Question for the šŸ³ļøā€šŸŒˆ bears (Iā€™m one too)

Submitted by ProsaicPansy t3_113v2r9 in wallstreetbets

"I was nearly twenty-seven years old. I had been at the game twelve years, but the first time I traded because of a crisis that was still to come I found that I had been using a telescope. Between my first glimpse of the storm cloud and the time for cashing in on the big break the stretch was evidently so much greater than I had thought that I began to wonder whether I really saw what I thought I saw so clearly. We had had many warnings and sensational ascensions in call-money rates. Still some of the great financiers talked hopefully, at least to newspaper reporters, and the ensuing rallies in the stock market gave the lie to the calamity howlers. Was I fundamentally wrong in being bearish or merely temporarily wrong in having begun to sell short too soon?"

Reflections from the original šŸ³ļøā€šŸŒˆ bear, (Jesse Livermore, as depicted in ā€œReminisces of a Stock Operatorā€). This shit is the same today as it was 100 years ago. Donā€™t blow out your account shorting too much, too quickly. Are we fundamentally wrong, or did we just short too soon?

Positions: Short SPY at $405 and long Mar 17 380 puts @ $4.9.

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VisualMod t1_j8sdiot wrote

>There is no question that we are in a bear market. The only question is how long it will last and how severe it will be. I believe that this bear market will be much longer and more severe than most people expect. That is why I am short SPY at $405 and long Mar 17 380 puts @ $4.9.

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ImTheButtPuncher t1_j8sdupf wrote

I was told by a well placed source that stocks only go up so good luck with that

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Analyst_Simple t1_j8to7rs wrote

I'm a bear king, and my positions are looking way better. Hang in there, you are right. Just not the right time.

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ProsaicPansy OP t1_j8xe7vr wrote

Definitely looking better today and end of yesterday, but I have my positions sized such that I can sleep at night and not feel too stressed out about the market on a day-to-day basis. If the market rockets higher, I have more dry powder to deploy on the short-side. The point of this post is to say that you can be right about your position but still wrong in the market if you use too much leverage and get stopped out before you can see your worldview validated.

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Magnasparta1 t1_j8uyhmd wrote

You are shorting too soon. Last year the bulls let bears run wild. This year the bulls have convinced themselves with statistics that benefit their own narrative.

ā€œThe market has only every been red for two years consecutive four timesā€ā€X percentage of the time January is green, the year ends greenā€

These are all narratives that remove the underlying cause for the final result. WHY in these scenarios, did the year turn green? Did things change? More than likely the issues were resolved within the year leading to a green result.

If we analyze what the problem now and determine if we can resolve it in a year, it is more likely not possible. This will not stop the bulls from completely ignoring data that works against them.

Not only that but there are more bulls in general because things like DCAing exist. If you ignore last year, the past 10 years with easy monetary policy stonk only go up. This is indeed a form of recency bias, hence why bull only funds are shit like ARKK. They donā€™t know how to play downside because they became famous for the auto win buy button that lasted 10 years.

This week has shown something unprecedented. If a up day or down day are determined on a blackjack game. The bulls always get 20 on technicals ALONE. Every narrative, every earnings, everything is seen in bullish lenses. Fundamentals, mechanics, the option chain - all irrelevant.

In order for the stock market to go red in a day, EVERY SINGLE other bearish indicator must be active at once, oversold, bollinger bands, expensive calls, DXY/Vix pumpā€¦. If not the bulls buy it up and shrug it off.

This is how the crash will happen: EVERY SINGLE MACRO ITEM MUST COALESCE. Negative earnings, red chart, SPR drained and gas prices up, inflation up, layoffs, interest rate delay, credit card crisis, savings at new lower levels, liquidity crisis, housing crash, student loan repaymentsā€¦. All of it. SPR being empty doesnā€™t even take place until early 2024.

Save most of your bear ammo for then. Play the bullish sentiment as it comes and goes.

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ProsaicPansy OP t1_j8xdfkp wrote

Nah, if the fed keeps raising rates and keeps them higher-for-longer there will be pain in interest-rate sensitive sectors and valuations for all US stocks. The immediate risk for the rally is that the ten year rallies above 4% again and tech stocks/long duration gets whacked again.

My overall thesis is that inflation will stay elevated for longer than people think because there is a lot of money from fiscal stimulus that hasn't been deployed yet (greater demand than before) and even with China reopening, supply won't ramp fast enough in the next year to mute the heightened demand. In this scenario, the Fed keeps raising rates because inflation gets another peak and they are hesitant to rapidly lower rates until the job market breaks. When the job market breaks, people pull money out of their 401ks (especially if laid off), stop DCAing (or net sell), and slow down their consumption. All of these things will slow down the economy, lowering companies revenue and profit margins (aka earnings). This situation will eventually allow for lower rates, but not before there is a lot of pain. The current pricing for equities implies that the fed will start lowering rates within the next year AND there is no recession. The only way the Fed lowers rates from here (and even higher) is if we have a recession that shows up in the jobs numbers.

I currently think we get out without a recession for 2023, but persistant inflation forces the fed to keep rates above 5% and then we see some level of recession in 2024. I don't think SPY, QQQ, etc. are priced for this scenario, so it's a good risk-reward to be short US equities broadly through OTM options as a hedge against a standard long-only portfolio. If the market continues to rally, I'll be flat to slightly up. If the market takes a huge shit and goes to 3600 again in the next month or so, I'll be up big. Worst case scenario is we grind between 4000-4200 for the next month, but again, I'll lose less than 2% of my portfolio in this case. You've got to love the convex payout of options :)

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Magnasparta1 t1_j8xfhcc wrote

Ok. 2024 recession works with my thesis as well. There are a lot of negative headwinds, including the ones you mentioned. Letā€™s see what happens.

However, bad news can be good news or bad news throughout the year. Market sentiment is the only way to make money right now imo. Trend is your friend. It can be easy to find yourself biased trading right now. Bearish if you have extensive research and bullish if you donā€™t lol.

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VisualMod t1_j8sdhuu wrote

User Report
Total Submissions 1 First Seen In WSB 2 years ago
Total Comments 87 Previous Best DD
Account Age 2 years [^scan ^comment ](https://www.reddit.com/message/compose/?to=VisualMod&subject=scan_comment&message=Replace%20this%20text%20with%20a%20comment%20ID%20(which%20looks%20like%20h26cq3k)%20to%20have%20the%20bot%20scan%20your%20comment%20and%20correct%20your%20first%20seen%20date.) [^scan ^submission ](https://www.reddit.com/message/compose/?to=VisualMod&subject=scan_submission&message=Replace%20this%20text%20with%20a%20submission%20ID%20(which%20looks%20like%20h26cq3k)%20to%20have%20the%20bot%20scan%20your%20submission%20and%20correct%20your%20first%20seen%20date.)
>TL;DR: We might just be too early.
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Igotabwc7 t1_j8se2dx wrote

why the flag?

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Marcus_Qbertius t1_j8sl9lu wrote

Itā€™s an inside community joke that anyone who is bearish is referred to and refers to themselves as a gay bear.

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SateliteDicPic t1_j8snp73 wrote

Itā€™s not political, itā€™s part of the ongoing bear joke here on WSB.

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ProsaicPansy OP t1_j8x7zkz wrote

Yeah, bro. I'm pretty damn liberal, but I'll still call myself a gay bear and call this questioner a regard. That's just what makes WSB great.

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