Oh, good. You’ve got a theory!

“You know, it’s funny – I don’t see you picking up the phone to sell those contracts, and I’m pretty sure I just heard your daddy come over here and cut off your allowance, so I’m a little surprised.” – Marcuse, 25th Hour

I have always loved watching movies related to finance, investing or making money.  My obsession started from a young age before I was even in finance as it gave me a glimpse of what life was like on Wall Street which was at the time, in my mind, the ultimate destination for me. Watching movies of traders made it seemed like the coolest job in the world to sit on a loud, action-packed trading floor, with phones ringing off the hook and traders shouting numbers across the floor.

I know, it’s so cliche, but yes my favorite movies coming up in the biz were the likes of Wall Street, Trading Places, American Psycho, Boiler Room and 25th Hour.

Wait a minute…25th Hour?  That’s not an investing/trading/finance movie.  It’s about how a convicted drug deal spends the last 24 hour hours of his life before having to check into prison.

Ah.  As a level 10 finance geek, I not only loved watching any movie that had to do with finance, I also loved watching any movie that had even a single scene shot on a Wall Street trading floor, which is exactly what 25th Hour had.

I’ll quickly describe the scene for those of you who are reading this at work and can’t click on the link above:

The trader in this particular scene is Frank Slaugherty (played by actor Barry Pepper). He’s a close friend of the protagonist of the movie Monty Brogan (Ed Norton) who is about to go to prison. In the scene, Frank gets chewed out by his boss for placing a US$100mm bet (by using OEX contracts, a proxy for the S&P 100) that the unemployment number (Initial Jobless Claims) will be a low number, despite the fact that the rest of the street’s consensus is that it will be a high number.  Frank claims to have a “theory” that he’s been tracking and at the end of the scene Frank’s risky bet turns out to be right and he is vindicated for his “cowboy” antics.  Whew.

Coincidentally, after a more or less uneventful FOMC meeting last night (my goodness, imagine if there was a surprise…!) the unemployment numbers for last week come out tonight at 8:30 pm, followed by Non-Farm Payrolls on Friday.

What a week it’s been…between all the macro data, trade war chatter and earnings to navigate through (thank you Apple for bailing us out!), I just can’t get a good feel on this market. The Facebook bomb came and went and while there is significant fallout from that little surprise (even Dan Loeb got burned on that one) we still haven’t really seen signs of the great unwind happening yet.

Maybe this is the “last chance to get off the train” or maybe it’s just a blip on the radar screen, but the current set up sure doesn’t make me feel good.  Valuations are up, unemployment is low and we are 9 years into a recession-less period of economic expansion (on average they last just over 4 years).  Meanwhile, the 5 largest stocks in the S&P 500 are worth more than the bottom half…does that make anyone else nervous at all?!

Asia isn’t necessarily doing any better unfortunately and China particularly has people spooked. The trade wars have been bad for the currency and in the back of everyone’s mind looms the painful memories of the summer of 2015 when the Yuan devalued and markets nearly halved.

It’s times like these where I hate the micro level of investing and prefer to look at the macro, which helps me sleep at night. We all know that the long-term structural growth story remains in Asia despite the speed bumps along the way and many of the best opportunities out there are actually in the private market, hidden from the public domain.

In the meantime, keep calm and hang on.  As I write this the HSI is down over 2% and Tencent, our bellwether of all things good in Asia, is on its 6th straight session of sell down, from the HK$380 level down to HK$342 last.  I retain my “theory” that though we may have already entered into a bear market, we still have one leg up to go and I’ve positioned myself accordingly to capitalize off of what might be the last mini bull run left for a long, long time.  In the meantime, it’s all pain all day and only time will tell if I should have sold those OEX contracts like my daddy told me to.