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Thoughts on Todays Markets

This is starting to look possibly like the beginning of the big drop I've been talking about for years. I keep reading from several different really great investors that the play in this market is to be long equities and short bonds. I always get nervous however when I hear a large amount of people saying the same thing in the markets.

We are currently long and short about 16 different stocks with a perfect 50/50 balance between long and short. Our longs are more classical value plays while the shorts are companies I think are fads, going broke, or both.

Netflix is a company we have been building a short position in for a while and will continue to following today's big drop. Every metric with the exception of growth points to a big disasterous drop, NFLX EV (including off Balance Sheet)/EBITDA is at 345x, NFLX warns huge cash burn is coming in the second half of the year: "our content cash spending will be weighted to the second half of 2018" Company will burn up to $3.2BN in H2, NFLX total debt: $8.4BN; cash $3.9BN. All the math points to a big drop, but timing is everything.

In the mean time we expected the market to jump off it's 200 day moving average, we posted that a week ago. What we're waiting to see now is if the market turns over and resumes the drop, or floats sideways or up a little bit as earnings begin to be anounced across Wall Street. So far earnings have been disappointing or met with lackluster excitement by the market in the case of a beat.

And all of this is taking place while the Fed continues to raise rates and warn everyone that they will continue to raise rates until the next crisis.

However a lot of smart investors see this as a reason to buy stocks, and sell bonds like I said. I posted a link to one such report below, Icecap asset management, they are a good group of investors. Their returns aren't where I like to be, but they are a smarter group than most, and continue to actually look to outperform, not just grow their fund through sales and adding new clients. However I don't agree with them in the big picture, equities at these prices with rates going up is not somewhere you want to be unless you are like me and can go short and long specific companies you like and have researched.

http://icecapassetmanagement.com/global-outlook/july-2018-icecap-global-outlook-eruption/

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