Date: November 16, 2022

The Fall of SBF Continues as Markets Yawn

The FTX news and spectacular collapse of the company and crypto poster boy, Sam Bankman-Fried (SBF), continues. From 10,000 creditors, last I saw it was up t0 1,000,000 creditors. Other crypto firms are being wiped out in the contagion. Thankfully, it seems limited to that sector and is not systemic. SBF is yet another in a long line of supposed transcenders who knew better and ended up in ruin. The Hunt brothers with silver in 1980. Bernie Madoff in 2008. Michael Milken in 1990. John Meriwether in 1998. Angelo Mozillo in 2008. The list goes on and on and on and I didn’t even start with the Dotcom era. It’s all very sad and tragic. That’s what happens to those swimming naked when the tide goes out.

If you missed my video from Sunday, here it is again. And They Called ME an Idiot

Just like with the election, markets were nonplussed by the news and instead focused on the PPI report which showed the inflation at the wholesale level moderated in October. While pundits were calling for repeat of last week’s CPI report reaction, markets rarely give a doubleheader reward. Instead, rumors of a Russian missile striking Poland tempered the bulls’ enthusiasm.

We know that the Dow Industrials have led this month. That’s not something to celebrate. It’s 30 price-weighted stocks where investors typically try to hide because liquidity is so high. Top notch action is when the NASDAQ and/or Russell 2000 lead which they have since the October 13th bottom. On the key sector side, semis, banks and transports have performed well, but consumer discretionary is lagging badly. That is not surprising given Amazon’s weight in the index.

The stock market has rallied smartly and some retrenchment is appropriate. I do not believe the rally off the October 13th low is over. What fell the most has bounced the most. Let’s see if other leadership steps up.

On Monday bought QQQ. We sold IJJ. we On Tuesday we bought IWP, IWO, PFF, EIFAX, PFNNX, DYBIX, more IEO, more JNK, more QQQ and more ENSG. We sold IVE, IJS, PMPIX, RYPMX and levered NDX.


Paul Schatz, President, Heritage Capital