Stocks were already partying into the Fed meeting (up ~12% over 6 weeks) – however when Powell provided his December update on monetary policy – he simply turned up the music. Risk was on. So here’s my question – with stocks up an incredible 15% in just 7 weeks – how much of next year’s potential gains have been pulled forward? Is it riskier now to buy stocks than it was a few weeks ago? To be clear, stocks are likely to add to their gains before the year is done – however we are now trading close to 20x next years earnings. That’s not a bargain.
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Bifurcated Markets Usually End the Same Way
If you’re long the market – it was another rough week. My portfolio was no exception. My largest position (Google) was smoked – losing around 10%. The Index is now only up 7.24% for the year…. a long way from almost 20% higher in June. The next hurdle for the market comes next week – when we get payrolls. A soft print might give the market hope the Fed is almost done. However, if it comes in hot, the Fed may have no other choice but to hike again in December… given the uncomfortably high Core PCE last week.
“Big Short” Investor Goes Short… But Not on Housing
45 days after the end of every quarter – Wall Street’s top fund managers are required to report their most recent holdings. These filings are known as 13Fs – and they reveal a lot about where the ‘smart’ money is going. Whilst there was nothing too out of the ordinary – a particular trade from Big Short investor – Michael Burry – caught my eye. He took a $1.6B short bet against the SPY and QQQ (in aggregate) using Put Options. Let’s explore why he could have made that bet…. and he’s not alone