Stocks-The Option Professor Warned You & Encouraged HEDGING for a Year! Read More!
June 11 2022 Option Professor Observations & Opinions
The stock market got whacked in the last 2 days for about 5% of it’s values. The CPI came in hot and prices are rising on just about everything. On Wednesday we wrote a QUICK ALERT to our readers that a turnaround Thursday & Blackish Friday may be in the cards (especially if we remained UNDER SPX 4180!). This idea of a Fed pause (the balance sheet and Fed rates haven’t even budged) we said was aspirational. As far as inflation peaking and a swift decent; that also was concocted by people who desperately need a rally not those who realize….inflation is persistent and the economy/earnings will be slowing/P/E’s tighter. We are humble around here but we are from the Show Me State (Mo.)…break above SPX 4180 & we’ll see. The idea is you can’t get to Boston from NYC without going thru Connecticut…so let’s catch the bus there. The last time we had headline inflation (8.6%) and Core inflation (6%) at this differential (2.6%) was in the 1970’s into 1980 and we had a thing called Stag-Flation-stubborn prices/fading growth-sounds like NOW!
We have been barking about the P/E ratios for a couple of years and rather than the boy who cried wolf-all you needed was to be a little patient AFTER the Fed did a pivot in Nov 2021…then HEDGE or GET OUT! Where’s the bottom? What a silly question…nobody knows….but we do know the trend is down and we know inflation is persistent and we know inventories are rising & hiring is slowing and margins are tighter. We know P/E ratios overshoot to 14X-16X and earnings are 2.35 on SPX this year and 2023 needs a shave. Why is the Fed so slow on hiking (balance sheet hasn’t budged & Fed funs is 3/4%!)? Our view is they are PETRIFIED the asset bubbles they created ( stocks-bonds-real estate) would COLLAPSE with normal rates! We actually agree with them. The STOCKS & BONDS are off to their worst start in decades w/ 3/4 Fed rate
We told reader BEFORE the drop in stocks & bonds that this was the year of the Will Rogers theory which is you should be interested on the return of your money not the return on your money. We Can Help!
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