A Comment -- General Comments From an Expert (A Commentary)

His issue with the markets right now is that it's a concentrated market. For example, it's insane that NVDA is up about 25% today. Six stocks make up 50% of the NASDAQ. Market breadth is terrible. The advance/decline line is declining, which means there are fewer advancers than decliners overall. 

By itself, the NASDAQ looks good driven by those 6 stocks. But the broader picture shows that it can't last like that. We've seen this before, and it's called 2001 and late 2021. It's not a healthy market when most stocks are going down and a few are going up.

He's cautious.

You don't care if you're in that index or you're in those stocks. But let's take the example of TSLA. For a while, it could do no wrong. The PE ratio of 100x didn't bother people, because they said it's going up. But it rounded over and got ugly. These stocks get overvalued, and the crowd moves on.

You can trade the trend, but it's getting peaky. You don't want to be the last person to exit the subway.

Driven a lot by OPEC and politics. Likes it, but he's trading it. He's here for a good time, not a long time. Momentarily oversold. Might still be in a downtrend, but still has potential to bounce. He's regression trading right now. Trade it for a pop.

Yes. If it's breaking support, you have to stop out. You have to have a discipline, whatever that is. But just holding because you bought it doesn't make sense to him. He's OK with holding stocks that are zig-zagging in a base. 

But when something breaks down, you shouldn't hold it. Give it 3 days to 3 weeks, but don't hold it forever. If it stays below your neckline, you have to sell. Once things waterfall, it gets ugly fast. 

No one wants to take a loss, so they hold on. Hold and hope is a bad strategy. Walk away, no matter how much it hurts.

A 4% short position doesn't sound like a big factor to him. Most stocks have some sort of a short position.

It's at its support level and has not done anything yet. He's out of the trade. A little ugly. If you see recent peaks taken out and it moves up through those levels, it's game on. He wouldn't buy until it's started to show some turnaround.

Things can change, but don't predict, just prepare. For example, just because he observes the tech stocks being overbought, it doesn't mean he should go out and short them today. It just means he's a little cautious. The trend can be OK, but you have to prepare, just in case.

Market's climbing a wall of worry. Debt ceiling is probably more of a political event. Higher interest rates. Inflation is coming down. Even today in the UK, inflation went below 10% for the first time. Wage inflation is probably at the lower end.

The economy's picking up the pandemic slowdowns. There are still delivery and production delays. He's optimistic that the building blocks for recovery are being put in place. Double-ordering in the inventory cycle will work through the economy, probably sometime March/April of 2024. 

The economy's doing well. Incredible productivity will come out of AI, and productivity in general is very high. 

A political event. If they don't pay the bills, the system will come down and both parties know that. It will get resolved, but it's a matter of who can extract the most from the other before the deadline.

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The current debt ceiling crisis reminds him of the crisis of 2011--fears of interest rates shooting up and the economy falling into recession. A month after the debt catastrophe was averted in 2011, investors made a ton of money.

Two major themes now: 1) Macro forces, debt levels, lower liquidity in markets. 2) This is countered by AI interest that could bring deflationary pressures The context is the globalization of the last 30 years with China offering very cheap labour

Markets today didn't react much to the current debt-ceiling crisis. Performing best were Cathie Wood-type stocks that have little money, no profit and promise future growth. Those hurt were stocks that have been performing well, like McDonald's and Pepsi. Sectors that could be hurt by a debt  default: real estate, financials, utilities, machinery and companies that need credit (cars, aircraft parts, for example). Those not hurt would be megacap tech. Then again, some investors ask, Who cares? It's all theater. When the nation's debt was downgrounded in 2011, it was a colossal buying opportunity. No, the US won't run out of money, but a default would harm its reputation abroad.

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