q1-comment-final.pdf
It's all a random walk to me.
I just walk randomly....
We'll see how his shorts do when QE goes to $170 Billion/month.
He will be burn a kied...I wish him all the luck in the works though
Slope of hope is my daily read along with charts of new all time highs...do your homework
Zimbabwe Stock Exchange used to have plenty of 200% up days, too. I swiched from dollars to troy ounces several years ago.
Yes, we know everything is due to crash, but what will be the trigger? What will be the trigger? What will be the trigger? What will be the trigger? What will be the trigger? What will be the trigger? What will be the trigger? What will be the trigger? What will be the trigger? What will be the trigger? What will be the trigger? What will be the trigger? What will be the trigger? What will be the trigger? What will be the trigger?
Everyone knows that everything is unsustainable and due to crash, but ... What will be the trigger?
A while ago we saw a chart (Russell 2000? I can't remember), that looked like a nice, growing exponential decay. After a day or two of pondering at the time, I mentioned that we could probably extrapolate the growth, and when the growth got too small, that would be the trigger for the next QE. We might even be able to guess the new desired growth, and guess the new QE needed to achieve that "growth".
If we assume that TPTB will continue with QE increases as "necessary", what will be the trigger for the crash? When people max out their credit cards to do the weekly shopping (on top of SNAP) ? When banksters convince the govt to increase minimum wage so they don't have to book more credit card losses? When the minimum wage is less than SNAP?
Surely someone here knows something.
Agoldhamster
You mean you think after this correction the stock market will keep going up til 2015 right?
And JAY outlook that market high in 2014 is wrong ?
Thanks
if he can get the timing trigger right, he is RIGHT. if he can't do that, then bernanke will stretch his ass for him.
That's it, Fed will destroy him with some verbal intervention
If he had any brains in him, he would go out and say buy buy buy - FED will never please him and his likes by letting the market sell off.
I like the cut of this guy's jib....Smithers, whom is that go getter in Sector 12?
Once upon a time, there was, a sector 13.
At least he is smart enough to not tout his shorts- cough, Ackman, cough.....
For it to make sense to take any position in a market, long or short, the market must be largely efficient.
Otherwise, it doesn't matter even if you are "right", if the market is rigged you will never get paid.
The market is now so rigged and nonefficient no position makes sense, taking any position is just gambling with cheaters at the table.
William Sonoma reported blowout earnings after the bell. Comps up 8%. Anyone who trys to argue the consumer is weak is an idiot.
Rich consumer is doing great. That place sells $25 pancake mix. Not exactly the walmart crowd.
Yeah, that's like following Tiffany & Co.'s results and thinking that has anything to do with the average American consumer.
I'm assuming you forgot to write <end sarc>
Is Home Depot the Tiffany's crowd too? LOL. HD comps up 8%. Tractor Supply comps up 7%. Lazy Boy comps up 13.7%. LOL. Joe Sixpack went on a buying binge at Lazy Boy.
Home Depot stock hit an all-time high today. They just reported excellent results according to their press release, which will be parroted by the pundits on CNBC. They are one of the better run retailers in the country. The reason they are doing relatively well is that they stopped building stores years ago, closed underperforming stores, and focused on the existing stores. They now operate 2,260 stores.
The MSM faux business journalists will be reporting the wonderful sales and profit figures versus last year. The internet is a wonderful thing. It took me two minutes to find their 3rd Quarter 2006 earnings announcement.
They are boasting about the $19.5 billion of sales they achieved this quarter. Seven years ago they achieved $23.1 billion of sales with 150 less stores. For the mathematically challenged, their sales are 16% lower than they were seven years ago.
But it gets better. They are thrilled with the $1.4 billion profit in the current quarter. It seems they generated a profit of $1.5 billion in 2005 and 2006. So, in 2005 they made a profit of $1.5 billion on revenue of $20.4 billion, with 300 less stores than they operate today. I would say the ROI on those additional 300 stores hasn’t been so hot. No biggie. It only cost them $3 billion to build those stores to generate $100 million LESS profit.
You won’t get this info from Jim Cramer or the bimbos on CNBC. They will just continue the charade. Their job is to misinform and obfuscate the fact that our retail world is in a terminal contraction phase. Even the best retailers make less money today than they made in the mid-2000?s. Those are the facts.
It’s all relative part two. Yesterday I showed the ridiculousness of the CNBC cheerleaders by showing that Home Depot spent $3 billion on 300 new stores since 2005 to generate $100 million less profit.
Today, the CNBC nitwits will be touting the fantastic results of Lowes. They generated a $499 million profit on sales of $12.96 billion. WOW!!! That’s great.
It took me two minutes to find their 3rd quarter 2006 earnings announcement. It seems they were able to generate $716 million of profit on only $11.2 billion of sales seven years ago.
Now for the real kicker. Lowes operates 1,825 stores today. They operated 1,325 stores in 2006. So let’s think about that for one minute. It costs approximately $10 million to build a Lowes store. In the last seven years, the bozos running this operation spent $5 BILLION to generate $217 million LESS profit. And CNBC is gushing about their wonderful results.
The morons managing this company have spent $5 billion cannibalizing their own existing stores and generating an average incremental sales level of $3.5 million per store built since 2006. A Lowes store needs to achieve a sales level of $20 million to just breakeven. Now you know why their profit is 30% lower than it was seven years ago.
We are over retailed and public relations spin will not change that fact. The debt based expansion is over and the contraction has begun.
And the beat goes on. Halfway through the quarter JC Penney came out and said comparable store sales had turned positive. That shouldn’t be hard, since they had fallen more than 40% in the previous two years. In case you haven’t noticed, they have reverted back to weekly SALES and coupons. These rocket scientists have surely found the right formula to revive the 100 year old retail zombie. They bring back the old CEO because the Silicon Valley Apple moron has destroyed the company.
Well the results are in. The old/new guy managed to lose $366 million more than the new/old guy did last year. He somehow was able to drive comparable sales down by another 4.8%. Not an easy feat after a 40% decline over the previous two years. They burned through $737 million of cash in one quarter. They DID NOT provide a Balance sheet or Income statement in their quarterly earnings release. This is unheard of.
This company is headed for the runway at the same decline rate as that Russian Boeing 737 in yesterday’s post.
JC Penney is in a death spiral, so of course the Wall Street shysters have elevated the stock by 8% before the opening. Some things never change. I wonder if the new/old CEO can manage to lose more than $500 million in the 4th quarter? That should surely boost the stock.
Damn, Jim! Who is this uncle.bigs that compeis you to write serial, and btw, salient comments? Could'a been an article if strung together.
Just to let you know, I thank you for what you do, and fully appreciate that pretty much anyone who doesn't appear batshit crazy in this forum is not really payin' attention.
I own a business, I know the uncle.bigs' of this world are full of shit. 2013 is a mirror of 2009 for me- down 14% YOY. Still, who is this guy that trips your trigger so?
I'm gonna follow your lead. My sales are down 14% from a year past, but profit is up 48%. How did I do that? I reduced staff by half (since '09). My question is as follows: In the grand scheme of things, is it a good thing that I leverage my knowledge of automation, or not?
I wanted to help people. I do that, for the ones I do biz with. But, I'm finding it increasingly difficult to help the so-called workers. I don't want to be an elitist, but increasingly I find that they're not worth employing. If I can program a machine to do the same tasks they might do, I just don't need them- or their "issues". As such, I am conflicted.
I also realize that these unemployable persons are unable to contribute to the economy my enterprise ultimately depends on.
The Ol' Man woulda called this dilemma a self eating watermelon. I didn't know what it meant when he said it, but I do now.
acetinker: "We don't need jobs, we need production. Automation is good." That's what I say, anyway, but I do realize that the practice is a lot more brutal than the theory.
I don't want a job competing with the robots, I want a job fixing the robots, or building better robots. The crime isn't in losing your job. The crime is not being able to find a better job, or not being able to create your own job. For the unemployed, lack of knowledge is a problem. Lack of capital is a problem. Did I say, "Lack of knowledge"? That "lack of knowledge" isn't just lack of technical knowledge. It includes not knowing how to find customers ( including bosses - a "boss" is just a privileged type of "customer" ), and not knowing how to finance ventures ( most people have a sense of self-preservation that means they won't try and borrow money before they figure out how to repay it ).
If we ever reach a point where robots do everything, including building and fixing other robots, why would we need money? Why would we need work? It is just unfortunate that
1. We are stuck in this difficult transitional phase where some people still have to work and some of those jobs are quite unpleasant, and
2. Some people genuinely can't handle free time. Idle hands etc.
Did the horse get upset when the car took his job?
plunge protection team is now the russel terrier sheep dog, keeping equity on the trail, avoiding bears and sudden cliffs, moving the herd to the promise land of infinite PE.
These were three separate entries from my own blog that I had already posted. This guy is a troll who is either paid to mislead people, or has no functioning brain cells.
That's like saying record sales of Rolls Royce are an indication that the middle class is getting stronger.
Shopping With Bernanke: Where QE Cash Ends Up Tells Us Who Benefited
One can debate whether QE has benefitted Main Street or Wall Street until one is blue in the face, even though five years later, the answer is perfectly clear to all but the staunchest Keynesians and monetarists (and if it isn't, just pay attention to the 3:30 pm S&P ramp every day). One thing, however, that is undisputed is what the market itself says about where the QE money ends up when it is being spent by its recipients. And that story is so simple even a Keynesian would get it.
Stated briefly, luxury retailers such as Tiffany, Coach and LVMH are now up 500% since the Lehman lows, and about 30% above the prior cycle highs. On the other hand, regular retailers such as Macy's, Kohl's and JC Penney are barely up 100% from the crisis lows, and still more than 30% below the last bubble highs.
And that, in a nutshell, is precisely how the money from QE has been distributed.
the unspoken aspect of the daily ramp is that traditionally there is only one category of market participant who routinely trade for MoC: index funds. and, they are generally only active a few times a month at most. which leaves you to conclude that a new type of player is buying the close--one who is less concerned about benchmarking the close for a flow transaction (like an index) and is more concerned about nudging the close to protect a portfolio position (like a bank and/or consortium of hedgefunds, in other words, levered players).
B.T.F.D.
Janet, we have a drone target in sector one !
I am relieved he didnt lay out too much of a bear case on Micron. Now that would have been really silly...
Remarkable. He still has a face.
Ah, the shorting opportunity of a lifetime. Anybody seen Taleb and Russell Napier, fellow opportunity of a lifetime merchants.....?
Speaking of Taleb, if I read his latest "Antifragility" correctly, you want to be long volatility, which in this case means (net) long puts. But you'll suffer the death of a thousand cuts from time decay if you're not very, very lucky with your timing.
Has anyone successfully traded this with short-delta positions such as ratio backspreads, rather than shorting the underlying directly? As a short-term example, currently on the RUT, -1x 1110P @ 16.90, +2x 1080P @ 8.30 costs about $3k per spread in margin, breaks even if it continues to go up, and is +vega, +gamma if we do go down.
3d printing is a joke, so yeah short there.
As far as shorting in general, at this current rate of commie/crony/Fed lunacy. There may not be a market to short.
Opportunity of a lifetime? To short the Fed?
Stick it out there, Bucko!
Plot a chart with the following data series.
1). Real US Government Budget Balance (tax revenue - spending)
2). Fed Funds Rate
Plot the chart back to 1970.
Bingo, now you can see when the Fed Funds rate move.
Short TSLA...oh wait..that was 3 weeks ago...move on
There is no market only Pomo
you will need deep pocket and stomach of steel ...
the best long term short is TSYs when Yellen increases money printing the TSY will go higher in a last gasp, then you go for the jugular and short. TSYs getting sborted will break the Fed.