I actually look for any decent drop in Nov./Dec. time framer to purchase Calls. looking at the most outrageously priced equities to have a decent pullback because in this frenzied market the same players will salivate to buy into any drop.
Bonds are either artificially suppressed or they project a real slowdown coming and money is switching still from bonds to stocks. ONLY options today. I believe the Bond market, which has a great track record, is completely wrong.
HEDGE for long term BUT after end of year or most likely first 2 weeks in January depending on market action.
Here is the fundamentals today: 1 - Large disposable income still. 2 - JOLTS report at levels that suggest there is a HUGE number of people demanding better jobs and more pay. the higher the education level the more likely a bigger bump in wages. 3 - OIL and most commodities will rise much further as tight supply and added demand give a one two punch. 4 - All service restrictions will translate into increased purchases of hard goods. 5 - Virus will see a huge jump in hospitalizations this winter simply because we are witnessing the biggest longest Masocistic period in the last 100 years. Refusal to do the only logical thing and vaccinate, wear masks indoors, avoid crowds. Once hospitals ICU wards are full expect new restrictions.
6 - Debt and valuations no longer looked at. When analysts project huge earnings increases they tend to think it goes on forever and NEVER see the immediate danger. 7 - Historic indicators show approaching historic over valuations in every category. 8 - PCE is the single best indicator for forward looking inflation. It will continue to rise much further and longer than anticipated. Word transitory will mean years.
HEDGING for unspecified timeline with solid fundamental and technical support. Hedging for short term suggest you should see a decisive break in the mega stocks with mega valuations and the most speculative high flyers. BITCOIN is my canary in coal mine. It should stop singing and die well before the rest of market does.
Vehicles to hedge. 3x ETF's, OTM Puts (when) decisive support is breached without any sustained rebound. OTM CALLS in next 2 months especially after a 3 day slide of significant. Most commodities will surge between NOW and March. All inflation assets will shine in that same period.
All depends on US response to new virus threat. In NY the moron mayor pledges to have a huge New Years crowd. His pledge for the Saint Patrick's Parade as the virus was ravaging NY was met with his announcement "Us NYers know better". We are tired of this virus and restrictions. The obvious result will be another overflow of hospitalization especially in the RED STATES. That will exacerbate the current imbalance of demand on goods at expense of service spending. Historically service accounted for 75% of GDP. This ONE FACTOR, if scenario plays out, will spike purchase prices, tight supply, and accelerate Wage growth. The WORSE possible scenario creating the biggest bubble in history.
In 1929 right before the depression all economists were so sure of the future path they coined the term New Paradigm describing the future was set and glorious as far as the mind can conceive. They used the CURRENT economic model dismissing crazy valuations, crazy speculative play all because they WANTED to see the world one way. Current headlines from REUTERS: "S&P, Nasdaq tick higher as strong earnings outweigh inflation fears". Truth be told there is NO FEAR. In fact almost all analysts think we are entering a perfect stock scenario.
The virus makes the glaring discrepancies even more so. From 75% of GDP to perhaps 25%. The past accumulative affect will surely cause inflation to spike AND an added Virus mandate will accelerate that by 5.
As for actual HEDGES you can decide based on projections of your own on which asset class will get hit the hardest. Inflation is NOW a given. How much or more importantly will the FED allow it to hit mortgages and treasuries? The two biggest factors causing long term economic stall. they are GAMBLING here hoping it is temporary. If not they will lose complete control. Debt and creditors willingness to lend will cause the next great depression.
