For the first time since 2013, I have added some additional bearish positions. All are short etfs. The largest position is in TZA which follows the Russell 2000. The Russell 2000 is the easiest index to manipulate so it is not an easy ride. I am also long BIS which is short the biotechs and TAZ which is short the financials.. I am also long a bear etf for each of the major indexes. All etfs are of the 3x or 2x variety. I have gone from 80% cash down to 70% cash. For the first time in three years, I have a small profit in bearish positions. That will not necessarily be the case in coming days but it is worth the risk now. I don’t know when stocks will tank, but it will happen. I know of know way to time this because central banks, the Federal Reserve included, are buying outright. They are not trading. They are just supporting the market. I know of no analysis that is useful for timing the collapse of something like this. Cash after the crash is the goal. 30% committed to the downside is not unreasonable.
Since the Federal Reserve creates the money it uses to support the market, it is conceivable for the Fed to to become a huge stockholder in the world’s corporations. That is a path to socialism that is never mentioned but it is one way for government to take over commerce. Up until just recently, central banks could count on friends of the Fed which traded risk free in return for supporting the market. Such arrangements are mostly missing these days. Mostly we are seeing central banks buying outright. There is no way to tell how long the agenda can be carried. There is no historical precedent. Face saving alone is a huge incentive. No one on the Open Market Committee wants to explain why the market crashed and the economy crashed following all of their efforts. It will happen. They all know it. They would rather all disasters be postponed until after they are gone. In that case, the new members will get blamed.
In all of financial history, there has never been this large of supply hanging over the market. The breadth is the worst I have seen in all of the years I have been trading. I started in 1968.
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