March 3, 2021
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Transcript

Felix Frey:

The market is doing this see-saw up and down, but I think there's something interesting to see, at least we can get a grip on the overall picture. You know, I think it's important to have some idea of what potentially might be going on. We keep talking, and I'm just going to keep bringing this up each day, momentum versus value. We're in an environment where the market has stalled a little bit. Let's take a look at the facts before talking about what could cause it. The facts are: momentum has been somewhat weak over the course of the last few weeks. We've called that. We've sort of said, be careful with these 100+ volatility names.

Felix Frey:

They're just not moving the way you want them to move, which is basically, if you're buying calls, just keep going up. You know, the time, the amount, and volatility that you pay can really hurt you if you're buying these things and it doesn't move quick enough. So this stall over the last three weeks can hurt any call options or buying momentum names, that's one. So we see this momentum versus value. Two, we know that there is this potential big rebalance, which means that people are going to have to buy bonds and sell equities by the end of March. When that starts, how that began starts, if it's going to happen, no one knows for sure, but it's likely that this buying of bonds, selling of equities will have to rebalance their portfolios.

Felix Frey:

So that's in the backdrop. Maybe that's causing the momentum to stop a little bit, but again, we just want to point out sort of things that we know. We know that we see today's number, this economic number that was weak, private payroll gross was really, really low relative to the estimates, which tells you that there really isn't that many jobs being created right now and that the economy is hurting. Another thing we're seeing: commodities prices are shooting straight up. So that's interesting because usually prices go up when there's product demand. But right now we're seeing just price demand, which means people are just buying the commodities. That's important because we talked about who's buying the commodities. China's buying anything they can get. They're trying to take their dollars and trying to buy any dollar denominated commodity in the world.

Felix Frey:

So you have China buying and then we have bonds for sale. We got the bond market imploding, and this is a huge move that happens once every 10 years. And it's causing a little bit of indecision with portfolio managers. What does this mean for the longterm? So you've got bonds for sale, and then factually, we know that China has been selling bonds. So regardless of what the news or the media are saying about the inflation coming, there was a question that someone pointed out the other day saying they didn't believe in hyper-inflation. I'm not sure I believe in hyperinflation. I'm not saying that. I'm actually a realist. I look at the situation and I try to avoid what the news is telling me.

Felix Frey:

And I just say, there are sellers of bonds. There are buyers of commodities. We know that China is one of the largest buyers of commodities. They just keep pushing the price up. They're just hoarding commodities. We know that they're also selling bonds. And we know that this Corona virus has wiped out our economy and many jobs, the restaurant industry's imploded. This is family owned businesses that have just imploded. So how are we going to get payrolls up? How are we going to get jobs up? The answer is we got this 1.9 trillion, check coming from the government. It's really not all to us, right? They've actually just reduced how much money is going to come to each family. So if you're going to get it at all, you have to have a certain income.

Felix Frey:

So $1400 is what you're going to get. $1400 bucks doesn't pay for one month of grocery bills for a family of five. Or just barely gets there. So you know, how much is it going to help? And that's what I've been talking about, rent and what people are really having problems with. So you have this situation where money is going directly to people, but then then the government is banking on jobs that corporations are going to get this money and they're going to what, create jobs. Now, what jobs are going to be created? Well, you have a very specific job area that's going to be created. They're spending a lot in clean energy. So we have millions upon millions of 21, 22 year old kids out of college, looking for jobs. And they're looking for jobs in the field of Wall Street in the field of maybe healthcare and all these different places, but really where the jobs are going to pop up...

Felix Frey:

Is in clean energy. So what does that mean? So now you've got to convince... I can't get a 21 year old kid. I can't convince them to do anything for OptionsGeek for more than one week without his head going: "No, I want to do something else, talk to you later." Now you've got to convince these 21 and 22 year old kids where all the jobs are there in the Backwoods of Texas and we're going to create windmills. So you're going to create windmills. That that's not what many people want to do. So, you know, trying to convince them, and you know what he's gonna say? He's like, "I just made $25,000 in GME. I I'm long rocket right now because there's a short squeeze." That's where we are in the world. And, and there's something really, really wrong now.

Felix Frey:

Does a market go down on that? I don't know. I suspect that, in every last moment of a bull market, there is this last hurrah. And when people get a $1,400 check and there are millions of people that would get a $1,400 check, you throw $700 at food and then you take a Yolo bet, another $700 to see what happens. And $700 could turn into $5,000 and then you take another $5,000... This is sort of the psychology that's going on. It's incredibly dangerous. And we're banking on the corporations to do the right thing and create jobs. But all you see is that they're investing in AI, they're investing technology to reduce jobs, right? So how is this all going to end? I have no idea. I'm not saying it ends now, but we're walking towards a path where I'm not sure this ends very well.

Felix Frey:

That doesn't mean we don't shoot up in the SPY to $420, or in the SPX to $4,200. I'm just saying that it doesn't feel well. For the meantime, right now we are focusing on buying. If there's this range, you know, from October to December momentum, January momentum was way over here (high). High momentum, go for it. Now, investors are looking more towards value. They're moving more towards the value. So what you're starting to see is, look, there's, we're talking about reopening, Texas just came out and said, you know what, where we're opening everything up. So, all of a sudden you're getting things opened up, which means airlines, cruises, casinos. Now they've had already a big jump and we've talked about this step up, but you're seeing them bid today. And we're going to look at where the flow is.

Felix Frey:

I think the backdrop, when you're playing this game... People ask me, how do I come up with an idea, dr how do I think about it? Yes, it's UOA. I'm using the UOA as my signal, but what I'm really doing is framing, not only the charts, but I'm also framing the world and seeing sort of what's generally happening in the world. And then I am putting together the micro, which is the individual name when I see something pop up. I like certain names. That doesn't mean we're in certain names. I just like them. I can rattle five names and I'm just waiting for that UOA to pop up and for the market to tell me now's the right time.

Felix Frey:

So it's a combination of all these things that we're doing. I think it's very important that when I'm framing the universe for you, that it doesn't look like I'm overly bearish. I'm not, I'm an odds maker. And we have some short-term puts that will come in handy if the market does make a sharp turn, but in the meantime, I'm trying to find, as the market's pulling back, I'm trying to find situations that are still relatively explosive. Still just need a match to get it going, have a good story and they're in a good trending market, even though the market might have pulled back a little bit. So that's really what we're trying to do. And that's what the idea is here.

Other Ideas From This Episode

BAC & C

AA & THIS STOCK

RKT LOSS

Find Your Next Idea


Transcript

Felix Frey:

The market is doing this see-saw up and down, but I think there's something interesting to see, at least we can get a grip on the overall picture. You know, I think it's important to have some idea of what potentially might be going on. We keep talking, and I'm just going to keep bringing this up each day, momentum versus value. We're in an environment where the market has stalled a little bit. Let's take a look at the facts before talking about what could cause it. The facts are: momentum has been somewhat weak over the course of the last few weeks. We've called that. We've sort of said, be careful with these 100+ volatility names.

Felix Frey:

They're just not moving the way you want them to move, which is basically, if you're buying calls, just keep going up. You know, the time, the amount, and volatility that you pay can really hurt you if you're buying these things and it doesn't move quick enough. So this stall over the last three weeks can hurt any call options or buying momentum names, that's one. So we see this momentum versus value. Two, we know that there is this potential big rebalance, which means that people are going to have to buy bonds and sell equities by the end of March. When that starts, how that began starts, if it's going to happen, no one knows for sure, but it's likely that this buying of bonds, selling of equities will have to rebalance their portfolios.

Felix Frey:

So that's in the backdrop. Maybe that's causing the momentum to stop a little bit, but again, we just want to point out sort of things that we know. We know that we see today's number, this economic number that was weak, private payroll gross was really, really low relative to the estimates, which tells you that there really isn't that many jobs being created right now and that the economy is hurting. Another thing we're seeing: commodities prices are shooting straight up. So that's interesting because usually prices go up when there's product demand. But right now we're seeing just price demand, which means people are just buying the commodities. That's important because we talked about who's buying the commodities. China's buying anything they can get. They're trying to take their dollars and trying to buy any dollar denominated commodity in the world.

Felix Frey:

So you have China buying and then we have bonds for sale. We got the bond market imploding, and this is a huge move that happens once every 10 years. And it's causing a little bit of indecision with portfolio managers. What does this mean for the longterm? So you've got bonds for sale, and then factually, we know that China has been selling bonds. So regardless of what the news or the media are saying about the inflation coming, there was a question that someone pointed out the other day saying they didn't believe in hyper-inflation. I'm not sure I believe in hyperinflation. I'm not saying that. I'm actually a realist. I look at the situation and I try to avoid what the news is telling me.

Felix Frey:

And I just say, there are sellers of bonds. There are buyers of commodities. We know that China is one of the largest buyers of commodities. They just keep pushing the price up. They're just hoarding commodities. We know that they're also selling bonds. And we know that this Corona virus has wiped out our economy and many jobs, the restaurant industry's imploded. This is family owned businesses that have just imploded. So how are we going to get payrolls up? How are we going to get jobs up? The answer is we got this 1.9 trillion, check coming from the government. It's really not all to us, right? They've actually just reduced how much money is going to come to each family. So if you're going to get it at all, you have to have a certain income.

Felix Frey:

So $1400 is what you're going to get. $1400 bucks doesn't pay for one month of grocery bills for a family of five. Or just barely gets there. So you know, how much is it going to help? And that's what I've been talking about, rent and what people are really having problems with. So you have this situation where money is going directly to people, but then then the government is banking on jobs that corporations are going to get this money and they're going to what, create jobs. Now, what jobs are going to be created? Well, you have a very specific job area that's going to be created. They're spending a lot in clean energy. So we have millions upon millions of 21, 22 year old kids out of college, looking for jobs. And they're looking for jobs in the field of Wall Street in the field of maybe healthcare and all these different places, but really where the jobs are going to pop up...

Felix Frey:

Is in clean energy. So what does that mean? So now you've got to convince... I can't get a 21 year old kid. I can't convince them to do anything for OptionsGeek for more than one week without his head going: "No, I want to do something else, talk to you later." Now you've got to convince these 21 and 22 year old kids where all the jobs are there in the Backwoods of Texas and we're going to create windmills. So you're going to create windmills. That that's not what many people want to do. So, you know, trying to convince them, and you know what he's gonna say? He's like, "I just made $25,000 in GME. I I'm long rocket right now because there's a short squeeze." That's where we are in the world. And, and there's something really, really wrong now.

Felix Frey:

Does a market go down on that? I don't know. I suspect that, in every last moment of a bull market, there is this last hurrah. And when people get a $1,400 check and there are millions of people that would get a $1,400 check, you throw $700 at food and then you take a Yolo bet, another $700 to see what happens. And $700 could turn into $5,000 and then you take another $5,000... This is sort of the psychology that's going on. It's incredibly dangerous. And we're banking on the corporations to do the right thing and create jobs. But all you see is that they're investing in AI, they're investing technology to reduce jobs, right? So how is this all going to end? I have no idea. I'm not saying it ends now, but we're walking towards a path where I'm not sure this ends very well.

Felix Frey:

That doesn't mean we don't shoot up in the SPY to $420, or in the SPX to $4,200. I'm just saying that it doesn't feel well. For the meantime, right now we are focusing on buying. If there's this range, you know, from October to December momentum, January momentum was way over here (high). High momentum, go for it. Now, investors are looking more towards value. They're moving more towards the value. So what you're starting to see is, look, there's, we're talking about reopening, Texas just came out and said, you know what, where we're opening everything up. So, all of a sudden you're getting things opened up, which means airlines, cruises, casinos. Now they've had already a big jump and we've talked about this step up, but you're seeing them bid today. And we're going to look at where the flow is.

Felix Frey:

I think the backdrop, when you're playing this game... People ask me, how do I come up with an idea, dr how do I think about it? Yes, it's UOA. I'm using the UOA as my signal, but what I'm really doing is framing, not only the charts, but I'm also framing the world and seeing sort of what's generally happening in the world. And then I am putting together the micro, which is the individual name when I see something pop up. I like certain names. That doesn't mean we're in certain names. I just like them. I can rattle five names and I'm just waiting for that UOA to pop up and for the market to tell me now's the right time.

Felix Frey:

So it's a combination of all these things that we're doing. I think it's very important that when I'm framing the universe for you, that it doesn't look like I'm overly bearish. I'm not, I'm an odds maker. And we have some short-term puts that will come in handy if the market does make a sharp turn, but in the meantime, I'm trying to find, as the market's pulling back, I'm trying to find situations that are still relatively explosive. Still just need a match to get it going, have a good story and they're in a good trending market, even though the market might have pulled back a little bit. So that's really what we're trying to do. And that's what the idea is here.