Folks Insanity Incoming We've got lots to discuss. Number One tensions between the U.S and China heat up as hedge funds and prominent managers like Michael burry reveal new positions in China as a reopening trade. What's going on? What are they buying and why some Insidious things happening behind the scenes here that you're going to want to know about. Number Two Insiders are selling shares of their companies like crazy.

We'll go through some crucial Market data that may explain exactly why Let's Get Right to Work Today's first story comes from the Berg of Bloom China warns of retaliation against U.S Entities in balloon Saga China Warned that it will retaliate against the U.S over violations of its sovereignty, potentially escalating a lingering dispute just as top diplomats from both Nations plan to attend a security conference in Germany As if war in Europe record inflation, higher and higher debt ceilings, and the Wrath of the Powell weren't enough. Well, now we've got China escalating the damn balloon Fiasco But you know what they say, it's not a circus unless you have balloons. So welcome to geopolitics. But the fascinating situation here is it looks like like the US was actually tracking the Chinese spy balloon from launch on Hainan island this whole time and so now you have these two stories as to what has happened.

You have the US story which is claiming this is a spy balloon and you have the Chinese story which is that this is a weather surveillance balloon and you can have your pick at which you think is the truth. But now we are in the situation where both sides have to project strength or risk looking weak. the body Administration which is being heavily criticized for waiting too long to shoot down the original balloon has to now act extremely outraged and dedicated to Downing any future objects and ready to investigate and escalate if necessary. whereas the Chinese now have to act super duper outrage that they're supposedly useless weather surveillance balloon was shot down at all.

and they're also escalating that rhetoric right? This is yet another political circus that can have real world implications and seriously damage. U.S Chinese Relations further: China sends balloons U.S is angry China says the US has set them Balloons Balloons here. Balloons. There are balloons everywhere.

Complete and utter circus. Who knows what the real story is. But remember, any form of tension can cause huge pain in the stock market and you already have some of our close allies like Canada all of a sudden going and banning all research funding with the Chinese military and State security institutions which I mean kinda weird that they were doing that in the first place. but hey, Trudeau is a weird dude isn't he? and then you have experts coming out and saying perhaps even Russia has something to do with these unidentified objects that are flying over into North America This is how escalation and trade tensions and further isolation happen.

A lot of analysts have been predicting a more segmented world and here are the signs that that is coming. And look: I Don't know what your geopolitics are or what you think the world should look like, but all I am saying is this has big impacts on the economy and the stock market and what assets become toxic and what assets become more valuable. And ironically, it just came out that hedge fund managers and big money investors are buying into China like crazy right now, but they're doing it very, very strategically. For example, let's look at the ever quoted Michael burry He tweets cell on January 31st, but then on February 14 8 he disclosed massive buy orders in China and in other areas.

if you look at his fund's mandatory disclosures that just came out, he disclosed that as of the end of 2022, he reduced positions in Geo Group in Karate Retail, but he opened a ton of new positions in a host of other stocks so much for selling right, most of which seem to actually be specifically China-related place. A couple are direct Chinese stocks like your Alibaba with a 4.4 million dollar position, JD with a 4.2 million dollar position and then you have MGM Resorts which is going to benefit massively from the Resurgence of MGM China during the reopening of Macau and more interestingly is his bet on Coherent. Coherent is a manufacturer of optical materials and semiconductors expected to benefit from more anti-china Chip trade restrictions. So in effect it seems like he's betting big on both China's Resurgence and China relations souring at the same time investing tons of money into Commerce giants into reopening casinos and hotels, and at the same time in chip manufacturers that benefit from relations souring.

And the further interesting context here is that if you read the latest Global Fund manager survey from Bank of America, it's not just bury doing this. Participants all around the world are long in Chinese equities and that is the most crowded trade right now. and if managers are positioning heavily in China and China's hours, that could cause a double whammy to funds here in the U.S that have already been struggling the last 12 to 18 months. Okay, moving on.

so let's look at some of the current market data. But before we do that, a quick word from today's sponsor today's video is brought to you by our completely free ZIP Creator Research reports that get delivered straight to your inbox. These come out once a week and are a breakdown of the many different setups and action plans that we see. You don't want to miss them folks.

All you got to do is hit the link in the description down below and put in your email and Boom! you're on the list and we'll send you that next report when it comes out. We've had a lot of positive feedback on last week's report and I don't want you to miss the next one. Okay game of Trades Posted this chart on Twitter this morning that shows that insiders are selling at a record Pace a higher amount than we've seen in the previous peaks of 2022.. The big difference though is that if of course they are now selling into a rally versus back in 2022, they were trying to jump ship as fast as possible because ships were sinking back then.

Now they're like, okay, ships may be coming back afloat and they're like, well, let's hop off So while stock pricing has changed, well, Insider's opinions of their own companies and their own Futures haven't They're more ready to jump off than ever. And remember, insiders are people who have access to non-public information about the companies that they are selling. So they know a lot about the introworkings that we don't and we can only guess as to why they are selling. But here are some obvious reasons that may explain this number one: V Rally since late September to mid-october is being viewed as a bear Market rally by most participants.

So if you are an Insider who is expecting your company to go under in the coming economic collapse and you see markets rally and expect the rally not to continue, Well, you're likely going to want to take advantage of that while you can, especially if you're already trying to dump last year at much lower prices. Another thing that is going on right now is a switch of themes I Know we've talked about this a little bit in the past, but a while back managers were asked what are the investment theme games for this decade versus the last decade And in 2010, Some of the biggest themes were the One Percent Who Made Tons Of Money through Tech and the Bounce Back of Finance Wall Street Inequality QE Monetary Access Invisible Hand Repression deregulation, Globalization Stock BuyBacks Credit Tech Large Cap Democracies, Peace and deflation But for 2020, the biggest investing themes are lifting the 99 up Main Street Inclusion: Quantitative tightening, Fiscal excess, Visible fist, volatility, redistribution, Isolationism, Wealth Taxation Commodities Energy, Small Caps, Dictatorships, war, and inflation. In other words, the themes of the 2010s were a lot more favorable to wealth creation than the themes of the 2020s, which means a lot of managers are left thinking, hey, you know what? Maybe I want to sell out of some of my company shares and diversify into areas much less likely to be attacked by government and public opinion or trade Wars or perhaps even physical War like we're seeing right now in Europe and in some other regions too. And this diversification could mean selling off of big Mega cap stocks and diversifying into Commodities energy and small caps based domestically or in closely Allied countries that could be a lot less open to severe risk in the coming 10 years, especially if you're considering that maybe we have a high inflationary environment.

Maybe we have a lot more segmenting of different countries and economies and trade relations that create a lot of small cap Winters here in the U.S But create a lot of losers abroad, but even massive companies here at home are at threat. You think about all the massive big Tech players that made massive, massive gains on market cap the last 10 years. Well, guess what? The government is now working really, really hard to break up Tech in any which way, shape or form. So if you're somebody who made your wealth in that, well, maybe this is the era.

A new decade to diversify out of it and into smaller companies into different assets that are much less likely to fall under scrutiny, right? Maybe you're even moving some of your assets abroad because you're like, hey, maybe this us, this Us thing. Well, a lot of these people, people in government. they're talking about taking away as much wealth as possible and the voters are getting more and more willing to say, you know what, Screw anybody that makes more than me I Don't want all that money redistributed and that's kind of the political theme that's going on and getting a lot more traction here in the US and is getting a lot more attraction in Western countries as a whole. I'm not trying to preach any kind of political view here, but if you're somebody that has significant wealth, you got to be thinking hey, this government is going to get crazier and crazier as time goes on, voters are going to go more and more to a certain direction that is not going to be in my favor.

So maybe I should start thinking about how to move things around so that I can protect myself and my family and the assets I built. The other thing is that you absolutely need to look at the bull case and bear case price targets for the S P 500 right now. The bull case at Morgan Stanley and really it's similar to a lot of other Banks as well is that the S P 500 is going to end the year at 4 200. Well, that's about 3.2 percent of upside.

Half that now because the market went up a bit since this graphic, but at the same time your base case is negative 4.2 percent and you're bearcase is negative 14. So if the market is best case scenario ending at 4200, but position to most likely end at 3 900 or in a bear case at 3 500, Well, that means you have very, very little upside and a lot of downside. The risk versus reward just isn't in your favor. In order to get a couple percent return, you're risking a loss in the base case scenario and a massive loss in the bear case scenario.

And this is the S P 500's projections. You got to know individual companies, especially big movers are going to be moving many multiples of this. So the risk versus reward isn't in your favor. but you have a massive massive risk of loss.

and if the risk versus reward just isn't in your favor, well, it starts making sense to say you know what? Hey, I'm going to take profits, especially into this rally. So overall I mean insiders have this massive problem right now. Where if they are on board with these projections, what is the incentive for them to stay invested right now? What is the incentive for them not to take some of their chips off the table and protect themselves? Probably not a lot, which is a another reason why they are selling. Now for a contrarian piece of data which I think is more relevant for people who are trading in this market and for hedge funds and institutional traders who specifically make money off.

Trends Well take a look at the average S P 500 return before and during bear markets. The current Trend that the market has followed is in Black If you get a recession, the market theoretically tends to follow this trend here, which would suggest we've got a lot more to. Rally If it turns out we don't have a recession, or if it turns out we do have a recession, we have more selling off and then some months down the road you're going to start rallying again. Now what? This Doesn't tell us though, is what happens.

If say, the first two or three quarters of this year aren't formally defined as a recession and the worst bludgeons don't happen until Q4 of this year or even Q1 of 2024.. perhaps that could mean that we follow along this line and then we revert back to the mean. So that's one thing that you have to be very, very careful of. A lot of people think that hey, if you see recessionary data, you see a lot of recessionary.

Trends You see a lot of things that look like they're going to spark a recession. Well, a lot of people have been making the mistake again and again, myself included into thinking that that needs to happen like now now pronto. Pronto Pronto When in reality it could take a while, and in that period of time, markets can be easily easily swayed into believing that perhaps this is the most likely scenario and the most likely outcome, and thus rally up stocks and allow them to climb a wall of worry. So the contrarian View and a lot of people always ask me Charlie Can you please share the contrarian view too? Well, the contrarian view is perhaps the economy takes a lot longer to fall off the cliff, and perhaps markets can trace the no recession trend line until the recession inevitably comes.

But at the end of the day I think we're going to revert back to the mean you don't get out of printing tons and tons of money and making a lot of sloppy fiscal and monetary mistakes the last few years and then not have to pay for it on the other side, right? So that is just my thought process. I Hope I'm wrong I Really would not want a recession? I would really prefer to have markets only go up and the economy to only do better and berries and Roses to be everywhere for free. but that's just not a always how it happens unfortunately. Anyways, folks, that's all we got for you today.

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