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The dollar standard and how the Fed itself created the perfect setup for a stock market crash
Disclaimer: This is neither financial nor trading advice and everyone should trade based on their own risk tolerance. Please leverage yourself accordingly. When you're done, ask yourself: "Am I jacked to the tits?". If the answer is "yes", you're good to go. We're probably experiencing the wildest markets in our lifetime. After doing some research and listening to opinions by several people, I wanted to share my own view on what happened in the market and what could happen in the future. There's no guarantee that the future plays out as I describe it or otherwise I'd become very rich. If you just want tickers and strikes...I don't know if this is going to help you. But anyways, scroll way down to the end. My current position is TLT 171c 8/21, opened on Friday 7/31 when TLT was at 170.50. This is a post trying to describe what it means that we've entered the "dollar standard" decades ago after leaving the gold standard. Furthermore I'll try to explain how the "dollar standard" is the biggest reason behind the 2008 and 2020 financial crisis, stock market crashes and how the Coronavirus pandemic was probably the best catalyst for the global dollar system to blow up.
Tackling the Dollar problem
Throughout the month of July we've seen the "death of the Dollar". At least that's what WSB thinks. It's easy to think that especially since it gets reiterated in most media outlets. I will take the contrarian view. This is a short-term "downturn" in the Dollar and very soon the Dollar will rise a lot against the Euro - supported by the Federal Reserve itself.US dollar Index (DXY)If you zoom out to the 3Y chart you'll see what everyone is being hysterical about. The dollar is dying! It was that low in 2018! This is the end! The Fed has done too much money printing! Zimbabwe and Weimar are coming to the US. There is more to it though. The DXY is dominated by two currency rates and the most important one by far is EURUSD.EURUSD makes up 57.6% of the DXY And we've seen EURUSD rise from 1.14 to 1.18 since July 21st, 2020. Why that date? On that date the European Commission (basically the "government" of the EU) announced that there was an agreement for the historical rescue package for the EU. That showed the markets that the EU seems to be strong and resilient, it seemed to be united (we're not really united, trust me as an European) and therefore there are more chances in the EU, the Euro and more chances taking risks in the EU.Meanwhile the US continued to struggle with the Coronavirus and some states like California went back to restricting public life. The US economy looked weaker and therefore the Euro rose a lot against the USD. From a technical point of view the DXY failed to break the 97.5 resistance in June three times - DXY bulls became exhausted and sellers gained control resulting in a pretty big selloff in the DXY.
Why the DXY is pretty useless
Considering that EURUSD is the dominant force in the DXY I have to say it's pretty useless as a measurement of the US dollar. Why? Well, the economy is a global economy. Global trade is not dominated by trade between the EU and the USA. There are a lot of big exporting nations besides Germany, many of them in Asia. We know about China, Japan, South Korea etc. Depending on the business sector there are a lot of big exporters in so-called "emerging markets". For example, Brazil and India are two of the biggest exporters of beef. Now, what does that mean? It means that we need to look at the US dollar from a broader perspective. Thankfully, the Fed itself provides a more accurate Dollar index. It's called the "Trade Weighted U.S. Dollar Index: Broad, Goods and Services". When you look at that index you will see that it didn't really collapse like the DXY. In fact, it still is as high as it was on March 10, 2020! You know, only two weeks before the stock market bottomed out. How can that be explained?
Global trade, emerging markets and global dollar shortage
Emerging markets are found in countries which have been shifting away from their traditional way of living towards being an industrial nation. Of course, Americans and most of the Europeans don't know how life was 300 years ago.China already completed that transition. Countries like Brazil and India are on its way. The MSCI Emerging Market Index lists 26 countries. Even South Korea is included. However there is a big problem for Emerging Markets: the Coronavirus and US Imports.The good thing about import and export data is that you can't fake it. Those numbers speak the truth. You can see that imports into the US haven't recovered to pre-Corona levels yet. It will be interesting to see the July data coming out on August 5th.Also you can look at exports from Emerging Market economies. Let's take South Korean exports YoY. You can see that South Korean exports are still heavily depressed compared to a year ago. Global trade hasn't really recovered.For July the data still has to be updated that's why you see a "0.0%" change right now.Less US imports mean less US dollars going into foreign countries including Emerging Markets.Those currency pairs are pretty unimpressed by the rising Euro. Let's look at a few examples. Use the 1Y chart to see what I mean. Indian Rupee to USDBrazilian Real to USDSouth Korean Won to USD What do you see if you look at the 1Y chart of those currency pairs? There's no recovery to pre-COVID levels. And this is pretty bad for the global financial system. Why? According to the Bank of International Settlements there is $12.6 trillion of dollar-denominated debt outside of the United States. Now the Coronavirus comes into play where economies around the world are struggling to go back to their previous levels while the currencies of Emerging Markets continue to be WEAK against the US dollar. This is very bad. We've already seen the IMF receiving requests for emergency loans from 80 countries on March 23th. What are we going to see? We know Argentina has defaulted on their debt more than once and make jokes about it. But what happens if we see 5 Argentinas? 10? 20? Even 80? Add to that that global travel is still depressed, especially for US citizens going anywhere. US citizens traveling to other countries is also a situation in which the precious US dollars would enter Emerging Market economies. But it's not happening right now and it won't happen unless we actually get a miracle treatment or the virus simply disappears. This is where the treasury market comes into play. But before that, let's quickly look at what QE (rising Fed balance sheet) does to the USD. Take a look at the Trade-Weighted US dollar Index. Look at it at max timeframe - you'll see what happened in 2008. The dollar went up (shocker).Now let's look at the Fed balance sheet at max timeframe. You will see: as soon as the Fed starts the QE engine, the USD goes UP, not down! September 2008 (Fed first buys MBS), March 2009, March 2020. Is it just a coincidence? No, as I'll explain below. They're correlated and probably even in causation.Oh and in all of those scenarios the stock market crashed...compared to February 2020, the Fed balance sheet grew by ONE TRILLION until March 25th, but the stock market had just finished crashing...can you please prove to me that QE makes stock prices go up? I think I've just proven the opposite correlation.
Bonds, bills, Gold and "inflation"
People laugh at bond bulls or at people buying bonds due to the dropping yields. "Haha you're stupid you're buying an asset which matures in 10 years and yields 5.3% STONKS go up way more!".Let me stop you right there. Why do you buy stocks? Will you hold those stocks until you die so that you regain your initial investment through dividends? No. You buy them because you expect them to go up based on fundamental analysis, news like earnings or other things. Then you sell them when you see your price target reached. The assets appreciated.Why do you buy options? You don't want to hold them until expiration unless they're -90% (what happens most of the time in WSB). You wait until the underlying asset does what you expect it does and then you sell the options to collect the premium. Again, the assets appreciated. It's the exact same thing with treasury securities. The people who've been buying bonds for the past years or even decades didn't want to wait until they mature. Those people want to sell the bonds as they appreciate. Bond prices have an inverse relationship with their yields which is logical when you think about it. Someone who desperately wants and needs the bonds for various reasons will accept to pay a higher price (supply and demand, ya know) and therefore accept a lower yield. By the way, both JP Morgan and Goldmans Sachs posted an unexpected profit this quarter, why? They made a killing trading bonds. US treasury securities are the most liquid asset in the world and they're also the safest asset you can hold. After all, if the US default on their debt you know that the world is doomed. So if US treasuries become worthless anything else has already become worthless. Now why is there so much demand for the safest and most liquid asset in the world? That demand isn't new but it's caused by the situation the global economy is in. Trade and travel are down and probably won't recover anytime soon, emerging markets are struggling both with the virus and their dollar-denominated debt and central banks around the world struggle to find solutions for the problems in the financial markets. How do we now that the markets aren't trusting central banks? Well, bonds tell us that and actually Gold tells us the same! TLT chartGold spot price chart TLT is an ETF which reflects the price of US treasuries with 20 or more years left until maturity. Basically the inverse of the 30 year treasury yield. As you can see from the 5Y chart bonds haven't been doing much from 2016 to mid-2019. Then the repo crisis of September 2019took place and TLT actually rallied in August 2019 before the repo crisis finally occurred!So the bond market signaled that something is wrong in the financial markets and that "something" manifested itself in the repo crisis. After the repo market crisis ended (the Fed didn't really do much to help it, before you ask), bonds again were quiet for three months and started rallying in January (!) while most of the world was sitting on their asses and downplaying the Coronavirus threat. But wait, how does Gold come into play? The Gold chart basically follows the same pattern as the TLT chart. Doing basically nothing from 2016 to mid-2019. From June until August Gold rose a staggering 200 dollars and then again stayed flat until December 2019. After that, Gold had another rally until March when it finally collapsed. Many people think rising Gold prices are a sign of inflation. But where is the inflation? We saw PCE price indices on Friday July 31st and they're at roughly 1%. We've seen CPIs from European countries and the EU itself. France and the EU (July 31st) as a whole had a very slight uptick in CPI while Germany (July 30th), Italy (July 31st) and Spain (July 30th) saw deflationary prints.There is no inflation, nowhere in the world. I'm sorry to burst that bubble. Yet, Gold prices still go up even when the Dollar rallies through the DXY (sadly I have to measure it that way now since the trade-weighted index isn't updated daily) and we know that there is no inflation from a monetary perspective. In fact, Fed chairman JPow, apparently the final boss for all bears, said on Wednesday July 29th that the Coronavirus pandemic is a deflationarydisinflationary event. Someone correct me there, thank you. But deflationary forces are still in place even if JPow wouldn't admit it. To conclude this rather long section: Both bonds and Gold are indicators for an upcoming financial crisis. Bond prices should fall and yields should go up to signal an economic recovery. But the opposite is happening. in that regard heavily rising Gold prices are a very bad signal for the future. Both bonds and Gold are screaming: "The central banks haven't solved the problems". By the way, Gold is also a very liquid asset if you want quick cash, that's why we saw it sell off in March because people needed dollars thanks to repo problems and margin calls.When the deflationary shock happens and another liquidity event occurs there will be another big price drop in precious metals and that's the dip which you could use to load up on metals by the way.
Dismantling the money printer
But the Fed! The M2 money stock is SHOOTING THROUGH THE ROOF! The printers are real!By the way, velocity of M2 was updated on July 30th and saw another sharp decline. If you take a closer look at the M2 stock you see three parts absolutely skyrocketing: savings, demand deposits and institutional money funds. Inflationary? No. So, the printers aren't real. I'm sorry.Quantitative easing (QE) is the biggest part of the Fed's operations to help the economy get back on its feet. What is QE?Upon doing QE the Fed "purchases" treasury and mortgage-backed securities from the commercial banks. The Fed forces the commercial banks to hand over those securities and in return the commercial banks reserve additional bank reserves at an account in the Federal Reserve. This may sound very confusing to everyone so let's make it simple by an analogy.I want to borrow a camera from you, I need it for my road trip. You agree but only if I give you some kind of security - for example 100 bucks as collateral.You keep the 100 bucks safe in your house and wait for me to return safely. You just wait and wait. You can't do anything else in this situation. Maybe my road trip takes a year. Maybe I come back earlier. But as long as I have your camera, the 100 bucks need to stay with you. In this analogy, I am the Fed. You = commercial banks. Camera = treasuries/MBS. 100 bucks = additional bank reserves held at the Fed.
Revisiting 2008 briefly: the true money printers
The true money printers are the commercial banks, not the central banks. The commercial banks give out loans and demand interest payments. Through those interest payments they create money out of thin air! At the end they'll have more money than before giving out the loan. That additional money can be used to give out more loans, buy more treasury/MBS Securities or gain more money through investing and trading. Before the global financial crisis commercial banks were really loose with their policy. You know, the whole "Big Short" story, housing bubble, NINJA loans and so on. The reckless handling of money by the commercial banks led to actual money printing and inflation, until the music suddenly stopped. Bear Stearns went tits up. Lehman went tits up. The banks learned from those years and completely changed, forever. They became very strict with their lending resulting in the Fed and the ECB not being able to raise their rates. By keeping the Fed funds rate low the Federal Reserve wants to encourage commercial banks to give out loans to stimulate the economy. But commercial banks are not playing along. They even accept negative rates in Europe rather than taking risks in the actual economy. The GFC of 2008 completely changed the financial landscape and the central banks have struggled to understand that. The system wasn't working anymore because the main players (the commercial banks) stopped playing with each other. That's also the reason why we see repeated problems in the repo market.
How QE actually decreases liquidity before it's effective
The funny thing about QE is that it achieves the complete opposite of what it's supposed to achieve before actually leading to an economic recovery. What does that mean? Let's go back to my analogy with the camera. Before I take away your camera, you can do several things with it. If you need cash, you can sell it or go to a pawn shop. You can even lend your camera to someone for a daily fee and collect money through that.But then I come along and just take away your camera for a road trip for 100 bucks in collateral. What can you do with those 100 bucks? Basically nothing. You can't buy something else with those. You can't lend the money to someone else. It's basically dead capital. You can just look at it and wait until I come back. And this is what is happening with QE. Commercial banks buy treasuries and MBS due to many reasons, of course they're legally obliged to hold some treasuries, but they also need them to make business.When a commercial bank has a treasury security, they can do the following things with it:- Sell it to get cash- Give out loans against the treasury security- Lend the security to a short seller who wants to short bonds Now the commercial banks received a cash reserve account at the Fed in exchange for their treasury security. What can they do with that?- Give out loans against the reserve account That's it. The bank had to give away a very liquid and flexible asset and received an illiquid asset for it. Well done, Fed. The goal of the Fed is to encourage lending and borrowing through suppressing yields via QE. But it's not happening and we can see that in the H.8 data (assets and liabilities of the commercial banks).There is no recovery to be seen in the credit sector while the commercial banks continue to collect treasury securities and MBS. On one hand, they need to sell a portion of them to the Fed on the other hand they profit off those securities by trading them - remember JPM's earnings. So we see that while the Fed is actually decreasing liquidity in the markets by collecting all the treasuries it has collected in the past, interest rates are still too high. People are scared, and commercial banks don't want to give out loans. This means that as the economic recovery is stalling (another whopping 1.4M jobless claims on Thursday July 30th) the Fed needs to suppress interest rates even more. That means: more QE. that means: the liquidity dries up even more, thanks to the Fed. We heard JPow saying on Wednesday that the Fed will keep their minimum of 120 billion QE per month, but, and this is important, they can increase that amount anytime they see an emergency.And that's exactly what he will do. He will ramp up the QE machine again, removing more bond supply from the market and therefore decreasing the liquidity in financial markets even more. That's his Hail Mary play to force Americans back to taking on debt again.All of that while the government is taking on record debt due to "stimulus" (which is apparently only going to Apple, Amazon and Robinhood). Who pays for the government debt? The taxpayers. The wealthy people. The people who create jobs and opportunities. But in the future they have to pay more taxes to pay down the government debt (or at least pay for the interest). This means that they can't create opportunities right now due to the government going insane with their debt - and of course, there's still the Coronavirus.
"Without the Fed, yields would skyrocket"
This is wrong. The Fed has been keeping their basic level QE of 120 billion per month for months now. But ignoring the fake breakout in the beginning of June (thanks to reopening hopes), yields have been on a steady decline. Let's take a look at the Fed's balance sheet. The Fed has thankfully stayed away from purchasing more treasury bills (short term treasury securities). Bills are important for the repo market as collateral. They're the best collateral you can have and the Fed has already done enough damage by buying those treasury bills in March, destroying even more liquidity than usual. More interesting is the point "notes and bonds, nominal". The Fed added 13.691 billion worth of US treasury notes and bonds to their balance sheet. Luckily for us, the US Department of Treasury releases the results of treasury auctions when they occur. On July 28th there was an auction for the 7 year treasury note. You can find the results under "Note -> Term: 7-year -> Auction Date 07/28/2020 -> Competitive Results PDF". Or here's a link. What do we see? Indirect bidders, which are foreigners by the way, took 28 billion out of the total 44 billion. That's roughly 64% of the entire auction. Primary dealers are the ones which sell the securities to the commercial banks. Direct bidders are domestic buyers of treasuries. The conclusion is: There's insane demand for US treasury notes and bonds by foreigners. Those US treasuries are basically equivalent to US dollars. Now dollar bears should ask themselves this question: If the dollar is close to a collapse and the world wants to get rid fo the US dollar, why do foreigners (i.e. foreign central banks) continue to take 60-70% of every bond auction? They do it because they desperately need dollars and hope to drive prices up, supported by the Federal Reserve itself, in an attempt to have the dollar reserves when the next liquidity event occurs. So foreigners are buying way more treasuries than the Fed does. Final conclusion: the bond market has adjusted to the Fed being a player long time ago. It isn't the first time the Fed has messed around in the bond market.
How market participants are positioned
We know that commercial banks made good money trading bonds and stocks in the past quarter. Besides big tech the stock market is being stagnant, plain and simple. All the stimulus, stimulus#2, vaccinetalksgoingwell.exe, public appearances by Trump, Powell and their friends, the "money printing" (which isn't money printing) by the Fed couldn't push SPY back to ATH which is 339.08 btw. Who can we look at? Several people but let's take Bill Ackman. The one who made a killing with Credit Default Swaps in March and then went LONG (he said it live on TV). Well, there's an update about him:Bill Ackman saying he's effectively 100% longHe says that around the 2 minute mark. Of course, we shouldn't just believe what he says. After all he is a hedge fund manager and wants to make money. But we have to assume that he's long at a significant percentage - it doesn't even make sense to get rid of positions like Hilton when they haven't even recovered yet. Then again, there are sources to get a peek into the positions of hedge funds, let's take Hedgopia.We see: Hedge funds are starting to go long on the 10 year bond. They are very short the 30 year bond. They are very long the Euro, very short on VIX futures and short on the Dollar.
This is the perfect setup for a market meltdown. If hedge funds are really positioned like Ackman and Hedgopia describes, the situation could unwind after a liquidity event:The Fed increases QE to bring down the 30 year yield because the economy isn't recovering yet. We've already seen the correlation of QE and USD and QE and bond prices.That causes a giant short squeeze of hedge funds who are very short the 30 year bond. They need to cover their short positions. But Ackman said they're basically 100% long the stock market and nothing else. So what do they do? They need to sell stocks. Quickly. And what happens when there is a rapid sell-off in stocks? People start to hedge via put options. The VIX rises. But wait, hedge funds are short VIX futures, long Euro and short DXY. To cover their short positions on VIX futures, they need to go long there. VIX continues to go up and the prices of options go suborbital (as far as I can see).Also they need to get rid of Euro futures and cover their short DXY positions. That causes the USD to go up even more. And the Fed will sit there and do their things again: more QE, infinity QE^2, dollar swap lines, repo operations, TARP and whatever. The Fed will be helpless against the forces of the market and have to watch the stock market burn down and they won't even realize that they created the circumstances for it to happen - by their programs to "help the economy" and their talking on TV. Do you remember JPow on 60minutes talking about how they flooded the world with dollars and print it digitally? He wanted us poor people to believe that the Fed is causing hyperinflation and we should take on debt and invest into the stock market. After all, the Fed has it covered. But the Fed hasn't got it covered. And Powell knows it. That's why he's being a bear in the FOMC statements. He knows what's going on. But he can't do anything about it except what's apparently proven to be correct - QE, QE and more QE.
A final note about "stock market is not the economy"
It's true. The stock market doesn't reflect the current state of the economy. The current economy is in complete shambles. But a wise man told me that the stock market is the reflection of the first and second derivatives of the economy. That means: velocity and acceleration of the economy. In retrospect this makes sense. The economy was basically halted all around the world in March. Of course it's easy to have an insane acceleration of the economy when the economy is at 0 and the stock market reflected that. The peak of that accelerating economy ("max velocity" if you want to look at it like that) was in the beginning of June. All countries were reopening, vaccine hopes, JPow injecting confidence into the markets. Since then, SPY is stagnant, IWM/RUT, which is probably the most accurate reflection of the actual economy, has slightly gone down and people have bid up tech stocks in absolute panic mode. Even JPow admitted it. The economic recovery has slowed down and if we look at economic data, the recovery has already stopped completely. The economy is rolling over as we can see in the continued high initial unemployment claims. Another fact to factor into the stock market.
TLDR and positions or ban?
TLDR: global economy bad and dollar shortage. economy not recovering, JPow back to doing QE Infinity. QE Infinity will cause the final squeeze in both the bond and stock market and will force the unwinding of the whole system. Positions: idk. I'll throw in TLT 190c 12/18, SPY 220p 12/18, UUP 26c 12/18.That UUP call had 12.5k volume on Friday 7/31 btw.
Edit about positions and hedge funds
My current positions. You can laugh at my ZEN calls I completely failed with those.I personally will be entering one of the positions mentioned in the end - or similar ones. My personal opinion is that the SPY puts are the weakest try because you have to pay a lot of premium. Also I forgot talking about why hedge funds are shorting the 30 year bond. Someone asked me in the comments and here's my reply: "If you look at treasury yields and stock prices they're pretty much positively correlated. Yields go up, then stocks go up. Yields go down (like in March), then stocks go down. What hedge funds are doing is extremely risky but then again, "hedge funds" is just a name and the hedgies are known for doing extremely risky stuff. They're shorting the 30 year bond because they needs 30y yields to go UP to validate their long positions in the equity market. 30y yields going up means that people are welcoming risk again, taking on debt, spending in the economy. Milton Friedman labeled this the "interest rate fallacy". People usually think that low interest rates mean "easy money" but it's the opposite. Low interest rates mean that money is really tight and hard to get. Rising interest rates on the other hand signal an economic recovery, an increase in economic activity. So hedge funds try to fight the Fed - the Fed is buying the 30 year bonds! - to try to validate their stock market positions. They also short VIX futures to do the same thing. Equity bulls don't want to see VIX higher than 15. They're also short the dollar because it would also validate their position: if the economic recovery happens and the global US dollar cycle gets restored then it will be easy to get dollars and the USD will continue to go down. Then again, they're also fighting against the Fed in this situation because QE and the USD are correlated in my opinion. Another Redditor told me that people who shorted Japanese government bonds completely blew up because the Japanese central bank bought the bonds and the "widow maker trade" was born:https://www.investopedia.com/terms/w/widow-maker.asp"
Since I've mentioned him a lot in the comments, I recommend you check out Steven van Metre's YouTube channel. Especially the bottom passages of my post are based on the knowledge I received from watching his videos. Even if didn't agree with him on the fundamental issues (there are some things like Gold which I view differently than him) I took it as an inspiration to dig deeper. I think he's a great person and even if you're bullish on stocks you can learn something from Steven!
Hi guys, I have been using reddit for years in my personal life (not trading!) and wanted to give something back in an area where i am an expert. I worked at an investment bank for seven years and joined them as a graduate FX trader so have lots of professional experience, by which i mean I was trained and paid by a big institution to trade on their behalf. This is very different to being a full-time home trader, although that is not to discredit those guys, who can accumulate a good amount of experience/wisdom through self learning. When I get time I'm going to write a mid-length posts on each topic for you guys along the lines of how i was trained. I guess there would be 15-20 topics in total so about 50-60 posts. Feel free to comment or ask questions. The first topic is Risk Management and we'll cover it in three parts Part I
Why it matters
Using stops sensibly
Picking a clear level
Why it matters
The first rule of making money through trading is to ensure you do not lose money. Look at any serious hedge fund’s website and they’ll talk about their first priority being “preservation of investor capital.” You have to keep it before you grow it. Strangely, if you look at retail trading websites, for every one article on risk management there are probably fifty on trade selection. This is completely the wrong way around. The great news is that this stuff is pretty simple and process-driven. Anyone can learn and follow best practices. Seriously, avoiding mistakes is one of the most important things: there's not some holy grail system for finding winning trades, rather a routine and fairly boring set of processes that ensure that you are profitable, despite having plenty of losing trades alongside the winners.
Capital and position sizing
The first thing you have to know is how much capital you are working with. Let’s say you have $100,000 deposited. This is your maximum trading capital. Your trading capital is not the leveraged amount. It is the amount of money you have deposited and can withdraw or lose. Position sizing is what ensures that a losing streak does not take you out of the market. A rule of thumb is that one should risk no more than 2% of one’s account balance on an individual trade and no more than 8% of one’s account balance on a specific theme. We’ll look at why that’s a rule of thumb later. For now let’s just accept those numbers and look at examples. So we have $100,000 in our account. And we wish to buy EURUSD. We should therefore not be risking more than 2% which $2,000. We look at a technical chart and decide to leave a stop below the monthly low, which is 55 pips below market. We’ll come back to this in a bit. So what should our position size be? We go to the calculator page, select Position Size and enter our details. There are many such calculators online - just google "Pip calculator". https://preview.redd.it/y38zb666e5h51.jpg?width=1200&format=pjpg&auto=webp&s=26e4fe569dc5c1f43ce4c746230c49b138691d14 So the appropriate size is a buy position of 363,636 EURUSD. If it reaches our stop level we know we’ll lose precisely $2,000 or 2% of our capital. You should be using this calculator (or something similar) on every single trade so that you know your risk. Now imagine that we have similar bets on EURJPY and EURGBP, which have also broken above moving averages. Clearly this EUR-momentum is a theme. If it works all three bets are likely to pay off. But if it goes wrong we are likely to lose on all three at once. We are going to look at this concept of correlation in more detail later. The total amount of risk in our portfolio - if all of the trades on this EUR-momentum theme were to hit their stops - should not exceed $8,000 or 8% of total capital. This allows us to go big on themes we like without going bust when the theme does not work. As we’ll see later, many traders only win on 40-60% of trades. So you have to accept losing trades will be common and ensure you size trades so they cannot ruin you. Similarly, like poker players, we should risk more on trades we feel confident about and less on trades that seem less compelling. However, this should always be subject to overall position sizing constraints. For example before you put on each trade you might rate the strength of your conviction in the trade and allocate a position size accordingly: https://preview.redd.it/q2ea6rgae5h51.png?width=1200&format=png&auto=webp&s=4332cb8d0bbbc3d8db972c1f28e8189105393e5b To keep yourself disciplined you should try to ensure that no more than one in twenty trades are graded exceptional and allocated 5% of account balance risk. It really should be a rare moment when all the stars align for you. Notice that the nice thing about dealing in percentages is that it scales. Say you start out with $100,000 but end the year up 50% at $150,000. Now a 1% bet will risk $1,500 rather than $1,000. That makes sense as your capital has grown. It is extremely common for retail accounts to blow-up by making only 4-5 losing trades because they are leveraged at 50:1 and have taken on far too large a position, relative to their account balance. Consider that GBPUSD tends to move 1% each day. If you have an account balance of $10k then it would be crazy to take a position of $500k (50:1 leveraged). A 1% move on $500k is $5k. Two perfectly regular down days in a row — or a single day’s move of 2% — and you will receive a margin call from the broker, have the account closed out, and have lost all your money. Do not let this happen to you. Use position sizing discipline to protect yourself.
If you’re wondering - why “about 2%” per trade? - that’s a fair question. Why not 0.5% or 10% or any other number? The Kelly Criterion is a formula that was adapted for use in casinos. If you know the odds of winning and the expected pay-off, it tells you how much you should bet in each round. This is harder than it sounds. Let’s say you could bet on a weighted coin flip, where it lands on heads 60% of the time and tails 40% of the time. The payout is $2 per $1 bet. Well, absolutely you should bet. The odds are in your favour. But if you have, say, $100 it is less obvious how much you should bet to avoid ruin. Say you bet $50, the odds that it could land on tails twice in a row are 16%. You could easily be out after the first two flips. Equally, betting $1 is not going to maximise your advantage. The odds are 60/40 in your favour so only betting $1 is likely too conservative. The Kelly Criterion is a formula that produces the long-run optimal bet size, given the odds. Applying the formula to forex trading looks like this: Position size % = Winning trade % - ( (1- Winning trade %) / Risk-reward ratio If you have recorded hundreds of trades in your journal - see next chapter - you can calculate what this outputs for you specifically. If you don't have hundreds of trades then let’s assume some realistic defaults of Winning trade % being 30% and Risk-reward ratio being 3. The 3 implies your TP is 3x the distance of your stop from entry e.g. 300 pips take profit and 100 pips stop loss. So that’s 0.3 - (1 - 0.3) / 3 = 6.6%. Hold on a second. 6.6% of your account probably feels like a LOT to risk per trade.This is the main observation people have on Kelly: whilst it may optimise the long-run results it doesn’t take into account the pain of drawdowns. It is better thought of as the rational maximum limit. You needn’t go right up to the limit! With a 30% winning trade ratio, the odds of you losing on four trades in a row is nearly one in four. That would result in a drawdown of nearly a quarter of your starting account balance. Could you really stomach that and put on the fifth trade, cool as ice? Most of us could not. Accordingly people tend to reduce the bet size. For example, let’s say you know you would feel emotionally affected by losing 25% of your account. Well, the simplest way is to divide the Kelly output by four. You have effectively hidden 75% of your account balance from Kelly and it is now optimised to avoid a total wipeout of just the 25% it can see. This gives 6.6% / 4 = 1.65%. Of course different trading approaches and different risk appetites will provide different optimal bet sizes but as a rule of thumb something between 1-2% is appropriate for the style and risk appetite of most retail traders. Incidentally be very wary of systems or traders who claim high winning trade % like 80%. Invariably these don’t pass a basic sense-check:
How many live trades have you done? Often they’ll have done only a handful of real trades and the rest are simulated backtests, which are overfitted. The model will soon die.
What is your risk-reward ratio on each trade? If you have a take profit $3 away and a stop loss $100 away, of course most trades will be winners. You will not be making money, however! In general most traders should trade smaller position sizes and less frequently than they do. If you are going to bias one way or the other, far better to start off too small.
How to use stop losses sensibly
Stop losses have a bad reputation amongst the retail community but are absolutely essential to risk management. No serious discretionary trader can operate without them. A stop loss is a resting order, left with the broker, to automatically close your position if it reaches a certain price. For a recap on the various order types visit this chapter. The valid concern with stop losses is that disreputable brokers look for a concentration of stops and then, when the market is close, whipsaw the price through the stop levels so that the clients ‘stop out’ and sell to the broker at a low rate before the market naturally comes back higher. This is referred to as ‘stop hunting’. This would be extremely immoral behaviour and the way to guard against it is to use a highly reputable top-tier broker in a well regulated region such as the UK. Why are stop losses so important? Well, there is no other way to manage risk with certainty. You should always have a pre-determined stop loss before you put on a trade. Not having one is a recipe for disaster: you will find yourself emotionally attached to the trade as it goes against you and it will be extremely hard to cut the loss. This is a well known behavioural bias that we’ll explore in a later chapter. Learning to take a loss and move on rationally is a key lesson for new traders. A common mistake is to think of the market as a personal nemesis. The market, of course, is totally impersonal; it doesn’t care whether you make money or not. Bruce Kovner, founder of the hedge fund Caxton Associates There is an old saying amongst bank traders which is “losers average losers”. It is tempting, having bought EURUSD and seeing it go lower, to buy more. Your average price will improve if you keep buying as it goes lower. If it was cheap before it must be a bargain now, right? Wrong. Where does that end? Always have a pre-determined cut-off point which limits your risk. A level where you know the reason for the trade was proved ‘wrong’ ... and stick to it strictly. If you trade using discretion, use stops.
Picking a clear level
Where you leave your stop loss is key. Typically traders will leave them at big technical levels such as recent highs or lows. For example if EURUSD is trading at 1.1250 and the recent month’s low is 1.1205 then leaving it just below at 1.1200 seems sensible. If you were going long, just below the double bottom support zone seems like a sensible area to leave a stop You want to give it a bit of breathing room as we know support zones often get challenged before the price rallies. This is because lots of traders identify the same zones. You won’t be the only one selling around 1.1200. The “weak hands” who leave their sell stop order at exactly the level are likely to get taken out as the market tests the support. Those who leave it ten or fifteen pips below the level have more breathing room and will survive a quick test of the level before a resumed run-up. Your timeframe and trading style clearly play a part. Here’s a candlestick chart (one candle is one day) for GBPUSD. https://preview.redd.it/moyngdy4f5h51.png?width=1200&format=png&auto=webp&s=91af88da00dd3a09e202880d8029b0ddf04fb802 If you are putting on a trend-following trade you expect to hold for weeks then you need to have a stop loss that can withstand the daily noise. Look at the downtrend on the chart. There were plenty of days in which the price rallied 60 pips or more during the wider downtrend. So having a really tight stop of, say, 25 pips that gets chopped up in noisy short-term moves is not going to work for this kind of trade. You need to use a wider stop and take a smaller position size, determined by the stop level. There are several tools you can use to help you estimate what is a safe distance and we’ll look at those in the next section. There are of course exceptions. For example, if you are doing range-break style trading you might have a really tight stop, set just below the previous range high. https://preview.redd.it/ygy0tko7f5h51.png?width=1200&format=png&auto=webp&s=34af49da61c911befdc0db26af66f6c313556c81 Clearly then where you set stops will depend on your trading style as well as your holding horizons and the volatility of each instrument. Here are some guidelines that can help:
Use technical analysis to pick important levels (support, resistance, previous high/lows, moving averages etc.) as these provide clear exit and entry points on a trade.
Ensure that the stop gives your trade enough room to breathe and reflects your timeframe and typical volatility of each pair. See next section.
Always pick your stop level first. Then use a calculator to determine the appropriate lot size for the position, based on the % of your account balance you wish to risk on the trade.
So far we have talked about price-based stops. There is another sort which is more of a fundamental stop, used alongside - not instead of - price stops. If either breaks you’re out. For example if you stop understanding why a product is going up or down and your fundamental thesis has been confirmed wrong, get out. For example, if you are long because you think the central bank is turning hawkish and AUDUSD is going to play catch up with rates … then you hear dovish noises from the central bank and the bond yields retrace lower and back in line with the currency - close your AUDUSD position. You already know your thesis was wrong. No need to give away more money to the market.
Coming up in part II
EDIT: part II here Letting stops breathe When to change a stop Entering and exiting winning positions Risk:reward ratios Risk-adjusted returns
Coming up in part III
Squeezes and other risks Market positioning Bet correlation Crap trades, timeouts and monthly limits *** Disclaimer:This content is not investment advice and you should not place any reliance on it. The views expressed are the author's own and should not be attributed to any other person, including their employer.
Not sure if this is allowed, but fuck it, we're hurting and desperate times create desperate people who do desperate things. TL;DR: Local butcher shop with cheap prices. Trying to keep afloat and keep folks fed. Address at bottom. Sup ya'll, it's your favorite local meat boy (for those that don’t get it, here's my first post: original NYC meat boy post). Despite COVID cases in NYC having dropped a fair amount, a lot of businesses that have opened up aren't doing so hot, and still some are not going to open up ever again. While there's unemployment insurance for individuals, there really isn't much for small local businesses. I also know that the pandemic boost for UI is about to run out end of month, so if you're sweating about how you're going to eat, I got you. Most of America's economy began to feel the effects of The Rona around March of this year, but businesses located in Chinatown were fucked as early as January. America's reporting on COVID centered around China being the bad guy, which trends to loop all Asian Americans as "others" and "not really American." Chinese businesses tanked and hate crimes shot up. People within the community began their own self-imposed quarantine due to increased fear of being caught slacking by some racist fuckstick. Then came the formal lock down in March, which really flipped us over, bent us over the couch for good leverage, and fucked us deep and hard. At the time of 14JUNE2020, less than half of Chinatown's restaurants are open, and less than a third of total businesses are open (Bloomberg article supporting claim). Most funds meant as relief for small businesses got snagged by large corporations. And now all the SMEs are floundering. As of now, the end of July, still less than a third of Chinatown businesses have opened up, especially since most of them couldn't apply for any assistance due to language barriers. So again, here I am peddling my wares. I also have $9.75 left from someone that wanted to pay it forward earlier in the year for what it’s worth. We’re a small local meat shop. A butcher shop. A boutique culinary protein throwback to simpler times. Whatever the fuck you want to call it. We sell meat. You get the idea. Our prices are real fucking low. Lower than your self esteem. Lower than what your parents think of you. And that’s a good thing. Cause you like cheap things, you cheap fuck. Save all the money you can. While I can’t guarantee that we’re the cheapest you’ve ever seen, I can guarantee that we’ll be top five in cheapest prices in NYC. What do you want? Cause more likely than not, we got that shit. POULTRY. We got all kinds of birds. Chicken, silkies, qual, squab, duck, goose, stewing hens. Fuck you want? Still debating on whether drums or mid’s are better with your friends? Fuck around and cop a pound of each for under $5 per person: mid-wings are $3.89 a pound, drums are back to $.69/lb. Want more meat? Fine. A whole ass chicken leg and thigh, $.89/lb. You fuck with feet? It’s 2020, more power to you my guy. Chicken feet stands at $1.69/lb, duck feet at $1.49/lb. You into titties? Of course you're into titties: chicken breast coming in hot at $4.95 for a 2.2lb net weight bag. Into retirees and GILFs? All you Jack Black: Stewing Hens are two for $5.95. Haven’t gotten neck and head in a hot minute cause of COVID, or your Tinder and Hinge profile is just that basura? Say less: duck heads and necks at $1.39/lb. Into spawn kill? My guy: we got a dozen eggs for $2.95, 30 pack for $6.50. Duck eggs, six for $3.95. PORK. My man, let me tell you something. You fuck with pork chops? Even if you don't, for $2.39/lb, you fuck with pork chops. We got tenderloins for $3.19/lb. Bones for stock? $.99/lb. Let me guess, you miss eating authentic char siu over rice with the sauce from Chinatown. At $2.69/lb for char siu meat, you can afford to fuck up three times and still come out ahead instead of buying it from a restaurant. Since it's getting hot, you're going to want to throw BBQs, right? Hopefully they're socially distanced, everyone is responsible and wearing a mask, and all you motherfuckers got COVID tested prior. Got you some ribs for $2.89 a pound. You want some of them dim sum ribs? Them itty bitty, little tiny cuts of ribs? Small just like your feelings when your ex left you? $3.59 a pound. You been going through a rough time and need an ear to listen to you. $3.39/lb for pig ears buddy, say more. If you been fucking with feet and chicken and duck feet don't cut it, do it like J. Cole "so big it's like a foot is in yo' mouth" cause I got pre-cut pig trotters for $1.49 a pound. Oh, you deadass want the whole foot in your mouth? Weird, but we're being open-minded here: whole uncut pig trotters at $1.79/lb. BEEF. Let me guess: you haven't gotten enough foul language from this post and need a better tongue lashing? You filthy, sick, sorry, piece of shit. Beef tongues will run you $6.99 a pound. Or you want to boss up, but instead of being bad and boujee, you've been sad and boujee cause of COVID. Well, fear not, cause with femur bones at $1.95/lb, you can split them right down the fucking middle to get to that sweet, sweet, succulent marrow and feel like you're out brunching, spending $80 you don't have for a meal you can't afford to flex on hoes you couldn't really give less of a shit about. What's that? Pig trotters don't cut it? You trying to deepthroat the shit? I mean, do mama proud I guess. I got beef trotters/feet at $1.89 a pound. I mean, with skills like that, why you even buying from me? You belong on the yacht of some old rich man. But do you. Oh what's that? Your girl says your stroke game shit and you falling short of getting up in her guts? No fix for that, sorry, but you can cop honeycomb tripe or stomach at $3.39 a pound and know for a fact you can absolutely beat the ever living fuck out of these guts. You trying to fuck with flank steaks? $7.45 my guy. New York Strip? $8.99. T-Bone? $7.99. My bone? Ten camels. Where my Jamaicans at? Waa gwaan? I know oxtail is AT LEAST $6.75/lb where you’re at. We have them on deck for $5.99/lb. Or maybe you’re a rapper. You’re on SoundCloud pushing music and living out your mama’s crib. No shame, it’s rough out here King. Want to know how to really blow up? What did Eminem call himself in 8 Mile? That’s right, B-Rabbit. And you know what I got? Rabbit for $4.69 a pound. You are what you eat man. I’m not saying that eating rabbit will immediately blow your rap career the fuck up and give you the lyrical genius of Eminem, but I’m not saying it won’t either. For less than $5 a pound, you really gonna chance it? What if the other rappers cop it and you don’t and they blow up? Don’t get left behind my guy. You a King and King’s gotta do what they don’t want to do sometimes for the betterment of the folks. And the folks want to hear your music. Or maybe rabbit not your thing. You right, it’s too lean and lacks fat. Eat too much rabbit and nothing else and you’ll starve your body of fat. So how about goat? You want to be the GOAT, don’t you? Reddit’s even got a badge for it. If you want to be the Goat, guess what you gotta do? That’s fucking right, you are what you eat and here I am, your fucking pusher man for goat. You're fancy and trying to be boujee. Let me guess: lamb? Say less, I got you that bonjour hon hon hon rack of of lamb chops. Want a quarter of lamb? Got that too. All you gotta do is ask. I'm not going to really keep going down the list. You get the idea. I work at a fucking meat shop, I'm going to sell meat. I sell wholesale to restaurants and retail to walk-in folks. It's a pretty simple fucking concept. Is our meat fresh? As fresh as, if not more so, than any large chain due to constant turn over on wholesale side. Why are our prices so low? Because we're a small mom-and-pop brick and mortar shop. We're located in Chinatown. Ever heard of FUBU? Same concept: we're built by Chinese immigrants, for Chinese immigrants. Unfortunately, the Chinese population in NYC is one of, if not THE poorest communities we have. Raising prices will price out the community and jack the reason why we're even here: to feed the community. This also means that our margins are fucked, but we're making it work. Yes, we look janky asf. I know, we're not "modern" and our aesthetic looks like some tossed together shit from the 60's. Shit, our band saw is from the 80's. But we're clean, we're sanitary, we pass all health standards and inspections, and we're doing our fucking best. We're literally the definition of "no frills." To hear some say it, we'd be considered ghetto. I prefer the term resourceful, so fuck you. Because we're local and serve local, we only accept cash, EBT, SNAP, and debit. We don't do credit. Venmo is @FourSevenDivisionStreetTrading. PSA as the last one: if you think you can roll up to squeeze us, find out if you're a better shot than I am. Not my job to judge your life choices, but I will send you to someone who will. I'm the only person here that is fluent in English, so unless you're feeling real brave about pointing at shit and figuring it out, you speak a dialect, know how to read Chinese, or know what cut you're looking for, come on Tuesday and Thursday afternoons (02:00pm - 06:30pm) since that's when I'm directly on the floor. If you're a restaurant and you're looking to keep overhead low, PM me, I'll work something out with you. Our location is: 47 Division Street Ground Floor New York, NY 10002 B/D to Grand Street, F to East Broadway Our hours are: Monday - Saturday 0800am - 0630pm 23JUL2020 0323AM Edit: Added beef and lamb, added venmo acc, schedule and times. 25JUL2020 0015AM Edit: Changed schedule to add in Saturday.
Would you like to entertain yourself with a story about one of the greatest schemes in the history and, maybe, learn a few plays? This story is about three brave autistic brothers, who almost cornered the entire commodity and how one (not so brave, but shrewd) bank did it without anyone noticing. As in any good fable – there’s a moral and a strategy that you could draw from it. The year is 1971. Nixon temporarily abolishes gold standard. And every temporary government program is never reversed, as you know. Trading price of gold went sky high: from 270s to 800s in two years or so. Enter Hunt brothers, sons of H. L. Hunt, oil tycoon, one of, if not the, richest man in the world at that time. Hunt family was, what one might describe as, right-wing libertarian and anti-globalist. They believed that Keynesian economics and the US shift to the left in the 60s will lead to the debasement of the US dollar and monetary collapse. Thus, return to the gold or silver standard was the way, as they thought. Allegedly, Hunts also had a feud with Rothschild family and other financial speculators, and were resentful towards the US government for doing nothing to protect their oil assets in Libya, confiscated by Gaddafi. So they started their move against America, alpha-silver bug style. In 1973 Hunts began buying all the silver they could. And, instead of just speculating futures contracts, they actually took delivery. Initial price was $1.5/oz. Silver was shipped to Switzerland in secretive and costly operations and stored in vaults (brothers feared confiscations – remember, private citizens were still prohibited from owning gold in the US). The following events are quite vivid and include the efforts to create a cartel similar to OPEC, talks with Iran and Saudi monarchs, pump and dump publicity and large scale purchases of miners. But we will spare the details, except one: Hunts even tried to corner the soy market at the same time. Reminds you how WSB slv gang quickly switched to corn gang. But the soy scheme didn't fly and they focused on silver only. Their efforts pumped the price to almost $50/oz by early 1980. At some point Hunts controlled around 230 million oz of silver and the majority of what was traded. Hunt brothers laughing at your pump&dump effort Of course, when you are such a smart ass, you become a target. Chicago exchange officials became very concerned citizens by 1979. They started issuing numerous regulations limiting the amount of market share one can accumulate in one hands. As all American concerned citizens, they had financial incentive to do so: Hunts managed to prove that Chicago exchange board members had short positions against silver. Finally, CFTC (Commodity Futures Trading Commission) issued a ruling that basically forced Hunts to liquidate part of their portfolio by February 1980. This sent silver prices down dramatically and brothers started to get margin calls which they could not cover. And so their story ended with bankruptcies and heavy fines for the family. Shortly after, Reagan and Volcker raised interest rates and silver price never recovered to $50/oz ever since. We skip to the year 2008. Global financial crisis is in full swing. Bear Stearns is royally fucked, as due to all bears. Before the music was over, they mastered paper speculation of futures contracts like no one else. Bear Stearns accumulated world biggest naked short position on silver. What could go wrong? Stonks go up, silver goes down. Until it reversed and silver skyrocketed from $11 to $21. This became one of the margin calls to screw Bear Stearns. JP Morgan is asked by the FED and co. to buy out BS and to save the entire market. Since BS's shorts are now deeply down - JPM gets the whole bank with pennies on a dollar. But the problem is that JPM themselves have massive naked short position on silver. Combined with BS it will exceed anything permitted by the CFTC. Since Obama administration was in a rush, they push CFTC to grant JPM basically a carte blanche to accumulate any position over the limit for a period of time. Period of time comes due and turns out that JPM not only didn’t trim the shorts significantly – they even bought more shorts at some point. Even with all the fines, it went very much their way, because in 2009 silver dropped. So they pocketed hundreds of millions of dollars. But come 2011 and silver spiked again, dramatically. JPM, now bleeding cash on shorts, could close short positions, like any of us would do, right? Nope, fuckyall says JPM and starts hedging short futures positions with… physical silver. 'But wouldn’t that be even more control over the commodity?' - you might ask. See, nothing in the rules of CFTC says you can’t do that, because to help cronies speculate with paper futures contracts, made of thin air, CFTC basically started treating physical silver and futures as two different instruments (it’s, actually, even more complicated than that: google difference between physical, eligible, registered and so on). In the next 9 years JPM becomes the world biggest holder of both short contracts and physical silver. The later they 'loaned' to SLV trust, of which they are custodian. This way upkeep of physical silver, which otherwise would be a liability for hedging, becomes an asset, because we, retards, who own SLV pay the maintenance. People are often confused here, because SLV is issued by Black Rock, not JPM. Well, there is a difference between being an operator of a financial instrument and being a custodian providing backing. Now, to confuse you even more – JPM is one of the major holders of Black Rock itself with 1.6% or sth like that. By estimates of Theodore Butler, JPM acquired 900 million oz of physical silver since 2011. That’s 4 times more than what Hunts owned. Just shows you, that banks can get a pass with something that even the richest individuals can not. And you have to give it to JPM - their play was very clever. Instead of risking it all on a margin call, they make money on every turn. As of 2020, JPM still holds both shitton of physical silver and short COMEX contracts. You can call this the most epic straddle of all time. With such mass they can swing prices in any directions and profit from this on any given day. Latest example you’ve seen on the August 11th. Why am I bothering your poor gambling soul with this wall of text, you might ask? Market makers manipulate the market as they please, what’s new about that? Well, here we come to the conclusions and a strategy. How can a small retard replicate what the big boys are doing? Conclusions:
There will not be a linear up or down with silver and the swings might be dramatic. The reason being not only the sentiment of investors, but the ease of manipulation that is eligible to big players.
If we believe that speculation will throw the price of silver in all directions – it is unwise to go only long or short on silver, especially on a short term;
What shall we do? a) Only long expiration dates and calls; no weekly expiration, not even monthly. Ideally – at least half year options; b) Go long on certain silver stocks. Maybe I’ll do a write up on good silver stocks to buy; c) Sell covered calls on long positions; d) Buy 1-3 month puts on your long positions as a hedge; Now, day trade with those positions: on red days sell your puts and buy back covered calls. On green days – reload puts and sell calls. Repeat until lambo. P. S.: I gathered these facts from the open sources, since these events were of interest to me. Some facts are intentionally oversimplified, google for more details, there are good reads. And feel free to correct me if you know contradictory facts. P. P. S.: JPM, plz don’t whack me.
You might want to say: "Retard, there have been at least a dozen posts about RKT already." Well, there is some itsy bitsy tiny bit of new information...
Hold on to your butts 🚀
Yes, you might have seen the stock price climb to ~$26 after IPO and fall back to $19 and not listened to this brilliant retard telling you not to sell the GODDAM stock. Maybe because you have read the "sEeKinG alPhA aNaLysT" giving it a "meh" rating. Well, in an effort to give you another chance on those sweet tendies, Rocket announced pre-earnings numbers, before the actual earnings date of September 2. This is what it looks like:
Quarterly earnings are up by 125% from the previous year with quarterly revenue of $5.31 billion. On an adjusted basis revenue is up by 300% over last year. The full report is here.
Adjusted net income is $2.8 billion, which is an increase of $2.2 billion compared to the first quarter of 2020 and $2.6 billion compared to the second quarter of 2019. For the accountants among you, the full set of numbers are here.
To put numbers into perspective this is a company with $2.4 billion float according to Google.
The stock was up 11.22% today and trading at around $23.8 at market close.
What does this all mean?
This is the parent company of Quicken Loans, it is essentially a FinTec company for mortgage refinancing, etc. Some argue that it is actually a tech company. They handle pretty much everything electronically via their website and app. This is important because of COVID-19. According to online reviews, they have one of the best-streamlined and user-friendly interfaces. You can do pretty much everything regarding financing your home without having to sit in a crowded office in your facemask.
Because of how user-friendly their apps are, they have sweet sweet margins: "Who is going to do DD on home mortgages when you can do everything on an app. Am I right?"
Interest rates are extremely low due to Fed intervention and it is to remain low for a very long while. Remember the famous quote from our lord and savior JPow: "We're not thinking about raising rates, we're not even thinking about thinking about raising rates." For this reason, everyone and their mum are doing refinancing, buying homes, etc.
With a float of $2.4 billion, the company can have VERY significant price changes in a short time.
RKT is the ultimate meme ticker. "RKT to the moon 🚀" and "REKT 🔥" memes will keep us entertained for years to come while providing free advertisement for the company.
Q: But what if the interest rates go back up tomorrow? A: It won't, as that would collapse the S&P 500 overnight. They have to keep interest rates low so that the money stays in the stock market. Q: This sounds like the next subprime mortgage crisis. What if people start defaulting on their mortgages? A: They are not the ones lending the money, so they don't care. They package the mortgages and hand it to someone else. They keep mortgages for only 3 weeks on average during the process, then they are off the hook. Q: Aren't there other mortgage companies with online services? A: Yes, but nothing this streamlined and easy to use. And they have very good brand recognition with the Rocket brand and Quicken Loans. Again, it is like TurboTax: yes there is other tax software out there, but who cares? Q: But the stock price does not reflect the fundamentals. Didn't it crash last week and then stall? A: Yes there was some price discovery after IPO and you would have been right up until Monday of this week. But since the pre-earnings announcement, the stock price is picking up some serious steam. Once the mainstream media catches on and price exceeds the ATH (probably tomorrow), this will go to the moon. If this does not look like a RKT platform I do not know what does: https://preview.redd.it/lyevy8wx6bi51.png?width=1260&format=png&auto=webp&s=10da2d7c8be7d4a83c0b798c16aafaa94bacfc20
I spent the last 6 weeks playing all 13 main series Pokémon games. Here's my experiences
Some of you may remember me. Most of you probably don't. I made a post about it six weeks ago, which you can find here, about how I was gonna play 13 of the main series Pokémon games within six weeks, which I did. I was gonna make weekly updates, but they got automatically removed for some reason, so that's fun So what I'm gonna do now is the biggest part of this whole 'project.' I'm gonna summarize exactly 306 hours and 35 minutes of gameplay within one reddit post. And if you're wondering how I know the exact times, I made a Google Sheet to document my journey, which you can see here, if you want all the boring numbers. If you don't want my summary of every single game, just scroll down to the bottom, where I'll share my thoughts about the whole ordeal. So let's get started on this, shall we?
Honestly, I enjoyed Blue a lot more than I thought I would, even though the flaws of Gen 1 were hard to ignore. And may I say, thank god for LP compilers and podcasts, because 95% of the time I was playing Blue and Crystal, I was listening to something else. There's only so much beep-boop music one man can take. Overall, it was a great start to this journey. Some miscellaneous notes I took while playing:
Wrap is terrible and can go die in a fire
Damn some of the old sprites were terrible
I used a Snorlax in the latter part of the game, which I nicknamed Monokuma. But I should've named it Critikuma, because he was ALWAYS hit by critical hits. I know that crits are more common in Gen 1, but I cannot stress enough how frequent he was slammed down to half health immediately. It was so bad I just boxed him partway through the Elite Four
I captured all 4 legendaries in this game within the span of a few hours. After that, I considered the game 'completed.' (more details on what I consider 'completed' later)
The team I used: Venusaur, Golem, Alakazam, Ninetales, Vaporeon, Snorlax
Crystal was where the... difficulties of this challenge started coming up. I actually started Crystal on July 6th, just after capturing Mewtwo, and I played up to beating Bugsy. Unfortunately, I stayed up way too late, and woke up with a massive headache. So I spent most of the next day unwinding and mentally preparing myself for what's coming up. The rest of the game wasn't too difficult... until the 10th. I wanted to stay on a '1 game per 3 days' schedule, and this was the last day for Crystal, and I was just started on the Pokemon League. I was a little underleveled, so I spent the first half of my day repeatedly grinding up farther and farther up until I beat Lance on my 5th or 6th attempt. So I had to speed through all the Kanto section to stay on track. Which I did, to my amazement. I beat all the Kanto gyms super fast, and managed to get to Red... and immediately got slamjammed by his Pikachu So this lead me to a question: 'when can I stop playing a game?' So I made this rule: Once I've beaten the Champion and the credits roll, I'm free to move on to the next game as I please. This is the hard rule I'm gonna adhere to. I don't want this to become stressful or a job, so I'm making this rule for my own sanity That all out of the way, here's a few notes I took while playing:
I think this game made me appreciate color again. You don't realize how much you miss color until you spend 3 days only looking at a monochrome screen
I find it so strange that Jasmine's Steelix is the same level as the boss of the radio tower, but you have to beat Jasmine in order for Team Rocket to attack
One of my team members was a Slowpoke/Slowking that was so ugly, anything with Self-Destruct or Explosion immediately went off. Fortunately my Gengar usually stepped in to block in, but goddamn it was uncanny how often it happened
Using Forretress before the invention of Gyro Ball was a mistake. He was always the least useful of my team, and I straight-up boxed him during the Elite Four and Kanto
The team I used: Typhlosion, Gengar, Slowking, Forretress (aka the mistake), Umbreon, Dragonair
If I had to create a line graph detailing my enjoyment of Emerald, it would be a line steadily going up... until Flannery, then just a slow painful crawl down to the end. I can't place an exact reason why, but this was the only game I played that I've actively disliked playing through. If I had to hazard a guess, I'd say it's because the RNG of Pokemon finally broke me. If there's one lesson I took out of this, it's that you can NEVER chance it on Sleep/Paralysis/Confusion not working. If you wanna work past them, you just heal. And if you inflict it on an enemy, it just won't work. I know it sounds like I'm exaggerating for comedic effect, but this was way too true for me. And the critical hits in this game were maybe the worst yet, even more so than gen 1, although I realize that might've just been me I ended up using Rayquaza to speed through the Elite Four, because I was just genuinely exhausted of this game, and I did not want to try grinding through it. I'm gonna try to avoid using legendaries, but if I have to, I'm not gonna feel sorry about it That being said, here's some various extra notes:
Whoever decided that Flannery's Torkoal should be level 29 when everything else is 26 or less should be shot. Similarly, fuck Liza and Tate. I have no clue why these kids are the smartest goddamn trainers this side of Orre. Seriously, I spent 30 minutes of my precious time grinding up, and I was still 5 levels lower, and barely survived with my Skarmory. Fuck. Them.
On the other hand, I need to shout out my Skarmory, who was the absolute GOAT of my team. Seriously, I cannot overstate how great she was. I always liked Skarmory, but she has easily been one of my favorite team members so far.
Actually, my entire team was solid this time, although Skarmory ended up outshining them. Even Torkoal was a solid team member (a lot better than the Forretress, anyways)
I debated using Shedinja and Armaldo, but I dropped them. I evolved a Shedinja, but after the first few battles with her ended up unsuccessful, I boxed her for my own sanity. I also revived Anorith, but I boxed him after learning that he evolved at level 40. F in chat for Ninjask/Shedinja and Anorith.
The team I used: Swampert, Gardevoir, Breloom, Torkoal, Skarmory, Rayquaza
This game was a lot easier to play through than Emerald, fortunately, although I don't have a lot more to say. It was pretty fun, but my Blue playthrough might've been more enjoyable due to my choices in team members. I decided against capturing all the legendaries this time around, with one exception. I captured Articuno to replace my Fearow for the Pokemon League, since they were long outclassed by this point, and I couldn't cheese my way through Lance with poison-types this time. Still, my Fearow did better than the useless Forretress, so I still appreciate them. Overall, it felt like my Blue playthrough, except slightly worse. But it was still better than Emerald, so I won't complain That's pretty much all I have to say, so time for some extra points:
I have no clue why they made the L and R buttons bring up a tutorial menu. Maybe it's because I already know all of this, but it feels absolutely unnecessary
I am 90% sure that Magnitude can only be 7-10 when enemies use it, but only 3-7 when you use it. I have no proof to back it up, but that's what it feels like. Similarly, the chances of me switching my Pokemon, only for RoaWhirlwind to immediately drag them back out cannot be a coincidence
Holy shit, my Gyarados was the damn hero of this playthrough. Bulky as hell, hit hard with Surf despite it being a special attack, and when I gave them Secret Power, they paralyzed so often. Ever had a Gyarados that could paralyze? It's fantastic
On the opposite hand, my Dugtrio was good... up until I beat Koga, then they were useless. Even for Blaine, my Gyarados did most of the heavy lifting. They just could not take a hit, so they really underperformed
The team I used: Charizard, Fearow, Gyarados, Vileplume, Dugtrio, Magneton, Articuno
So this is my favorite Pokémon game, so I really tried to be impartial about it and treat it the same as the others... which didn't work, since it was the game I spent the most time on and explored the most in. Whoops! But I'm not ashamed; this was the best region out of everything I played. Honestly, I'm glad to know that my joy for this game wasn't just misplaced nostalgia, and still holds up to today. Although it was really unfortunate that I was having technical issues that I had to devote a lot of time to dealing with, otherwise I could've probably beaten this game in three/three and half days. I'll go into more details in the SoulSilver section. So here's some notes about my experience:
Replaying this game made me realize how great the ground type was in gen 4. Torterra, Gastrodon, and Garchomp, just to name a few
Team Galactic is still my favorite evil teams in the Pokémon franchise, mixing evil campiness and serious threat perfectly in ways the Team Plasma and Team Flare don't. Also their aesthetic is really cool
Did you guys know the Storm Drain only redirected water-type moves instead of absorbing it? I didn't, so imagine my surprise when I bring my Gastrodon into Wake's fight and get whooped
And while we're talking about my team, wow my choices made the Candice fight hard. If it wasn't for my Bronzong, it would've been a lot harder
The team I used: Torterra, Staraptor, Gastrodon, Bronzong, Garchomp, Porygon-Z
If I had to rank my favorite Pokémon games, SoulSilver would be in the top 5, only just below Platinum. So it sucks that my house was suffering internet outages (around the 19th-24th) while I was supposed to be playing this game. And since gen 4 is the slowest of all the games, that DOUBLY sucks. So I had to devote valuable time to fixing that, and ended up not getting to play the Kanto section of this game. That sucks, but since I already went through this with Crystal, so I'm not too fussed. Other than the circumstances, this wasn't too different from Crystal, although my team choices were a lot better Yada, yada, yada, notes:
This was the first game I decided to play as the girl player character this time, because she's the cutest thing in the entire franchise. This is not up for debate
I ended up bringing trading some stuff from Platinum, mainly Houndour and some evolution stones for my Togetic and Exeggcutor. I would've gotten the stones legitimately, but I'm on a time crunch here. I brought Houndour over because it's one of my favorite gen 2 mons, and the only way to get it before Kanto is by trading it in, and it's super easy to grab in Sinnoh, so... fuck it
I ended up keeping Metronome on my Togekiss for way too long, just because it was too much fun. It wasn't until after Clair that I ended up dropping it
Whoever decided that Koga's Muk should spam Minimize, gave it Black Sludge, use Toxic on everything, AND gave him a Full Restore... I hope your children hate you. I'm still upset just remembering it
The team I used: Feraligatr, Ampharos, Togekiss, Houndoom, Exeggcutor, Mamoswine
WHITE & WHITE 2
(I'm combining the two because I don't have a lot to say about them individually) So as a child, I really disliked White, because I was a child who couldn't appreciate how much effort was put into them, and I was upset I couldn't use any of my old favorites. But as an adult, I can really understand the work behind it, or at least behind White 1. Although I still say the lack of options in White 1 is a major downside, since anybody who's not challenging themselves are gonna have some combination of the same 15-ish Pokémon on the story campaign. But while the 2nd game has a better Pokémon choice, the story is also factually worse, so pick your poison. But back to the point, I really enjoyed these games. A lot more than I did when I was younger, anyways So here's my extra notes; two for each game: (White)
I thought Platinum and Soul Silver were rough with encounter rates, but good fucking lord, this game was bad. I could not count how many times I walked 1-2 steps into the grass (not running, walking) and got an encounter, often just after one encounter. I ended up yelling 'I TOOK ONE STEP' so many times
I really, REALLY hate the Reshiram vs Zekrom fight with N. Seriously, it's absolutely stupid. N's dragon has two extra levels, so it's guaranteed to outspeed you. And since the dragon's stats are near-equal, it's gonna do as much damage as you do to it, so there's next to no way you can beat it with just your dragon alone. Ugggghh
When I fought Elesa, she was a massive level spike, which I never got to overcome. But the game got easier, even if the numbers said I should be struggling. Maybe because trainers started to use less Pokémon, but I couldn't place my finger on it
I did a small challenge here: I used a Swoobat on my White 1 team, and a Crobat on my White 2 team, as a pseudo-experiment to see which one was better. Unsurprisingly, the better performer was my favorite Pokémon, Crobat. But Swoobat was still a favorite of mine, and performed a lot better than I thought they would
The team I used for White 1: Serperior, Swoobat, Excadrill, Scolipede, Carracosta, Chandelure The team I used for White 2: Emboar, Azumarill, Crobat, Sigilyph, Sawsbuck, Escavalier
A lot of my friends consider X/Y some of the worst games in the franchise, and while they may have a point, I still enjoy them a lot more than... another title we'll be talking about later. Personally, I think the gameplay is pretty much a straight upgrade from Black/White, although the story... UGH. Easily the worst. Especially Team Flare. I could make an entire post about them, but to simplify: They're a team all about style, yet their admins are way too overdesigned and forgettable to make a point. Instead of the cold uniformity of Team Galactic or the easily understood motives of Team Plasma, they're just a hot mess whose admins are completely forgettable. And Lysandre is just President Rose, but more obviously a villain and somehow more overdramatic I had a loooooot of notes about this game, mostly about Team Flare, but here's what I condensed it down to:
Did you know that you can buy Hyper Potions after getting the second badge? This is when your Pokémon are around level 25. Why the hell would you need a 200 HP heal at this point in the game?
Remember before you could save Xerneas/Yveltal, and you had to fight 4 admins, who collectively had 6 Pokémon? Why not just condense them into one admin, and actually give them a personality?
Ok, I really need to rant about Lysandre's final fight. He uses four Pokémon that're pretty much the same as the ones he uses when you first arrive in his lair, the background is a burning area for some reason, and he's wearing some stupid sci-fi nonsense that does nothing! I sweeped him with my Meowstic, who was five levels higher than his Gyarados
This was the first game I was a higher level than the Champion, and my Meowstic made Diantha trivial by just putting up Light Screen/Reflect and letting the others 1-hit ko 2/3rds of her team, with only her Gardevoir putting up any meaningful resistance. Seriously, this was the easiest game yet, by a large margin
The team I used: Chesnaught, Talonflame, Florges, Meowstic, Barbaracle, Goodra
(So a quick preface, I actually played Ultra Moon before Omega Ruby, since the cartridge I had was corrupted, so I played UM while I waited for my new cart to arrive. Just thought I'd mention it) So Alpha Sapphire was is in the top 5 games for me, alongside Platinum and SoulSilver. Which is why I'm kinda surprised that this is the game I spent the least time on (17 hours, 18 minutes), being one of the two games I spent less than 20 hours on. Which is absolutely strange to me, since I spent at least an hour grabbing useful TMs for the Elite Four and getting Heart Scales to remember moves, so it really should be higher. Whatever, what about the gameplay? Well, it was like Emerald, but the exact opposite, since I actually really enjoyed it. I don't have much else to say except Pelipper, Zangoose, and Cacturne were all surprisingly fun team members. Seriously, Cacturne might be my new favorite grass-type Extra notes, blah blah blah:
Why did they make the lower floor of Granite Cave inaccessible until you got the bike? I had to wait until I got the Mach Bike to go catch my Aron, and I have no idea why they did this. It's not like having one would be game-breaking, but whatever
I decided to catch a Manectric here, since I knew they could be Mega-Evolved in the main story. But they weren't too much stronger when they were Mega'd, so that was a little disappointing. Still, at least they were a strong team member overall
I didn't mention this in the X notes, but lemme clarify: I abused the hell out of the improved Exp Share, since it really helped me cut past any grinding, which is great, since I'm on a timer here
I tried to cheese the Steven fight by teaching my Cacturne Spikes, so imagine my surprise when his Skarmory also uses Spikes of his own. Touché, Mr. Stone
The team I used was: Blaziken, Pelipper, Manectric, Aggron, Zangoose, Cacturne
So I originally promised to play Sun and Ultra Sun in my original post, but some circumstances led me to cut it down to Ultra Moon. More details can be read about it in the Google Sheet, but trust me, I have my reasons. I decided to play the Ultra version because the bonus versions of the games are supposed to be the "definitive version" of the games. Not sure if I agree on that, since there's basically no difference between Sun and Moon and USUM, and what is different is sometimes worse than what it was. This isn't the time or place to review these games, but if you ever want to replay the Alola games, pick up Sun or Moon, and avoid USUM. As for my experience... I dunno, it was ok. I liked my team, had a few challenges, yeah yeah yeah. Look, this is like the 10th or 11th game I played, this whole thing's become routine at this point But at least I got a few notes to add:
I guess we'll slightly critique the story: I really hate the Aether Foundation. They're like Team Flare, but if they had Team Plasma as a side antagonist before they came out of nowhere. I adore Team Skull and how they're really sympathetic, but them Team Aether comes in, and then we're back to the typical Poképlot
And I'm still upset that they turned an eldritch horror story about an alien creature corrupting a mother into insane obsession into the standard evil dragon Poképlot. Also whoever came up with the Ultra Recon Squad should never work on Pokemon again
In the second visit to Aether Paradise, you fight three scientists, each with one Pokémon. Why not just one scientist with three? This bugs me so much, and I don't know why. Also, one of the double battles later had the same Houndoom/Manectric pair as one of the Team Flare admin fights, because thinking up another good pair of Pokémon that look good together costs too much/is too much work
I almost used a Lopunny on my team, but then I relaized I could use a Metagross instead. So I used a Metagross instead. But I am gonna include Lopunny on my team list because they did a lot of work
The team I used: Primarina, Lopunny, Alolan Muk, Ribombee, Alolan Marowak, Lurantis, Metagross
LET'S GO, EEVEE
UUGGHHHH. This is my least favorite game. I insisted on playing it, since it was technically a main series game, and that was a mistake. I forgot how hand-holding this game was. If you don't know what I'm talking about here's my example: In the original games, you could immediately go from Lavender Town to Celadon, and then go into the Rocket base, no problem. Here, you have to go up the tower, see that there's ghosts, and then leave the tower (which to my knowledge, no other dungeon in Pokémon ever does) then go see Jessie and James talk out loud about the ROCKET HIDEOUT in the CELADON GAMES CORNER. Then when you get there, you can get close to them, and they'll talk out loud about the HIDDEN HIDEOUT with the SWITCH BEHIND THE POSTER Also, the gym requirement thing is just dumb. The fact that the game requires you to have a grass/water-type to fight Brock or have a Pokémon at least level 45 before fighting Sabrina is insane, and makes it nearly impossible to lose. And Koga's requirement of catching 50 unique Pokémon is uniquely cruel in a game where there's only 150-ish Pokémon available, especially to people like me who just like to capture a core team and stop catching unique Pokémon Even besides those, the catching mechanic was broken. Seriously, it was terrible. I had to throw the ball at a 90-degree angle to throw the ball at a target just a little off to the side. One time, I tossed the controller upwards to throw the ball, and it was a perfect throw. Uggghh, I don't even wanna talk about my experience, I just want to complain. So whatever, I'm moving on, no notes this time The team I used: Eevee, Victreebel, Mr. Mime, Rhydon, Starmie, Magmar
I'll admit, I enjoyed this game more than I thought I would. Maybe it's just because it WASN'T Let's Go, or because it was so easy to grind up levels with wild area candies. Either way, this was my second-fastest game played, clocking in at exactly 20 hours played. If I devoted myself to it, I could've beaten this in two days. But since I've got nothing much else to talk about, I'd like to discuss the stories of these games. Because I think I've found the perfect metaphor for these "Poképlots." It's like there's a good story somewhere in there, but half of it we're told to stay out of because we're not adults, and the other half of the plot was ripped out of a better story and painstakingly refitted into the Poképlot format. And if you're wondering why I'm talking so much about the stories, it's because that's the only thing meaningfully different about these games at this point Alright, one last set of notes:
I hate Eternatus' design. Like, I understand that it's supposed to be like an unknowable alien creature, but it's so alien and incoherant that it's just a meaningless skeleton. I know it's supposed to be the bow to Zacian and Zamazenta's sword and shield, but it just doesn't work. It looks like something ripped out of a different JRPG. Even its name sounds out of place
Also the Eternamax fight is pointless, it should've just been a cutscene. Zacian and Zamazenta are the only ones who can do meaningful damage, me and Hop are just pointless additions
I think I've discovered the telltale sign for a pokemon antagonist. They show up for no logical reason in the early game, talk some exposition at you without any real interaction, then walk away
The thing that infuriates me most about this game is that for some unholy reason, some goddamn Burger King has some long-lost tapestry about ancient legend. Seriously, imagine going into a Five Guys, and seeing the Venus de Milo on top of some grill. WHAT THE FUCK. HOW ARE WE THE FIRST ONES TO NOTICE THIS???
The team I used: Inteleon, Boltund, Tsareena, Centiskorch, Perrserker, Grimmsnarl
So I ended up completing my challenge, but what was the point of this whole thing? Well, I wanted to try and revive my love for the Pokémon franchise, since the past few games have really burned me out on the series. So, did I accomplish that? Yeah! Despite all the hard times and frustrating moments, this was actually really fun. I feel like I should hate Pokémon now, since I've literally spent the last month and a half doing nothing but playing the games, but no. I came out of this whole challenge with a greater enjoyment of the series and a few new favorite Pokémon. So... mission accomplished! Although I don't think I'm gonna play any Pokémon games until the Sinnoh remakes come out (whenever that happens). I'm not burned out, but I think I need some time away at this point So... that's it. I'm done. It's over. Feels free to reply about how right/wrong I am with my opinions. Thank you for coming to my TED Talk EDIT: I'm glad this blew up, all the discussions I've been having have been super interesting, especially since we're talking about literally any Pokémon game right now. Thanks for making this post so incredible with your replies, guys. I'm happy my experiment was so interesting to read about
PRPL Nurples- Why purple valuation just might make your NIPS hard - DD inside
All- I have received hundreds of DM asking where the stock is going. I have received questions such as: where do you think it stops, is it over valued, undervalued, should my mom invest, should i Yolo, should i sell and take profits? blah, blah blah. Here is some DD- stop asking me about where this ends up because I don't know for sure but I have some Feely Good estimates. I hope this post makes your nipples hard and if it doesn't you're probably a gay bear. I am going to give you a quick run down of what my expectations are for Q2 earnings and it will include the good, the bad and the ugly. The ugly being the warrant accrual that will hurt GAAP. First of all, There is little that needs to be determined for Q2 top-line as they have already released April and May Sales. April Sales Came in around ~62M based on my math and May Sales came in at 88M and some change. Based on these numbers, we can safely assume that we will at a minimum have somewhere around 225M in revenue for the quarter by using the average of April and May to determine June. I believe 225M to be on the low side and I have continued to up my estimates as I believe E-commerce is still thriving, especially purple. Purple continues to climb the web traffic ladder and has moved up another ~500 spots to be the 13,000 most popular site in the world. For simplicity sake, I am going to use some historical numbers to estimate profits. If you'll look at previous posts that I've made then you'll see how I arrived at these numbers. There are some quick napkin calculations below. We can safely assume that the average wholesale selling price of a mattress is ~1350 dollars and we can assume that GM for wholesale is around 30%. This means the average cost of a mattress to manufacture is ~945 on average. From my previous posts, we knew that pre Covid the business was split by units, not by gross sales. On average, wholesale consumed 50% of capacity and DTC consumed 50% of capacity. In order to determine average DTC selling price then we can equation .5*1350 + .5*(DTC Price) = 1900. PRPL indicated their average selling price per mattress was ~1900.00, I found this in their s-3. ----------------------------------- .5*1350 + .5*(DTC Price) = 1900=========== DTC average price is 2450.00, 1350 is average Wholesale price. DTC Margin is ~62% Estimated Wholesale Margin ~30% Estimated ---------------------------------- Historically, advertising costs have been about 30% of revenue. I have been tracking advertisement for purple and from a TV cost standpoint, they have not increased their commercial count at all in the last three months. See link, PRPL is still only performing 125 commercials per day. This commercial rate has held steady for 6 months. https://www.ispot.tv/brands/tqU/purple-mattress I believe purple has increased their ad spend online but I believe it will be proportional to their new capacity on a unit basis. Previously purple had 6 Machines of capacity and spent 38M in advertising, I believe they will spend (7/6)*38M which is 44M or roughly 15M per month. Just because revenue is up, doesn't mean they will spend more per unit- they are capacity constrained and that is terribly inefficient. ---------------------------------- The following table shows my best guesses on their major category costs. This includes the gross Margin and the other costs subtracted from the Gross Margin.
Total Revenue net revenue effect
Gross Margin from Wholesale
Gross Margin from DTC
Research and Development
Profit Non GAAP
66.5M or 1.23 EPS
Profit GAAP Estimated
$31.5M or .59 EPS
--------------------------------------------------------------------------------------------------------------------------------------------------- If we used 66.5M, PRPL would report 1.23 EPS on an adjusted Basis. The warrant Accrual will unfavorably push the EPS down on a GAAP basis and we will likely see something around .59 EPS. If they can achieve this for the next 4 quarters then in a years time there is a huge potential for stock increases based on the following P/E's.
Non GAAP Est.
Stock price assuming 8x P/E
Stock Price assuming 12x P/E
Stock Price assuming 15x P/E
Stock Price assuming 20x P/E
People may say that this is super inaccurate..... but if you look at the following cash statement then you will realize that PRPL has been generating more than 1M per day in cash for the last two months - that is absolutely insane. purple has generated 70M in cash in 60 days. Mark my words, PRPL is going to be more profitable than TPX this quarter. TPX reported earnings of .68 EPS today on revenue of 665M. TPX is trading at 80+ per share. if purple reports a similar .68 EPS then it would be valued about 60% lower than TPX on an EPS basis. if purple posts EPS of ~1 dollar then it would be undervalued as compared to TPX by about 80%. I hope your NIPS are tender now. Hope this helps you understand why I believe PRPL to be so undervalued.
Seeing AMD is ATH on Monday, I became greedy yesterday and sold 200 naked calls expiring 814 at $85/$90 hoping the stock will pull back. Tuesday, AMD surged as a huge surprise, which instantly destroyed my buying power. Fidelity called and I had to liquidate for margin call. So $50k loss in 24 hours. The lesson learned here
Never sell naked calls (although, in this case, it won't help very much as $90 and $95 calls are much cheaper)
Never use too much of your buying power to sell calls, you will likely get margin called if price move against you.
A black swan event or a sudden price change in a stock could bankrupt you. I felt in a way lucky that AMD didn't got to $90 today and remained at $85.
Don't blind yourself P/E ratio, technical analysis on a trendy and passion stock. These don't seem to matter for growth stock anymore.
Be determined when cutting your loss, this morning, I could have limited my loss to $35k when it dipped to $83, but got greedy again and waited a few more minutes and price bounced back to $85.
I'm very unpleased by this outcome, as it's the biggest lost I've had in my trading career, which also wiped out all my gains over the last two months, I hope this would be a good cautionary tale for others. Edit: I honestly didn't expect this many comments, so just a few reactions to "what I could have done replies":
Rolling the call - I thought about rolling the call to a higher price at later exp date. The upside of this is I won't lose more money than I already lost, but trading off time and security - and the reasonable moves to roll would be in 8/28 or 9/7 but at that time, who knows if AMD will rise to $95-$100 again giving its upcoming PR and new product releases?
Buy the cover when short is ITM - I thought about buying 200 contracts to cover my position, that will restore some of my buying power to avoid liquidation, but these contracts are really expensive now we're talking about $1.9 at $90 to cover $3 at $85, they won't necessarily limit my loss exposure significantly (the reason I didn't buy the cover in the first place), the best case scenario at 8/14 I might only lose $20k, but AMD can keep going up into next week as market index is going up.
Why I believe AMD will keep going up - even AMD by itself at this point is standing still and moving sideway, the macro is going up and things are getting better than I thought, with Friday's bill potentially passing, market can celebrate another 1-2% tech gain and I would be losing another $20-$30k. I also think the chance for AMD to pull back could happen not this week, but next week or late August - based on prior history, in 2018, 2019 AMD both had two long run up streak of %20-%30 gain for more than 2 weeks before pulling back.
Plain english warning about CFD trading, just something I wish someone had told me
tl;dr - trading CFD's is the equivalent of drag racing your drunk mate down the freeway into oncoming traffic. No self respecting adult would bother with them, CFD's are for cocaine-snorting thrill-seeking morons (like me apparently) who have no respect for risk management. Don't gamble with your savings. What are CFDs CFD's are 'Contracts for Difference'. Very simply, if you have a trading account with the right permissions you can trade in CFD's. Why are they dangerous Because say you trade $250, on a normal trade (ie stocks etc) if the price falls by 10% you lose $25, which sucks but isn't world ending. CFD's are NOT like that - they are 'leveraged' which just means that if you put up $50 your exposure is many many many many times larger than that EXAMPLE You buy 50 contracts on a stock that is trading at $100 a share.The stock then drops $10 in value.Your exposure is (50 * 100) = $5,000 BUT because your 'margin' is only 5% of that, the initial amount you put up is a mere $250. So to illustrate: Stock Trading Initial Investment - $250 Value drop - 10% Loss - $25 CFD Trading Initial investment - $250 Value drop - 10% Loss - $5,000 Closing remarks These things are illegal in the US for a good reason. CFD's are for suckers, don't listen to anything that you hear to the contrary. EU regulators say that 76% of CFD accounts lose money. Let me say that again, 76% of these things lose $&*#ing money. If the odds at the casino were 1:4 there is no fkn way anybody would go. When you trade CFD's you are essentially just gambling but with WAY WAY worse odds.Cited: https://www.iexpats.com/76-of-cfd-traders-lose-money-on-their-deals/ You can't make long investments with CFD's, they aren't a long-term strategy and they are not part of ANY investment strategy with a reasonable risk profile. Please don't make the mistake I did and get sucked into trading them, it's stressful as hell and it is pure bravado driven bullshit. Stay safe out there folks, times are nuts Edit 1: Formatting got stuffed up
tldr; I'm an algorithmic cryptocurrency trader with my own cross-exchange trading platform that is performing well(ish) and I'm looking for ideas, partners, investors etc to help me push it forward. I've been trading cryptocurrencies programmatically since 2016 with some success. For about a year I made a modest living executing arbitrage trades across mostly fiat pairs using a bot hurredly hacked together in my spare time. As time went on the margins got lower and lower and eventually I turned the system off as it just wasn't profitable enough. I wasn't sure what to do, so I went back to my career in finance while I considered my options. Skip to the present day and I have rebuilt everything from scratch. I now have a cloud hosted (GCP), fully functional trading platform and have some new algos that are running unsupervised 24x7. The platform is far from finished of course, and like all non-trivial solutions to non-trivial problems: it has bugs, both scaling and performance problems and has a number of unfinished features. However, it does work, and cruically: it's stable, performant and reliable. In the past 12 months it has traded over $4m (roughly 40,000 executed orders and 100,000 fill events), and 99.9% of these orders are generated by my algos. I don't do arbitrage any more, though I may resurrect that algo as my exchange fees come down. My new algos are a little more sophisticated and they seem to reliably make a small profit (between 0.1% and 0.4%). I have a number of ideas cooking away for more algos, I'm just finding it difficult to manage my time. Both the platform and the algos need a lot of work and I only have one pair of hands. I'm actively trading on 18 exchanges and adding a new one roughly every couple of weeks. The system records and reports every order, trade, balance change, transfer, fee etc in real time using the APIs offered by each exchange. Each new exchange presents a new set of problems. Some are easy to integrate and have fairly sensible APIs, but some definitely do not. Some exchanges have helpful support, some defiantly do not. Some of the APIs change over time, some do not (although sometimes I wish they would). The more exchanges I add the more difficult it is to keep the system behaving in an rational manner. Some exchanges are so bad, though a combination of API and support, that I've had to blacklist them. With every exchange so far, and for varying reasons, I've had to implement both the streaming (websocket / fix) AND REST APIs in order to get a working solution. Exchanges don't typically do a great job with their APIs - some are astonishingly poor IMO, and have been for years. Some reputable exchanges do completely miss some really quite basic features. Some are internally inconsistent with things like error reporting. They all report fees differently and the way they charge fees varies greatly (some don't report the trade fees at all). Each exchange of course has it's own symbols for currencies and markets, and they also change over time (typically as a result of forked blockchains: BCC -> BCH -> BCHABC...). Some use different symbols between their own REST and websocket APIs. It's not uncommon for exchanges to delist markets, but surprisingly common for them it ignore the impact on users when they do so. It's also not uncommon for exchanges to delete your old orders after they close, but some exchanges will delete your trade data too after a relatively short period of time (good luck doing your tax returns). They all employ different strategies for rate limiting. Some have helpful metadata API calls, but most don't. And of course the API docs are often either missing, misleading or blatantly incorrect. Exchanges will routinely close markets, or suspend deposits and/or withdrawals of a certain currency (which has a huge impact on prices). The good ones with have API calls that reports this data, but there are very few good ones. I could go on but you get the picture. My application currently trades around 50-100k USD per day, and I'm planning/hoping to scale this up to 1m USD per day in a year from now. At any one moment it's managing about 100 to 300 concurrent open orders. The order management and trade reporting is the thing I've probably spent most time on. Having an accurate and timely order management system is vital to any trading system. My order sizes are relatively small and I have a pretty solid risk management system that prevents the algos from going crazy and building up large unwanted exposures. Having said that, the number of things that can go wrong is large, and when things do go wrong they tend to go VERY wrong VERY quickly... usually while I'm out walking the dog. I measure and record pretty much every aspect of the system so that I know when and where the time is being spent. Auditing is key. My system isn't what you'd call lightning fast right now. I don't think you would want to use it for high frequency trading. But I firmly believe that knowing where the time is being spent is over half the battle, so that's what I'm focusing on right now. Reducing latency and increasing throughput are always in the back of my mind, and although I've never intentionally designed the system to be fast, I make sure not to do anything that would needlessly slow it down. The platform itself is built on asynchronous messaging. It is backed by a cloud hosted SQL database and (apart from the database) all components have redundancy. It's running on a hand made cluster of 12 low cost servers, but much of the workload is distributed to cloud functions. It costs me a few hundred USD per month but as I scale up I expect that to scale up accordingly. I have a fairly basic front end (I'm not a UI person at all) built in react and firebase that I use to monitor and report the state of the system. It needs A LOT of work, but functionally it does what I need right now. I can see my orders, trades, portfolio, transfers etc in real time and I can browse and chart the market data that the system is collecting. One feature it has that I am very pleased with is the trade entry form for manual trading (its surprisingly nuanced). I only trade on spot markets right now, so other markets (derivates, lending etc) are not supported. Until I have an idea for a algo that trades in these markets I won't be adding them. And currently I only trade on the old fashioned, centralised exchanges. I'm writing this because I'm looking for ideas, partners, investors or even customers. I think the system has value, and it's time to move to the next level, whatever that may be. If you have an idea for an algo, adding them to the system is trivial now and if we could work out some sort of profit sharing I'd be keen to discuss it (and happy to sign an NDA of course). Feel free to reach out to me privately if you want to discuss anything.
PRPL earnings is tomorrow, 8/13, after hours. Any other date is wrong. Robinhood is wrong (why are you using Robinhood still!?!). I'm going to take you through my earnings projections and reasoning as well the things to look for in the earnings release and the call that could make this moon even further.
I make the assumption that Purple is still selling every mattress it can make (since that is what they said for April and May) and that this continued into June because the website was still delayed 7-14 days across all mattresses at the end of June. May Revenue and April DTC: The numbers in purple were provided by Purple here and here. April Wholesale: My estimate of $2.7M for Wholesale sales in April comes from this statement from the Q1 earnings release: " While wholesale sales were down 42.7% in April year-over-year, weekly wholesale orders have started to increase on a sequential basis. " I divided Q2 2019's wholesale sales evenly between months and then went down 42.7%. June DTC: This is my estimate based upon the fact that another Mattress Max machine went online June 1, thus increasing capacity, and the low end model was discontinued (raising revenue per unit). June Wholesale:Joe Megibow stated at Commerce Next on 7/30 that wholesale had returned to almost flat growth. I'm going to assume he meant for the quarter, so I plugged the number here to finish out the quarter at $39.0M, just under $39.3M from a year ago. Revenue Expectations from Analysts (via Yahoo) https://preview.redd.it/notxd6hhbng51.png?width=384&format=png&auto=webp&s=aa0453414f467aa6c5bf72ce8a8046c0ae6e62a5 My estimate of $244M comes in way over the high, let alone the consensus. PRPL has effectively already disclosed ~$145M for April/May, so these expectations are way off. I'm more right than they are.
I used my estimates for Q3/Q4 2019 to guide margins in April/May as there were some one time events that occurred in Q1 depressing margins. June has higher margin because of the shift away from the low end model (which is priced substantially lower than the high end model). Higher priced models were given manufacturing priority.
Marketing and Sales Joe mentioned in the Commerce Next video that they were able to scale sales at a constant CAC (Customer Acquisition Cost). There's three ways of interpreting this:
Overall customer acquisition cost was constant with previous quarters (assume $36M total, not $93.2M), which means you need to add another $57M to bottom line profit and $1.08 to EPS, or
Customer Acquisition Costs on a unit basis were constant, which means I'm still overstating total marketing expense and understating EPS massively, or
Customer Acquisition Costs on a revenue basis were constant, which is the most conservative approach and the one I took for my estimate.
I straightlined the 2.2 ratio of DTC sales to Marketing costs from Q1. I am undoubtably too high in my expense estimate here as PRPL saw marketing efficiencies and favorable revenue shifts during the quarter. So, $93.2M General and Administrative A Purple HR rep posted on LinkedIn about hiring 330 people in the quarter. I'm going to assume that was relative to the pre-COVID furloughs, so I had June at that proportional amount to previous employees and adjusted April and May for furloughs and returns from furlough. Research and Development I added just a little here and straight lined it.
Interest Expense Straightlined from previous quarters, although they may have tapped ABL lines and so forth, so this could be under. One Time and Other Unpredictable by nature. Warrant Liability Accrual I'm making some assumptions here.
We know that the secondary offering event during Q2 from the Pearce brothers triggered the clause for the loan warrants (NOT the PRPLW warrants) to lower the strike price to $0.
I can't think of a logical reason why the warrant holders wouldn't exercise at this point.
Therefore there is no longer a warrant liability where the company may need to repurchase warrants back.
The liability accrual of $7.989M needs to be reversed out for a gain.
What to Watch For During Earnings (aka Reasons Why This Moons More)
Analysts, Institutionals, and everyone else who uses math for investing is going to be listening for the following:
Warrant Liability Accrual
Capacity Expansion Rate
CACs (Customer Acquisition Costs)
New Product Categories
Cashless Exercise of PRPLW warrants
Margin Growth This factor is HUGE. If PRPL guides to higher margins due to better sales mix and continued DTC shift, then every analyst and investor is going to tweak their models up in a big way. Thus far, management has been relatively cautious about this fortuitous shift to DTC continuing. If web traffic is any indicator, it will, but we need management to tell us that. Warrant Liability Accrual I could be dead wrong on my assumptions above on this one. If it stays, there will be questions about it due to the drop in exercise price. It does impact GAAP earnings (although it shouldn't--stupid accountants). Capacity Expansion Rate This is a BIG one as well. As PRPL has been famously capacity constrained: their rate of manufacturing capacity expansion is their growth rate over the next year. PRPL discontinued expansion at the beginning of COVID and then re-accelerated it to a faster pace than pre-COVID by hurrying the machines in-process out to the floor. They also signed their manufacturing space deal which has nearly doubled manufacturing space a quarter early. The REAL question is when the machines will start rolling out. Previous guidance was end of the year at best. If we get anything sooner than that, we are going to ratchet up. CACs (Customer Acquisition Costs) Since DTC is the new game in town, we are all going to want to understand exactly where marketing expenses were this quarter and, more importantly, where management thinks they are going. The magic words to listen for are "marketing efficiencies". Those words means the stock goes up. This is the next biggest line item on the P&L besides revenue and cost of goods sold. New Product Categories We heard the VP of Brand from Purple give us some touchy-feely vision of where the company is headed and that mattresses was just the revenue generating base to empower this. I'm hoping we hear more about this. This is what differentiated Amazon from Barnes and Noble: Amazon's vision was more than just books. Purple sees itself as more than just mattresses. Hopefully we get some announced action behind that vision. This multiplies the stock. Cashless Exercise of PRPLW Warrants I doubt this will be answered, even if the question is asked. I bet they wait until the 20 out of 30 days is up and they deliver notice. We could be pleasantly surprised. If management informs us that they will opt for cashless exercise of the warrants, this is anti-dilutive to EPS. It will reduce the number of outstanding shares and automatically cause an adjustment up in the stock price (remember kids, some people use math when investing). I'm hopeful, but not expecting it. The amount of the adjustment depends on the current price of the stock. Also, I fully expect PRPL management to use their cashless exercise option at the end of the 20 out of 30 days as they are already spitting cash.
I've made some updates to the model, and produced two different models:
Warrant Liability Accrual Goes to Zero
Warrant Liability Accrual Goes to $47M
I made the following adjustments generally:
I reduced marketing expenses signifanctly based upon comments made by Joe Megibox on 6/29 in this CNBC video to 30% of sales (thanks u/deepredsky).
I reduced June wholesale revenue to 12.6M to be conservative based upon another possible interpretation of Joe's comments in this video here. It is a hard pill to swallow that June wholesale sales would be less than May's. The only reasoning I can think of is if May caused a large restock and then June tapered back off. The previous number of $19.0M was still a retrenchment from the 40-50% YoY growth rate. I'm going to keep the more conservative number (thanks again u/deepredsky).
I modified the number of outstanding shares used for EPS calculations from 53M (last quarters number used on the 10-Q) to almost 73M based upon the fact that all of the warrants and employee stock options are now in the money. Math below. (thanks DS_CPA1 on Stocktwits for pointing this out)
Now that we have established that coliseum still has not exercised the options as of july 7, and that purple needs to record as a liability the fair value of the options as of june 31, we now need to determine what that fair value is. You state that since you believe that there is no logical reason that coliseum won't redeem their warrants "there is no longer a warrant liability where the company may need to repurchase warrants back." While I'm not 100% certain your logic here, I can say for certain that whether or not a person will redeem their warrants does not dictate how prpl accounts for them.
The warrant liability accrual DOES NOT exist because the warrants simply exist. The accrual exists because the warrants give the warrant holder the right to force the company to buy back the warrants for cash in the event of a fundamental transaction for Black Scholes value ($18 at the end of June--June 31st that is...). And accruals are adjusted for the probability of a particular event happening, which I STILL argue is close to zero. A fundamental transaction did occur. The Pearce brothers sold more than 10M shares of stock which is why the exercise price dropped to zero. (Note for DS_CPA1 on Stocktwits: there is some conflicting filings as to what the exercise price can drop to. The originally filed warrant draft says that the warrant exercise price cannot drop to zero, but asubsequently filed S-3, the exercise price is noted as being able to go to zero. I'm going with the S-3.) Now, here is where it gets fun. We know from from the Schedule 13D filed with a July 1, 2020 event date from Coliseum that Coliseum DID NOT force the company to buy back the warrants in the fundamental transaction triggered by the Pearce Brothers (although they undoubtably accepted the $0 exercise price). THIS fundamental transaction was KNOWN to PRPL at the end Q4 and Q1 as secondary filings were made the day after earnings both times. This drastically increased the probability of an event happening. Where is the next fundamental transaction that could cause the redemption for cash? It isn't there. What does exist is a callback option if the stock trades above $24 for 20 out of 30 days, which we are already 8 out of 10 days into. Based upon the low probability of a fundamental transaction triggering a redemption, the accrual will stay very low. Even the CFO disagrees with me and we get a full-blown accrual, I expect a full reversal of the accrual next quarter if the 20 out of 30 day call back is exercised by the company. I still don't understand why Coliseum would not have exercised these. Regardless, the Warrant Liability Accrual is very fake and will go away eventually.
ONE MORE THING...
Seriously, stop PMing me with stupid, simple questions like "What are your thoughts on earnings?", "What are your thoughts on holding through earnings?", and "What are your thoughts on PRPL?". It's here. Above. Read it. I'm not typing it again in PM. I've gotten no less than 30 of these. If you're too lazy to read, I'm too lazy to respond to you individually.
I have a post that I explained how in etoro you don’t own the stock what so ever but u just own a cfd contract even if you don’t use margin In this post I’ll explain a little bit about how etoro pays dividends on your stocks even tho you don’t own them and the dangers of trading on this kind of brokers “””””””””””””””””””” As I said in one of my replay , the underlying asset is a cfd contract (cfd contracts are decaying assets ) , a cfd contract doesn’t grant you any ownership over the real stock. Let me explain again . In one of the legit brokers I use , they have this program that if you subscribe in , you give the broker the permission to lend the stocks in your portfolio to other traders who want to short sell the stock , like I have 5 apple stocks in my portfolio, if I’m signed up to the lending programme in this legit broker , then they can take my 5 apple stocks and lend them to someone who wants to short sell them . 1 - by law I’m not paid dividends on those stocks that they borrowed from me , but the borrower is paid the dividend cause he is the owner now as long as he is borrowing my stocks . 2- said broker will pay me 50% of the interest that he charges the short seller 3- the broker will still give me my dividends equivalent but in a form of capital gain ( etoro does pay u dividends equivalent from the commission that he charges on his platform , but not real dividends, ) This might sound complicated but again this is way a broker like etoro can tell their clients that they are buying the asset which in-fact they are not , it is legal but it is a form of word play , the real danger is if etoro goes bankrupt or for any reason doesn’t wna does his part of cfd contract deal then they tottaly can , they don’t do it upfront , but they can halt trading on a certain stock , just an example , a real legit broker will never halt trading on a stock unless the exchange itself halt trading and no one in the world can buy the stock , in etoro you will find that you can’t sell a certain position or open one , while at the same time other traders on other platforms are happily buying the same stock and selling it , this is one form of etoro saying “ I don’t want to keep up to my words that and exercise the cfd contract “ Somethings I said are a bit complicated but etoro banks on the low experience and innocency of their clients . They actually blocked a popular investor called “harshsmith” because he was allegedly scalping stocks , and he have 2k copiers , so every 1000$ he made is 2 million $ that etoro had to pay to all his copiers , they might not allow scalping and that’s their law but keep in mind , if they are a legit broker they would be happily letting him scalp cause he and his 2k copiers are paying commission, and commission is how they make their profit as they say (big lie , they make it from your losses ) , then why block and profitable popular investor with a lot of copiers paying commission? Cause they are paying him his profit from their pocket and not the real market , I don’t mind them having their own non scalping law , but why have it if your legit ?! More scalping is more commission for the broker right ? Unless it is not a legit broker such as etoro Hope this helps
The NBA league office announced that all awards will be officially based on play PRIOR to the bubble. With that, the cases are locked, the campaigns are closed, and the voting will begin. While the media may focus on the MVP award and other prestigious honors, reddit has the distinct honor of awarding the LVP. The LEAST Valuable Player. It's a tradition that dates back to 2016-17, when aging Indiana SG Monta Ellis won the inaugural trophy and then promptly disappeared from the NBA forever. In 2017-18, Minnesota SG Jamal Crawford won the (dis)honor with some incredibly bad defensive numbers. Last season, New Orleans SF Solomon Hill won LVP by helping to sink a drowning team and accelerating Anthony Davis' decision to fly the coop. Before we announce this year's winner, let's review the criteria and caveats: --- Obviously, the worst players in the league are the ones who sit at the end of the bench and don't get any playing time. However, this award focuses on players who log a decent amount of minutes and consequently affected their team's play the most. Simply put: the more you play, the more damage you can do. --- And that actual "damage" is important. If you're on a tanking team, no one cares about your poor play; it may even be a positive. I'm also ignoring young players (under 21) who are still developing and can't be expected to be solid players yet. --- Similarly, we don't want to judge players within the context of their salary any more than the actual MVP does. We also do not weigh in injuries either. For example, the Wizards would have a hard time competing with John Wall on the sidelines (0 games played, $32M in salary), but we want to focus on players' on-court performance instead.
PG Mike Conley, Utah: 28.6 minutes per game, -0.80 RPM We're using Mike Conley to reiterate that the LVP does NOT factor salary into the equation any more than the MVP does. But if it did, Mike Conley and his $33M salary may be in trouble. It was a disastrous start to the season for Conley. Playing in a new role as a second fiddle to another guard, he could never find his groove. His assists plummeted (down to 4.3 per game), his free-throw attempts cut in half (from 5.8 to 2.9), and he only shot 42.9% from two-point range. That said, he still shot pretty well from 3 (37.6%) and played OK defense, keeping him off our official ballot. SF Miles Bridges, Charlotte: 30.7 minutes per game, -2.68 RPM Like Mike Conley, Miles Bridges seems like a great guy whom you'd hate to criticize. Alas, that's our exercise here. Caught in between positions, Bridges hasn't been able to figure out his rhythm on offense in the NBA either. He hasn't shot well (33% from three, 48.6% from two) and doesn't get to the line enough (2.0 FTA) to make up for it. The advanced stats get even worse from there (although to be fair, they get dragged down by playing in a bad starting lineup.) Fortunately for him, Bridges is spared by his youth. At 22, he's technically over our "21 year old" threshold, but it still feels unfair to pick on his growing pains as a sophomore. Perhaps in time, he can find a role that can take advantage of his athleticism and talent. But be warned: the clock is ticking. We're taking the kid gloves off soon. Bridges and fellow analytics-allergic Kevin Knox (-7.7 RPM!) will be entering Year 3 next season and will need to step their games up to avoid LVP discussion. SF Kyle Kuzma, L.A. Lakers: 24.6 minutes per game, -0.74 RPM Kyle Kuzma can score if need be, but his skill set never made him a natural fit to play third banana to superstars like LeBron James and Anthony Davis. He's not a 3+D player -- he's more of a no-3 (30% this year) no-D player. At the same time, the LVP is about negative impact, and it's hard to find much of consequence here. After all, the Lakers still finished with the # 1 record in the West. Kuzma struggling to find his way is like a tree falling in the woods or a person farting in an empty elevator – ultimately it didn't matter. SF Andre Iguodala, Memphis/Miami It feels like ancient history now, but this past offseason, the Memphis Grizzlies acquired Andre Iguodala in a trade (under the presumption he may be dealt again.) According to official reports, Iguodala and the Grizzlies MUTUALLY decided that he wouldn't play for Memphis and wouldn't even report to the team in the meantime. Okay. Fine. We'll go along with that. Still, that situation leaves a sour taste in the LVP headquarters. Memphis turned out to be better than expected, and could have used an extra rotational player. And even if Iguodala wouldn't have helped much on the court, he could have been a valuable mentor for their young kids. That's the least you can expect for a nice $15M in salary.
our official top 5 LVP ballot
(5) PF Anthony Tolliver (POR, SAC, MEM): 15.6 minutes per game, -3.60 RPM I've always had a soft spot for the wise ol' owl, Anthony Tolliver. He's reportedly a great teammate and locker room presence. He also started to develop into an effective stretch four towards the end of this career. But alas, the end of his career may have snuck up on us sooner than we expected. Tolliver disappointed for Minnesota last season, and completely flopped in his return to Portland. At age 34, he doesn't seem to be a viable rotation player anymore. He didn't play quite enough to merit LVP, but he still played more than he should have. There's a chance Tolliver comes back next year to serve as a veteran mentor and pseudo-assistant coach somewhere, but it's more likely that he retires. If he does, he'll have played for 10 different franchises in his not-so-illustrious but very respectable career. (4) SG Bryn Forbes, San Antonio: 25.1 minutes per game, -0.95 RPM The NBA is all about shooting these days, and Bryn Forbes can shoot. He's hit an even 40.0% from three during his NBA career so far, and wasn't too far removed from that this season with 38.8% on 6.0 attempts per game. As a result, his true shooting percentage (57%) was above average. The Spurs lacked spacers, and Forbes fit that bill. So what's the problem...? Turns out, basketball is more than a halfcourt game. And whenever the ball crosses that pesky midcourt line, Bryn Forbes starts to become a liability. At only 6'3", Forbes is undersized to play the SG position, which is where the Spurs played him 74% of the time (according to basketball-reference.) Partly due to those athletic limitations, he only registered 0.5 steals per game, and blocked a grand total of 0 shots in his 1579 minutes of action. The advanced stats get ugly; Forbes ranks near the bottom at his position in DRPM, DBPM, all the alphabet formulas that you can cook up. At the end of the day, LVP is about negative impact, and there's plenty here. Forbes is not a bad player in a vacuum, but he did not help the Spurs this year. In fact, their undersized lineup is a big reason why they're struggling so much on defense (25th in the NBA). As a direct result, they're on track to miss the playoffs for the first time in decades. (3) SF Mario Hezonja, Portland: 16.3 minutes per game, -2.79 RPM During the entire run of the Damian Lillard - C.J. McCollum era, Portland has struggled to figure out their wing rotation. That would be tested even more this season, with familiar faces like Moe Harkless, Al-Farouq Aminu, and Evan Turner slipping out the door. The trials and tribulations kept coming like Damian Lillard was Job, as injuries ravaged the Blazers' new depth chart. The team didn't need a star to emerge at forward -- but they needed somebody. Anybody. In theory, that player should have been Mario Hezonja, a former lottery pick and a live body with good athleticism and size at 6'8". Signed this summer for a modest price ($1.7M), Hezonja had the chance to jumpstart his NBA career with a major opportunity on the team. Instead, he flopped like Marcus Smart taking a phantom elbow. Hezonja's biggest problem is that, at age 25, he still hasn't found his feel on the court. He's not a good shooter (32.8% from three), and doesn't use his athleticism to find his way to the line (1.1 attempts per game.) He was a non-factor (5 PPG, 3 RPG) on a team that desperately needed him to step up. In fact, the Blazers were so desperate for help that they not only signed Carmelo Anthony, but they played him over 32 minutes a game. Again, we see a real "LVP" candidacy here with a direct effect on the standings. The Blazers' getting a big fat nothing from Hezonja was a major part of their struggle to get to .500 this season. (2) C Dewayne Dedmon, SAC/ATL: 17.6 minutes per game, -2.51 RPM We're not supposed to factor in salaries into this equation, but Dewayne Dedmon's situation merits a mention for context. The Sacramento Kings signed the big man to a head-scratching 3-year, $40M deal this summer (seriously.) Clearly, GM Vlade Divac thought his young Kings were only a few veterans away from making the playoffs, bringing in (and over-paying) Dedmon, Cory Joseph, and Trevor Ariza. Among the three, Dedmon turned out to be the most disappointing for several reasons. He didn't play well to start the season, and got usurped in the rotation by underrated Richaun Holmes. Rather than suck it up, take a deep breath, and take a relaxing dive in his new Scrooge McDuck money pool, Dedmon started to whine and complain and push for a trade. For a team that was struggling, Dedmon's headache became the last thing they needed. Ultimately, they ditched him back to where he came from in Atlanta. Now, being difficult and being a prima donna isn't enough to get you LVP honors. You have to stink on the court as well. And sure enough, Dedmon started to check those boxes. Billed as a stretch five after hitting some threes in Atlanta, Dedmon lost his shot in the SMF airport baggage claim. He shot only 19.7% from three for the Kings, registering a 47.3% true shooting percentage on the season. His defense is OK, but it's not good enough make up for his poor offensive play. He's not bad enough to get LVP, but he hurt his team this year. (1) PG Isaiah Thomas, Washington: 23.1 minutes per game, -2.75 RPM We've awarded three LVP trophies in the past, and a familiar pattern is starting to emerge. The most dangerous players aren't necessarily the bad players; they're the players who used to be good. Because of their prior success, they tend to get overplayed by their coaches and drag their teams down with them. It wasn't too long ago that Isaiah Thomas found himself in the MVP conversation for the Boston Celtics, as his incredible shotmaking helped make up for any defensive limitations he may have as a 5'9" player. That said, a small player like Thomas is always going to have a thin margin for error to remain a winning player. He needs to be GREAT offensively to make up for his defense. Unfortunately, his offense has not been great since his infamous injury. He can still make shots (hitting 41.3% of his threes), but he's not getting inside the paint and not getting to the free-throw line (1.9 attempts per game.) As a result, his true-shooting percentage lagged to 53.1%, well below league average. If Isaiah Thomas isn't making scoring efficiently, then what is he doing to help a team win? He's not a great distributor (3.7 assists per game.) He's a very poor rebounder (1.7 per game.) And yes, that defense is still a major problem. According to ESPN's RPM metric, Thomas graded as a -4.2 impact per 100 possessions, the second worst in the league at PG after Trae Young. Basketball-reference lists his "defensive rating" at 121. For comparison's sake, the worst team defense in the league still held teams under 116. (That worst team? The Wizards.) You can make an argument that there's still a place for Thomas in the NBA as a sparkplug scorer off the bench. Alas, that's not how the Wizards had been using him this season. He started 37 of 40 games for the team. Largely as a result of that, the Wizards' starting lineup was atrocious defensively. Fellow starters like Bradley Beal and Rui Hachimura ranked toward the bottom of their position in defensive metrics as well. When your lineup stinks defensively, a good coach may look in the mirror and say: hey, maybe we need a change here. Sadly, quick reactions are not Scottie Brooks' strong suit. He has the type of sloth-like speed that even frustrate workers at the DMV. The Wizards eventually dumped IT, but it took far too long to make that shift. To be fair, the Wizards' options at point guard were limited with John Wall injured. Veteran Ish Smith is mediocre right now, and Shabazz Napier arrived late in the season. Still, the point here is: almost any competent point guard (like a Napier) would have helped the Wizards more than Isaiah Thomas. He had become a negative for them. The cold hard truth is that: it's very difficult to win basketball games with Thomas starting. And given that, he is our official LVP.
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