6/24/25 - $SPY - punchbowl musings. moar upside into YE.6/24/25 :: VROCKSTAR :: pondering $SPY/M2
I'll attempt to keep this punchy.
- Moar upside into YE, but with a few bumps along the road. We're probably due for a small garden variety pullback sooner vs. later. And it should be bought, without flinching. Index options are easiest and lowest risk way to play this trend, unless u like single names like me :)
- I look at the above chart SPY/M2 (so S&P divided by M2) a lot
- The last time it grabbed my interest was earlier this yr before the market did it's lil dip, now it's grabbing my interest again since we've played out a bottom and a recovery
- I wonder... is px action going to follow '98 (door 1) or the trapdoors of '08/09 (door 2)/ '20 (door 3)/ '22 (door 4).
- I suspect it's closer to '98 (and btw had this thesis before seeing the recovery in the last two months, so it's played out)
- While any event can cause the market to reset another 20-30% from here, the problem is "we don't have this event". Clearly war (at least an escalating one, not a multi-week headline-driven one - sad as any war is) won't do it. Also the Fed is just about telling Trump to suck the long one... and even that rates might go higher, but the mkt also is either ignoring this/ or frankly- might acknowledge it and doesn't care. Also we have a consumer recession on the horizon - this is no surprise to many of us. Market still doesn't really care. So what kind of event is it?
- Well in door 2 we had a pretty gnarly set of defaults in US housing. Will this happen again? Probably not in housing, there will be pockets, yes. But these sorts of things typically don't repeat, esp with the money printer locked and loaded.
- Door 3 was a "pandemic" (quotes intended) which freaked everyone out. Well played Klaus. But doubtful that card can be re-played without also seeing the money bazooka locked and loaded.
- Door 4 was rates FINALLY seeing liftoff after over a decade. But now they're pretty restrictive. Can they get more restrictive? Sure. But will they go up another 2...3...4...%? Unlikely. Direction ultimately is probably lower *eventually*, even if there's a bit more economic pain on mainstreet.
- So door 1 is somewhat unique. The market doesn't remember that timeframe well. And it feels like tech is back in that sweetspot. Mag 7 (just use QQQ on it's IWM- small cap pair) so QQQ/IWM or even SPY/IWM (both contain similar mag 7 weightings) shows no brakes. Hard to see why I'd rather pay 15 or 20x for a small cap with mid singles growth and no margin or moat vs. say NVDA at a slight premium. You get the point. So I think we're back there.
- Does that mean we get a garden variety pullbacks here/there along the way as headlines hit? Probably. I see a lot of crazy 0dte'ing all over the place. The cheapest and probably most profitable way to play that would simply be sticking to index options, tbh. But alas, that's not a 10 or 20x ;)
- Could a consumer recession in 2H keep stonks flat or only +5-10% higher capped until we can see "beyond"? Maybe. But remember, the big leaders (most Mag 7) are B2B and AI-driven. So you can paint an earnings story (lower costs b/c of tech) even if the top-lines are challenged. Again, let's see.
- Alas people have been DM'ing me "WHY ARE YOU SHORT?"
- Simply put, I have conviction in a very few number of things right now on the long side. I do think the market will tend to see higher highs, and there's not an obvious reason why that ends, just yet. And the market needs a reason to go down, not up.
- However, a lot of ETFs I've found to short are offering me ATM exposure for 5-10x leverage for very very little premium (low IV) relative to picking and banging my head causing brain damage to keep identifying the single names. Most of these ETFs own "the same company" which all trade correlation 1... so in any garden variety pullback, they will all trade v similarly and so I'd rather just pay less for the hedge.
- Therefore I remain with high BTC exposure (vis a vis OTC:OBTC ) at nearly 50% of my book. I think this converts to ETF in the next 90 days, giving me another 10-12% pop (as it's 88-90% discount to spot). Therefore, I can pack just a 1.4% IBIT ATM short (vis a vis puts) for nearly half this exposure. If BTC runs, as I expect, but can't predict exactly (EVEN IF THE CONVERT DOESN'T HAPPEN), I lose the 1.4% but probably pick up a solid 10...15...20% on this OBTC exposure. Seems like a good hedge.
- Same thing for BUG, ROBT, UFO... IV is just low. These are all correlation 1 baskets. They let me offset my NXT and GAMB size. That's all. I'm not calling "SHORT IT ALL" but rather, if things keep running "yes" i'll make less... but I believe my long exposure OBTC/ NXT and GAMB will outrun these ETFs. And even if they are similar in px action... I'll just make less, but it will still be positive.
- Now if the market really does puke 10-15 or 20%... I'll take these shorts and just deploy across all the work on single names I like. V likely the usual suspects are the one's I've written about and I'd size these up. King among them will be BTC.
Hope that helps. I like looking at this chart. Perhaps you have one that catches your attention too... that allows us a glimpse around what inning we're in.
The TL;DR is I think we're in inning 7 of this multi-decade run. I'd guess a true top gets put in in the coming years. But unlikely this year. And I'd be surprised if we retest the Mar/ Apr lows. Dips of the 5-10% size should be bought aggressively, not feared.
Alas who knows. I don't have a crystal ball.
V
