Some Highlights and Lowlights of 2022 – Part 1

Even as we look ahead to the start of 2023, it seems like an opportune time to look back at our best and worst calls of 2022.  On balance, I would say we got more correct, though I really wish we were more emphatic about some of them.

They Don’t Always Ring a Bell at the Top – January 10^th – “Only now, when it appears that the firehose of Fed-provided liquidity is likely to abate, do conventional valuation considerations seem to be arising.” “While my friend’s market call [of a peak in NDX] was a brilliantly timed one, the $3 trillion valuation of AAPL, while a reflection of high animal spirits (if not outright greed), was more a coincidental symptom rather than the proverbial bell ringing at a market top.” 

When Does “Sell the Rips” Replace “Buy the Dips”? – January 19^th – “…those of us with some *ahem* history in the markets know that there is a second half to the “buy the dip” mantra.  The full phrase is actually “Buy the Dips, Sell the Rips.” “…when fighting the Fed means a failure to recognize their shifting tactics and the trends become far less friendly, “Sell the Rips” takes on a far greater importance.”

Splitting Alphabet May Be A Boon To Options Traders – February 2^nd – “With a minimum cost of entry that will be 1/20th of what it is currently, the options will indeed be more accessible to small traders.  Even better, spreads should decline markedly.”

Bear Market Rallies are Short, Sharp, and Ferocious – February 7^th – “It can be seductive and quite profitable to play a rally that follows an oversold market.  It is also crucially important to know whether this is a trading opportunity or an investable rally.  It’s quite hard to tell the difference, and to believe it’s the latter when it’s actually the former.”

Will We Be Nostalgic for Super Bowl Crypto Ads? – February 14^th – “While much of the commentary about the half-time show focused upon its early 2000’s nostalgia, I felt a similarly reminiscent feeling during the seemingly incessant commercials for cryptocurrency companies.  They brought back memories of the internet ads of Super Bowl XXXIV.” “I am not calling for the imminent demise of cryptocurrencies, but I do believe that a culling of weaker currencies and crypto-linked businesses could fall by the wayside like many of the early internet pioneers.”

VIX Inversion is a Necessary, But Not Sufficient Signal – February 23^rd – “Remember that a futures curve in backwardation usually means there is a temporary shortage of the commodity in question.  In this case, the commodity is volatility protection.” “I interpret the message of the market to be that we should continue to expect volatility – remember that volatility encompasses moves in both directions – but not to expect that a major bottom was put into place in recent sessions.”

Slowing Growth + Regulatory Murk = Troubles for Chinese ADRs – March 11^th – “…it is important to recognize that Chinese ADRs remain risky and speculative until or unless we get more regulatory clarity about them on both sides of the Pacific.”

At What Point Do We Reach Peak Musk? – April 22^nd – “People have gone broke betting against Elon Musk for years.  It doesn’t appear prudent right now to bet heavily against him right now either.  But that doesn’t mean that betting on him is a sure thing anymore.  I can’t say we’ve reached peak Elon Musk yet, but I can’t say we haven’t either.”

Crypto, Stablecoins, Twitter, Capitulation – Notes from a Reunion – May 16^th – “Sorry, but we are very unlikely to find the market’s bottom until that mindset fades [that we always bounce back quickly] or we see … significant changes” “My basic piece of advice remains that if you don’t really understand what you’re investing in [referring to crypto], then don’t invest in it.” [Comparing Musk’s bid for TWTR to buying a house without an inspection] The mold (aka bot accounts) may indeed be worse than the seller claimed, but you forfeited your contractual right to make that a reason to lower the price.  How do you expect that to work out for you? “

The “Fed Put” Lives.  But It’s Never Been About Stocks – May 27^th – “I will assert that the Fed Put remains alive and well.  It’s simply misunderstood.  The reality is that it has little to do with equities whatsoever.” “Here’s the real thing – the Fed has never stated that they will intervene in equity markets just because they are down.  But they will almost certainly intervene if there is a crisis in credit markets that threatens the banking system or the flow of money.  That is a huge difference – a crucial facet that equity investors need to understand.”

Don’t Fight the Fed! – June 1^st – “Now that the Fed is about to embark upon a program of balance sheet reduction amidst a backdrop of rising interest rates, it is crucial for us to reassess exactly what fighting the Fed now entails. For the better part of the past 13 years, and certainly for most of the past two, stocks and bonds have benefited from a Fed whose stance has ranged from generally accommodative to wildly accommodative, punctuated by sporadic, tentative attempts to withdraw liquidity.”

If Safe Assets are Getting Clobbered, Risk Assets Don’t Stand a Chance – June 13^th – “If a relatively low-risk asset like 2-year notes is getting clobbered, what chance do risky assets have?” “If equities are getting tossed because of diminished risk tolerance, what hope do cryptocurrencies have?  Looking at the price movement in cryptos large and small today and over the weekend, it is clear that many crypto holders decided to de-risk in a hurry.  More ominously, the Celsius network froze all withdrawals and transfers…”