$SPY – The Coked Out Bull Who Outran Inflation – S&P 500 Trade Thesis
What’s poppin’ fellas, I’ve got a trade thesis for y’all which I need picked apart. Although I spent a great deal of time discussing it with the greatest minds Twitter and Discord had to offer, I still can’t shake the feeling that this trade is pretty fuckin’ stupid at face value, so bare with me.
I was a little drunk on Easter, and had an epiphany :
- SPY 100 – 200 took roughly 14 years.
- SPY 200 – 300 took 3.5 years.
- SPY 300 – 400 took a little over a year.
With the rate things are going, SPY 400 – 500 is looking like it’s set to happen in under a year, maybe even faster. Hell, in our current investing environment, I would be shocked to see SPY lower than 500 by the end of the year. Asset inflation is running rampant which is indirectly driving up the value of equities, we’re printing fuckloads of money with no end in sight, and money is flowing into the markets out the ass as investing becomes increasingly mainstream. I know a lot of people will doubt me for these things, but I’m thoroughly convinced that this is what modern day inflation looks like.
/u/DustyBowls had an awesome writeup on this which can be found below :
The stock market is not a bubble. This is inflation. This is what modern inflation looks like. The federal government – Dem or Repub matters little, as Bush, Obama, Trump and now Biden all did this – they hide the true inflation by excluding things from the inflation basket such as real estate. All the easy money, low interest rates and supermassive spending by Bernanke, Yellen, now JPow.
This is why the upper middle class and to a much greater extent the rich can profit at all times – they're so heavily into stocks and other financial devices plus housing and land that the massive devaluation of the dollar and the explosion in inflation is not their problem – they just rise with the tide. Regular middle class and worker bees (the 99.6%) are seeing massive pay cuts in the form of inflation. You got a decent job making high five / low six figures and want to buy a place? Even in mid-size midwestern towns, the housing market is so hot that you just got priced out of the market. And you'll never get back into because this is not a bubble that will burst – this is inflation. The Federal government is going to print even more money and devalue the dollar so that its debt / GDP doesn't get too fuked. The rich don't care. The well-positioned middle class (a minority of the middle class) don't care. Everyone else should. You got a $600 or $1400 or $2500 stimulus check? Cool story the housing price and your rent just went up 10% compound for the next five years and you're far worse off than you were.
It ain't a bubble it's a rising sea. If you aren't in a yacht or at least a skipper, you're fukin’ drowning man. Your flat salary, your savings account, your hourly wage – you just got a LOT poorer.
By riding the coattails of the rich, we can look to become a lot less poor in the process. We’ve identified the trend, and now we can also rise with the tide. Ultimately, our end goal seems to be SPY 500. The price action over the past year reinforces this, as we’ve gone from $264 to $405 (over a 55% increase) during that time period. Hell, even the past decade of data supports us. Every year from 2008 onwards, bar 2015 and 2018 have easily netted a 20% return. If we see an increase that’s even remotely as good, we will be well ITM by the time our year is up. SPY 01/21/2022 500Cs are trading for $1.00. Dirt fuckin cheap. For more risk averse traders, we can go with a SPY 450C 01/21/2022 for $5.00 instead. Regardless of the chosen strikes, if these plays hit, it’s at minimum a 10 bagger, likely more.
Personally, I’m going to look for an entry around SPY 400 since we’ve left some gnarly gaps, but I’m thoroughly convinced that we may continue to rip. We need less than a 20% increase in 10 months, which is well within reach. We’re in a fucked up investing landscape, which is heavily skewed towards exponential growth. All we need to do is take the leap of faith, and reap the reward in a couple of months.
All that being said, I can’t think of a good bear thesis, so this is where I turn to y’all. I’m not worried about the “bubble” popping, as I don’t think we’re in a bubble; This entire system is just a byproduct of the insane amounts of money we have printed. In my eyes, the only thing that can stop SPY 500 from happening is us getting nuked by North Korea, a new strain of super aids wiping out a good chunk of civilization, or aliens coming down and fucking some shit up. If any of those things happen however, we’ve got bigger problems than our SPY 500Cs expiring OTM. If anyone has a decent bear thesis, please lay it on me.
TLDR: Fuckloads of printed money combined with asset inflation will be a pretty nuts combo for the markets. Bears r fuk. Buy SPY 01/21/2022 500C.
Submitted April 06, 2021 at 11:18PM by FluxRevived
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