Another chapter from u/eruwenn and myself. First / Prev / Next Aaron couldn’t help but be a little underwhelmed by the star port. When he had been told about a large space station that served as a central hub for the entire system he was expecting some bizarre bazaar of goods from every corner of the galaxy. What he found was a joyless jumble of bulk traders, hauliers offices and bars. This wasn’t the Azrimad with its prestigious shops and expensive cafes; this was a place for work. As they walked further along, the occasional gambling house or unique vendor would crop up, and Aaron spotted a couple of places that might be worth a second look. An Arkellian souvenir shop looked the most interesting thus far. They had various ceremonial outfits and cultural items from throughout their history, and he thought he could find a fun gift for Alexa there. A few people paid attention to the pair in the Gal. Fed. uniforms, but not many noticed Aaron. Without Sassie he was just another biped, a less common colour but hardly remarkable. On board the Azrimad he'd become accustomed to the constant glances. It was nice to blend in, and he was enjoying the anonymity. The high-pitched scream caused the whole thoroughfare to fall silent. Aaron spun around and saw a young Arkellian girl in oversized overalls pointing at him. “It’s really you!” she exclaimed; people were staring and Aaron was definitely being noticed now. The young girl grabbed the front of her overalls and tore them open to reveal a pale blue Cupcake Coalition t-shirt. “The first human. You’re him right?” She walked forward excitedly while clutching her hands to her chest, eyes wide. The crowd, realising this wasn’t going to turn into street theatre, quickly lost interest and the background chatter returned. Aaron let out a short laugh of relief and waved. “Hi there. Nice shirt.” Clak’Soon took his hand from his sidearm and Ha’Mon stepped out from behind the J’Rami. He was about to speak when the young Arkellian began gushing. “I couldn’t go to the march but I watched from my dad’s hauler. Where’s Sassie? I buy cupcakes every cycle and I have three t-shirts and a hat. My dad says I can get a Sassie onesie if I do well at school! Where is Alexa? Did you invent cupcakes? I watch all your videos, I subscribed when you only had four videos, and only three thousand followers. I decided to make my own channel too, and so far I've made six videos and gained twelve followers. Oh, oh, oh!” She was dancing from foot to foot. “Will you be on my channel? Please!” She’d spoken quickly and even though she’d stopped it still took a moment for them to process everything she’d said. Clak’Soon and Ha’mon both looked to Aaron – his fan, his problem. Aaron took a knee, bringing himself down to the girl’s eyeline. “First, please don’t eat a cupcake everyday. They’re treats, so space them out. Sassie and Alexa are packing up our belongings because we’re going on an adventure.” He paused as he tried to remember everything she’d said. “Oh, I didn’t invent cupcakes, just adapted a recipe from home. But,” -he leaned forward a little and whispered- “we managed to make safe chocolate chips, mostly.” As he said this next word he spread his hands like he was creating a rainbow in front of his face. “Cookies.” “OOooooooooh!” Her little dance became even more energetic, then she stopped as a puzzled look appeared on her face. “What’s a cookie?” Aaron’s laughter rang out and he stood up. “Don’t worry, they’re being approved in the next day or so. Do you have your camera?” “No.” She looked at her feet, and with sadness in her voice and the beginnings of tears in her eyes as if remembering some great trauma, she replied, “I’m not allowed to take it off the shuttle, after I lost my first one.” Aaron saw that she was getting upset and tried to make her feel more at ease. “Don’t worry about it, I lose stuff all the time. I lost my whole planet!” Her head lifted with a bright smile and she laughed. “I can run and ask my big sister to borrow hers.” Aaron was pleased he had cheered her up, but the constant shuffling of his companions reminded him they had somewhere to be. “We have an important meeting to get to. If you see us later we can do it then, ok?” She nodded. “What’s your name?” She paused and in a conflicted tone replied, “Dad says, I’m not supposed to tell strangers.” Realisation struck her and, once again, her smile vanished. ”Dad says, I’m not supposed to talk to strangers.” Attempting to head off another emotional roller coaster, Ha’Mon was quick on the rescue. “How about you bring your big sister? Then we can introduce ourselves and not be strangers.” It took a moment for her to think it through, then her face once more erupted in a smile and her excited dance started again. “I’ll go ask her.” She didn’t even wait for a reply before she dashed off into the crowd. A large hairy J’Rami hand pulled Aaron upwards. “We’re late.” The shops they passed were now a blur. They had to increase their pace to a brisk walk, and as a result had to focus on not bumping into people as they hurried along. The Engineer’s Pit was hard to miss. Who needs a sign with a smell so pervasively unique? It was a scent with layers. Beyond the sweat, vomit and stale drink he caught the faint aroma of wet fur, grease and smoke. Aaron caught a brief glimpse of the frontage before they turned off down the Junak Arm, and the descriptor 'dunghole' seemed to be generous. He had no doubt that the floor within would be sticky with substances he didn't want to imagine. The arm that extended away from the Pit was clearly a recent addition, cleaner and brighter although still not a patch on the Azrimad. There were less stores, and no cafes or bars, simply a multitude of offices and what looked like warehouses attached to docking ports. Xii’Nok Wholesalers was just along from Xii’Nok Industries, and a little farther they passed Xii’Nok Construction. Finally they reached Xii’Nok’s Used Ships. An Arkellian in a smart, white suit was standing out front. He looked agitated, but as they drew closer his smile brightened and he rushed forward. “Ambassador Cooper!” He regarded the others, noting that neither was an officer. “And his loyal Galactic Federation assistants. Welcome, welcome, welcome. I am Lek Xii’Nok, please call me Lek, I’m sure we’re going to be great friends.” His handshake became a guiding arm on Aaron’s shoulder as he led him swiftly inside, leaving the others to trail behind. Aaron looked helplessly back over his shoulder as he was corralled into a seat. “Nice to meet you, Lek. Please call me Aaron.” Lek bowed deeply. “Thank you, Ambassador Aaron.” He stood and quickly clapped twice; the lights dimmed and a soft spotlight fell on Lek, while relaxing music began playing from hidden speakers. “I understand you are here for an extra-system ship. A first contact in my home system that wants to venture forth. It's a beautiful moment for our two species.” He seemed to choke up momentarily. “That you would choose my shipyard to find your vessel, your new home amongst the stars. I am honoured.” Another bow, and this time he raised his head to give Ha’Mon and Clak’Soon an irritated glance as they found their seats either side of the human. This was not exactly what Aaron had expected. It seemed more than a little theatrical for a simple sales pitch. “So...” He cleared his throat. “As we mentioned in our call, we don’t have much time. I’d like to see the ships as quickly as possible.” “Absolutely,” He quickly pulled a controller from his pocket and began clicking buttons. A large holo-display appeared in front of them with Lek’s face appearing as a logo, glowing brightly and smiling at them. “I always admire those with a decisive disposition. I have seen the footage and know that you are a man of action as well. Here I have selected an exceptional ship.” He clicked a button, with a flourish, and the hologram head became a large sleek ship. “This is a vessel befitting an Ambassador-” “Bollocks!” Clak’Soon yelled out, “The Keflox series are all looks and no oomph!” Ha’Mon was mortified by Clak’Soon’s rudeness but he had to agree. “It is true Aaron, and the repair costs are excessive due to their abundance of non-standard parts.” Lek’s mouth opened and shut as he tried to recover his composure. Before he could, the human spoke. “Next.” “Yes. Of course.” Lek fumbled, recovered, and performed another overly flamboyant click. The ship dissolved to be replaced by a smaller, more rounded ship. “This is-” “Bah!” Clak’Soon called out immediately. “Kasurian? No offence Ha’Mon, old pal. You guys make some fast racers, but the human can’t go around in a Kasurian ship. Do you know how often people try to kill him?” Lek blinked, looking from Clak'Soon to Aaron to Ha'Mon. Before he could say a word, the Kasurian spoke up instead. “It’s true. Half the people he meets try to kill him.” Aaron, slightly offended, quickly turned defensive. “I wouldn’t say half.” The large J’Rami stood and took the controller from Lek’s hand. “Let’s see if you have anything good.” He began clicking and ships, shuttles and tankers started whizzing past, the security officer oblivious to the outrage on Lek’s face. Ha’Mon jumped up and joined his friend. “I have it narrowed down already. He has all the ships listed on his portal. Stop clicking so fast!” Clak'Soon and Ha'Mon spoke in rapidfire shorthand, something they had clearly developed over a long friendship. Aaron couldn't follow a word of it, and instead watched the small Kasurian engineer. He darted this way and that, repeatedly trying – and failing – to obtain the controller. Lekfinally stood still, admitting defeat. He was clearly not happy that his slick presentation was ruined, and after a moment's contemplation more he rushed out of the room. “Somebody help! Security!” Aaron watched him leave, and a moment of worry passed over him as quickly as the ships flashed past his eyes. If they could find a ship he was fairly certain the salesman would forget about any inconvenience they had caused. The barrage of images slowed to a halt, revealing only three ships on display. Aaron stood and walked towards them, pointing out. "You know, you could have just asked him." Clak'Soon shrugged, but at least Ha'Mon had the decency to look ashamed. "So... what are my options?" The J’Rami and Kasurian looked at each other, then came to an unspoken agreement. Ha’Mon began. “Not good. If you were looking to haul cargo, then you’d have a better selection.” The human shook his head. “I don’t need something that big.” “Well not much else makes it this far out,” Ha’Mon continued. “We do have three that might work.” He pointed to the first ship and Aaron could tell it was Fae’Dan. Such a predictable style. “This is a Calarel series, functional and reliable. Your crystal life will be good, but in system you’re going to be pretty defenseless if you get into a fight-” “If? Hah!” Clak’Soon interrupted. “The only thing it’s good for in a fight is a swift surrender. No good for a human.” Aaron wanted to argue, but his track record was decisively against him. “Ok, that’s fair. But, fighting isn’t really the plan, remember?” Ha’Mon looked at Aaron seriously. “My people call you Lefu’Yendra. You know what that means?” Aaron was well aware, as he'd asked Agent Fenink about it. “Walking Death. Or, so I’ve been told.” Ha’Mon nodded, fixing the human with a fierce stare. When he spoke, it was cautious, hushed, as if he were reciting from a holy text. “It is more than just a name. Where you walk, Death is summoned. Like the Leokas, the great servant of Death, it is drawn to you. Others will cross your path, some as friend and some as foe. You will never know peace.” Aaron wasn’t superstitious, but the Kasurian’s intense glare was a little disconcerting. The dim lighting and strange background music wasn’t helping, and for a moment he was caught in the spell. Luckily, Clak’Soon was there to shatter it. “Stop being weird Hammy. Next ship.” Ha’Mon snapped out of it and immediately returned to his presentation. “So our next option is Clak’Soon’s choice. Honestly, I have no idea how Lek got his hands on this. It’s a Rinoxian hazardous materials transport.” Eyebrows raised, Aaron looked at the space Volvo. “Alright, you got my attention.” Hooting excitedly, Clak'Soon took over. “Blast proof -” “From the inside.” Ha’Mon said quietly. “- Industrial, max grade, atmospheric scrubbers -” Clak’Soon wasn’t deterred. “That sometimes removes the oxygen as well.” “- Emergency cargo hold separation -” “Which has a zero point five percent chance of auto-activating due to faulty sensors, jettisoning your cargo into space. Rinoxians aren’t known for reliability.” “Hey!” Clak’Soon, growing louder, had had enough. “You don’t like it? The human can fly this thing straight through another ship and he’ll probably be fine!” Ha’Mon yelled back, “You could never get close enough to ram another ship, those things are slower than… than… Slo!” “STOP!” The human silenced them both instantly. “I get it. Tough, but slow, and it might break or kill us. Let’s see what’s behind door number three.” They gave him a puzzled look before dismissing it as a human thing. Ha’Mon moved to stand beside the third option. “This is a Niham design, a basic hauler, but it does have a good size hold and space for four shuttles on board. It’s an Argo class, ten crew cabins and the captain’s quarters, a bit smaller than the others.” Ha’Mon stopped talking, the human was standing transfixed, looking at the Niham ship with a smile. Aaron rubbed his hands together. “You had me at Argo.” Clak’Soon gave him a puzzled look. “You’re a fan of farm animals?” “What?” The J’Rami explained, “Argo is an animal on Niham, the meat is very versatile. Like the ship.” Understanding dawning, of course it wasn’t an epic greek reference, the ship was basically a space pig. “Ahh. On my world Argo means something else.” He stood and waited, but they didn’t say anything more. “I’m waiting for the downside. What’s wrong with it?” Clak’Soon shrugged, and with his large shoulders it was an impressive feat. “They’re boring.” Ha’Mon’s head bobbed from side to side as he sort of agreed and disagreed. “They aren’t boring, they’re average. This one isn’t currently working; a few parts need replacing and there’s some damage to repair. It’s salvage. Raiders killed the crew and someone brought it in and sold it to Lek. Money gets split between the families of the survivors and the salvage crew. It’s already been cleaned, so no blood at least.” He gave a little shudder. “A couple of cycles and a good team, it’ll be fine.” A little annoyance tinged the human’s reply. “I don’t have a bicycle.” The J’Rami let Aaron’s strange phrasing slide over him and applied his superior logic. “Use a bigger crew.” The Kasurian engineer looked furious, opened his mouth to argue, and then stopped. “That might work, actually. There are always engineers and ship hands hanging around these places, waiting for someone to take them on. But we still need parts, and somewhere to work.” Aaron clapped his hands together, startling the others. “It’s a plan. Let’s find Lek; he should be back soon with security. He has to know someone who sells parts.” They walked outside to find Lek leaning against the wall. “Made your decision then?” Aaron looked around. “No security?” Lek laughed. “Tulseria’s balls, no. I’ve dealt with their kind before.” He gestured to the Gal. Fed. duo. “Know every ship inside and out, and have strong opinions on all of them. Bah, I have no chance. All they’ll do is criticise my choices to prove they know more than me.” Aaron gave a single nod of agreement. “We’ve chosen a ship.” “Of course you have! I said you were decisive, didn’t I?” Lek stood up straight and with a cheerful voice asked, “Which one? I’ll bet it’s the Rinoxian ship, hard to find one like that. You can keep those Inorganics in the secure hold. If they try anything funny” -he made a gesture with his hands indicating separation- “just shoot them into space and protect the real people.” Aaron's smile stayed in place but his eyes grew cold as he replied, “It’s the Argo.” Lek was a savvy businessman and could read people well. Something had changed in the human, and it was not a pleasant change. “Fine ship, good choice. You are aware it needs some repair work? I have it docked on a lower arm awaiting repairs. If you give me three cycles I’ll have it in a condition worthy of an Ambassador, four if you want any big alterations. Once we have the details finalised I can work on a price. Of course, as the ship was salvaged, you will need to register it again.” Aaron shook his head. “I don’t have that kind of time. Give me a price now, as it sits. I’ll hire my own repair team and buy the parts myself to speed things up.” Momentarily flummoxed, Lek was quick to rebound. “I have already hired a crew, they won’t be happy to lose out on three cycles of work.” A large J’Rami shadow fell across Lek. “Humans can be very persuasive.” Lek swallowed hard, recalling the video feed of the incident on Arkellis. “Fine. I was planning on selling that ship, once repaired, for over a million credits.” Clak’Soon scoffed. “You can buy a new one for that much!” With a smile Lek countered, “Maybe on Niham, but this is the fringe, my friend.” Aaron let out a long sigh. “Look. I don’t have time for this. How about we do the short version? I counter with half that, as the thing’s busted and I’m paying to fix it. You say nine hundred thousand because you’re an asshole, and I say six because I’m a bigger asshole. I say, I won’t pay over seven hundred. You’re trying to squeeze me so you’re going to say eight hundred, probably adding ‘it’s only this cheap because you like me’ or some other utter shite.” Lek was growing to like the human, he was exciting. “So we will both settle at seven hundred and fifty thousand credits. Yes?” “No.” Aaron leaned in close. “Remember, I’m the bigger asshole. Seven hundred, because I’m going to register this ship as an Earth vessel. Same as the K7. No sales tax or fees. Special Ambassador discount.” The Arkellian’s mind buzzed with possibilities. Was this legal? Probably not. Would anyone ask? Probably not. He always looked into new clients, especially those planning to spend a great deal. From what he’d seen and heard regarding the human, he was a walking loophole. Registration fees and sales tax could be anywhere from ten to thirty percent, depending on the world, and that’s if they even accepted your application. “Done.” Ha’Mon elbowed Aaron in the hip. “We also need the use of his repair station.” Aaron cracked his knuckles. “I’ll pay you twenty thousand credits for one cycle at the repair station. I’ll cover parts you supply, at cost plus five percent, and I’ll add five percent to the price if you help us get it done by morning.” Negotiations were a reflex for Lek, and he barely skipped a beat. “Ten percent on both.” “Done.” The Arkellian salesman began walking them back down the arm. “Your ship is at the repair station on the Himbak Arm. Drones, lifters, everything is there along with the team I hired. Dismiss them or hire them, it’s your problem now. You need more, try the Engineer’s Pit. I’d tell most people to avoid it but...” He looked at Aaron and then Clak’Soon, and an unpleasant grin spread across his face. “Some of them deserve your kind’s attention.” Clak’Soon laughed, still proud that Aaron was descended from an ape-like species in a similar way to himself. “No one will mess with the primates!” The human slapped the large J’Rami on the back. It was nice that he thought of him as one of his own. “Apes together strong.” He was going along with things right now, but he wasn’t a tool to be pointed at people Lek didn’t like. He was still harboring a grudge that the Arkellian had said Alexa wasn’t a real person. “Alright, that’s workers. What about parts?” The Arkellian looked genuinely angry, furious even. “Go see that miserly Doytaran, Essad Hoy, two decks down from the repair station and a quarter turn spinward. The crew I hired are preparing a list of what they will need.” The thinly-veiled hostility intrigued Aaron. “Something I should know?” Lek looked uncomfortable and avoided Aaron’s gaze. “Business disputes, and some personal grievances, ha. I’m a businessman and I look out for my interests. He doesn’t like that. Let’s get the paperwork out of the way; tiks are credits, as they say.” With a hefty bonus on the line the paperwork was processed remarkably quickly, helped along by the lack of requirements from the planet of registration. There was a lot more documentation for the extra-system ship, more regulations and protocols to be observed. Aaron hadn’t realised that he would get to rename the ship. Shuttles weren’t named but the larger ships were. He realised it made sense, as you had to distinguish between ships of the same class. The planet you registered with usually had naming rules, or a process to automatically assign a designation. Aaron marched from Lek’s office, a man on a mission, head held high and mind racing with the task ahead. Ha’Mon had to scamper to keep up and even Clak’Soon with his long legs was breathing heavily from the pace. The human came to a sudden halt before the Engineer’s Pit and turned to the others. He tapped his ear piece, wanting Slo to hear this as well. Once he had confirmed the Jaimsmae was listening he began. “First, I want to thank you guys for coming to help me choose a ship. It was a huge help. As far as I’m concerned, you’ve done me a big favour already. You never agreed to this next part. So, right here, I’m giving you the chance to walk away, no hard feelings. ” A large hand covered in orange fur rested on Aaron’s shoulder, and a large face with a toothy grin looked down at him. “You know nothing about ships. You need us. Anyway, this is the most fun I’ve had since I joined the security team. Shuttle bay guard is not as exciting as it sounds, you know? I’m with you.” Ha’Mon looked less enthusiastic but just as determined. “We’ll get your ship ready if I have to do the repairs myself.” Aaron delivered a gentle punch to the Kasurian’s shoulder. They all waited for Slo’s answer. “So you found a ship?” “He’s in.” Clak’soon slapped his hands together as he had seen the human do. It was surprisingly satisfying, he decided as he turned to Aaron. “Time to do things your way.” With a look of mild confusion Ha’Mon asked, “What is the human way?” Aaron gave a broad grin. “It’s like the wrong way, but faster.” With that he leaned back, raised his right leg and kicked open the double doors to the Engineer’s Pit.
This is a new post after some interest in a comment why I believed the S&P is going to 1700. Update 3: I am going to limit my answers in the comments guys; as the post becomes more popular it is becoming more diluted with snark etc. I don't expect anyone to follow my opinions; I just want to share one aspect of why I am making the trades I am. I maybe wrong. Random walk and all that.. Original Disclaimer: This is based on historical precedence and we are in unprecedented times but, with history as our guide a strong argument can be made for the S&P to decline to a level that is currently inconceivable.I have disclosed all my positions near the bottom. Update 1: Slightly long; happy to be challenged in the comments, it is late in the UK (2am) so may tidy it up and add more references and charts tomorrow.Update 2:Have expanded the post to answer as many comments and requests for references wherever possible and tagged in the requestors.
Intro: Are we in a recession?
If you believe so, or that we are heading into a recession then there are four things needed to support a genuine rally out of a recession
Improving economic health indicators
Accurate pricing reflecting the end of the recession and tempered optimism
We are missing 2 out of those 4 criteria; the overwhelming monetary and fiscal policy (world-records) are compensating for lack of positive indicators and volatile and bullishpricing.
What do you mean by pricing?
It can be argued that the current price of stocks is not discounting for the acute and likely chronic harm to consumer sentiment and spending power. For example; the UK clothing retailer Next Group closed their bricks and mortar stores (share price increased 4%) then they cancelled all online shopping (share price increased 3%) and finally they cancelled all orders with their supply chain (shares leapt 12.8% during the rally.) There is the massive amount of second, third and fourth order effects that this one company does to the UK economy (and Turkish factories). Suppliers, shipping, design, marketing etc all cancelled and the staff furloughed. This is one example but the indexes are currently full of similar examples and some analysts are ringing the alarm bells.
Lazard Asset Management are concerned that the pandemic “will persist longer than many investors suspect and that the economic damage will be deeper and potentially longer-lasting”.
Reddit is quick to mention that stonks only go up but there is some truth to that sentiment at present since any negative factors are dismissed as being priced in and all positive factors are heralded as a cause for stocks to rally. If priced in was accurate then we would not see record-beating market rallies back to back. 10% volatility swings over 48 hours is the very definition of not priced in. There is evidence to suggest that, well, the bullish sentiment is wrong and mainly because it is retail investors being taken for a ride whilst funds re-balance and offload. Retail traders "buying the dips" is normally a contrarian signal, meaning that it's time to sell. This section is for u/lntoIerant in response to a comment.
Edit to answer some comments about this portion thus far.
Do retail investors move the market?
No, they act as a sentiment indicator that the market is reaching a peak absurdity. Similar sentiments have preceded major recessions in the past. When you hear a layman offering stock tips or googling how to buy stocks then we are reaching the precipice of a depression. new market entrants are not the same as traditional retail investors.
Are retail investors buying in greater volumes?
That is hard to say because the majority of retail trades are done off-book. The trades are mixed in with portfolio moves or using the retail service which is a dark pool.
Are retail investors dumb money?
Well, no. Kind of. It depends. This white paper indicates that retail investors are more knowledgeable, more profitable and better informed than previously thought. However, a lot of their trades, as mentioned above, are done off-book as part of a larger portfolio and they simply lose a fraction of a basis point because market timing is not that critical.
What does this have to do with the S&P dividend and the EPS?
Major indexes are comprised of stocks that pay handsome dividends; normally 2% yield a year. The companies have reached their limit of growth (HSBC haven't discovered 5 million new customers and Shell are not finding new fossil fuels) so investors hold the stock for income-seeking reasons. The FTSE 100 was priced in to generate £89 billion in dividends for 2019 and £90 billion+ in 2020. That has largely collapsed. The only companies that pay dividends are those taking on debt to do so like Shell. And they have; a 10Bn credit line to maintain dividends. The Bank of Englandhad to slap 5 UK banks from issuing dividends at this time. That means that their primary valuations as income-generating stocks are questionable... ...especially since the dividends are not expected to return to the 2020 levels for another 10 years now. Edit to add: This portion is taken from the market report by BNY Mellon. You can see the chart here. The analyst is John Velis of BNY. Thanks to u/flash_aaaah_ahhhhh for prompting me.
“By 2021, the market expects dividends per share for the S&P 500 to be down to under $38 per share (a staggering 41 per cent drop from recent highs of approximately $63 per share) and then to start slowly rising again. Going out 10 years to 2030, the expectation is that dividends will just about recover to pre-Covid-19 levels.”
Main body: Onto the S&P
In 2021 the market expects the dividends per share for the S&P to be reduced to $38 per share. That is priced in and common knowledge. That is a 41% drop from the recent highs of $63 a share and seems alarming for income seeking investors since we are not expected to recover to those prices for 8-10 years. Source. But DataTrek have noted that we are still currently trading at 21X the trailing 10 year earnings of $122 a share. Dividends per share normally don't fall as far as earnings per share. But they are inverted at present. For the S&P to be trading at 2,650 level (or even higher) it means the market does not believe the pandemic or recession will have any long-term damage. That puts us squarely at odds with items 3 and 4 in our list of factors needed to exit a bear market.
In other recessions, including 2008, the dividend price per share drops approximately 12-15% but the earnings per share drop by considerably more; as much as 85%. That means that in 2008 financial crisis and subsequent bear market; the dividends per share dropped by a lower percentage amount than the total index value drop. You can see that in this chart here.
The market drop was approximately 56% and the Dividend drop was 14%
The market drop was 56% and the earnings drop was 85%
Right now, we have the reverse. Dividend share drop in this market is 41% (which is chilling) and market drop was approximately only 30% and rallying heavily back to the mid-20's only. That makes no financial sense unless the assets were being propped up by buyers...
S&P ATH: 3386 to 2488 on April 4th (26.5% drop)
S&P ATH Dividend: From $63 expected to $38 (a 41% drop)
S&P ATH EPS:
If the S&P follows the same playbook at 2008-9, then we would expect to see levels of around 1400 at the bottom but that seems extremely bearish expecting that this crisis is worse than 2008. If previous indications hold true, then we would expect the S&P to drop by approximately 50-60%ish at the true bottom to reflect the 41% decrease in expected shares plus additional discounts and negative market sentiment. In reality, we are probably likely to pull back to between 13X and 15X trailing average which puts the S&P between 1600 (low side) and 1800 (high side).
You are putting a lot of faith in a re-run of the 2008 crisis
I am. No doubt about it. After October 2008, stocks fell for another four months, piling up 40% of losses before the recently ended bull market began in March 2009.
New market indicators
Since I wrote this post, the DJIA was up over 4% and closed down on the day. Thank you to theTwitter feed of Jim Bianco for this: Since 1925 (95 yrs!), up more than 4% and closing down on the day has happened only one other time ... Oct 14, 2008 (Tsy Sec Hank Paulson forced the banks to take TARP money). The S&P 500 was up 3.5% at the high and closed down on the day. Since April 1982 (daily H,L,C began) has happened three other times...Oct 3, 08, Oct 14, 08, and Oct 17, 08. This mkt continues to trade like Oct 08. It was six months and another 25% down before the low. Bezinga are also playing up the 2008 similarities.
Why is bullish sentiment so wrong?
The negative reports are so wildly negative that the almost defy belief. We are dealing with insane numbers way beyond our traditional frame of reasoning. This is topped only by the insanity of the scale of quantitative easing. Less than a year ago, a small movement in the non-farm payrolls would lead to a 2-3% move in the markets; now we are hitting 700K jobs lost, a truly ugly number and the market rallies hugely. Future economic students will study this to try and understand what was happening. In the space of weeks the majority of the Western economies have swung to being effectively state-sponsored, centralised economies and no one really knows how to unwind these positions. It is impossible to reconcile being a bull with a centralised state economy and blue-chip stocks that refuse to pay dividends but the share price remains at the same levels as when they paid a 2% yield. The UK forecast is for the deepest contraction since 1900. Business surveys have shown activity crashing faster in March than during the financial crisis. The Office for National Statistics has published experimental research on the impact of Covid-19 on the economy.
With entire swaths of the economy having shut down “traditional forecasting methods become irrelevant”, warned Chiara Zangarelli, economist at investment bank Nomura.
Michelle Girard, economist at NatWest, said that while there was huge uncertainty about the precise magnitude of the contraction in gross domestic product in the second quarter, “there is little doubt that it will be off the scale” That is not a bullish sentiment. It means markets are acting irrationally since fundamentals are being dismissed as priced-in. In reality; nothing is priced in.
I am long VIX to 78 (expected by end of Apri but ideally by 24/4)
I am short India to 7800 (expected by 15/05)
I am short S&P to 2200 (expected by mid-late of May)and will be to 1810-50
I am short Dow to 19000 (expected by mid-late May)and will be again to 17000
I am short FTSE to 5200 and will be again to 4800 (expected by mid-late May)
No current active hedges / all spreads due to being tax free profits in the UK
Further spread betting the swings to the upside where I can to scalp
I am holding a portfolio of streaming services and gaming companies
I am holding Microsoft and Disney
I own a very small quantity of crypto, primarily XRP
Edit to add: So, your entire thesis is totally destroyed if companies keep paying dividends?
Yes. In a nutshell. But something else will be destroyed; the western taxpayer and future growth.
If companies are using 0% interest rates to take out loans and then transferring those loans a small 1% of the populace via dividends; that bill will come due to the citizen taxpayer and/or shareholder of the future
If companies are taking federal or governmental aid to furlough workers but still paying dividends to shareholders? That bill will come due to the citizen taxpayer and effectively is an even more extreme form of socialising market losses; it means that we truly can never have a correction since the top 1% will lose. Not lose the investment itself, which can rebound, but will simply lose the yield on an investment and only for a short period of time. If we have reached a point where that is considered unacceptable then we truly are living in a new socialist, centrally planned world.
Here is Tesco defending their decision today of £635m in dividends...despite receiving considerable amounts of VAT, Rates and Rental relief from the UK Government (£585m)...they have done an admirable job and are profitable but this market signal and their stated reasons for doing so are alarming.
CEO said 'every pound we receive [in rates relief] will be invested in ensuring Tesco is able to support British shoppers...' That is tax payers paying a subsidy to a free-market company for the ability to shop...and also... Mr Lewis said that the needs of savers and pension funds also needed to be considered in the debate around dividends. “We’ve thought long and hard about our responsibilities here . . . we are in a strong position to pay out for the benefit of those people
Edit to add: What about the FED and stimulus
u/tauriel81 and u/aliveintucson325 and u/100PERCENTYOLO_VEQT OK - to truly test my own assumptions; here is my argument AGAINST my position. The Fed have not quite printed money as Reddit loves to meme. They have issued liquidity and central banks worldwide have allowed banks to relax their requirement to hold reserves of cash. That injects money into the business world by allowing lending and borrowing to continue. It also reduces theoretical risk since the models are back within tolerance. When the time comes they will remove the credits gradually without causing hyperinflation. They do this by paying banks not to lend back into the system by holding a % of their assets at the Federal Reserve. So they pay the banks but the banks keep the deposit at the Fed and don't pass on the liquidity to potential borrowers..gradually and sustainably. https://www.aier.org/article/powells-new-monetary-regime/ That means the borrower of the future (home purchasers, entreprenuers etc) will have very few credit facilities available so RIP to the long-term economic growth. We also have unprecedented government support for citizens. The largest social security welfare plan since WW2, especially in Europe. If you believe that the Western economies can weather this storm using the bridging devices by central banks then it pays to dollar cost average into the market and keep buying the dips as a retail investor. Lots of buoyant news from European nations and China about the slowing pandemic is overwhelming the negative leading and lagging economic indicators about economic data. If you believe the economy can return to normal within 36 months, then it pay to be bullish and invest. If you are day-trading, swing-trading or short-term options trading then the overwhelming market moves are likely to crush people as the system flexes under lots of volatility. You are also likely prioritising the negative news and technical analysis in your filter bubble and de-prioritising the positive news particularly when that news is fiscal or monetary policy since those things are dry, boring and incomprehensible half the time. So you miss Fed backstops critical bankingi and instead hear UK Prime Minister in intensive care. If you want to know what is going on...
Look at the short term fundamentals
Zoom out. Re-look.
Zoom out to an even longer timeline. Re-look.
Zoom out to an even even longer timeline. Re-look.
Zoom out to an even even even longer timeline. Re-look.
Decide where you making a prediction. Plan your trade, trade your plan. How do the FED take money back out of the economy? They FED purchase the security initially to then sell it back to the asset-holder later. So the balance of credit-deficit merely swaps but by paying a small premium on the excesses that they hold, they can cushion the inflation or deflation of the currency. So, they effectively give the bank liquidity and then remove that liquidity later by passing the asset back...but also provide a small premium to cushion the blow; 50% of the premium is then held on Federal Reserve books so that the market is not flooded with new money. The FED previously reduced their balance sheet from $4.4 trillion to $3.7 trillion but it remains to be seen if they can unwind a position of this size.
2 out of the 4 necessities for exiting a recession are not present
S&P currently trading at 21X the trailing 10 year average dividend
In previous recessions a 50% drop in the market was accompanied by a 15% drop in dividends
Market analysts expecting for a 41% drop in dividends but only trading a 26% drop in the market. At present the S&P dividend per share drop is 41% but the S&P is rallying back to less than 20% drop...whilst dividends are not expected to return to 2019 levels of income for 8-10 years
In previous recessions the dividend per share drop is much less than the overall index drop
S&P highly overvalued, completely inverted when compared with dividend expectation and market dividend pricing
S&P pull back to 1600-1800 over short-medium time frame (1 month-6 months).
If market history is to be believed then 1400 is not unfeasible based on percentages but you have to be hoping for a total economic destruction for this to happen.; expect a total Governmental response if this happens.
If S&P continues to rise then it indicates companies are taking on debt or other instruments to pay dividends rather than innovate, upgrade or consolidate their business position which some are (Shell etc).
Economic data will eventually overpower the stimulus and the Coronavirus is not priced in; hardly anything is priced in and analysts are now saying so publicly.
Bitch you better read if you want your Robinhood to look like this: gainz, bitch Why am I telling you this? Because I like your dumb asses. Even dickbutts like cscqb4. And because I like seeing Wall St. fucking get rekt. Y’all did good until now, and Wall St. is salty af. Just google for “retail traders” news if you haven’t seen it, and you’ll see the salty tears of Wall Street assholes. And I like salty Wall St. assholes crying like bitches. https://www.zerohedge.com/markets/retail-investors-are-crushing-hedge-funds-again That said, some of you here are really motherfucking dense & the sheer influx of retardation has been driving away some of the more knowledgeable folks on this sub. In fact, in my last post, y'all somehow managed to downvote to shit the few guys that really understood the points I was making and tried to explain it to you poo-slinging apes. Stop that shit yo! A lot of you need to sit the fuck down, shut your fucking mouth and listen. So I'm going to try and turn you rag-tag band of dimwits into a respectable army of peasants that can clap some motherfucking Wall Street cheeks. Then, I'm going to give you a mouthbreather-proof trade that I don't think even you knuckleheads can mess up (though I may be underestimating you). If you keep PM-ing me about your stupid ass losses after this, I will find out where you live and personally, PERSONALLY, shit on your doorstep. This is going to be a long ass post. Read the damned post. I don't care if you're dyslexic, use text-to-speech. Got ADHD? Pop your addys, rub one out, and focus! Are you 12? Make sure to go post in the paper trading contest thread first. THE RULES:
Understand that most of this sub has the critical reading skills of a 6 year old and the attention span of a goldfish. As such, my posts are usually written with a level of detail aimed at the lowest common denominator. A lot of details on the thesis are omitted, but that doesn't mean that the contents in the post are all there is to it. If I didn't do that, every post'd have to be longer than this one, and 98% of you fucks wouldn't read it anyway. Fuck that.
Understand that my style of making plays is finding the >10+ baggers that are underpriced. As such, ALL THE GOD DAMN PLAYS I POST ARE HIGH-RISK / HIGH-REWARD. Only play what you can afford to risk. And stop PM-ing me the second the market goes the other way, god damn it! If you can't manage your own positions, I'm going to teach your ass the basics.
Do you have no idea what you're doing and have a question? Google it first. Then google it again. Then Bing it, for good measure. Might as well check PornHub too, you never know. THEN, if you still didn't find the answer, you ask.
This sub gives me Tourette's. If you got a problem with that, well fuck you.
This shit is targeted at the mouthbreathers, but maybe more knowledgeable folk’ll find some useful info, idk. How do you know if you’re in the mouthbreather category? If your answer to any of the following questions is yes, then you are:
Are you new to trading?
Are you unable to manage your own positions?
Did you score into the negatives on the SAT Critical Reading section?
Do you think Delta is just an airline?
Do you buy high & sell low?
Do you want to buy garbage like Hertz or American Airlines because it's cheap?
Did you buy USO at the bottom and are now proud of yourself for making $2?
Do you think stOnKs oNLy Go uP because Fed brrr?
Do you think I'm trying to sell you puts?
If you take a trade you see posted on this sub and are down, do you PM the guy posting it?
Do you generally PM people on this sub to ask them basic questions?
Is your mouth your primary breathing apparatus?
Well I have just the thing for you! Table of Contents: I. Maybe, just maybe, I know what I’m talking about II. Post-mortem of the February - March 2020 Great Depression III. Mouthbreather's bootcamp on managing a position – THE TECHNICALS IV. Busting your retarded myths V. LIQUIDITY NUKE INBOUND VI. The mouthbreather-proof trade - The Akimbo VII. Quick hints for non-mouthbreathers Chapter I - Maybe, just maybe, I know what I’m talking about I'm not here to rip you off. Every fucking time I post something, a bunch of dumbasses show up saying I'm selling you puts or whatever the fuck retarded thoughts come through their caveman brains.
Sit down, Barney, I'm not here to scam you for your 3 cents on OTM puts. Do I always get it right? Of course not, dumbasses. Eurodollar play didn't work out (yet). Last TQQQ didn't work out (yet). That’s just how it goes. Papa Buffet got fucked on airlines. Plain retard Burry bought GME. What do you fucking expect? Meanwhile, I keep giving y'all good motherfucking plays:
28/10/2019: "I'ma say this again, in case you haven't heard me the first time. BUY $JNK PUTS NOW!". Strike: "11/15, 1/17 and 6/19". "This thing can easily go below 50, so whatever floats your boat. Around $100 strike is a good entry point."
3/9/2020: "I mean it's a pretty obvious move, but $JNK puts."
3/19/2020, 12pm: "UVXY put FDs are free money." & “Buy $UVXY puts expiring tomorrow if we're still green at 3pm. Trust me.”
3/24/2020: “$UUP 3/27 puts at $27.5 or $27 should be 10-baggers once the bill passes. I'd expect it to go to around $26.”
And of course, the masterpiece that was the TQQQ put play. Chapter II. Post-mortem of the February - March 2020 Great Depression Do you really understand what happened? Let's go through it. I got in puts on 2/19, right at the motherfucking top, TQQQ at $118. I told you on 2/24 TQQQ ($108) was going to shit, and to buy fucking puts, $90ps, $70ps, $50ps, all the way to 3/20 $30ps. You think I just pulled that out of my ass? You think I just keep getting lucky, punks? Do you have any idea how unlikely that is? Well, let's take a look at what the fuckstick Kevin Cook from Zacks wrote on 3/5: How Many Sigmas Was the Flash Correction Plunge?
"Did you know that last week's 14% plunge in the S&P 500 SPY was so rare, by statistical measures, that it shouldn't happen once but every 14,000 years?" "By several measures, it was about a 5-sigma move, something that's not "supposed to" happen more than once in your lifetime -- or your prehistoric ancestors' lifetimes! "According to general statistical principles, a 4-sigma event is to be expected about every 31,560 days, or about 1 trading day in 126 years. And a 5-sigma event is to be expected every 3,483,046 days, or about 1 day every 13,932 years."
On 3/5, TQQQ closed at $81. I just got lucky, right? You should buy after a 5-sigma move, right? That's what fuckstick says:
"Big sigma moves happen all the time in markets, more than any other field where we collect and analyze historical data, because markets are social beasts subject to "wild randomness" that is not found in the physical sciences. This was the primary lesson of Nassim Taleb's 2007 book The Black Swan, written before the financial crisis that found Wall Street bankers completely ignorant of randomness and the risks of ruin." I also took advantage of the extreme 5-sigma sell-off by grabbing a leveraged ETF on the Nasdaq 100, the ProShares UltraPro QQQ TQQQ. In my plan, while I might debate the merits of buying AAPL or MSFT for hours, I knew I could immediately buy them both with TQQQ and be rewarded very quickly after the 14% plunge."
"The plunge in US equities yesterday (12 March) pushed weekly returns down to 7.7 standard deviations below the norm. In statistical science, the odds of a greater-than seven-sigma event of this kind are astronomical to the point of being comical (about one such event every 160 billion years).
Let's see what Stephen Mathai-Davis, CFA, CQF, WTF, BBQ, Founder and CEO of Q.ai - Investing Reimagined, a Forbes Company, and a major fucktard has to say at this point:
"Our AI models are telling us to buy SPY (the SPDR S&P500 ETF and a great proxy for US large-cap stocks) but since all models are based on past data, does it really make sense? " "While it may or may not make sense to buy stocks, it definitely is a good time to sell “volatility.” And yes, you can do it in your brokerage account! Or, you can ask your personal finance advisor about it." "So what is the takeaway? I don’t know if now is the right time to start buying stocks again but it sure looks like the probabilities are in your favor to say that we are not going to experience another 7 standard deviation move in U.S. Stocks. OTM (out-of-the-money) Put Spreads are a great way to get some bullish exposure to a rally in the SPY while also shorting such rich volatility levels."
"tinygiraffe21 1 point 2 months ago Haha when? I’m loading up in 4/17 25 puts" "dlkdev Scratch that, helicopter money is here." "AfgCric 1 point 2 months ago What does that mean?" "It means the Fed & Trump are printing trillions with no end in sight. If they go through with this, this was probably the bottom."
Idiot, I have no way of knowing that Billy boy Ackman was going to go on CNBC and cry like a little bitch to make everyone dump, so he can get out of his shorts. Just like I have no way of knowing when the Fed decides to do a bailout. But you react to that, when you see it. Do you think "Oh no world's ending" and go sell everything? No, dumbass, you try to figure out what Billy's doing. And in this case it was pretty obvious, Billy saw the Fed train coming and wanted to close his shorts. So you give the dude a hand, quick short in and out, and position for Billy dumping his short bags. Video of Billy & the Fed train Here's what Billy boy says:
“But if they don’t, and the government takes the right steps, this hedge could be worth zero, and the stock market could go right back up to where it was. So we made the decision to exit.”
https://www.businessinsider.sg/bill-ackman-explains-coronavirus-trade-single-best-all-time-podcast-2020-5 Also, “the single best trade of all time.” my ass, it was only a 100-bagger. I gave y’all a 150-bagger. So how could I catch that? Because it wasn't random, yo. And I'm here to teach your asses how to try to spot such potential moves. But first, the technical bootcamp. Chapter III. Mouthbreather's bootcamp on managing a position – THE TECHNICALS RULE 1. YOU NEVER BUY OPTIONS AT OPEN. You NEVER OVERPAY for an option. You never FOMO into buying too fast. You NEVER EVER NEVER pump the premium on a play. I saw you fuckers buying over 4k TQQQ 5/22 $45 puts in the first minutes of trading. You pumped the premium to over $0.50 dudes. The play's never going to work if you do that, because you give the market maker free delta, and he's going to hedge that against you. Let me explain simply: Let's say a put on ticker $X at strike $50 is worth $1, and a put at strike $51 is worth $2. If you all fomo in at once into the same strike, the market maker algos will just pull the asks higher. If you overpay at $2 for the $50p, the market maker will just buy $51ps for $2 and sell you $50ps for 2$. Or he'll buy longer-dated $50ps and sell you shorter-dated $50ps. Max risk for him is now 0, max gain is $1. You just gave him free downside insurance, so of course he's going to start going long. And you just traded against yourself, congrats. You need to get in with patience, especially if you see other autists here wanting to go in at the same time. Don't step on each other's toes. You put in an order, and you wait for it to fill for a couple of seconds. If it doesn't fill, AND the price of the option hasn't moved much recently, you can bump the bid $0.01. And you keep doing that a few times. Move your strikes, if needed. Only get a partial fill or don't get a fill at all? You cancel your bid. Don't fucking leave it hanging there, or you're going to put a floor on the price. Let the mm algos chill out and go again later. RULE 2. WATCH THE TIME. Algos are especially active at x:00, x:02, x:08, x:12, x:30 and x:58. Try not to buy at those times. RULE 3. YOU USE MULTIPLE BROKERS. Don't just roll with Robinhood, you're just gimping yourself. If you don't have another one, open up a tasty, IB, TD, Schwab, whatever. But for cheap faggy puts (or calls), Robinhood is the best. If you want to make a play for which the other side would think "That's free money!", Robinhood is the best. Because Citadel will snag that free money shit like no other. Seriously, if you don't have a RH account, open one. It's great for making meme plays. RULE 4. YOU DON'T START A TRADE WITH BIG POSITIONS. Doesn't matter how big or small your bankroll is. If you go all-in, you're just gambling, and the odds are stacked against you. You need to have extra cash to manage your positions. Which leads to RULE 5. MANAGING YOUR WINNERS: Your position going for you? Good job! Now POUND THAT SHIT! And again. Move your strikes to cheaper puts/calls, and pound again. And again. Snowball those gains. RULE 6A. POUND THOSE $0.01 PUTS: So you bought some puts and they’re going down? Well, the moment they reach $0.01, YOU POUND THOSE PUTS (assuming there’s enough time left on them, not shit expiring in 2h). $0.01 puts have amazing risk/return around the time they reach $0.01. This is not as valid for calls. Long explanation why, but the gist of it is this: you know how calls have unlimited upside while puts have limited upside? Well it’s the reverse of that. RULE 6B. MANAGING YOUR LOSERS: Your position going against you? Do you close the position, take your loss porn and post it on wsb? WRONG DUMBASS. You manage that by POUNDING THAT SHIT. Again and again. You don't manage losing positions by closing. That removes your gainz when the market turns around. You ever close a position, just to have it turn out it would have been a winner afterwards? Yeah, don't do that. You manage it by opening other positions. Got puts? Buy calls. Got calls? Buy puts. Turn positions into spreads. Buy spreads. Buy the VIX. Sell the VIX. They wanna pin for OPEX? Sell them options. Not enough bankroll to sell naked? Sell spreads. Make them fight you for your money, motherfuckers, don't just give it away for free. When you trade, YOU have the advantage of choosing when and where to engage. The market can only react. That's your edge, so USE IT! Like this: Example 1: Initial TQQQ 5/22 position = $5,000. Starts losing? You pound it. https://preview.redd.it/gq938ty8e5151.png?width=944&format=png&auto=webp&s=734ab7ed517f0e6822bfaaed5765d1272de398d1 Total pounded in 5/22 TQQQ puts = $10,824. Unfortunately expired worthless (but also goes to show I'm not selling you puts, dickwads) Then the autists show up:
"Hahaha you lost all your money nice job you fucking idiot why do you even live?" - cscqb4
You have a downside position, but market going up or nowhere? You play that as well. At least make some money back, if not profit. Example 2: 5/22, long weekend coming right? So you use your brain & try to predict what could happen over the 3-day weekend. Hmm, 3 day weekend, well you should expect either a shitty theta-burn or maybe the pajama traders will try to pooomp that shite on the low volume. Well make your play. I bet on the shitty theta burn, but could be the other, idk, so make a small play. Sold some ES_F spreads (for those unaware, ES is a 50x multiplier, so 1 SPX = 2 ES = 10 SPY, approximately). -47x 2955/2960 bear call spreads for $2.5. Max gain is $2.5, max loss is 2960-2955 = $5. A double-or-nothing basically. That's $5,875 in premium, max loss = 2x premium = $11,750. Well, today comes around and futures are pumping. Up to 3,014 now. Do you just roll over? You think I'm gonna sit and take it up the ass? Nah bros that's not how you trade, you fucking fight them. How? I have: 47x 2960 calls -47x 2955 calls Pajama traders getting all up in my grill? Well then I buy back 1 of the 2955 calls. Did that shit yesterday when futures were a little over 2980, around 2982-ish. Paid $34.75, initially shorted at $16.95, so booked a -$892 loss, for now. But now what do I have? 46x 2955/2960 bear calls 1x 2960 long call So the fuckers can pump it. In fact, the harder they pump it, the more I make. Each $2.5 move up in the futures covers the max loss for 1 spread. With SPX now at ~3015, that call is $55 ITM. Covers 24/46 contracts rn. If they wanna run it up, at 3070 it's break-even. Over that, it's profit. I'll sell them some bear call spreads over 3050 if they run it there too. They gonna dump it? well under 2960 it's profit time again. They wanna do a shitty pin at 3000 today? Well then I'll sell them some theta there. Later edit: that was written yesterday. Got out with a loss of only $1.5k out of the max $5,875. Not bad. And that, my dudes, is how you manage a position. RULE 7 (ESPECIALLY FOR BEARS). YOU DON'T KEEP EXTRA CASH IN YOUR BROKER ACCOUNT. You don't do it with Robinhood, because it's a shitty dumpsterfire of a broker. But you don't do it with other brokers either. Pull that shit out. Preferably to a bank that doesn't play in the markets either, use a credit union or some shit. Why? Because you're giving the market free liquidity. Free margin loans. Squeeze that shit out, make them work for it. Your individual cash probably doesn't make a dent, but a million autists with an extra $1200 trumpbucks means $1.2b. That's starting to move the needle. You wanna make a play, use instant deposits. And that way you don't lose your shit when your crappy ass broker or bank gets its ass blown up on derivative trades. Even if it's FDIC or SIPC insured, it's gonna take time until you see that money again. Chapter IV. BUSTING YOUR RETARDED MYTHS MYTH 1 - STONKS ONLY GO UP Do you think the market can go up forever? Do you think stOnKs oNLy Go uP because Fed brrr? Do you think SPX will be at 5000 by the end of the month? Do you think $1.5 trillion is a good entry point for stonks like AAPL or MSFT? Do you want to buy garbage like Hertz or American Airlines because it's cheap? Did you buy USO at the bottom and are now proud of yourself for making $2? Well, this section is for you! Let's clear up the misconception that stonks only go up while Fed brrrs. What's your target for the SPX top? Think 3500 by the end of the year? 3500 by September? 4000? 4500? 5000? Doesn't matter, you can plug in your own variables. Let's say SPX only goes up, a moderate 0.5% each period as a compounded avg. (i.e. up a bit down a bit whatever, doesn't matter as long as at the end of your period, if you look back and do the math, you'll get that number). Let's call this variable BRRR = 0.005. Can you do the basic math to calculate the value at the end of x periods? Or did you drop out in 5th grade? Doesn't matter if not, I'll teach you. Let's say our period is one week. That is, SPX goes up on average 0.5% each week on Fed BRRR: 2950 * (1.005^x), where x is the number of periods (weeks in this case) So, after 1 month, you have: 2950 * (1.005^4) = 3009 After 2 months: 2950 * (1.005^8) = 3070 End of the year? 2950 * (1.005^28) = 3392 Now clearly, we're already at 3015 on the futures, so we're moving way faster than that. More like at a speed of BRRR = 1%/wk 2950 * (1.01^4) = 3069 2950 * (1.01^8) = 3194 2950 * (1.01^28) = 3897 Better, but still slower than a lot of permabulls would expect. In fact, some legit fucks are seriously predicting SPX 4000-4500 by September. Like this dude, David Hunter, "Contrarian Macro Strategist w/40+ years on Wall Street". IDIOTIC. https://twitter.com/DaveHcontrarian/status/1263066368414568448 That'd be 2950 * (BRRR^12) = 4000 => BRRR = 1.0257 and 2950 * (BRRR^12) = 4500 => BRRR = 1.0358, respectively. Here's why that can't happen, no matter the amount of FED BRRR: Leverage. Compounded Leverage. There's currently over $100b in leveraged etfs with a 2.5x avg. leverage. And that's just the ones I managed to tally, there's a lot of dogshit small ones on top of that. TQQQ alone is now at almost $6b in AUM (topped in Fed at a little over $7b). Now, let's try to estimate what happens to TQQQ's AUM when BRRR = 1.0257. 3XBRRR = 1.0771. Take it at 3XBRRR = 1.07 to account for slippage in a medium-volatility environment and ignore the fact that the Nasdaq-100 would go up more than SPX anyway. $6,000,000,000 * (1.07^4) = $7,864,776,060 $6,000,000,000 * (1.07^8) = $10,309,100,000 $6,000,000,000 * (1.07^12) = $13,513,100,000 $6,000,000,000 * (1.07^28) = $39,893,000,000. What if BRRR = 1.0358? => 3XBRR = 1.1074. Take 3XBRRR = 1.10. $6,000,000,000 * (1.1^4) = $8,784,600,000 $6,000,000,000 * (1.1^8) = $12,861,500,000 $6,000,000,000 * (1.1^12) = $18,830,600,000 $6,000,000,000 * (1.1^28) = $86,526,000,000 And this would have to get 3x leveraged every day. And this is just for TQQQ. Let's do an estimation for all leveraged funds. $100b AUM, 2.5 avg. leverage factor, BRRR = 1.0257 => 2.5BRRR = 1.06425 $100b * (1.06^4) = $128.285b $100b * (1.06^8) = $159.385b $100b * (1.06^12) = $201.22b $100b * (1.06^28) = $511.169b That'd be $1.25 trillion sloshing around each day. And the market would have to lose each respective amount of cash into these leveraged funds. Think the market can do that? You can play around with your own variables. But understand that this is just a small part of the whole picture, many other factors go into this. It's a way to put a simple upper limit on an assumption, to check if it's reasonable. In the long run, it doesn't matter if the Fed goes BRRR, if TQQQ takes in it's share of 3XBRRR. And the Fed can't go 3XBRRR, because then TQQQ would take in 9XBRRR. And on top of this, you have a whole pile of leveraged derivatives on top of these leveraged things. Watch (or rewatch) this: Selena Gomez & Richard H. Thaler Explaining Synthetic CDO through BLACKJACK My general point, at the mouth-breather level, is that Fed BRRR cannot be infinite, because leverage. And these leveraged ETFs are flawed instruments in the first place. It didn't matter when they started out. TQQQ and SQQQ started out at $8m each. For the banks providing the swaps, for the market providing the futures contracts, whatever counter-party to whatever instrument they would use, that was fine. Because it balanced out. When TQQQ made a million, SQQQ lost a million (minus a small spread, which was the bank's profit). Bank was happy, in the long run things would even out. Slippage and spreads and fees would make them money. But then something happened. Stonks only went up. And leveraged ETFs got bigger and more and more popular. And so, TQQQ ended up being $6-7b, while SQQQ was at $1b. And the same goes for all the other ETFs. Long leveraged ETF AUM became disproportionate to short AUM. And it matters a whole fucking lot. Because if you think of the casino, TQQQ walks up every day and says "I'd like to put $18b on red", while SQQQ walks up and says "I'd only like to put $3b on black". And that, in turn, forces the banks providing the swaps to either eat shit with massive losses, or go out and hedge. Probably a mix of both. But it doesn't matter if the banks are hedged, someone else is on the other side of those hedges anyway. Someone's eating a loss. Can think of it as "The Market", in general, eating the loss. And there's only so much loss the market can eat before it craps itself. If you were a time traveller, how much money do you think you could make by trading derivatives? Do you think you could make $20 trillion? You know the future prices after all... But no, you couldn't. There isn't enough money out there to pay you. So you'd move the markets by blowing them up. Call it the Time-travelling WSB Autist Paradox. If you had a bucket with a hole in the bottom, even if you poured an infinite amount of water into it, it would never be full. Because there's a LIQUIDITY SINK, just like there is one in the markets. And that, my mouth-breathing friends, is the reason why FED BRRR cannot be infinite. Or alternatively, "STONKS MUST GO BOTH UP AND DOWN". MYTH 2 - YOU CAN'T TIME THE MARKET On Jan 14, 2020, I predicted this: Assuming that corona doesn't become a problem, "AAPL: Jan 28 $328.3, Jan 31 $316.5, April 1 $365.7, May 1 $386, July 1 $429 December 31 $200." Now take a look at the AAPL chart in January. After earnings AAPL peaked at $327.85. On 1/31, after the 1st hour of trading, when the big boys make moves, it was at $315.63. Closed 1/31 at $309.51. Ya think I pulled this one out of my ass too? Yes you can time it. Flows, motherfucker, flows. Money flow moves everything. And these days, we have a whole lot of RETARDED FLOW. Can't even call it dumb flow, because it literally doesn't think. Stuff like:
ETF flows. If MSFT goes up and AAPL goes down, part of that flow is going to move from AAPL to MSFT. Even if MSFT flash-crashes up to $1000, the ETF will still "buy". Because it's passive.
Option settlement flows. Once options expire, money is going to flow from one side to another, and that my friends is accurately predictable from the data.
Index rebalancing flows
401k passive flows
Carry trade flows
Tax day flows
Flows of people front-running the flows
And many many others. Spot the flow, and you get an edge. How could I predict where AAPL would be after earnings within 50 cents and then reverse down to $316 2 days later? FLOWS MOTHERFUCKER FLOWS. The market was so quiet in that period, that is was possible to precisely figure out where it ended up. Why the dump after? Well, AAPL earnings (The 8-K) come out on a Wednesday. The next morning, after market opens the 10-Q comes out. And that 10-Q contains a very important nugget of information: the latest number of outstanding shares. But AAPL buybacks are regular as fuck. You can predict the outstanding shares before the market gets the 10-Q. And that gives you EDGE. Which leads to MYTH 3 - BUYBACKS DON'T MATTER Are you one of those mouthbreathers that parrots the phrase "buybacks are just a tax-efficient way to return capital to shareholders"? Well sit the fuck down, I have news for you. First bit of news, you're dumb as shit. Second bit: On 1/28, AAPL's market cap is closing_price x free_float_outstanding_shares. But that's not the REAL MARKET CAP. Because the number of outstanding shares is OLD AS FUCK. When the latest number comes out, the market cap changes instantly. And ETFs start moving, and hedges start being changed, and so on.
"But ETFs won't change the number of shares they hold, they will still hold the same % of AAPL in the index" - random_wsb_autist
Oh my fucking god you're dumb as fuck. FLOWS change. And the next day, when TQQQ comes by and puts its massive $18b dong on the table, the market will hedge that differently. And THAT CAN BE PREDICTED. That's why AAPL was exactly at $316 1 hour after the market opened on 1/31. So, what can you use to spot moves? Let me show you: Market topped on 2/19. Here’s SPY. I even marked interesting dates for you with vertical lines. https://preview.redd.it/7agm171eh5151.png?width=3713&format=png&auto=webp&s=d94b90dcd634c8dc688925585bf0a02c3299f71b Nobody could have seen it coming, right? WRONG AGAIN. Here: https://preview.redd.it/i1kdp3cgh5151.png?width=3713&format=png&auto=webp&s=7a1e086e9217846547efd3b6c5249f4a7ebe6d9e In fact, JPYUSD gave you two whole days to see it. Those are NOT normal JPYUSD moves. But hey maybe it’s just a fluke? Wrong again. https://preview.redd.it/fsyhenckh5151.png?width=3693&format=png&auto=webp&s=03200e10b008257ae15d40b474c4cf4d8c23670f Forex showed you that all over the place. Why? FLOWS MOTHERFUCKER FLOWS. When everything moves like that, it means the market needs CASH. It doesn’t matter why, but remember people pulling cash out of ATMs all over the world? Companies drawing massive revolvers? Just understand what this flow means. The reversal: https://preview.redd.it/4xe97l0oh5151.png?width=1336&format=png&auto=webp&s=07aaa93f6b1d8f542101e40e431edccbc109918f https://preview.redd.it/v6i0pdmoh5151.png?width=1338&format=png&auto=webp&s=74d5589961db2f978d4d582e6d7c58a85f6305f9 But it wasn’t just forex. Gold showed it to you as well. Bonds showed it to you as well. https://preview.redd.it/40j53u8th5151.png?width=3711&format=png&auto=webp&s=fe39ab51321d0f98149d33e33253e69f96c48e23 Even god damn buttcoin showed it to you. https://preview.redd.it/43lvafhvh5151.png?width=3705&format=png&auto=webp&s=1ef53283cbc0fb97f71c1ba935c0bd747809636e And they all did it for 2 days before the move hit equities. Chapter V. LIQUIDITY NUKE INBOUND You see all these bankruptcies that happened so far, and all the ones that are going to follow? Do you think that’s just dogshit companies and it won’t have major effects on anything outside them? WRONG. Because there’s a lot of leveraged instruments on top of those equities. When the stock goes to 0, all those outstanding puts across all expirations get instantly paid. Understand that Feb-March was a liquidity MOAB. But this will end with a liquidity nuke. Here’s just HTZ for example: $239,763,550 in outstanding puts. Just on a single dogshit small-cap company (this thing was like $400m mkt. cap last week). And that’s just the options on the equity. There’s also instruments on etfs that hold HTZ, on the bonds, on the ETFs that hold their bonds, swaps, warrants, whatever. It’s a massive pile of leverage. Then there’s also the ripple effects. Were you holding a lot of HTZ in your brokerage margin account? Well guess what big boi, when that gaps to 0 you get a margin call, and then you become a liquidity drain. Holding long calls? 0. Bonds 0. DOG SHIT! And the market instantly goes from holding $x in assets (HTZ equity / bonds / calls) to holding many multiples of x in LIABILITIES (puts gone wrong, margin loans, derivatives books, revolvers, all that crap). And it doesn’t matter if the Fed buys crap like HTZ bonds. You short them some. Because when it hits 0, it’s no longer about supply and demand. You get paid full price, straight from Jerome’s printer. Is the Fed going to buy every blown up derivative too? Because that's what they'd have to do. Think of liquidity as a car. The faster it goes, the harder it becomes to go even faster. At some point, you can only go faster by driving off a cliff. THE SQUEEZE. But you stop instantly when you hit the ground eventually. And that’s what shit’s doing all over the place right now. Rewatch: https://www.youtube.com/watch?v=3hG4X5iTK8M And just like that fucker, “I’m standing in front of a burning house, and I’m offering you fire insurance on it.” Don’t baghold! Now is not the time to baghold junk. Take your cash. Not the time to buy cheap crap. You don’t buy Hertz. You don’t buy USO. You don’t buy airlines, or cruises, or GE, or motherfucking Disney. And if you have it, dump that shit. And the other dogshit that’s at ATH, congrats you’re in the green. Now you take your profits and fucking dump that shit. I’m talking shit like garbage SaaS, app shit, AI shit, etc. Garbage like MDB, OKTA, SNAP, TWLO, ZM, CHGG etc. And you dump those garbage ass leveraged ETFs. SQQQ, TQQQ, whatever, they’re all dogshit now. The leverage MUST unwind. And once that’s done, some of you will no longer be among us if you don’t listen. A lot of leveraged ETFs will be gone. Even some non-leveraged ETFs will be gone. Some brokers will be gone, some market makers will be gone, hell maybe even some big bank has to go under. I can’t know which ones will go poof, but I can guarantee you that some will. Another reason to diversify your shit. There’s a reason papa Warrant Buffet dumped his bags, don’t think you’re smarter than him. He may be senile, but he’s still a snake. And once the unwind is done, THEN you buy whatever cheap dogshit’s still standing. Got it? Good. You feel ready to play yet? Alright, so you catch a move. Or I post a move and you wanna play it. You put on a small position. When it’s going your way, YOU POUND DAT SHIT. Still going? Well RUSH B CYKA BLYAT AND PLANT THE GOD DAMN 3/20 $30p BOMB. Chapter VI - The mouthbreather-proof play - THE AKIMBO Still a dumbass that can’t make a play? Still want to go long? Well then, I got a dumbass-proof trade for you. I present to you THE AKIMBO: STEP 1. You play this full blast. You need some real Russian hardbass to get you in the right mood for trading, cyka. STEP 2. Split your play money in 3. Remember to keep extra bankroll for POUNDING THAT SHIT. STEP 3. Use 1/3 of your cash to buy SQQQ 9/18 $5p, pay $0.05. Not more than $0.10. STEP 4. Use 1/3 of your cash to buy TQQQ 9/18 $20p, pay around $0.45. Alternatively, if you’re feeling adventurous, 7/17 $35p’s for around $0.5. STEP 5. Use 1/3 of your cash to buy VIX PUT SPREADS 9/15 $21/$20 spread for around $0.15, no more than $0.25. That is, you BUY the 21p and SELL the 20p. Only using Robinhood and don’t have the VIX? What did I just tell you? Well fine, use UVXY then. Just make sure you don’t overpay. Chapter VII - Quick hints for non-mouthbreathers Quick tips, cuz apparently I'm out of space, there's a 40k character limit on reddit posts. Who knew?
Cheating Boyfriend Betrayed by His Good Christian Sister in the Best Possible Way
This story is now somewhat famous in my circle of friends, and one finally roped me into spilling it on here (here you go Evan). This is the tale of myself and this perfect girl named "Charlie". Part 1: Exposition This took place roughly 2 years ago, at the twilight of my senior year of high school. It was early May and our graduation was set for early June, so with most of our brains switched to summer mode and our teachers fresh out of fucks, my friends and I finally fell in line with the majority of our class and started ditching. Our friend group consisted of a handful of minor characters in addition to my boyfriend of 3 years: "Kyle", my best friend since middle school: "Sarah", myself, and a recent inclusion: "Brad", who, not gonna lie, was and is a bit of a White Knight. Kyle belonged to a Christian family. No, not the nice, charity giving, actually Christian Christians, but rather the homophobic, slur slinging, will kick a homeless guy in the face and then sit in church like a saint Christians. They always went to church every Wednesday and Friday, and while they invited me, I never went due to being a) an Agnostic, b) a closeted bisexual, and c) almost physically sick from their hypocrisy. They never really liked me because of this. They also were entitled. It wasn't evident until they got into trouble. You see, they helped organize the Church's funding (grants, donations, charity, maintenance, etc), which put them pretty high on the pecking order. The Church, while not the centerpiece of our part of town, still claimed A LOT of the district's authority figures as patrons. It was the sort of unofficial institution that sneaks its way into politics without ever being directly involved. So whenever they got pulled over or issued a parking ticket, they'd drop a couple names and dodge the whole thing. Kyle himself was decent. I'd known him since elementary school, he was usually nice, and he was hot (shallow, I know, but it was high school), so I tolerated his idiotic and oftentimes narcissistic behavior (they treated him like God's gift to Earth). But it was his sister, "Charlie", who redeemed the whole family. She was a year younger than Kyle and I, and was the only genuine Christian in the group. However, she also had an impish streak in her that led to some fun hi-jinx. You could always tell she'd had a devilish epiphany with this little half smile she'd make. We'd often hang out and she was a blast to be around. We were very close, and she often confided in me about stuff she couldn't tell her family. To me, a great friend. To them, the perfect little Christian daughter. Sarah was a really good friend who had helped me through the death of my mom. I wasn't diagnosed with depression or anything major, but I loved my mama to pieces and it shattered me. Her and Kyle were always there for me and she was the one who pushed me to ask him out. I trusted her about as much as any teenager could. Anyways, back to the story. One fateful Tuesday, Kyle, Sarah, myself, and our mutual friends headed downtown to get food, skate, and generally do stereotypical annoying teenage stuff. Getting bored of our current activities, I asked Kyle if he wanted to race on our boards to the end of the street (it was just past the lunch rush so most people were either back in their offices or stuck in traffic). He accepted and about 30 seconds and a loose flagstone later I ended up planting my face into the sidewalk and fracturing my arm. I tried to shake it off but no one else was having it, considering I was walking like a newborn deer and my arm was beginning to swell. We ended up making a visit to the ER where they confirmed that yes, I did have a fractured arm, and a concussion to boot. The concussion was my dumbass tax. It wasn't too big a deal as far as accidents go, but considering my sorry state, they wanted me to stick around so they could do a few more tests, brace my arm, and generally just ensure that I was healthy enough to return to my dumbassery. Thankfully, Kyle and Sarah had offered to stay with me, because apparently their parents didn't care, and we were already ditching so school the following day wasn't a big issue. I ended up spending the night in the hospital (the hospital had been understaffed for years, so once your condition was deemed stable they tended to shove you into limbo) and went home the following day with the usual concussion orders. Effectively I was to become as a vegetable for 10 days. Wanting to get back to my recently attained freedom I complied, meaning I spent about 7 days sleeping and eating. I only picked up my phone after the doctor cleared me, to which I found an unexpected message. Part 2: The Act Brad had gotten my number from Kyle, and sent me a link to a private data storing account (one of those services where you can upload videos, pictures, etc and lock it behind a pass-code for personal use only) and a password. I, being intrigued by this sudden plot hook in my boring life, followed it to find literal GIGABYTES of pictures, all showing Kyle and Sarah in compromising positions and captions hollering things that were definitely not beneficial to their relationship with the Lord. I'm talking everything from individual nudes taken from the Chat of Snaps to full on money shots and everything in between. It looked like an amateur porn album. The most recent of which was dated to, as you probably guessed, that Tuesday evening. Brad explained that Kyle had this whole thing where he'd upload videos of him and Sarah doing it for his close circle to whack off at. I personally would've simply used Pornhub like a normal human, but Kyle had always been a little self-infatuated so I wasn't too surprised at this Narcissus level move. Brad had apparently just been included and was sickened by the whole thing. For context, in our 3 years of dating, the furthest Kyle and I had gone was a BJ after a football game that January. He spewed BS about "saving it for marriage" while dicking down my BFF. I. Was. Shattered. The two people I had placed my unconditional trust in had, without my knowing, been taking turns pounding that trust away, all the while being fully aware of their importance in my life. I confronted Kyle about this when we next hung out at his place, and he denied everything at first. Said I was being a paranoid bitch. When I showed him the evidence, he involved his parents, who started claiming I PHOTOSHOPPED the photos and videos, and threatened that they would report me for making child porn (Sarah and Kyle had only just turned 18 the past September). Knowing the police would prove me right, but not wanting to tank Brad for possession (our city had been throwing the book at people for this for years) I dropped it and left. I thought we'd broken up, but apparently his parents insisted we stay together until after graduation to save face with his extended family. Apparently they knew deep down he was guilty, but the usual EP tendencies flared up. Not wanting to make waves (yet) I reluctantly complied, and began regressing into my earlier negative mental spaces. Part 3: The Revenge The funny thing about religious families is that they are just as prone to producing LGBT children as non-religious ones. Kyle had avoided the "sickness". Charlie hadn't. Not one week after our argument, I was at Kyle's house, helping him keep up the act. We hardly interacted, so I turned to Charlie for companionship. This typically happened when Kyle and I would get into fights, as Charlie's chill demeanor and deep concern often led me to confide in her, sometimes with things I didn't even share with Sarah. This, being the biggest "argument" of our relationship, was no different. While we were chilling in her room, she started to get really antsy. Her normal bubbly demeanor was gone. Contrary to your typical homosexual, I didn't have a strong gaydar, so I assumed she'd learned of Kyle's infidelity. Well yes, but actually no. I asked her what was wrong and she said she had a secret to spill. I wasn't really in the mood for drama or comforting, but it being Charlie I let her go. In what has yet to be the second biggest surprise of my life, she told me about how she'd been in the closet for years (14 or 15 was when she first started figuring it out), and apparently for a long time she'd been trying to get closer to me because I was the only person she truly felt comfortable around. Her family was almost stereotypically homophobic and really only approved of her church friends. She was jealous of Kyle and our relationship, but thinking I was straight and not wanting to rock the boat she resigned herself to her angsty teenage heartache. That was until the HMS Relationship struck an infidelity iceberg and she figured she could finally shoot her shot. Now, given any other circumstance, I would've said hell no. We'd known each other for over a decade, and I'd been dating her brother for 3 years. It would've been scummy and Charlie was practically a sister to me at this point. But then the blood started rushing and the lizard brain started screaming for payback. I'll spare the details for her privacy, but one woo-hoo later her and I were enjoying the afterglow when the gears really started turning. I felt like shit. I knew what I'd done was wrong, but given my current situation I frankly didn't care about that. I more so felt bad for Charlie. At the time, my feelings were twisted and painful, and I thought I didn't really like her that way, so I thought I'd just one-and-doned the only non-family member who I still trusted. She caught on to the vibe I was giving off and ended up talking me out of some bad thoughts while we got dressed and said our goodbyes. We ended up continuing the relationship after that. For her she finally got to be with her longtime crush, and I got an escape. When the day of graduation came and went, we maintained the charade until both our families, as well as their church group, went over to their place for a massive dinner celebration and commemorative slideshow. Now I'd known about this event since the fall, and hadn't thought too much of it until the incident. During our fling, Charlie had been pushing me out of my slump and towards thoughts of vengeance. Apparently, her parents had been spreading rumors to their church group that I had been cheating on Kyle, and they were saying that after the dinner he was going to dump me. In front of an entire crowd that included MY FAMILY. I didn't really care about myself, but my dad had gotten a lot of flak for remarrying after mom died. Some of it even came from me, but having the perspective of age and distance I got over it. I was not about to have him publicly embarrassed by some shitheads who thought they blessed the ground they walked on. Before it was just petty high school drama. But this was no joke. My dad worked for the District Rep's office. The District Rep grew up at that church. It was part of his "one of the people" persona. A few choice words my dad's job would be history. Guess Kyle's parents in their malignancy never thought that part through. Or maybe they did and I'm giving them too much credit. Either way, this was now personal. So Charlie, being her impish self, began scheming. She was loved by the Church group, so it was easy for her to get the role of prepping the slideshow. She even gave a whole speech about how she couldn't wait to "finally give her brother and his friends the recognition they deserved". She then began compiling the videos and photos from the circle jerk account Kyle had made (dumbass hadn't changed the password), alongside screenshots of their conversations in a group chat they had (she got those by "borrowing" his phone, making a "call" and sending the screenshots to her phone before deleting them from the message history) , and integrated them into a slideshow. It was structured so that a slide would pop up with a bunch of pictures of the boy in question alongside their favorite bible quote. Then the next few slides would include the screenshots of their respective conversations and whatever pictures they had listed as their favorites (censored and from after they had turned 18 for obvious reasons). Altogether this slideshow took Charlie days to compile, but not once did she complain or ask for a break. She was on a mission, and alongside being hot in its weird way, it was also shifting my perspective on our relationship. So the night comes and we're all sitting around the table, making small talk and putting on our best fake smiles. Several church families are giving me smug "you're gonna get what's coming to you" looks, but I shrugged them off and stuck with my family for most of night. Charlie and I avoided each other to ensure no one got suspicious. Finally, the moment of truth came. Everyone was called into the backyard where they had rows of chairs set up in front of a massive projector. Charlie portrayed her best innocent little sister act before starting the soundtrack. The slides began to roll, and people began to gasp and yell in tune to Good Old Days by Macklemore. Seeing the looks on Kyle and his family's faces as they realized what was happening was priceless. In turn, each boy was brought onscreen and put on blast, and each time everyone was too busy recovering from the whiplash to stop it. The few that did tried to grab Charlie's laptop, but she quickly scooped it up and ran into the house, locking herself in a bathroom (the projector was wireless). No one thought to turn off the projector. Idiots. Finally, after almost five minutes of bible quotes and nudes, the boy of the hour was put on screen. His quote: Hebrews 13:4 "Give honor to marriage, and remain faithful to one another in marriage. God will surely judge people who are immoral and those who commit adultery." It was intended to create the setup for my humiliation. Oh how the turntables. A handful videos played showing his 18+ exploits, alongside screenshots of the rows of content he had made, with texts dating back to the summer of 2017 implying the length of his fling. It hurt to watch, but I found my solace in the sweet nectar of vengeance laid before my eyes. Finally came the last slide, a blank white page with a single audio file link. Even I was confused at this part, seeing as audio wasn't included in our plans. Charlie crept back outside and clicked play, and Kyle's parents' voices came screaming through the speakers. Apparently, Charlie had recorded their entire humiliation plan in detail, and had added it to the slideshow as evidence of my impending setup. The girl had covered all bases, and when the show ended, she stood next to the projector beaming that devilish half grin. It took a few seconds for anything to happen. Kyle and his family beat a hasty retreat to the house, but the party being at their place they had nowhere to go. Several church members conveyed their disgust at Charlie, Kyle, and the boys in equal measure for the event. She ignored them, called out to her parents, and waited for them to peep their heads out. When they did, she quickly planted a massive kiss on my cheek and pronounced herself as gay. Needless to say, that didn't go down well. My parents and I left in a hurry, and Charlie, now in deep shit, came with us. Part 4: The Aftermath Charlie and I have been dating since. As you probably guessed, her family cut ties with her, so she ended up crashing at my place. My stepmom wasn't too pleased with how she'd gone about my revenge, but my dad thought it was hilarious. He collected his $20 from my stepmom (they'd had a bet over when I'd come out, apparently) and argued on our behalf for Charlie to stay. After all, they had an interesting first impression, and there was no risk of pregnancy. To top it off, it was the perfect way for them to spite Kyle's family after they'd trashed my reputation and tried to make me an outcast. He caught some jokes and snide remarks at work for the next few weeks, but given the circumstances and the fact I was a teenage daughter (apparently we're prone to bouts of roguishness), he got off. No harm. As for Kyle? Well his family got barred from their church after his collection came to light, which caused them to fall from local grace. They lost the ear of local officials, and the various name drops they'd been using to avoid various fines and penalties caught up to them. Last I heard from Sarah they had moved to the next state over and Kyle was living sexless in his parents basement, squeaking by at a community college. Sarah and I made up eventually. It took a lot of apologizing and no small amount of grovelling on her part, but not wanting to resent her for the rest of my life I got over myself and allowed her back in. We're not as close as we used to be, but that trust is slowly growing back. Let's just hope she she keeps her stuff in her pants this time. Charlie and I lived together until I went off to college, where we've been long-distance since. She managed to get into a school two hours away, so we often spend weekends at each others' dorms or somewhere in between, doing our typical hedonistic thing. It's taken me some time to fully recover. As cathartic as our revenge felt, it did little to truly bring me solace. Despite the implications of this story, I had a really deep connection with Kyle, and while it's easy to write off as teenage drama, it still scarred me. My family and Charlie have helped me rebuild. Our relationship may have begun unconventionally, and could certainly be classifiable as "trashy", but we don't care. We're happy, and I have a girl who's gone above and beyond for me. Not everyone can say that. TL;DR: Boyfriend of 3 years cheats with my BFF, and his religious family tries to cover it up. I sleep with his sister, who exposes him during a church dinner, and drags me out of the closet with her.
Financial / Life Advice from an Adult Alright Kids. I’m 31 years old, and I look back on the last 11-13 years and wanted to share some financial advice, advice I wish I received from my parents or teachers when I was in high school. This is a little letter to my teenage self, and I think you will all find a lot of great ideas. I look back and realized if someone would had told me the following, my life would be very different. I have been very successful throughout my life but was never taught how to invest money. Investing is not for old people, it’s not for people in their 30’s and 40’s. It’s for you, on your 18th birthday. When you turn 18, you are legally able to invest money for your future. On your 18th birthday, you should be opening an investment account. For example, let’s pretend it was 5 years ago. On your 18th birthday, you had $1000 dollars saved. Let’s say you bought the following stocks, with your $1000 evenly across them (these are all examples that are high growth areas that I have looked at and invested into).
-CrowdStrike (Cybersecurity used by big companies)
-AMD (Computer parts)
-NVIDIA (Computer parts)
-Okta (Security for big businesses)
-Zynga (Digital Games company)
If you put $1000 dollars across all these shares evenly, and then put in 10 dollars a month by year 5 you would be sitting on $73,000. By year 7 you would be sitting on almost $400,000. By year 10 it would be worth $4.84 million dollars. This is all based on 5 years of past market data. All up you would have invested $2190, and in return in a decade if you kept investing every month that 10 dollars, and never touched the original $1000, you would be worth almost 5 million dollars. Imagine being 30 years old and having $5 million to then be able to invest responsibly even further… you would be able to work part time in a job you loved and didn’t hate, and just enjoy life. Now the past is NOT an indication of the future – but the point of this exercise is to show you if you are smart and invest in big and emerging companies like Apple, Netflix, Trade Desk, NVIDIA etc, over just a mid-long periods of time you could very well retire in your 30’s and live debt free for the rest of your life PEOPLE DON’T TEACH YOU ABOUT MONEY BECAUSE THEY WANT YOU TO WORK FOR THE REST OF YOUR LIFE. The education system is set up in a way to try and enslave you into work for the rest of your life. Don’t let that happen to you. If you be smart in your 20’s, you will be set for the rest of your life. They want you to slave away in a job that doesn’t pay you well, to retire with benefits that they will eventually take away from you. Don’t let the system do that to you. The dickheads on wall street also make it sound far too complicated and scary for an average person to get involved in. They will throw around terms that you don’t know, and it's all to try and confuse the sh!t out of you. They want to make money, and they want you to work the minimum hour job so that company can keep making huge profits of your misery. My advice is to read read read. Read and learn how the stock market & shares work in companies. Learn about dividends that companies pay you every month for just investing in their company. Learn about taxes and how it could affect you. YES – this stuff can be boring to read, and you might not find it very exiting as hours of scrolling on TikTok or Reddit…. But your future self will thank you (and maybe thank me). Watch an hour of CNBC every week and get to know what they are talking about with financial news. You might find it painfully boring, but really listen. Listen to what they are talking about with trends. Listen to what’s happening in the world of financial markets. Watch the opening bell program at 9:30am Eastern and learn how it works, and what they are talking about. LISTEN LISTEN LISTEN. Take Notes. Read a website called Motley Fool. Read Market Watch. Read Yahoo Financial. Watch interview Youtube with Warren Buffet. Listen to what that guy has to say – he has amassed one of the greatest fortunes on earth from simply reading, and understanding how companies work, and investing in the right ones. DO NOT look at your stocks and shares every single day. There WILL be days you see them go down, but just remember that you are not worried about this, you are looking at years from now. It is scary to see a stock drop 5% on a day and your money vanish. Just remember – it is only a LOSS when you sell. You have not lost a CENT until you press that sell button. BUY LOW, SELL HIGH. ALWAYS. BUY IN BIG NAMES There is a lot of “experts” out there that will try and tell you about this great new stock and its very low and it’s about to explode. These are called penny stocks – go see Wolf of Wall Street to learn more. These are super risky stocks that will skyrocket only a small percentage of the time. There is SO much money to be made in a 10-year window if you invest in just the safe big companies. Don’t be a schmuck and put 1000’s into a company selling its stocks for $1.98. Be smart, play it safe and you will increase your odds of that goal of having a million in the bank by a large percentage. Yes it might take an extra 4 or 5 years, but in the grand scheme of things would you rather that then lose all your money to a scam company that goes bankrupt? There is a thing now called “fractional shares” which means for the big boy stocks like Amazon, you can own just a small percentage of a share. That means you will still get some performance of a single share of amazon, but just on your fraction. If you keep putting your 10 dollars a month evenly across your shares, you will slowly grow your share amounts. For example. I have .8943 of a stock in Amazon. It is worth 2,264, where a full stock is worth 3,198. I have slowly built this up over the last month and already my investment is up $133 dollars or 6.26%. I have put a little bit of money every day into this stock, and every day it goes towards my goals. This is an amazing time to be alive for young people & investing. You can put even just a few dollars per week towards a big expensive stock like Amazon, Google etc. – and still earn the same rate of reward as the big-time investors. And you can do it from your phone or computer! DO NOT USE WALLSTREET AS A CASINO. DO NOT BET IT ALL ON 1 SINGLE STOCK. Spread your money out over 15 -20 stocks. Look at what some of those websites I mentioned are talking about. Read the forecast for the future. Learn what the companies make and do. Think logically – what could this product / industry do in 5-10 years time. That’s pretty much it guys. I just wanted to really write something that I wish I read when I was 15 -18. I regret not knowing how stocks worked until last year. I regret not being more in-tune with financial news, but I am trying to make up for it now. Don’t be like me. Start putting that 10 dollars a month, 5 dollars per week, whatever you can afford towards your future by the time you hit 30 – you will be in such a wonderful position. Just remember – THEY DON’T WANT YOU TO KNOW HOW TO INVEST / WHAT TO INVEST IN & MAKE IT SEEM SCARY BECAUSE THEY WANT YOU TO WORK YOUR 9-5 JOB FOR UNTIL YOU TURN 70. Don’t let the bastards do that to you. On a more personal note - since this is kind of like a letter to my self. Things get better. As a kid that was bullied, harassed & tormented through High School... if you put your head down, you just work hard, amazing things can and will happen. Be your beautiful individual self. Don't chase those who don't want you. You will find your place in the world, it just takes some time. I didn't have much of a future when I was your age, but I found my passion in life and I was able to build a pretty cool life out of it and was able to travel the world and have visited over 90 countries. Keep that chin up, keep smiling, and know that you are loved, cherished, and valued. You have SO much to contribute to the world, and you will. Don't let the bad guys win. Love xx
Hey, I do a bunch of world building and homebrew for the campaign I run for my friends, and I figured I'd share it if anyone wants to use it. ---------------------------------------------------------------------------------------------------------------------------------------------------- The Undercity? Yeah, it’s dangerous! You’ve got the redcap goblins, they aren’t much a danger by themselves, but they’ll give ya a hell of a time if a group gets you alone don’t you know? The Coldwrought clan moved down there some decades ago of course, and then… well, I don’t believe it myself of course, but they say stone giants still wander around down there. Gives me the shivers! -Elsta Barrlow The Undercity of Kol Taram is a city that was never meant to be: it exists in a massive drainage system built to protect Kol Taram above from spring melts from the nearby River of Colors. Across the Fallen Bridge on the other side of the cavernous drain channel, stone giants live a secluded life. The Coldwrought Crime Clan rules the Undercity with an iron fist, based out of their hotel/dungeon “The Dark Hive.” Woven between these dangers (and so many more) there are, of course, wonderous things, too: Yawmbo, the bugbear keeper of The Dark Hive, can acquire near anything you need; Cadence Clearwater, the skinny, high-strung tiefling can craft a specialized tattoo that allows anyone to summon a familiar; within the simple lean-to that Kev the Kenku has an assortment of interesting items plucked from the streets, amongst them the odd thing of interest. The Undercity Always Flows Many have tried to map The Undercity, but nobody has yet succeeded. Due to the violent, and untrusting nature of many of the denizens, The Undercity is constantly tearing areas down, and building anew. A night doesn’t pass without at least two incidents of arson, and any especially loud squabbles that border on riots result in the stone giants across the Broken Bridge lobbing boulders amongst the city which also result in frequent “re-zonings.” The best way to orient yourself to The Undercity are to look for the towering, 10-story high pillars that serve as both buildings and anchors to a fluid city.
The Glowing Pillar
A Pillar of the People
The Goblin Gables
The Dark Hive Pillar
The Pillar of Stairs
While there are many other structures outside of these super-structures built to support the weight of a mountain, most major buildings congregate around them. The Ring of Rejects The Undercity was not meant to be inhabited, but once The Squall began to rage, and a permanent winter has set in, there is no chance that the River of Colors will flood. Those not of dwarven descent often found that Kol Taram was a place they could never thrive, and many found their ways, by exile or by choice, to this so-called sixth ring, the Ring of Rejects. The Broken Bridge The only support structure to have ever fallen within the drainage system has left a massive, 100’ wide bridge of uneven and broken stones across the 120’ deep drainage ditch. Across it lives, hidden by piled boulders, a small hermitage of stone giants… or so the legend goes. The Broken Bridge is said to be their method of assault, should the violence in The Undercity ever spill over. Refugees of Kol Taram After Kienscale was awoken, and Kol Taram sacked, many of the citizens who knew of the Undercity and the methods to reach it, left the city through this dangerous route. Some lost their lives, most their possessions, and few chose to stay. Those few form around The Glowing Pillar, the mages of The Bearded Consortium dispelling whatever errant arcana had caused the faint light to radiate out from it, allowing the displaced dwarves to fashion out a makeshift fortress. There, elements of The Stoneguard gather, training the remaining citizens and gathering allies to eventually take back their city. Controlled Anarchy There are no set laws in The Undercity, save the unspoken, universal threat of the stone giants that might again assault the city should it grow too riotous. The Stoneguard keep order around the areas of The Glowing Pillar, and The Coldwrought Clan has enforcers keeping the money flowing and outside influences in check. The Goblin Gabbles is thoroughly ridden with goblins, who obey their own laws, a strange and violent pecking order that keeps their infighting at a steady level, and their threat to the city as a whole limited. A Dark City The Undercity features prominently races with darkvision, so aside from The Glowing Pillar and the Pillar of Stairs, there are not frequent sources of light. Those that do dot the inns, streets, and doorways of homes tend to be gas lamps turned to their lowest setting, or sweet, earthy Smolderwart, a pale white moss that burns for hours with a faint light and fragrant smoke. Guide to the Undercity I lived in the Ring of Copper once, you know? Me, a fat greenskinned goblin! No matter how good I became as a smith, it became obvious I’d never be more than skilled labor. So I moved, moved to the Undercity. Every day, death lurks, maybe not nearby, but around every corner you smell him: a feral, red cap’s knife or maybe one of the Lumare’s creepy hands around your neck; but when nobody pretends to like you, it’s a lot easier down here to know who to trust. -Miggblin, owner of Miggblin’s Custom Bladework. The danger of The Undercity, especially to humans and the aarakocra, cannot be understated. That said, outside the Coldwrought Clan, deception is not often practiced: this is a place where the sword will often prevail over the pen. The Natives The Ring of Stone is already within the realm of The Underdark, and The Undercity serves as a place for its citizens and those from the service to mingle. These places were not always occupied by sentient races: before Kol Taram came to be, the cavernous dark was occupied by hideous creatures dreamed into existence by a beholder in the Second Age. Thriving amongst the dark and deadly hellscape of this underdark were the Lumare, grey-skinned humanoids, more spindly than graceful, with unnaturally flexible joints which cause them to have a strange, exaggerated gait, and the ability to easily scale the stony walls of the underdark. Nearly wiped out by dragons, and again when The Undercity boomed into existence after the defeat of the Parroa Rebellion, they hold a place of awe and respect, even amongst the rabble of The Undercity. They are said to be able to read minds, and know your actions before you do. The rest of the creatures that belong to The Old Ones are less beloved, and wandering too far into the dark nooks of the city may find you face to face with them: Wandering Old Ones d4 Result 1 Dreamcrawler: Crawling along the walls, ceilings, and under bridges, these hands with bony, exposed, skeletal tips for scratching. (CR ½) 2 Fearwalker: Eyeless, bipedal humanoids with long, hooked ears, exaggerated mouths, and a taste for fear. They stalk the frightened, lost souls that wander into their domains. (CR 3) 3 Shadowstare: A flat creature of shadow that clings to a wall or under a shelf, though when it’s one massive eye opens it can be as dangerous as any beholder’s gaze. (CR: 5) 4 Zombie Beholder: (CR: 5) Spellcasting Services There are not many spellcasters in The Undercity, as the red cap goblins have a superstitious fear of magic, and they tend to target magic-users with more murderous intent than others. As such, there are no established spellcrafting services. The Bearded Consortium has powerful mages, but they are geared toward returning Kol Taram to its former standing; the Purple Terror who lurks in the city above keeps them wary. Living and Lifestyles in The Undercity ‘Poverty’ is an easy term to toss around within the Undercity: many of the abodes are squalid, temporary structures of pitiful design. This can be deceiving, however, as The Undercities denizens are loath to show off anything of value. These items, beautiful or rare or expensive, are carried on one’s person, or hidden carefully away. As such, it is hard to determine a person’s real wealth. Education and Learning Due to the transient nature of The Undercities populace, traditional schools aren’t common. The Undercity is no place for children. Within the Kol Taram garrison, safe in the halls of the Glowing Pillar, dwarvish children resume lessons under the direction of Headmaster Heurd Rocknose. There are rumors of a Lumare training ground somewhere deeper within The Underdark called The Alabaster Terrace, where the Lumare hone their unique abilities, though none have seen it. Most who call themselves “lifers” who were born and raised in The Undercity take on apprenticeships. Shopping There are no markets or centers of commerce, though what stores do exist tend to cluster close to, or within, the massive pillars that support the cavernous roof of the space The Undercity occupies. The Washed Market outside of The Dark Hive may be the only exception: under careful watch of Coldwrought enforcers, an open-air black market, a warren of tables, takes place on every Wednesday. Nothing living is to be sold but narcotics, stolen jewelry, historical artifacts, unsavory meats, and dark secrets can be found. While outright violence is not tolerated, the Coldwrought Clan does not concern itself with petty theft, and will take no action against thievery. Tax Day There is not a tradition of open celebration of holidays within The Undercity. The only “special” day is Tax Day, which can happen at strange intervals but usually once or twice a month. On this day, Couldwrought enforcers spread across the Undercity in groups, beating up locals who cannot pay for their “taxes.” Sports and Games The Undercity does attract it’s fair share of gamblers and unsavory types that are happy to make a quick copper at another’s expense. The Dark Hive features poker tables, Bluffer’s Cup, and for those with the pieces, a private Gragram room. Gragram An ancient dwarvish game that requires pieces scattered across the northern parts of Dominion, lost with the falls of two of the original citadels. Those who can find pieces will bet on fighting them with others; the pieces are enchanted, and can do harm only to each other; the pieces rebuild themselves after one day. Bluffer’s Cup Each player has three tiles: the shield, the sword, and the hand. It is a rocks, paper, scissors with betting and deception involved. The Square of Might Operated by The Coldwrought Clan, The Square of Might is a small fighting arena with two tiers of seatings. Fights may be arranged, with the loser being paid, the winner being paid more, and the house taking most. Fights are not typically to the death, but True Boughts are fought to the death. People of Prominence There is no recognized government, or set of laws outside of the unspoken ones that seem universal within the Undercity. Instead, there are people of prominence whose spheres of influence have shaped the behaviors of those around them. d6 Person 1 Yawmbo - A bugbear with oiled and styled hair brushed back across the fine black vest he wears over a brown-furred torso, Yawmbo speaks little, but is surprisingly intelligent. He works as a broker, and can obtain most things for players, in return for them completing tasks for the Coldwrought Clan, though this is never explicitly stated. 2 Chief Schneek - At 24, Schneek is ancient by goblin standards. He is blind now, but could once read the fortune of the Undercity using rat bones. He despises magic users, such as The Hidden Hag, who he blames for taking his site. His eyes are made of stone. 3 High Mage Wucrut Coalbeard - 322, Wucrut is a chauvinist, old-guard High Mage who resents the introduction of women to the Bearded Consortium. He is a powerful evocation mage, and proved himself in the Battle of Skaar against the Fire Giant Legion. 4 The Hidden Hag - Deep within The Statuary Pillar, amongst its hallways of petrified humanoids, shifting living statues, resides a pale, veiled woman known as The Hidden Hag. None have seen her face, though rumors speak of looking upon her resulting in the many statues around her abode. She keeps to herself, but hers is the only pillar with a good radius of emptiness around it. 5 The Stalker - The lone Lumare who makes permanent residence behind The Stalker’s Perch. He is quiet, speaks few words, but communicates mostly through his eyes. His insight is unparalleled, and he hunts down those who would cause particular trouble in the streets of The Undercity. 6 Dorgram Coldwrought, Patriarch of the Coldwrought Clan - The most dangerous man in The Undercity, Dorgram Coldwrought is 121, and has been groomed from birth to run the Coldwrought Clan. He is merciless, speaks slowly, but his words have great gravity. He always wears dull navy gloves with gold cappings around the knuckles, and around one eye is heavily tattooed to make it appear as if the flesh is peeling away to reveal bone. Holy Places The Undercity is a place that slows for freedom of worship, and nowhere is that more obvious than the Madruuc Lambus, undercommon for “Market of Gods.” Dug into the ground itself, a cave-like series of shafts and small caverns dedicated to the many gods that others worship. Less crime happens here, as those who defile a chamber of a deity are likely to find trouble with their followers. Within the boundaries of The Glowing Pillar and Fort Taram that has risen up to house the dwarven refugees of Kol Taram, there is a simple stone church known as “Last Hearth,” a simple place to keep the flame of the Dawnfather’s Horizon Cathedral burning while the city is under siege. Just outside of the city, in a cave that requires spider climb to access, there is a large altar designated for Lolth, and many drow slip away in secret to worship here. A City of Factions The huge, 100’ wide pillars that support the weight of Mount Taram above this system of gargantuan drains generally form the center points for factions, though not always. To call any of these groups outside of The Coldwrought Clan and the Red Cap Goblins organized is a stretch, but each of these groups has the resources, manpower, or prestige to lay claim to at least a small slice of The Undercity. The Shadow Scavs The Undercity was born of need; those who could never find a place amongst the elitist dwarves above, moved to a place where they could rise up as high as any other. Many did not wish to move below, however, bought south the help of those in dark places to get materials restricted to them. These people came to be known as The Shadow Scavengers, or Shadowscavs for short. They are a motley group of thieves, smugglers, and fences with the occasional use of Autis, a warforged enforcer usually hidden beneath a large jacket and hat, to protect magical items. Their symbol is a pair of crossed, upside down pickaxes. Ally Benefits: - Material costs for smithing-related projects are reduced by 15% - You may purchase the Rat Tunnels map from any Shadowscav leader for 10gp Stoneguard A small contingent of Stoneguard, the law keeping force and military of Kol Taram above, escorted refugees down to the Undercity. They currently man Fort Taram, the Gateway Garrison, and a small defensive position outside of The Pillar of Stairs to safeguard against any scouts from the invasion above. They are hardy warriors, with stone-coated half-plate and either two-handed mauls or one-handed war-hammers and shields. Their leader is The Stonewarden, Vaddarus, a younger male dwarf who always plays it safe. Ally Benefits: - You may be accompanied by a Stoneguard about the boundaries of the Undercity if you wish. They will provide you with some protection from the Red Cap goblins and various other entities. - Access to the Stoneguard Armory, which sells basic armor and weapons at 10% off the base market price. The Coldwrought Clan Of all the factions in the Undercity, The Couldwrought Clan is the most powerful and the most dangerous. The actual family members of the Coldwrought Clan number maybe two dozen, but they employ countless other dwarves, goblins, kenku, drow, and anyone else willing to back their clan up for the price of a little gold. Led by Dorgram Coldwrought, the family patriarch, they grow wealth with hidden desires to take back the citadel above that cast them down. Ally Benifts: - You can hire a Coldwrought Enforcer at the price of 5gp a day. - You may stay at The Dark Hive free of charge, with one fine meal per day included. The Bearded Consortium Once one of the two primary powers within Kol Taram, The Bearded Consortium has stood for 500 years as a men-only convocation of powerful magic users, primarily wizards. They are powerful evocation magic users, but have flaunted more political power than actual magic in recent centuries. In a large upset of tradition, with the fall of Kol Taram, Zelga Stonestaf, a female dwarf, has been made a full member. In this time of desperation, many welcome to powerful, blunt woman who wears a porcelain mask. Ally Benefits: - -10% to all components needed for a spell tagged as evocation. - Access to the Consortium Militia armory, where scrolls of spell levels 1-3 can be purchased, at the DMs discretion. The Six Great Pillars As said before, the easiest way to break up the ever-shifting mass of humanoids that make up The Undercity is by the most proximate Great Pillar to their location. The pillars themselves have been carved and built into over time, with the Goblin Gabbles being the most haphazardly worked and porous-looking, and the Pillar of Stairs being the most well-kept. It’s difficult to break down the pillar neighborhoods in terms of economic lines, but those who live within The Dark Hive tend to be very wealthy; those who live around the People’s Pillar count themselves as the most squalid in an already poor town. Getting Around While The Undercity is not massive in terms of it’s horizontal footprint, many of the pillars have carved stairs, and ascend stories into the dark with warrens, housing, and even small shops for those who know where to look. While it takes no more than two hours to walk from end-to-end, climbing to the top of The People’s Pillar may take nearly a day for those unfamiliar. As a general rule of thumb:
It takes approximately 30 minutes to walk from one pillar’s neighborhood to the next.
Climbing a Pillar takes approximately 15 minutes a story once it’s familiar to a traveler.
Statuary Pillar Locations Place Description The Stoneyard A church-like building of old casketwood, and fenced in areas of earth where the dead are interred. The Stoneyard is a gravesite that is backset by the Statuary, and even features statues scavenged from within the Statuary pillar itself. Part of the trio of reputedly haunted buildings that make up Quarry Row. The Gentle Repose At one time, The Repose was a beautiful structure, built to house the noble Clan Grandcrest who all succumbed to madness. The one beautiful, Victorian-style home has now been transformed into a hotel, of sorts, though ghosts can frequently be seen walking through walls to different rooms. Goblin Gables Locations Place Description Deek’s Cart Every Wednesday, Deek, a meek, skittish goblin, will bring a wheelbarrow-sized cart of belongings stolen by the Red Cap goblins to the Dark Market, but those in the know will tell you that Deek lives under the Goblin Gables. He even deals directly with the Shadowscavs. Pillar of the People Locations Place Description Bloodworm Farm One of the few edible things deep underground that grow readily are blood worms, each about four inches long and the width of a middle finger. They are protein rich and taste very iron-heavy. They are grown in troughs, and eat both dead organic matter and rust. Commoner’s Infirmary A large tent, similar to a circus tent, though its slowly become a more permanent fixture in The People’s Pillar neighborhood. It is a field hospital, with a limited supply of medicine and an even more limited number of people trained in the healing arts. Mudbath House The earthy, deep pits of thermally heated mud. For an added fee, they can even properly wash after. The Glowing Pillar Locations Place Description Ireworks The single forge now operates on behalf of the Taram Resistance. It expands slowly but surely, all the wire pumping out armor and weapons night and day. Kevin Kevin is a kenku who has set up a tent on the outskirts of The Glowing Pillar neighborhood. Most of what he has is junk, but now and then, he seems to come by a treasure or two. Undercut A general store that sells damaged and broken goods well below market price. Rois Quarry A large, three layer deep quarry for mining grey granite for bricks. The Bleedin’ Stout Named for its signature drink, The Bleedin’ Stout is a traditional dwarvish drinking hall, with a large chandelier, and features a sort of bloodworm pasta with a red pepper sauce that burns the iron flavor right out. The Training Yard Amidst the buildings of Fort Taram, there is a large stone courtyard dedicated to 24-hour combat exercises. The Dark Hive Locations Place Description The Dark Hive The Dark Hive itself is one party casino, one part sprawling hotel/dungeon that houses The Coldwrought Clan’s interests. On the fifth story of the tower is the Coldwrought Apartments, where the crime family lives, and deals with their top clients. The Dark Market Under careful watch from the Coldwrought enforcers, every Wednesday sees a large Square of Might To the west of the pillar proper, perhaps ten minutes walk, is a large, iron cube. There are vents on the top, which allow steam from the gathered crowd to escape. Within, there are seats for roughly 60 people, and a raised marble square where organized fights take place. The Gourmand’s Kitchen This small, eight-seat establishment operates within Coldwrought territory, and provides one meal a week, every Friday Night. It is highly exclusive, and few know what occurs within these walls… there are rumors that many of the items on the menu are harvested from the streets of The Undercity and beyond... Further, due to the nature of The Undercity (violent and volatile) many shops rise and fall quickly, or change locations. The following merchants may be located anywhere within The Undercity, or not at all, at the DM’s discretion. d6 Merchant 1 The Shoddy Scholar - A small shop filled with second-hand books piled on every available surface. Run by the deep gnome Gildroby Middleweasle who knows exactly where every title is, and exactly what's in stock. Specializes in fiction. 2 Feathered Lands - A tiny store, with a single drafting table, a desk, and a few shelves of rolled up, large, scrolls. Mi-Zhan, a middle-aged drow woman shaved bald, though constantly fussing with her head, can create and provide maps of Underdark locations. 3 Hchvat Marganum - Infernal for “Blown Glass”, Hchvat Marganum is just that: a glass blower. Owned by the tiefling Partillin, proud and sarcastic, it can produce glass of master quality. 4 Liquid Courage - A medium-sized Inn of a poor quality. Ownership frequently changes (at least once a week), resulting in odd, mis-matched decor. 5 The All Sleeper’s Domain - A medium-sized tent with comfortable pillows piled throughout. 10gp will get you a pleasant dose of Dreamer’s Stick, a minty, chewy reed that can induce a hallucinatory dream state. Many can’t quite remember where they’ve left all their things when they leave. 6 Cadence’s Tattoo Parlor - Always moving, the rapid-speaking, stream-of-consciousness speaking tiefling, Cadence Clearwater runs a tattoo parlor wherever somebody can track her down. She specializes in a tattoo that can summon a semi-spectral familiar (1,000gp, plus the ashes of 10gp worth of incense, herbs, and charcoal.) once per day. Dungeons of The Undercity The Undercity, by its very nature, might be considered a dungeon, depending on your disposition and willingness to overlook rampant violence. However, there are areas in both the developed pillar communities and the surrounding caverns that present particularly perilous settings. The Statuary Though the hag who is rumored to wander the halls of the pillar known as The Statuary has expressed nothing more than a desire to be left alone, the statues that dot the hallways, rooftop, and even surrounding The Statuary itself, were all adventurers, criminals, or sight-seekers who ignored her wishes and sought the various treasures said to remain from the Drow military outfit that used to inhabit the tower. The pillar itself was designed to be defended, with a pair of staircases twisting around each other through the center, visible to each level that passes. Not all statues remain still, either; gargoyles, mimics, and ropers all take residence here. Stone Giant Settlement Behind large piles of stones that obscure the settlement proper from the other side of the Broken Bridge, are massive steps that lead to a sunken-in portion of earth, hiding the true height of the giant’s large community-structure: similar to a pyramid, though each brick features fine linework to give the entire thing the appearance of being made my miniature stones. Within lives a small community of stone giants, who call themselves Draj-Larc, “The Dark Dwellers” in giantese. They live a quiet, secluded life, and seek to elevate their home to even finer heights, the leader chosen every 500 days by who has provided the most improvement to their lair. The Dark Hive An appropriate name for a complex, five-story-high maze of apartments, functional rooms, workshops, and storage areas. The Coldwrought Clan runs the entire structure, though as it expands ever-upward, even they don’t know the true extent of the pillar’s workings anymore. Many of those missing from the uneven streets of The Undercity still live (in the better scenarios) within The Dark Hive. Past the first level, which is largely a dark, smokey casino, intruders will be met with fierce resistance from the Coldwrought Clan and those in their employ. The complex nature of The Dark Hive does carry with it one advantage: There are no means to sound an effective alarm outside of a very localized area.
This is a follow up post to my previous analysis of BBSI prior to the release of their Q1’20 Earnings. As previously stated, we are living in a time of great uncertainty, which is reflected in any projections/modeling presented in this post. Note: All price information is as of 5/28/20. Any links are to images that will provide additional color to the section they're located in.
Disclaimer: This is not investment or financial advice and the above thesis is predicated on my opinion & interpretation of the facts mentioned. I am currently long BBSI in my personal portfolio.
Barrett Overview Barrett Business Services, Inc. (BBSI) is a PEO firm offering management solutions to small business across the country. They enter co-employment contracts with their clients and manage their payroll and workers compensation claims businesses, saving them money and saving management time. Barrett utilizes a professional referral network that they develop geographically to source new clients cheaply. Upwards of 90% of their new clients are from their professional referral network, with many of them being converted from in-house HR management teams. Barrett is often the first PEO firm that many of their clients have worked with, allowing them to not sacrifice on pricing through fierce competition with other firms. Their clients are typically small blue and gray collar business, averaging just 30 employees per client. When looking at their financials, the first thing that seems off is their PNL appears to be a very low margin business. Operating margins in 2019 were just 5.8%, but the numbers can be deceiving. BBSI bills their clients every pay cycle, and within their billing are included some of their major expenses that show up on their own PNL. Accounting rules stipulate that even though some of the expenses, such as Payroll taxes and benefits and Workers’ compensation, are billed directly to the clients for 100% of the expense, BBSI must still show this on their own PNL with top line revenue gross of these costs. Barrett’s operating income can be boiled down to the service fee they charge less their own corporate SG&A expenses. BBSI EBITDA and Operating Margins Working with insurance requires that Barrett hold a significant amount of cash on their balance sheet. They keep reserves of restricted cash and investments which are used to fund future workers’ compensation claims as they arise. The net debt position when only considering the unrestricted cash is still negative, showing Barrett’s strong current financial strength. Unfortunately, being in a low interest rate environment typically hurts insurers like Barrett, where investment income can make up a significant portion of net income. Their average yield on investments in the past has been above 2%, but with the recent market turbulence it is expected to be just 1.5% for the full year 2020. For the modeling done for this report, EBITDA or FCFF have been used as the cash flow figure of choice. Both metrics exclude investment income, as modeling out the values and returns of their investment portfolios would be done with too much uncertainty to have significant value. One of the main differentiating factors for Barrett from other PEO servicers are their focus on branch strategy. Many of the other PEO firms opt to use a SaaS model, which does not require the same type of geographic footprint that a branch strategy does. They have created a strong professional referral network which allows them to source new clients from in-house HR systems more cheaply than having to lure clients away from other PEO servicers. Barrett can then utilize more aggressive pricing practices as their retention stays high and most of their clients have never used a PEO firm before. While this would indicate a negative effect on client attrition, they have quarterly net new clients going back over 5 years running. Pricing can be one of the main factors that client’s site when they leave Barrett, but their retention rate remains above 97%. By keeping branch growth in geographic locations with an existing referral network they can leverage business connections with each new branch opening. Barrett currently has 57 branches open, and sees branches mature to profit margins in the ~60% range after roughly 5 years. This type of growth with the small investment it requires to get a branch started creates impressive operating leverage down the stretch. The branch model has another attribute, in that it focuses on small businesses. Relative to some of the other major PEO firms, Barrett’s average client size is on the small side at just 30 employees per client.
Number of Branches
Average Profit Margin
PEO Industry While the PEO industry has a couple major players with significant market shares (ADP and PAYX), the overall market is quite fragmented. The entire PEO industry serves roughly 4 million employees in the country, with about 35-40 million estimated to have use for a PEO plan. This leads to significant market fragmentation with the substitute good for PEO services (in-house HR and insurance) as one of the largest holders of market share. Firms like ADP and PAYX are mostly non-PEO services, but they still compete directly in the same markets. Typically, clients will use all of a single servicers’ offerings. For example, rather than using ADP’s Payroll services and Barrett’s PEO services, firms will typically opt to use a single servicer for all related functions. The high degree of market fragmentation has not significantly hurt the retention rates of PEO firms, often averaging above 95%. Switching costs are apparent even in systems like these, which companies can be weary of changing due to the time it takes to learn new services and programs. The stickiness of customers alone is not enough for most firms to have any level of sustainable competitive advantage, however ADP and PAYX have been able to achieve some level of economies of scale through their sheer size. Spreading out their fixed cost investments across a higher number of Worksite Employees/Sales allows them to generally outperform their peers, explaining their much larger multiples relative to the rest of the peer group. The PNL of firms that are predominantly PEO can be tricky as their revenues include costs that are directly billed to their clients under their co-employment arrangement. The main financial outcomes of the industry are low capital investments and high cash returns on those investments. Insurance is a cash heavy business, leading to significant levels of excess cash on all of their balance sheets, lowering their overall capital investment. Relative to income metrics such as EBIT, EBITDA, and FCFF, the return on invested capital metrics generally look very strong.
Barrett Business Services Inc (BBSI)
TriNet Group Inc (TNET)*
Insperity Inc (NSP)*
Automatic Data Processing (ADP)
Paychex Inc (PAYX)
With the current COVID pandemic, the labor market shock has been significant and hit PEO firms particularly hard. PEO’s charge a service fee based on the amount of wages billed for. A decrease in workers or a decrease in wages would lead to lower revenues for the industry. Such a strong tie to labor market health will inevitably see their valuations hurt as they see revenues and profits fall for the whole year 2020. A slower recovery will also lead to these effects bleeding into 2021. With such low multiples relative to historical averages, the industry poses some opportunities for investors with a longer time horizon who will hold through the recovery.
Thesis for Barrett I laid out my thesis in my previous post, and after an additional month of research it has been cemented. One additional point as been added to my original thesis. My thesis points have been recreated below. • Barrett is trading at a significant discount to their historical trading valuations, as well as at discounts relative to their PEO peers. After Q4’19, they reduced 2020 guidance on the eve of the full COVID pandemic, leading to a cool reception from the street. Alone, this would not be enough to feel it as a discount considering the significant impact COVID will have on their business. However, they also trade at a significant discount to their PEO peers while simultaneously leading their PEO peer group along metrics such as FCF yield and EV/EBITDA. They currently trade 2.1 standard deviations below their 3-year average EV/EBITDA ratio, a greater discount than any of their peers in PEO peer group. • Barrett has a strong balance sheet consisting of a negative net debt position, giving them significant leeway in weathering the COVID pandemic storm. Less than 10% of their TEV being made up of interest-bearing debt, they are sitting pretty when it comes to weathering this storm. At some points during the business cycle it feels silly to start financial analysis at the balance sheet, but during a recession is not one of those times. With so few financial obligations, they are expected to trim corporate SG&A and investment in their new technology platform to keep more cash within the firm. Barrett stands a high chance of making it out the other side with a low chance of bankruptcy. • The PEO industry is currently trading at a discount to mid-business cycle values, leading to investors with a longer time horizon an attractive return potential. Barrett is not the only PEO firm trading at a significant discount to their historical values. The entire PEO industry is being hit hard by this pandemic, but it creates an attractive bet as the industry takes advantage of the fall in unemployment. Across the major PEO players, April was viewed as the low point in employment data, leading to a rough Q2’20, but strong financials in the quarters following. • Focusing on growth from a geographical perspective, Barrett’s management has carved out a small business niche that has seen success in their ability to open new branches. Focusing on small businesses (average client firm size is ~30 employees) gives them an edge over some of the larger payroll companies in the market. Clients typically find BBSI through a strong referral network of both existing clients and external referral partners. Most of BBSI’s new clients are converting from internal Hadmin staff, which allows BBSI to provide a powerful value proposition. They turn small businesses’ fixed cost employee salaries into a variable cost based on total employee wages. • Quality branch economics shows a model with strong operating leverage and marginal ROIC. New branches take roughly a 500k investment and take about 5 years to become a mature branch. To be expected, more mature branches have more billing generation and more profit margin contribution. Barrett grows new branches geographically, allowing it to maintain high concentrations in local markets, ramp up the speeds of growth, and reduce fixed costs associated with new regions. Their strategies in opening new branches culminate in an ROIC in 2019 of 30.6%. The IRR on new branches that take 7 years to reach maturity is still more than 150%.
Base Case Model Management had conviction that April was the bottom of their gross billing cycle based on the entire month of April’s billing and the first week of May’s. This view was further supported by other PEO management teams indicating April as their bottom. My model includes all of the cost savings metrics announced thus far in the Q1’20 earnings call and includes projections they made for full year 2020 as well as projecting April as the low point. Management has projected that even in their most pessimistic scenarios that they will see positive net income in 2020. I have 2020 sales projected to be 11% below 2019, with a full year EBIT margin of 0.3%. Overall, my projections for 2020 are more conservative than the average of the 3 coverage analysts following BBSI. 2021 follows many of the similar patterns set in 2020, with a slow recovery to get back to normal. While sales growth looks big, the 2021 sales I have projected are still less than 2019 by 1.4%. Margins are beginning to normalize, but without the same scale and deferred branch openings, the operating margins will not fully come back until 2024. I view this assumption as conservative as their new technology platform should see increases SG&A efficiency once it is fully implemented as soon as Q3’20. The model ends by applying a multiple to terminal value based on their historical trading multiples as well as multiples from their small cap PEO peer group. While currently in the trough of their business cycle, BBSI will see multiple expansion as PEO becomes a higher demand service during and after the recovery. My time horizon on this investment is in the 3-5-year range as this will give enough time for the recovery efforts to take place allowing for proper multiple expansion towards their mid-business cycle levels. Rather than depending on an individual point estimate of BBSI’s intrinsic value, I have decided to provide a two-way data table based on forward 5-year growth rates and ending multiples. The cross in the table corresponds to multiples not expanding and trailing 5-year revenue growth being applied to my model. While I believe this is generally conservative, it still provides a 58% upside over current prices. Seeing that we are in the trough of the PEO business cycle, I do expect multiples to expand from their current lows, leading to the base case having significantly more upside than the above PT implies. Overall, this provides BBSI with a strong upside opportunity for those who have the time horizon to take advantage. Base Case Data Table The core of any DCF performed during this crisis is that there is too much uncertainty to truly know what any stock should be “valued” at. I certainly do not know how the recovery will look, and it could vary greatly from the way I have laid it out in my current model. Rather than providing a point estimate of intrinsic value, I will provide two-way data tables showing ending multiples and forward 5-year growth rates. If you believe some of my assumptions are either too verbose or too conservative, the data table should provide you with enough of an idea of what other outcomes could look like.
Bear Case I have provided a bear case model as well, predicting slower growth rates coming out of recovery, as well as slower margin expansion across the entire 5-year period. This would imply a more structural shift away from small businesses that would be significant enough to harm the future of Barrett’s new business even beyond the COVID pandemic itself. Revenue would not surpass 2019 levels until Q4’22, and EBITDA would not get back to pre COVID levels within the 5-year projection horizon. With the shift away from branches as a source of unit economics, Barrett’s margins will be lower and take longer than my forecast period to return to pre-COVID levels. The 2020E financials would be worse than management predicts in their pessimistic scenarios, predicting negative income for 2020, which management has said would not occur even in their worst situations. I believe the probability of the base case is much higher than the bear case, but felt it was worth including to help frame some of the modeling assumptions I had to make in my base case model.
Why does this opportunity exist? There are 3 primary reasons why this opportunity exists for us as investors, but only time will tell how long it will last before the margin of safety shrinks too much. BBSI has risen 16% since my original write up on 5/6, slowly eroding the long-term margin of safety this investment has. • The COVID pandemic has caused a major disruption in labor markets across the world, including the US. With unemployment skyrocketing to nearly 20%, the PEO firms will see significant hits in their billing due to fewer workers and fewer hours worked. The combination of these two factors will lead to decreased revenues, which has also kept the stock prices low. • An unemployment shock is the trough of the business cycle for the PEO industry. With sales declining as the base case expectation, they face headwinds in the short term, but tail winds in the longer term. The recovery will see the firms begin to build their businesses again as unemployment falls and the economy opens more. More services will be in demand, such as staffing, allowing some of the ancillary offerings to provide additional revenue support. • Many investors do not have the time horizon to buy at this point, as there is significant uncertainty regarding when the trough would end. The shape of the recovery and the length of this period are heavy factors in the ability for investors to see BBSI as an advantageous long position. • This is a small cap company with little analyst coverage. Trading at below $500mil market cap since February has knocked many investors off the trail of this company as it is below their mandates. There are typically only 3-4 analysts asking questions on each call, with only 3 sell side analysts publishing opinions.
Sources: SEC Edgar 10-k’s and 10-Q’s [Tikr.com's](Tikr.com) Earnings Call Transcripts Price and share data from TIKR and Excel add-in feed “Competition Demystified” by Bruce Greenald & Judd Kahn for ROIC formula/concepts Numerous white papers and research from NAPEO
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