I know I have fallen off the planet for the last few months, but I have been very busy getting settled in São Paulo…. I remain super bullish long-term on Brazil and see enormous opportunities here. Some of those periodically consume a lot of my time.
In any case I continue to read and analyze what’s going on. Volume in the markets has been extremely light and conditions are pretty dangerous in my opinion. Very large moves on very small volume affect asset values of enormous scale. I call that a form a leverage in the system. In a way I think it would be better if the market just remained shut rather than have +/- 2+% days on less than 200mm shares changing hands on the SPY.
I advocate running very small direction either long or short (depends on what you own or are short I suppose) in this market and keeping gross leverage low as well (gross leverage is [ABS(longs) + ABS(shorts)]/[Net Equity] where ABS is absolute value).
If you’re dying to have a position, WMT is looking pretty cheap. HPQ is as well. But hedge out some of the Beta to the market in any positions (including these). Don’t stretch at all in this market and try to get some sort of seniority in the capital structure. I think the general direction continues down in the long term. Maybe some miracle happens and the market somehow rallies, but the risk is more weighted to the downside in my opinion.
So I will leave with this video warning on the state of the market that I came across from Tony Robbins. I am trying to figure out who’s he referring to in his opening (if I do I will post an update), as he never reveals his source. I don’t think, based on the numbers that he mentioned, that his client is Paul Tudor Jones, but it sounds like someone of equal stature. What’s significant is that I have to take Tony’s claim that he is well connected at face value given what I know of him. So if he felt strongly enough to go on the record with a warning saying that his best clients are worried, especially given that Tony doesn’t need to say any of this to gain credibility, it’s worth listening to and considering. It at least adds to the body of data to be analyzed.
