Like a Grease Fire (guest: Jimmy Jude & Kuppy) - Market Huddle Ep.73

Episode Overview

• Guest Jimmy Jude shares his aggressively bullish outlook on the market, arguing that unprecedented government stimulus will overpower any short-term bearish trends once the pandemic news cycle improves.
• The episode explores the critical role of trader psychology, using a wild personal story to illustrate how maintaining a calm and detached mindset during chaos can lead to massive opportunities.
• A debate ensues on the future of central bank policy, specifically whether the Federal Reserve will follow the precedent of other central banks like the Bank of Japan and Swiss National Bank by directly purchasing equities.
• The conversation also covers specific market analysis, including using public sentiment as a contrarian indicator and identifying unique opportunities in the oil tanker market and small-cap pandemic plays.

Key Concepts

• Market Psychology & Mindset: The core idea that an optimistic, long-term perspective is more profitable than persistent pessimism. Maintaining a level head and avoiding panic during extreme volatility is presented as the most crucial skill for a trader.
• 2020 Crash vs. 2008 Crisis: The 2020 crash is characterized as a "grease fire"—sudden, violent, and unexpected—in contrast to the 2008 crisis, which was a "slow-moving train wreck" that could be seen coming for years.
• Federal Reserve Intervention: A strong thesis that the Fed will do "whatever it takes" to support the market, including morphing its policies to eventually buy equities, using its role as the "last resort liquidity provider" to crush short-sellers.
• Central Bank Precedents: The discussion uses the Bank of Japan's large-scale equity purchases in the Nikkei and the Swiss National Bank's active monetization against U.S. equities as precedents for potential future Fed actions.
• Contrarian Investing: The strategy of using overwhelmingly negative public feedback and "hate mail" from a bullish blog post as a contrarian indicator to identify market bottoms when sentiment is at its most fearful.
• Oil Tanker Market Dynamics: An analysis of the distinction between "dirty" (unrefined crude) and "clean" (refined product) tankers, explaining how a shortage of clean tankers has been created by an oversupply of refined products needing storage.
• Trading Patience: The advice for traders to "lay in the weeds" and wait for extreme moments of opportunity, rather than feeling a constant need to have a position, which often leads to poor decision-making.

Quotes

• At 1:24 - "I've never met a pessimistic millionaire, so I mean, you gotta, you gotta fucking keep it light, right?" - Jimmy Jude explaining his optimistic trading philosophy.
• At 1:57 - "I was a total pessimistic bear asshole. I hated everything." - Jimmy Jude describing his change in market perspective over the years.
• At 2:12 - "The big lesson I learned is this shit bounces back every fucking time, you know?" - Jimmy Jude on his key takeaway after experiencing numerous market cycles.
• At 8:16 - "This was like a fucking grease fire, you know? Like, it even, it caught me, I was... I was complacent." - Jimmy Jude contrasting the speed and violence of the 2020 crash with the slower 2008 crisis.
• At 23:53 - "You could have a week of limit up moves." - Jimmy Jude predicting the sheer force of the market rally once the virus news turns positive, fueled by massive stimulus.
• At 26:41 - "They will morph their policy to fuck anyone betting against them the entire way." - Jimmy Jude on his conviction that the Federal Reserve will ultimately do whatever it takes to support the market.
• At 27:16 - "They will jam you up the pooper with printing money." - Guest Jimmy Jude makes a colorful prediction about how the Federal Reserve will act as a liquidity provider of last resort.
• At 27:41 - "They are a top 10 shareholder in almost every stock within the Nikkei." - A host counters the previous claim, stating that the Bank of Japan's ownership stake in the market is actually very significant.
• At 28:06 - "Think about it, Switzerland owns all the US... Don't forget the Swiss National Bank monetizes against US equities. The precedent is there." - A host points to the Swiss National Bank as an example of a central bank already buying foreign equities.
• At 61:56 - "'You keep your ass in that pit and you keep rolling. You're trading really well... Just fucking block out the shit around you.'" - The surprising instructions Jimmy's boss gave him after discovering he was high but profitable.
• At 63:40 - "'If you could keep a level head, you could just rape the shit out of it, you know?'" - Jimmy explaining how a calm demeanor was a massive advantage during the chaotic days of paper-based pit trading.
• At 64:53 - "'When the shit really gets crazy... if you're not one of the guys that's getting crushed, your ability to make money goes up like hugely.'" - The host summarizing the key lesson that chaos creates immense opportunity for traders who can maintain their composure.
• At 74:24 - "'Lay in the weeds. You don't have to be in the market. Chill the fuck out.'" - Jimmy Jude's core advice for traders in the current volatile market environment, stressing patience over constant action.
• At 74:51 - "'If you always feel the need to have a position in something, you're always going to get fucked.'" - Jimmy warning against the common trading pitfall of feeling obligated to trade continuously.
• At 95:19 - "Dirty product is basically unrefined crude. Clean product is after it's been refined and has no sulfur." - Harris Kupperman provides a simple definition to clarify the different types of oil tankers being discussed.
• At 96:32 - "The refineries have nowhere to put the gasoline and the jet fuel they're producing. And so they're dumping it on pretty much anyone who will take it... and that's leading to clean tankers being very busy." - Kupperman details the secondary effect of the oil glut on the clean tanker market.
• At 98:01 - "One of the reasons I write a blog is I want to see where sentiment is." - Kupperman explains his rationale for using his blog as a tool to gauge market sentiment.
• At 98:42 - "I get hundreds of emails back: 'Kuppy, you don't get it. Millions of people are going to die... We're all going to be eating canned tuna for the next five years.'" - Describing the extreme bearish sentiment he used as a strong contrarian buy signal.
• At 108:09 - "There's a company called Emergent Capital... what their business is, they own 523 policies on people average age 85 and a half." - Kupperman introduces his "pandemic play," a company that profits from the maturation of life insurance policies.
• At 126:21 - "Slay your dragons while they are small." - The show's "Parting Wisdom," emphasizing the importance of cutting losses early.

Takeaways

• Assume central banks will continue to expand their mandates to support markets; do not bet against their ability to print money and intervene.
• In a crisis fueled by massive stimulus, the subsequent market rally can be far more powerful and swift than expected.
• Cultivate a long-term optimistic mindset, as history shows that markets consistently recover and persistent pessimism is a losing strategy.
• Your psychological state is your greatest asset in a volatile market; staying calm and detached when others are panicking is where the real money is made.
• Practice patience by waiting for clear opportunities to emerge rather than forcing trades out of a need to constantly be in the market.
• View extreme market chaos and fear not as a threat, but as the ideal environment for generating outsized returns if you are prepared.
• Use public sentiment as a contrarian indicator; when everyone agrees on a market direction, the turning point is often near.
• Look for second-order effects in market dislocations, such as how an oil glut creates a distinct but related storage crisis for refined products.
• Explore niche and unconventional investment ideas that may be uncorrelated with the broader market's movements.
• Recognize that even the most experienced traders can be caught off guard by sudden crises, reinforcing the need for constant risk management.
• Cut losses early and decisively. Small problems, if ignored, can quickly become unmanageable and catastrophic.
• Internalize the lesson that markets always bounce back, which provides the conviction needed to buy during periods of extreme fear.