The Nasdaq is down about 5% from its all-time high.
We had a guy in the chat room the other day going off the deep end. “Oh, I’m getting killed in here.” What the hell’s wrong with you, man?
Why would you take that much risk at any point? If you don’t like your risk, sell a couple of futures, neutralize your delta, close your positions. The greatest thing about being a retail trader is that you can whack your risk in two-tenths of a second.
And look, we haven’t even sold off yet. We’re not even in corrective territory. It’s not the end of the beginning, it’s not the beginning of the beginning, it is nothing.
We Haven’t Even Begun
Call me crazy, but if you saw the Nasdaq at 23,000 a month from now, I wouldn’t be the least bit surprised. And I’d probably be telling you the same thing I’m telling you right now, which is that you haven’t even begun.
Open up a 15-year chart. Low interest rates for a long time fueled this, and so did high inflation.
Both of those have come to an end. Rates are going to be too high, you’re going to fall back into stagflation, and it’s going to happen overnight.
They’re Going To Give RAM Away On The Street
You want to watch inflation turn to deflation immediately? Watch chips, like RAM memory.
I’ve got a computer being built for me right now. Going up to 128 gigs of RAM was an extra thousand dollars, and a two-terabyte hard drive was another thousand. That crap is outrageous.
And then they’re going to be giving it away for free on the street. You know the guys in Vegas with the little cards? “Hey, you want to buy RAM memory? RAM memory right here.”
These prices in Micron, AMD and Intel only represent a shortage. There’s a crapload of memory coming on the market, and there’s not even enough power to turn on the stuff Nvidia is selling. Eventually this hits a wall, literally and figuratively.
Define Your Risk Or Suffer The Wrath
Look at South Korea, the EWY. From its recent high to its low, it’s down more than 20%, which is the equivalent of a 1987 crash, except this one took a little time.
I think you’re going to see some rip-your-face-off rallies in there. But if you think something that’s been crashing is going to rally, don’t buy it outright.
Use a spread. A bull call spread means you buy one call and sell a higher one against it, so you know exactly what you can lose before you ever get in.
I have my own twist on this I call pocket profits, you can see how it works here.
Moving on…
Same deal with the SMH, the big chip fund. It’s only off about 15% from its recent high, and if it goes for it, 500 is easy.
Markets never crash from a high. They waterfall down like this, and then they crash from here. Define your risk for a rip-your-face-off rally, or suffer the wrath.
To your success,
Don Kaufman
