Rising On A Recession?

[MongiIG]

Inflation, Stagflation, Hyperinflation and Recession. On this episode of Engineering the Trade, Jermal Chandler and Julia Spina chew over these hot button economic terms and what they mean for markets.

 

 

[skyreach]

This is the topic lot of professionals will continue to talk about but will still remain confused at to what the outcome will be.

Some think we are heading for stagflation, others think a big recession and others worry about the sharp rise in inflation only.

Everyone has the illusion that an economy is doing well because the markets are doing well. Well, the markets have been running high on steroids ( QE money) and because of the whole masses of companies being fundamentally healthy and organically growing the businesses. We have a EVERYTHING BUBBLE ECONOMY. 

First thing to recognise is that THE OVER-SUPPLY OF THE MONEY SUPPLY and hence the huge "mount Everest" of mountain debts. The Fed has worried like hell about a likely Deflation for many years  and pretended to themselves and hence everyone else that JUST BY DOING QE (HYPER-SUPPLY OF PRINTED MONEY) WOULD BALANCE IT OUT.

Central bankers have all bypassed the facts and experiences of history. They live in  a self-created dilemma that then affects the pockets of everyone. Their goal is to PREVENT LOSS OF THE CURRENCY'S PURCHASING POWER, YET, THEIR ACTUAL ACTIONS & PRACTICE FOR DECADES HAS BEEN TO OVER-SUPPLY THE MONEY, WELL BEYOND THE GOODS & SERVICES DELIVERED. WHY? WELL, BANKERS EARN THEIR INCOME BY LENDING and USING IT IN INVESTING. SIMPLE BUSINESS ECONOMICS. THERE IS NO CONTROL OF LENDING. After all look around for the companies, individuals and governments that are in highest ever debts that they have NOW. Companies valuations are way way beyond their worth.

Businesses are only valuable when they have little debts, are well run, grow organically, and make a profit. 

 Inflation is a misunderstood term. Inflation can be good in a properly healthy growing economy, which we do not really have.  That is always balanced by the delivery of goods and services plus the bit more money supply for the expansion.

Deflation IS a result of excessive over-lending  and hence the inability of companies to grow their businesses and the GDP grinding (not at a good above average growth). The macro level is screwed up. Then Some trigger collapses the overall market. And as Jim Richard says:   "the house of cards economy" is what we have.

NOBODY, OR RATHER VERY FEW HAVE KEPT AN EYE ON THE ABUSE OF THE MONEY SUPPLY FOR SO MANY DECADES. We therefore gotten use to this environment that the central bankers have put us into.

Current scene was predictable, but not by the people who blindly followed the preaching's of the central bankers.

Jim Richard and Harry Dent are just a few who have seen all this coming. And they simply used correctly the basics of economics and see what is what.

Recession will unfold slowly but it will likely be the worst one ever. It does not matter what PR or opinions some central bankers state, that it is not likely. But such bankers have been here before, and said similar things before the start of and in the initial period of past recessions. Those who listened to them in the past paid the price of incorrect evaluations.

 

[MongiIG]

20 hours ago, skyreach said:

This is the topic lot of professionals will continue to talk about but will still remain confused at to what the outcome will be.

Some think we are heading for stagflation, others think a big recession and others worry about the sharp rise in inflation only.

Everyone has the illusion that an economy is doing well because the markets are doing well. Well, the markets have been running high on steroids ( QE money) and because of the whole masses of companies being fundamentally healthy and organically growing the businesses. We have a EVERYTHING BUBBLE ECONOMY. 

First thing to recognise is that THE OVER-SUPPLY OF THE MONEY SUPPLY and hence the huge "mount Everest" of mountain debts. The Fed has worried like hell about a likely Deflation for many years  and pretended to themselves and hence everyone else that JUST BY DOING QE (HYPER-SUPPLY OF PRINTED MONEY) WOULD BALANCE IT OUT.

Central bankers have all bypassed the facts and experiences of history. They live in  a self-created dilemma that then affects the pockets of everyone. Their goal is to PREVENT LOSS OF THE CURRENCY'S PURCHASING POWER, YET, THEIR ACTUAL ACTIONS & PRACTICE FOR DECADES HAS BEEN TO OVER-SUPPLY THE MONEY, WELL BEYOND THE GOODS & SERVICES DELIVERED. WHY? WELL, BANKERS EARN THEIR INCOME BY LENDING and USING IT IN INVESTING. SIMPLE BUSINESS ECONOMICS. THERE IS NO CONTROL OF LENDING. After all look around for the companies, individuals and governments that are in highest ever debts that they have NOW. Companies valuations are way way beyond their worth.

Businesses are only valuable when they have little debts, are well run, grow organically, and make a profit. 

 Inflation is a misunderstood term. Inflation can be good in a properly healthy growing economy, which we do not really have.  That is always balanced by the delivery of goods and services plus the bit more money supply for the expansion.

Deflation IS a result of excessive over-lending  and hence the inability of companies to grow their businesses and the GDP grinding (not at a good above average growth). The macro level is screwed up. Then Some trigger collapses the overall market. And as Jim Richard says:   "the house of cards economy" is what we have.

NOBODY, OR RATHER VERY FEW HAVE KEPT AN EYE ON THE ABUSE OF THE MONEY SUPPLY FOR SO MANY DECADES. We therefore gotten use to this environment that the central bankers have put us into.

Current scene was predictable, but not by the people who blindly followed the preaching's of the central bankers.

Jim Richard and Harry Dent are just a few who have seen all this coming. And they simply used correctly the basics of economics and see what is what.

Recession will unfold slowly but it will likely be the worst one ever. It does not matter what PR or opinions some central bankers state, that it is not likely. But such bankers have been here before, and said similar things before the start of and in the initial period of past recessions. Those who listened to them in the past paid the price of incorrect evaluations.

 

Thanks for sharing @skyreach

 

All the best - MongiIG

[MongiIG]

JUN 27, 2022

How to Trade and Manage Your Portfolio During a Recession and Bear Market
BY:RYAN SULLIVAN | Tastytrade

Tips for trading through big down moves in a bear market:

• Diversify your positions.
• Make small trades.
• Take profits early.
• Keep more of your portfolio in cash than you normally would in a bull market so that you can absorb large moves.

Take Profits Earlier and Redeploy Your Capital
Bear markets are an opportunity to take advantage of elevated volatility. Managing your portfolio through a bear market requires nuance and defensive positioning. Often, bear markets allow you to make trades on more products because of the increased level of premium available in the options market.

Markets fall faster than they rise. For us to be able to manage our short premium strategies through a bear market we must be willing to make trades more often than we might in a bull market. Either to close a position that is currently profitable or to make a defensive adjustment to a position that we are managing.

Taking profits earlier in a bear market is a solid strategy since a new downward move will expand volatility and likely test your strike prices more often. If we take profits earlier in a trade, it will free up our capital to be able to redeploy after a strong down move when premium is high. If we hold onto a position and try to ride out bigger moves, we lose opportunities to take new trades on different products. We want to get in and get out and move on to the next opportunity.

Key Takeaways

• Bear markets present huge opportunities.
• Trade often and take profits earlier.
• Keep your powder dry.

Diversify Your Portfolio

The catalyst for a bear market is often focused, with certain sectors taking much larger hits than others and dragging the market down with it as portfolio managers adjust. By taking positions in many different sectors, we can reduce the chance that all our positions react similarly to market events.

When looking for new trading opportunities, sort your options by sector. Once you have a position in a particular sector move to another sector and look for trades there. Do not fill your portfolio with positions in one sector, even if the premium to capital requirement is very attractive in that sector.

You’re much better off taking fewer positions in diversified sectors than loading up on positions in one attractive sector.

Fig. 1: 3-Month correlation matrix.

Recessions Will End
When you are battling through a bear market you will experience drawdowns often. It is important to remember that the market will get ugly and likely get worse, but then, eventually, it will get better. Keep your position sizes small so that big moves can be absorbed.

Big down moves will be followed by short-term rallies. Those opportunities are when we want to jump in and sell premium and then look for the near-term moment to close the position for a profit.

The market wants to find a price that participants are willing to transact at. Ideally, we get to that price level as fast as possible and let the bulls and the bears battle it out. We want to put our trades on right when the market finds a new level to transact at and then get out before the market swings to a new level.

This premium selling strategy allows us to take advantage of the premium expansion generated from a large move and then buy those positions back as the tug of war occurs at the new price level. We then look to get out early and take profits, keeping our powder dry and waiting for the next opportunity to make a similar trade.

Trading during a recession Key Takeaways

• Drawdowns are going to happen, keep your positions sizes small.
• Find opportunities in periods of consolidation.
• Put trades on after large moves and take profits early.