Posted on 01/25/2021 8:51:49 AM PST by SeekAndFind
“The big boys are no longer bullish,” bellowed Biggie Too in baritone. “The big boys are now bubble bullish,” continued the chief investment strategist for one of Wall Street’s Too-Big-To-Fail affairs. “They ask Biggie, why can’t the S&P trade 5,500?” said Too, easing into third person. “And Biggie asks ’em back: We got 6% GDP and 1% rates, who’s gonna short this?” he said. “You do the math, you gonna tell Biggie to short this thang?” asked Too. And I shrugged, having long since learned to recognize when Biggie’s question is the answer.
“No one’s gonna short the S&P unless 6% GDP falls to 4%, or 1% rates jump to 2%,” barked Biggie. “Ain’t happening in Jan,” whispered Too. “Too much Covid, too little vaccine, too much money, too few places to put it,” he said, riffing. “You think Powell’s gonna do a 2013 taper tantrum right now?” laughed Biggie. “No chance, everyone knows it. And that’s the only thang that scares Biggie,” said Too, smiling, breaking into a slow groove. “So tell me why ain’t this thing already up 10%? Why’s LQD soft? EMFX too?” winked Biggie.
“You know we gonna get a 15-20% budget deficit in 2021 right?” asked Biggie, not waiting for an answer. “And you know we gonna have a Fed balance sheet that’s 40% of GDP?” asked Too, on a roll. “And they just wrote $600 checks and now they’re gonna write $1,400 checks right?” he asked. I nodded. “You know that when these kinds of numbers keep rising they get real hard to roll back, right?” asked Biggie. “You know this is the kind of thing that sparks the Mamma of all Bubbles?” he asked. “And you know inflation will mark its end?”
Gatsby: “The 1920s followed the pandemic,” explained the CIO. “People don’t tend to draw that connection, but the reality is that throughout history, such catastrophes lead to periods where people lose their minds,” he said. “This time around, the government is providing the bridge, funding the collapse in demand. Who knows for how long? It could be 3yrs in total.” Here we are, approaching another March with lockdowns looming. “You see signs of political insanity, all sorts of speculation too, Robinhood. And today, everything happens faster, time compresses.”
Treadmills:
“Anyone being intellectually honest about Covid should admit the stimulus will be with us for a long time,” explained the CIO. “Mass vaccinations will take longer than anyone thinks - it’ll take until late summer or early autumn to bring Covid’s prevalence down,” he said. “Then come the mutations.” Which make it appear likely we’ll need to tweak the vaccines. “So we may enter a cycle where it takes nearly a year to vaccinate the population and each year we need new vaccines, which means this will restrain the economy for a couple more years.”
Caligula:
"It’s an orgy,” said the CIO. “A money illusion, sucking everyone in,” he continued, acknowledging that a fiat system is itself a monetary mirage. “In a market like this, you use your marked-to-market profits to double down, then to double down again,” he explained, all SPAC’d up with nowhere to go. “And it feels like we’re entering the illusory-illusion phase, where prices keep running ahead of the money supply expansion – where things keep going up as long as the Ponzi unit of account continues expanding,” he said. “It only ends when liquidity tightens."
"This is the hyper-aggressive stage of the market cycle where the smartest value guys start warning,” continued the same CIO. “Klarman, Marks, Grantham.” They remind us that asset prices must ultimately be anchored to fundamentals. “They’re not wrong of course, but they’re usually early, and the foundation for this speculative boom remains intact,” he said. “They argue valuations are extreme, and they’re right. But they can always get more extreme, and what you learn from past cycles is that valuations and fundamentals can diverge for ages."
Tulip bulbs anyone?
Absent a black swan event, I’m guessing that the stock market will continue to do well as long as interest rates are low. Few people are interested in buying bonds paying 2% or CDs paying 0.5%.
Disclaimer: Warren Buffett has never called and asked me for advice. So what do I know?
Doesn’t mean it is going to burst tomorrow.
RE: Doesn’t mean it is going to burst tomorrow.
If you’re concerned about the bubble bursting but want to protect gains that you’ve made from the stock market, the best thing to do is to put trailing stops on all stocks where you’ve made an outsized profits.
The crash is inevitable. It is the nature of markets and even another 4 years for Trump would not have changed it although the fundamentals would have been far stronger and the correction pushed down the road.
The real question is when does this happen? Our current economic outlook has to factor in the free money and sugar high policies of the Fed and big banks using cheap money to inflate the bubble. Much of the growth in the last 4 years was based on Trump policies strengthening the economic fundamentals. The big boys of Wall Street don’t really care though..... they know they can use the cheap money from the Fed to do the same thing. Win - win.
They are going to do everything they can to kick the can. It is the DC way. History shows the longer you kick the can the more severe the correction becomes. Plan accordingly?
Memoirs of Extraordinary Popular Delusions and the Madness of Crowds
https://www.gutenberg.org/ebooks/24518
Okay but is a market investment that would correspond to an STD antibiotic in this case?
We are seeing a lot of that already. And all the worse because a good part of it is a self-inflicted catastrophe. We see it even sometimes on FR, prompting Jim Rob's recent admonition. But it's a lot worse many other places. How did / do the Antifa / BLM riots get so much violent support? How did Antifa / BLM manage to so successfully use a small minority of Trump supporters on Jan. 6?
The problem with the bursts is they overshoot stops just great.
This is a money printing fueled orgy and it will get worse. I hate to give into it but I have projects that need finished. I will probably dash my principles, eat the turd and give in to doubled lumber prices. They are not expected to go down even this year.
AS for the insanity fueled by daVid, people are buying airplanes they know nothing about sight unseen the day they are listed. Same for homes. Same for new construction with builders booked a year out or even more and the price of the framing lumber alone up by nearly double from last year. They just don’t care about the condition or the price of either. Why? They are stir crazy? I don’t know.
The fed will not raise interest rates even with inflation as long as europe in in negative rate territory. This will only make inflation worse. As long as you are in equities under these conditions you will probably have the wheelbarrow full of money you need to go to the grocery store.
When the correction comes it will be horrible. How do you get out ahead of it? It will come so fast that a 10% stop loss sell order will be steamrolled in a day and your funds will close at the close of the day much further down than you ever believed.
We are in the crap and it is getting deeper and smelling worse every day.
Bonds are more like 0.6% and of course CDs are 0.5%. Is that your safe haven? If you go either place you will be deflating your money. Someday, after the crash, you may be even but some other day the market will return to the mean and the bonds will be left in the dust again. Bonds are below the market in the mean.
The inmates are running the asylum. Wall Street does not care, they never care, they make money on both sides of the trade, long haul has no meaning to them, trade and volatility are their business.
So the big guys on Wall St. are putting out the word: “C’mon in, the water’s fine!”. To me, sounds more like the party is winding down and they need the next sucker to come in. Someone needs to bail them out of their positions before the bottom drops out, bids disappear, and there’s no one left but them - holding an empty bag.
What could possibly go wrong?!
if they stop trading and then subsequently open lower, will your trailing stop loss help? Especially if there's some manipulation. Honestly I use them too, but I can't help but worry about the scenario where the market makers could play us for suckers around the circuit breakers...
Disclosure: Not a trader. 85% cash, 15% index ETFs since thanksgiving. 80% total untaxed gain in 2020 due to unlooked-for market timing, out when when the overpowering paranoia started keeping me up at night. Should inflation kick in the cash has to go back to work immediately, regardless of my paranoia over volatility.
Looks like the cronies with tech will make out just fine. I’ve nearly doubled my money in less than a year buying APPL during the COVID sell off.
Up 99.25% at close today expecting more ....
With 85% gains I think you are quite safe. Although the stops aren’t 100% reliable.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.