“Welcome to the Top Tickers Anonymous Toronto Chapter Meeting. Who would like to start?”
“I’ll go first,” I said as I rose to the front of the group. “Hi my name is Kevin and I have a problem with Top Ticking.”
“Hi Kevin,” the group responded in unison.
“I know I shouldn’t do it, but the pressure of seeing all these stupid idiots chasing these dumb stocks so f’ng high is sometimes too much to bear. I know that top ticking always looks glamorous, but the reality of trying to time the top is a life of roller coaster emotions, lots of red P&Ls and the shame of not being part of the in crowd. I know that if you keep trying to top tick too often you will end up penniless, without a family and stuck writing a bitter financial blog under some fictional movie character’s name (who doesn’t even exist in the movie either).
I had been relatively clean for more than 6 years now. I have had the occasional relapse where I dabbled in some recreational top ticking, but on the whole, I have been letting the market work its way higher without trying to engage in calling a top and going big time short. I guess that is because the pain from the last time is still with me.
It was in the late 2005s when I last engaged in serious top ticking. The homebuilders were flying straight to the moon, and I was completely convinced that there was no way that this mania could last. So like the true addict that I am, I stood in there and shorted the snot out of the them. Well, you all know how this story goes. What seemed like an expensive dumb price only became all the more dumb and expensive. And after a two month long binge of trying to pick the top, I finally gave up. Of course that proved to be pretty close to the top. Instead of having a profitable trade, I was left with the pain and damage done from trying to pick a top instead of waiting for the market to turn first.
As I said, since then I have been relatively clean. I did have some problems with knife catching in the gold market, but I managed to power through that difficult period in my life and hopefully that bad habit is behind me.
But lately I have been having these impulses. I can’t explain how powerful they are. I want to take all these people who are madly piling into stocks and shake them! Where were you two, three and even four years ago when stocks were cheap? You were busy piling into bonds, that’s where! And how did that turn out for ya? But now, with the stock market already up almost 3 fold over the last 5 years, you decide that now is time to buy? And not only that, you decide that buying the regular stocks isn’t good enough, but you have to pile into the Facebook’s, the Tesla’s and the LinkedIn’s of the world? You deserve what’s coming to you.
I know that these things that go on way longer than anyone imagines. Dumb can become absurd. Absurd can become unimaginable. And unimaginable can become impossible.
I know that trying to pick a top is only going to make me look foolish and cause me a lot of heartache.
We have all heard the expression that there are no casual heroin users and there are no casual top tickers. It always starts with a little bit of top ticking, maybe some out of the money puts. Then you start to add the occasional individual stock short. Before you know it, you are balls to the walls short S&P futures and your broker is buying back a half dozen S&P e-minis every point as you run out of margin in the ensuing asinine stock melt-up.
I am here tonight because I have started using again. So far I am keeping it under control. A little bit of short global equity index futures with just a taste of high flying momo stock puts. But it is getting a little more serious lately. I recently bought some VIX futures – which I can try to tell myself isn’t top ticking, but let’s face it – they might as well be more short equity futures. In my Personal Account I have now stuck a little bit of TZA Triple Inverse Small Cap ETF. That’s pretty well the crack cocaine of top ticking there. I am controlling it and dabbling small, but I am worried.
The more I watch the action in stocks, the more powerful the urges become. Facebook spending $19 billion on a messaging app and the stock surges to new highs? Seriously? Brokers doubling their price targets right in front of monster secondaries, yet the stock still manages to explode higher? F’ me.
But the public and market professionals are eating this shit up. It seems the more stupid it becomes, the more they like it. Some days I feel like I am the only sane one out there.
I know I have a problem trying to fight them with my top ticking habit. You guys understand how difficult it is to not short what are just outright ridiculous prices.
I hope I have the strength to keep my top ticking attempts small. It is hard and some days I don’t know how I am going to make it. But I guess that is why we have the motto of one day at a time. One more day without adding to my shorts. One more day watching the madness without trying to time the top tick. One day at a time…
I know that I should remember to just accept, and not expect. But it sure is hard…
Thanks for listening to me.”
Things that I am watching
I mentioned the other day that Russia was not going to be leaving Crimea anytime soon. Have a look at what Russian TV has done to their map for that area…
They have changed the Crimea to the same colour as Russia! The Russians might not have officially annexed Crimea, but they are going to occupy it for years to come.
Long March 2014 VIX Futures. Conviction 2.
Short 10 Year US Treasury Futures. Conviction 3
Short US 5 Year Treasury Futures. I expect the Fed to continue to withdraw stimulus aggressively. Conviction 3
Short US 2 Year Treasury Futures. I think the downside is a move from 31 bps to 25 while the upside is a move up to 50 bps. Conviction 4
Long a tiny position of puts on TSLA and FB. Just for shits and giggles. Conviction 1. Stop – none: when they go to zero the market will do it for me.
Short Euro. Added to this trade into the recent rally. Conviction 4
Short Nasdaq 100 futures, short Eurostoxx futures, and short Nikkei futures. Fed is going to taper until something breaks. Conviction 3. No stops for now
Short European stocks via ESTX50 index vs Long S&P 500. I continue to believe that the ECB is too tight relative to the Fed and the BoJ, and that this will translate into relative weakness of European equities. Conviction 4
Short Yen. Conviction 3
Short JGB futures. I can’t call myself a macro trader without this widow maker on the sheets. Small position for now, but will add aggressively at the first sign it is working. Conviction level: 1. No stop.
Long Yen volatility. I believe we are entering a period of increased volatility for the FX pair. Conviction: 3
Long 30 year US treasury volatility. Swapping half of this position into Yen volatility. Conviction 2
Long various deferred crude oil futures contracts. I own a variety of different expiries in years from December 2014 all the way to December 2020. Conviction level: 4. No hard stop.
Long precious metals smorgasbord. Long gold, silver and platinum futures. I also believe that the closed end ETFs (CEF.A CN Equity or PHYS US Equity) which are now trading at discounts versus years of trading at a premium are a good way to play this idea. Conviction level: 4. Using the year end lows as a stop for half the position.
Long grains. Long deferred corn, wheat and soybean futures. Conviction level:5. No stop period.
Long Ithaca Energy IAE CN Equity. See previous posts. Conviction level: 5
Long Input Capital INP CN Equity. I have not yet written this up, but I really like this story. More to come in coming days. Conviction level: 5