One day in the future, perhaps tomorrow, perhaps in 2025, this historic bull market will come to an end, and the 'massive' Central Bank infused debt bubble will burst like an over cooked Empanada. It will be oily, it will be messy, and those not fighting for whats left , the scraps of meat and bits of the crispy outer shell, will be faced with the reality of life without empanadas.
Now that I've scared you half to death, I'll let you in on a secret.... most supermarkets have pre-made empanada shells, usually in the frozen section. Cook some seasoned chop meat, insert into pre-made empanda shell, gently fry... and voila, your empanda nightmare is over.
And this is why the market continues on an upward trajectory. An overcooked empanada is just another excuse to make more empandas. More, more, and more. It's the world we live in these days. A world where everyone gets a trophy. Everyone wins. The stock market is following a similar path. Over eight years of 'winning'
Each passing day is a day closer to the empanada bursting. But again it could be a day in 2017 or a day in 2027. There is no telling precisely when. Policitcal Events, Central Bank action, Terrorism, Currency intervention... remember when the Swiss decided out of the blue to unpeg their currency:
Every reason to sell has ultimately been a reason to buy. Seemingly nothing can derail the stock market hitting new record highs.
Which brings me to one of the points I want to make.... Never get too comfortable. Nothing lasts forever. To borrow a small portion of a phrase utilized by the most bearish blog known to man, on a long enough timeline everyone is wrong.
Case in point, $OCN dropped over 50% yesterday after news surfaced of a lawsuit. This also brought down $ASPS.
As it stood into yesterdays session I still had some $ASPS April $40 calls that I bought for $.95. These were trading north of $7 earlier this week. With the possibility of more upside into the end of the week, I decided to hold on to a few contracts. Thankfully I had locked in most of the gains earlier.
In hindsight I would have sold them all prior to the news, but I had no way of knowing $OCN was going to get hit with a bombshell and get pulled down quicker than a passenger on an overbooked flight.
$ASPS chart looked supurb. It just broke to new multi-year highs. Seekingalpha contributors short squeeze commentary was gaining credence as late day volume sure looked like shares being forced to cover. $ASPS was at $46.99 this week. Just two days later it dropped to $25. An incredible decline.
The positive about this decline, if you could even call it that. Let's just say, the silver lining on the broken empanda is that what I lost via those now bidless $40 calls, was defined. Heading into any long call or long put trade, your risk is the amount of money you put into that trade. Can you imagine those long $OCN and/or$ASPS shares that did not have a limit order in? Wow. While stock options are terribly risky, that risk is defined. When you go long shares, make sure you put in a stop order!
Can you imagine yesterday an $OCN or $ASPS long who was out to lunch yesterday and did not have a stop order in? Wow.
Also, rarely do you regret taking profits along the way. $ASPS had a tremendous run. If the news didn't hit the wires for another few weeks, the stock could have rallied further, perhaps to $50+, but nothing in life is certain.
What else did we learn? The shorts have a habit of being right. That 83% short %? Sure it looked like they were wrong as the stock rallied from $35 to $46 in a few weeks. But oh, they looked so right yesterday.
All good things come to an end at some point. Sometimes its at the peak of invulnerability, when the market looks like it will never fall again and sometimes its the other way around. . Last February as the market was off to its worse start in history, sentiment was at a nadir, which marked a great buying point.
Always remember while your enjoying that perfectly crafted empanada, it's not always going to taste this good. Nothing last forever. And on a long enough timeline even a greasy overcooked empanada becomes inedible.