Tag Archives: Stock Market

Fear and Greed with a Roll of the Dice, by MN Gordon

Posted on February 24, 2023 | Leave a comment

There are still way too many people who want to buy when everyone else is buying, and nothing approaching the capitulation and loathing that characterize the true bottom of bear markets. From MN Gordon at economicprism.com:

Bear markets take time.  They also provide countless occasions to lose money.  With each bounce comes an opportunity for investors to buy higher so they can later sell lower.

Major U.S. stock market indexes hit what is likely an interim bottom in the fall of 2022.  Since then, they’ve bounced with incredible vitality.  The bounce has brought new confidence to investors at what may end up being the worst possible time.

Many smart people have misconstrued the bear market rally – a sucker’s rally – as the origins of a new bull market.  After January’s stellar performance to start the New Year, calls of a bull market have come far and wide.

Maybe these bull market calls are right.  Maybe the stock market’s selloff this week was merely a consolidation period.  And the major stock market indexes will soon charge past their all-time highs from over a year ago.  We’re not so sure.

Billionaire investor Jeremy Grantham, and co-founder of the Boston-based money manager GMO, recently provided a well-reasoned assessment of where the stock market, as measured by the S&P 500, is headed.  In his 2023 outlook letter, After a Timeout, Back to the Meat Grinder!, which was published on January 24, Grantham noted:

“While the most extreme froth has been wiped off the market, valuations are still nowhere near their long-term averages.  My calculations of trendline value of the S&P 500, adjusted upwards for trendline growth and for expected inflation, is about 3,200 by the end of 2023.  I believe it is likely (3 to 1) to reach that trend and spend at least some time below it this year or next.”

As of Thursday’s close, the S&P 500 was at about 4,012.  Thus, to hit 3,200, the S&P 500 would have to fall 20 percent.  What to make of it?

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Markets Are Expecting the Federal Reserve to Save Them – It’s Not Going to Happen, by Brandon Smith

Posted on October 21, 2022 | Leave a comment

The Federal Reserve is intentionally trying to destroy the economy and take down financial markets. From Brandon Smith at birchgold.com:

Markets Are Expecting the Federal Reserve to Save Them and It Is Not Going to Happen

Image © Steeve Roche

I have said it many times in the past but I’ll say it here again: Stock markets are a trailing indicator of economic health, not a leading indicator. Rising stock prices are not a signal of future economic stability. When stocks fall, it’s usually after years of declines in other sectors of the financial system.

Collapsing stocks are not the “cause” of an economic crisis, they are just the delayed symptom of a crisis that was already there.

Anyone who started investing after the crash of 2008 probably has no understanding of how markets are supposed to behave, and what they represent to the rest of the economy. They’ve never seen markets operating without interference and stock prices moving freely. Central bank meddling, which started as a “last ditch effort” to save the global financial system at any price has now become business-as-usual. Worldwide, stocks surge when investment banks anticipate Federal Reserve easing, the so-called and often-forecast “pivot” from its current monetary-tightening program back to the good old days of endless free money. And stocks plunge every time a member of the Federal Open Market Committee (FOMC) announces that inflation is still too high, and the Fed has to keep fighting it.

Most market participants no longer have any understanding of fundamentals. Robinhood day-traders and Redditors don’t see stocks as a fractional claim on the future profits of a business – they think they’re just buying poker chips in the great Stock Market Casino where everybody always wins.

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Monday is Going to Be Interesting for Stocks, by Wolf Richter

Posted on June 12, 2022 | Leave a comment

This bear market won’t be over until “buy the dip” is regarded as a bad joke among bedraggled stock speculators. From Wolf Richter at wolfstreet.com:

Still way too much wild craziness, including the ultimate bag-holder gamble: Why the bottom isn’t anywhere near.

I went out looking for blood in the streets Friday evening after the sell-off to see if markets had hit bottom, but there wasn’t any blood. There was instead chatter about the next rally, about what to buy and when. And there was the relentlessly exuberant pump-and-dump meme-stock crowd hoopla-ing DVD rental company Redbox Entertainment, one of the infamous SPACs, and video-streaming service Chicken Soup for the Soul Entertainment, which is going to acquire Redbox, in an utterly ridiculous crazy-wild game with a deadline (we’ll get there in a moment).

That this game is even played – that this utter nuttiness in the markets continues – indicates that there is still way too much exuberance, way too much liquidity, way too much craziness. And the bottom isn’t in until this kind of craziness is snuffed out.

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Posted in Banking, Business, Economics, Economy, Financial markets, Investing

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Doug Casey on Whether the “Everything Bubble” Has Finally Found Its Pin

Posted on May 19, 2022 | Leave a comment

Sneak peak: it has. From Doug Casey at internationalman.com:

International Man: Recently, large tech stocks lost over $1 trillion in value in just a few days. Many of these companies have been trading at insane earnings multiples for a long time.

Has the bubble finally popped?

Doug Casey: It actually started popping about a year ago—but now people are starting to notice that lots of these stocks are down not just down 50%, but 75%, and 90%.

Several classes of stocks are getting hurt particularly badly. One is the zombie companies that took advantage of low-interest rates and overleveraged. They borrowed a lot of money in order to pay dividends and buy back shares. The borrowing had little to do with growing the actual business. Now they can’t pay back the debt they’ve taken on since interest rates have gone up.

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Posted in Business, Currencies, Debt, Economics, Economy, Financial markets, Government

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Massive Stock Market Leverage Unwinds amid Brutal Bloodletting, by Wolf Richter

Posted on May 14, 2022 | Leave a comment

Losing borrowed money in the stock market is guaranteed to amplify your pain. From Wolf Richter at wolfstreet.com:

Margin debt started dropping a month before the Nasdaq went south, and it’s still dropping.

The total amount of leverage in the stock market is unknown and takes many forms. The only form that is tracked and reported on a monthly basis is margin debt. The other forms, such as Securities Based Lending (SBL) and hedge funds leveraged at the institutional level are not tracked. Not even banks and brokers that fund this leverage know how much total leverage their client has from all brokers combined, which became clear when the family office Archegos imploded in March 2021 and wiped out billions of dollars in capital at the prime brokers that had provided the leverage.

But margin debt – the tip of the iceberg and indicator of the direction of the overall stock market leverage – dropped by $27 billion in April from March, to $773 billion, according to Finra, which gets this data from its member brokers. Margin debt peaked in October last year at $936 billion and started falling in November. Over those six months, it has dropped by $163 billion, or by 17%. But leverage is still massive, and the unwind has a long way to go:

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No Wonder the Market Is Skittish, by Charles Hugh Smith

Posted on January 29, 2022 | Leave a comment

What happens when the central bank music stops. From Charles Hugh Smith at oftwominds.com:

The equity, real estate and bond markets all rode the coattails of the Fed’s ZIRP and easy-money liqudiity tsunami for the past 13 years. As those subside, what’s left to drive assets higher?

No wonder the market is skittish:

1. Every time the Federal Reserve began to taper quantitative easing / open spigot of liquidity over the past decade, reduce its balance sheet or raise rates from near-zero, the market plummeted (“taper tantrum”) and the Fed stopped tightening and returned to easy-money expansion.

2. Now the Fed is boxed in by inflation–it can’t continue the bubblicious easy-money policies, nor does it have any room left to lower rates due to its pinning interest rates to near-zero for years.

3. So market participants (a.k.a. punters) are nervously wondering: can the U.S. economy and the Fed’s asset bubbles survive higher rates and the spigot of liquidity being turned off?

4. The market is also wondering if the economy can survive the pricking of the “everything” asset bubbles in stocks, bonds, real estate, etc. as interest rates rise and liquidity is withdrawn. What’s left of “growth” once the top 10% no longer see their wealth expand every month like clockwork?

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Stocks Don’t Need More Alarm Bells, They’re Already Clanging and Jangling All Over the Place. But Here we Are: Leverage, by Wolf Richter

Posted on December 18, 2021 | Leave a comment

Leverage—borrowed money—amplifies both gains and losses. From Wolf Richter at wolfstreet.com:

Stock market leverage, the big accelerator on the way up, and on the way down.

Increasing leverage – borrowing money to buy stocks – puts buying pressure on the stock market up. Declining leverage – selling stocks to reduce leverage – puts selling pressure on the market. Stock market leverage has ballooned over the past 20 months by historic proportions, which has contributed to the historic surge in stock prices. So we’ll keep an eye on leverage.

The tip of the iceberg of stock-market leverage that we can actually see is margin debt, which is reported on a monthly basis by FINRA, based on data reported by its member brokers.

Other forms of stock-market leverage occur in the shadows, such as Securities Based Lending (SBA) that isn’t tracked and reported in a centralized manner, though some banks choose to disclose it quarterly or annually.

There is leverage associated with options and other equities-based derivatives. Then there is leverage at the institutional level such as with hedge funds, which doesn’t show up until a fund implodes, such as Archegos, and everyone gets to pick through the debris.

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Red Friday: A Little Dip and Already the Crybabies on Wall Street are Clamoring for the Fed to Soothe their Pain, by Wolf Richter

Posted on November 27, 2021 | Leave a comment

There’s nothing like a strong down day on the stock markets to get the easy money crowd to start clamoring for a bailout. From Wolf Richter at wolfstreet.com:

But raging inflation is a political bitch, and the White House got the Fed to acknowledge it, and that changes the equation.

Stock markets closed at 1 p.m. today, and there wasn’t enough time to rectify this evil situation that has emerged on Black Friday, when stocks were supposed to be meandering higher on very low volume, driven by a few algos that would make sure stocks meandered higher to easily book another winning day and a new record high for the S&P 500 to keep the hype going.

But the sellers had arrived overnight while the buyers suddenly weren’t super-interested at buying at these ridiculously inflated record prices after the largest and fastest money printing scheme ever. And voilà. What everyone knew would happen someday, happened on this Red Friday, and stocks swooned.

And already the crybabies on Wall Street have come out in force, clamoring for the Fed to end the tapering of its asset purchases, and to push out the expected interest rate hikes into distant infinity, and to maybe even re-start QE all over again before they even ended it, because, you know, stocks aren’t ever allowed to drop, not even a little bit off their ridiculously inflated highs.

But the Fed, unlike before, has bigger worries for the first time in four decades – and Powell and Brainard, along with just about every other Fed governor have acknowledged it: Raging consumer price inflation that has now spread broadly across and deeply into the economy, filtering into services such as rents that are unrelated to transportation mayhem and production shortfalls in Asia. Rents, accounting for about one-third of CPI, are just now getting started to flex their muscles in the inflation indices. And the mood of consumers has soured.

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The Counter-truths Unspin, by James Howard Kunstler

Posted on July 19, 2021 | Leave a comment

What if revulsion at Covid-19 totalitarianism plus the stolen election boil over at the same time the economy and financial markets head south in a big way? From James Howard Kunstler at kunstler.com:

Back in the day, LSD trips were mostly a matter of personal choice. Today, though, all you have to do is wake up somewhere between Montauk and the Farallon Islands and your senses are overwhelmed with hallucinations. The public used to depend on newspapers and TV networks to suss out reality, but that filter is long gone, replaced by a relentless “narrative” machine, and all it does is spin out one technicolor whopper after another.

The trouble is: narrative is not the truth. Generally, it’s the opposite of the truth. It’s manufactured counter-truth. The more narrative you spin, the faster you must spin off new supporting narrative to conceal the untruth of your previous narrative — until the national hive mind is lit up in unreality where nothing makes sense and the very language that separates humanity from the rough beasts becomes a social poison. And is “Joe Biden” not the perfect gibbering epitome of this mess, a ghost in the narrative machine, beckoning us into chaos?

America is on a bad trip. The country has lost its way psychologically. Two things will be required to bring it out of the fugue state it tripped into five years ago: some significant shocks to the system and the passage of time. Those shocks are in the offing and the “Joe Biden” regime — meaning Barack Obama and his wing-people who run things — are looking more and more desperate as auguries manifest.

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Posted in Civil Liberties, Collapse, Crime, Cronyism, Economics, Economy, Financial markets, Government, Media, Politics, Propaganda

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Do You Hear the Bells Ringing? by MN Gordon

Posted on June 27, 2021 | Leave a comment

The story of Ivar Kreuger was the point of departure for an Ayn Rand play (The Night of January 16th) and it holds lessons for today. From MN Gordon at economicprism.com:

There’s an old Wall Street adage, you’ve likely heard it, “No one rings a bell at the top (or bottom) of the market.”

The bell, of course, is the signal to sell at the market top.  Here we pause to take exception with this adage.  As far as we can tell, bells do ring at market tops.  Yet few hear them.  Most people’s ears are plugged with the prospects of easy riches.

Bull markets often give way to manias…where an asset’s intrinsic value becomes less important than the hope that an overpriced asset can be later offloaded at a higher price to a greater fool.  Certainly, irrational pricing based on greater fool dynamics is the sound of a ringing bell.  Though this can go on for years.

The current ratio of total market capitalization to GDP (now over 200 percent) is most definitely the sound of a ringing bell.  Another ringing bell is the $500 million batch in junk bonds recently sold by MicroStrategy for the sole purpose of buying bitcoin.  These bitcoin junk bonds pay a generous 6.125 percent coupon rate.

How will MicroStrategy pay the coupon if bitcoin goes down?  Will they sell more junk bonds?  Will anyone buy them?

Do you hear any bells ringing?

At the moment (at the market top), few people do.  These bells won’t be heard until after the market craters.  In retrospect, it becomes obvious that, at the market top, bells had been ringing practically every day.

The sound of a bell ringing at the market bottom is much more grim.  At real market bottoms, people kill themselves.  That’s when the great frauds are revealed.  And some former titans of industry are revealed to be great swindlers.

Today we look back nearly 100 years to one of the great Wall Street swindlers.  We squint for parallels to the present.  There is instruction to be found…and frauds to avoid…

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Posted in Business, Collapse, Debt, Economy, Financial markets, History

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