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Preparing for the deflation of the new dot-com stock market bubble

This page is a warning to retail "investors" and 401K lemmings, which serve as a feed fro Wall Street sharks. We do not know when the next financial crash will happen and what level the market will reach, but it is clear that risk now is disproportionally high in comparison the potential reward

News Stability is destabilizing: The idea of Minsky moment Recommended Links The Systemic Instability of Financial Institutions Neoclassical Pseudo Theories and Crooked and Bought Economists as Fifth Column of Financial Oligarchy Banking Bonuses as Money Laundering Regulatory Capture & Corruption of regulators
Secular Stagnation Peak Cheap Energy and Oil Price Slump Neoliberalism as a Cause of Structural Unemployment in the USA Credibility Trap Rational expectations scam Economism and abuse of economic theory in American politics Monetarism fiasco
GDP as a false measure of a country economic output Number racket Efficient Market Hypothesis Invisible Hand Hypothesys: The Theory of Self-regulation of the Markets Supply side Voodoo In Goldman Sachs we trust Neocolonialism as Financial Imperialism
Twelve apostles of deregulation Clinton Summers Greenspan Rubin Helicopter Ben: Arsonist Turned into Firefighter Reagan
Chicago school of deification of market Free Market Fundamentalism Free Market Newspeak as opium for regulators The Idea of Dynamic Stochastic General Equilibrium CDS -- weapons of mass financial destruction Phil Gramm Bush II
Zombie state of neoliberalism Insider Trading SEC corruption Fed corruption Systemic Fraud under Clinton-Bush Regime Wall Street Propaganda Machine American Exceptionalism
Redistribution of wealth up as the essence of neoliberalism Glass-Steagall repeal Pope Francis on danger of neoliberalism Fiat money, gold and petrodollar Neoliberalism as a Cause of Structural Unemployment in the USA Buyout Kleptocrats Republican Economic Policy
Principal-agent problem Quiet coup Pecora commission History of Casino Capitalism Casino Capitalism Dictionary :-) Humor  Ayn Rand and Objectivism Cult

While this page can be classified as "doom and gloom porn" and pain one-sided picture it is designed this way. The main idea is to serve as a warning to retail "investors" (actually petty speculators :-) and  401K lemmings that the risk might now outweigh the rewards. Often practiced by 401K lemming  overweighting ( in comparison  with 100-age formula) amount of stock funds in their portfolio carries outsize risks -- especially for those who are close to retirement. Now bonds slide considerable as inflation picks up and the whole idea of holding  bonds is open to review. But only up to the crash.

That sad truth is the ordinary "investor" usually gains very little from holding stocks. Petty speculators often lose  money, not gain anything. The main losses happens during the panic after the crashes, which became periodic ( 1986, 2000, 2008, 2010 flash  crash, 2017 (S&P500 dropped 20%), 2020 (S&P500 dropped 34%),  and the next ). Many people sell at this point, losing all or most of previous gains. People who are overleveraged often lose all their savings.  This is less true for "buy  and hold" investors, but in general it is true.

Of course, we hope that it will not turn into another 1927 crash, bot while hope for the next it is prudent to prepare for the worst. Here is a pretty telling table of sign of market bubble from U.S. stocks are demonstrating most of the characteristics of a bubble, but dont sell yet, says strategist - MarketWatch, May 26, 2021 (reverse background cell are those that the author think are more important sign of bubble then the rest):

10 point checklist for market bubbles

1 Historically high valuations
2 Overvaluations of multiple asset classes
3 High hopes for a "new era"
4 Ultra-easy monetary policy
5 Financial-sector deregulation
6 Rising leverage
7 A boom in "innovative" financial instruments
8 Overtrading and exponential price moves
9 An influx of foreign money
10 A rise in serious fraud

The S&P 500 is now 75% higher than its low point last March. At the end of April, the S&P 500 SPX, 0.21% traded at a cyclically adjusted price-earnings ratio of 37, a level not seen since the dot-com bubble of 1998. Monetary policy over the previous two decades has lifted investors risk appetite to extremes, powering the run-up in equities

The Nasdaq has more than doubled since its pandemic low. Tesla shares are up a staggering 900% over that span. There is persistent noise in MSM that the valuations are justified by low bond yields. In reality low or negative real bond yields have historically typically associated with rather low multiples, since they point to a stagnation -- a low-growth environment with a high risk of recession

Another sign of bubbles is that they tend to occur alongside the perception of a new era, which clearly is the case now with artificial intelligence. Ultra-easy monetary policy, the advent of new financial instruments like special-purpose acquisition companies and cryptocurrency, as well as so called overtrading exponential price movements and signs of above-average risk taking also are typical for bubbles.

The implosion of Archegos is an early warning sign about the next generation of unaccountable risky financial instruments hidden inside 'family offices' Opinion- How billionaires secretive speculation threatens the next financial meltdown - MarketWatch And there is never just one cockroach.

Irrational beliefs became norm: for example that  "OK this is a bubble, but bubbles only burst once central banks start to hike rates or take other steps to rein in their easy money policies."  Citigroup CEO Chuck Prince told the Financial Times in July 2007 about his bank role in providing loans for leveraged buyout : When the music stops, in terms of liquidity, things will be complicated. But as long as the music is playing, youve got to get up and dance. Were still dancing. Prince didnt dance for much longerin November 2007 he retired.  George Soros told the makers of the documentary film Inside Job (2010): Chuck Prince famously said we have to dance until the music stops. Actually the music had stopped already when he said that. The Big Apple- We have to dance until the music stops

And an army of traders on Reddit were able to send GameStop to the moon, at least for a few days. Strange companies with no product or "me too" products stage IPO with multi billion valuations.  This strongly echoes dot-com bubble environment before the crash of 2000.  Leverage is high and there is undeniable rise in serious fraud and the boom in "innovative" financial instruments (two categories that significantly overlap ;-).

20 years since previous crash typically are enough  to forget the lessons, so crashes tend to repeat. Of course, there are multiple warning but who is listening to them when the epidemic of irrational exuberance hits? ( 3 Ways I'm Preparing for the Stock Market Bubble to Burst - Nasdaq)

The stock market has experienced a record-shattering run over the past year. The S&P 500 is up nearly 70% since the market crashed in mid-March 2020, and it's been a wild ride for investors.

However, there's a chance the stock market is headed toward another correction. Some investors worry that this upward trend can't continue much longer, and the stock market bubble will burst soon. When that happens, stock prices could plummet, and we may experience a full-fledged market crash.

It's safe to say that the market will experience a downturn eventually -- after all, stock prices can't continue climbing forever. When, exactly, that will happen is anyone's guess, but it's a good idea to be ready no matter what happens. Here's how I'm preparing my finances for the inevitable downturn.

Stock market chart with a shadow of a bear in the background

Image source: Getty Images.

1. I'm keeping my emergency fund strong

Having a well-stocked emergency fund is always a good idea, but it's especially important during periods of stock market volatility. If you face an unexpected expense and you don't have an emergency fund, you may have no other option than to sell your investments to cover the cost.

However, when the market experiences a downturn, stock prices fall. If you sell your investments when prices are lower, you could end up losing money.

I generally aim to keep at least six months' worth of savings set aside in my emergency fund. This way, no matter what the market does, I don't have to tap my investments to cover any unplanned costs.

2. I'm continuing to invest consistently

It can be tempting to press pause on investing when the stock market is rocky. However, investing during market downturns can actually be a cost-effective move.

Because stock prices are lower during market downturns, it can be a good opportunity to buy good stocks at bargain prices. Even if you're investing in mutual funds or ETFs rather than individual stocks, you can still get more for your money during market downturns.

Instead of waiting until the market recovers to continue buying equities, it's a good idea to keep investing like usual, regardless of what the market does. If the stock market bubble does burst and stock prices take a nosedive, use it as an opportunity to load up on quality stocks without breaking the bank.

3. I'm maintaining a long-term outlook

Stock market crashes can be intimidating, but they're no cause for panic. Historically, the market has always recovered from every one of its downturns -- and it's extremely likely it will bounce back again if another crash is on the horizon.

^SPX Chart

^SPX data by YCharts.

If you maintain a long-term outlook, it's easier to avoid panic-selling when stock prices begin to drop. Remind yourself that the market will recover eventually, and you'll be able to ride out the storm.

The key to investing for the long term is to ensure you're investing in quality stocks or funds. Healthy companies with strong business fundamentals will be able to survive a market downturn, so their stock prices should bounce back. As long as you're putting your money behind strong investments, you should be able to get through even the worst market crashes.

As daunting as they may be, stock market downturns are quite normal. While nobody knows exactly what the future holds for the market, it's safe to assume that stock prices will fall sooner or later. By preparing for it now, you'll be ready for anything.

... ... ...

There are several interesting interview that expose the current bubble, but that does not mean that it can't be inflated further and last another several years.


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NEWS CONTENTS

Old News ;-)

[Jun 20, 2021] Facebook, Alphabet Keep Rising; Apple, Netflix Fade - WSJ

Jun 20, 2021 | www.wsj.com

Big tech stocks are going their own ways in 2021.

It is a far cry from last year, when the so-called FAANG stocks took a commanding role in a market driven by the coronavirus pandemic.

After the swift downturn of early 2020, shares of Facebook Inc., FB -2.04% Apple Inc., AAPL -1.01% Amazon.com Inc., AMZN -0.07% Netflix Inc. NFLX 0.49% and Google parent Alphabet Inc. GOOG -0.64% recovered more quickly than the broad stock market. Then they pushed higher, ultimately powering the S&P 500 to a 16% gain for 2020.

... ... ...

While Alphabet Class A and Facebook shares are up 37% and 21%, respectively, other members of the group have weighed on the market. Amazon shares are up 7.1% in 2021, lagging behind the 11% rise in the benchmark S&P 500. Apple and Netflix have fared even worse, down 1.7% and 7.4% for the year.

... ... ...

For much of 2020, a badly constricted economy pushed investors toward stocks -- like the FAANG names -- whose businesses were less affected and whose future growth became even more alluring with the drop in interest rates. The Russell 1000 Growth Index advanced 37% for the year, while the Russell 1000 Value Index eked out a 0.1% gain -- the largest annual performance gap between the two style benchmarks in FactSet data going back to 1979.

Big tech stocks were among the leaders of that rally. Apple shares climbed 81% in 2020 -- last August becoming the first U.S. public company to surpass $2 trillion in market value -- while Amazon rose 76% and Netflix gained 67%. Facebook added 33% for the year, and Alphabet 31%.

J

James Robertson

These companies are too big and too powerful. I hope for anti-trust legislation that cuts them down to size. The tech oligarchs have too much influence on what Americans think and do. They are a direct threat to our democracy. I hope more Americans will decide to support smaller companies (especially local stores), putting conviction ahead of convenience.
J Pate
Google and Amazon has no near peer competitors. Netflix and Apple do. My family got rid of Netflix last year and now have Hulu. There is a ton of free steaming sites also. We never missed Netflix.
Jay Urbain
"While Alphabet Class A and Facebook shares are up 37% and 21%, respectively, other members of the group have weighed on the market. Amazon shares are up 7.1% in 2021, lagging behind the 11% rise in the benchmark S&P 500. Apple and Netflix have fared even worse, down 1.7% and 7.4% for the year."

Time to take another look at AMZN and AAPL.

Jon Tannen
Gasp! So after breathtaking rises for Apple and Netflix stocks, they're merely flat these days? Not up 30% this month? Uh-oh! Sound the alarms! Someone please tell the writer that stocks are not a straight diagonal to the sky. [She's actually wrong about Apple's valuation being down this year, according to WSJ's very charts! The price is 130 now vs. 129 on Jan 4. But hey, she's obliged to come up with an article this week.]

This all reminds me of analyst Dan Niles coming on CNBC for years and proclaiming he's shorting Apple. Every few months: "I'm shorting Apple." "I'm shorting Apple." Again and again and again. The guy must be broke. [Of course, no one calls him out about it.]

Marshall Dillon
Amazon? Not for me. I have switched most of my online buying to Walmart and local stores. Amazon needs to get out of politics and stop suppressing free speech, much like the WSJ moderators.
SACHIN SHARMA
This entire article is misleading. Choosing 2020 as a base year to compare this group of stocks leaves out the important context of what happened the prior ten years, when FB and GOOGL underperformed vs APPL, NFLX, AMZN. A mean reversion within this group because money managers need to justify their existence could be the simple explanation. Also, how much of the Russel growth fund performance came from AMC and GME, those bell weather companies?

[Jun 12, 2021] Don't dismiss market bubbles" some leave lasting progress behind

Notable quotes:
"... As bubbles peak, they combine objective signs of excess" prices rising much faster than earnings can justify" with subjective signs of mania, such as frenzied trading and borrowing. ..."
"... My research on the 10 biggest bubbles of the past century, from the US stock market in 1929 to Chinese shares in 2015, shows that prices typically rise 100 per cent in the year before the peak, with much of the gain packed into the climactic last months. That finding is closely in line with bubble studies from academics at Harvard and others. ..."
"... By those standards, there are at least five current bubblets. They include the cryptocurrency market for bitcoin and ethereum; clean energy stocks, including some of the biggest names in electric vehicles; small cap stocks, including many of the hottest pandemic stories; a basket of tech stocks that lack earnings, which is also chock-a-block with famous brands; and special purpose acquisition companies (Spacs) , which allow investors a new way to buy into private firms before they go public. ..."
"... The historical bubbles in my study did suffer midcourse setbacks on the way up, but typically those corrections were around 25 per cent and never more than 35 per cent. Beyond that point" a 35 per cent drop" the bubbles in my sample became monophasic, or stuck on a one-way downhill path. ..."
"... It is important to remember that a bubble is often a good idea gone too far. In the early 2000s, the conventional wisdom was that the dotcom bubble had fuelled mainly junk companies with business plans barely worth the napkins they were written on. Later, researchers found that, compared with other bubbles, those in the tech sector produce many start-ups that fail but also help launch major innovations. For every few dozen dotcom flame-outs, there was a giant survivor such as Google or Amazon that would go on to make the economy more productive. ..."
Jun 06, 2021 | investornewsletter.net

As bubbles peak, they combine objective signs of excess" prices rising much faster than earnings can justify" with subjective signs of mania, such as frenzied trading and borrowing.

To some the entire US stock market looks bubbly given its dizzying run-up, but earnings growth has also been extraordinarily strong through the pandemic. Beneath the surface, however, sectors of the market from green tech to cryptocurrency show tell-tale bubble signs.

My research on the 10 biggest bubbles of the past century, from the US stock market in 1929 to Chinese shares in 2015, shows that prices typically rise 100 per cent in the year before the peak, with much of the gain packed into the climactic last months. That finding is closely in line with bubble studies from academics at Harvard and others.

By those standards, there are at least five current bubblets. They include the cryptocurrency market for bitcoin and ethereum; clean energy stocks, including some of the biggest names in electric vehicles; small cap stocks, including many of the hottest pandemic stories; a basket of tech stocks that lack earnings, which is also chock-a-block with famous brands; and special purpose acquisition companies (Spacs) , which allow investors a new way to buy into private firms before they go public.

Each of these bubblets is captured in an index that rose in the last year by around 100 per cent, often much more, to a peak value between $500bn and $2.5tn. Day traders and other newbies rushed in, a common symptom of late stage market manias. Now these bubbles are faltering, as they so often do, in response to increases in long-term interest rates. What's next?

The historical bubbles in my study did suffer midcourse setbacks on the way up, but typically those corrections were around 25 per cent and never more than 35 per cent. Beyond that point" a 35 per cent drop" the bubbles in my sample became monophasic, or stuck on a one-way downhill path.

For the median case, the bottom was found 70 per cent below the peak, and came just over two years after the peak. Except for the index of small-cap pandemic stocks, the other four bubble candidates have all experienced drops of at least 35 per cent, but also of no more than 50 per cent (in the case of ethereum). In other words, they are not likely to resume inflating any time soon, and they are still far from the typical bottom.

There is one new factor that could upset this historical pattern. Despite the rise in long-term interest rates, there is plenty of liquidity sloshing around the markets, with central banks committed to easy money as never before. The risks though are skewed to the downside.

It is important to remember that a bubble is often a good idea gone too far. In the early 2000s, the conventional wisdom was that the dotcom bubble had fuelled mainly junk companies with business plans barely worth the napkins they were written on. Later, researchers found that, compared with other bubbles, those in the tech sector produce many start-ups that fail but also help launch major innovations. For every few dozen dotcom flame-outs, there was a giant survivor such as Google or Amazon that would go on to make the economy more productive.

[Jun 12, 2021] Suze Orman thinks rising stock prices could be a problem for you" here's why

Jun 08, 2021 | finance.yahoo.com

"Over the past five years, the S&P 500 stock index has more than doubled. For the past 10 years, it has nearly quadrupled," says Orman. "If you have left your portfolios on autopilot, that could likely mean that you now own more stock than you intend to, or should."

Left to their own devices, your increasingly valuable stocks may have started to account for an even larger portion of your account

... ... ...

Orman cites a recent analysis from Fidelity Investments on the retirement plans the company handles. Fidelity estimates about 20% of savers own more stock than they'd recommend for someone of their age.


[Jun 12, 2021] Get Ready for $178 Billion of Selling Ahead of the Capital-Gains Tax Hike. These Are the Stocks Most at Risk. - MarketWatch

Jun 07, 2021 | www.marketwatch.com

...Analysts at Goldman Sachs""in October""ran the numbers on the stock market impact of previous capital-gains tax hikes. While there is only a modest impact on the stock market as a whole, momentum stocks usually get socked before they are levied, they found. That makes sense""investors logically are more motivated to sell the stocks where they would save the most by avoiding higher capital-gains taxes.

The last time capital-gains taxes were hiked, in 2013, the wealthiest households sold 1% of their equity assets, the Goldman analysts found. According to the Federal Reserve's distributional financial account data , the top 1% held $17.79 trillion of equities and mutual funds in the fourth quarter of 2020""so a 1% selling of stocks this time would be $178 billion. (The most recent Internal Revenue Service breakdown, from 2018, found that millionaires accounted for just over 500,000 filers or about 0.4% of the total.)

[Jun 07, 2021] As bubbles peak, they combine objective signs of excess prices rising much faster than earnings can justify with subjective signs of mania, such as frenzied trading and excessive leveraging

Jun 06, 2021 | investornewsletter.net

As bubbles peak, they combine objective signs of excess" prices rising much faster than earnings can justify" with subjective signs of mania, such as frenzied trading and borrowing. To some the entire US stock market looks bubbly given its dizzying run-up, but earnings growth has also been extraordinarily strong through the pandemic. Beneath the surface, however, sectors of the market from green tech to cryptocurrency show tell-tale bubble signs.

My research on the 10 biggest bubbles of the past century, from the US stock market in 1929 to Chinese shares in 2015, shows that prices typically rise 100 per cent in the year before the peak, with much of the gain packed into the climactic last months. That finding is closely in line with bubble studies from academics at Harvard and others.

By those standards, there are at least five current bubblets. They include the cryptocurrency market for bitcoin and ethereum; clean energy stocks, including some of the biggest names in electric vehicles; small cap stocks, including many of the hottest pandemic stories; a basket of tech stocks that lack earnings, which is also chock-a-block with famous brands; and special purpose acquisition companies (Spacs) , which allow investors a new way to buy into private firms before they go public.

Each of these bubblets is captured in an index that rose in the last year by around 100 per cent, often much more, to a peak value between $500bn and $2.5tn. Day traders and other newbies rushed in, a common symptom of late stage market manias. Now these bubbles are faltering, as they so often do, in response to increases in long-term interest rates. What's next?

The historical bubbles in my study did suffer midcourse setbacks on the way up, but typically those corrections were around 25 per cent and never more than 35 per cent. Beyond that point" a 35 per cent drop" the bubbles in my sample became monophasic, or stuck on a one-way downhill path.

For the median case, the bottom was found 70 per cent below the peak, and came just over two years after the peak. Except for the index of small-cap pandemic stocks, the other four bubble candidates have all experienced drops of at least 35 per cent, but also of no more than 50 per cent (in the case of ethereum). In other words, they are not likely to resume inflating any time soon, and they are still far from the typical bottom.

There is one new factor that could upset this historical pattern. Despite the rise in long-term interest rates, there is plenty of liquidity sloshing around the markets, with central banks committed to easy money as never before. The risks though are skewed to the downside.

It is important to remember that a bubble is often a good idea gone too far. In the early 2000s, the conventional wisdom was that the dotcom bubble had fuelled mainly junk companies with business plans barely worth the napkins they were written on. Later, researchers found that, compared with other bubbles, those in the tech sector produce many start-ups that fail but also help launch major innovations. For every few dozen dotcom flame-outs, there was a giant survivor such as Google or Amazon that would go on to make the economy more productive.

[Jun 07, 2021] Get Ready for $178 Billion of Selling Ahead of the Capital-Gains Tax Hike. These Are the Stocks Most at Risk. - MarketWatch

Jun 07, 2021 | www.marketwatch.com

...Analysts at Goldman Sachs""in October""ran the numbers on the stock market impact of previous capital-gains tax hikes. While there is only a modest impact on the stock market as a whole, momentum stocks usually get socked before they are levied, they found. That makes sense""investors logically are more motivated to sell the stocks where they would save the most by avoiding higher capital-gains taxes.

The last time capital-gains taxes were hiked, in 2013, the wealthiest households sold 1% of their equity assets, the Goldman analysts found. According to the Federal Reserve's distributional financial account data , the top 1% held $17.79 trillion of equities and mutual funds in the fourth quarter of 2020""so a 1% selling of stocks this time would be $178 billion. (The most recent Internal Revenue Service breakdown, from 2018, found that millionaires accounted for just over 500,000 filers or about 0.4% of the total.)

[Jun 07, 2021] Don't get too optimistic about a stock market rally" they've been fizzling out

Jun 04, 2021 | futurewealthdaily.com
This post was originally published on this site

... ... ...

This quick jumping onto and off of the bullish and bearish bandwagons has become the new normal, as you can see from the table below.

... ... ...

As I argued three weeks ago, this sentiment pattern suggests that the market may remain in a fairly narrow range for the next several months. The contrarian bet is that the market will finally break out of that trading range whenever the market timers stubbornly hold onto their sentiment beliefs in the face of the market moving in the opposite direction. That is, be on the lookout for when the market timers remain bullish in the face of declines, or bearish in the wake of rallies. That will indicate that a bigger decline or rally is in store.

In the meantime, the market timers' behavior suggests both market rallies and declines will be subdued. That's good news to the extent you were worried that a major new bear market is about to begin, but bad news if you were hoping for a more sustained rally.

. .. ... ...

Mark Hulbert is a regular contributor to MarketWatch. His Hulbert Ratings tracks investment newsletters that pay a flat fee to be audited. He can be reached at mark@hulbertratings.com . Continue Reading

[Jun 06, 2021] Yes, It's Still the Economy, Stupid by Karl Rove

An interesting question how stock market casino will volve. Will the Ponzi collase or will run for a couple more years.
Jun 02, 2021 | www.wsj.com

the OMB expects slower growth in the long run. It projects gross domestic product growth running slightly over 2% on average annually between fiscal 2022 and 2031, while the nonpartisan Congressional Budget Office pegs growth at less than 2% on average over the same window. Either growth rate is anemic, making more "broadly shared prosperity" unlikely as well.

...

It may be that raising federal spending turns out to be a winning formula for Democrats in 2022. Then again, it may not. Especially since Mr. Biden would hike taxes high enough to eat up more GDP than in any 10-year period in American history, according to the American Action Forum's Gordon Gray. The spending binge would also increase the nation's public debt to 117% of GDP""greater than the previous record GDP percentage that Washington clocked in the year after World War II.

Recent polling suggests the Democrats' approach may not help them in the midterms.

... Democrats may be counting on Republicans to emphasize "culture war" issues rather than deliver a focused, principled attack on the president's orgy of spending and tax increases. This isn't to suggest issues like defunding the police, critical race theory and border security are unimportant. But in 2022, as in most years, the economy will likely be the real congressional battleground. The sooner Republicans recognize that, the better.

Mr. Rove helped organize the political-action committee American Crossroads and is author of "The Triumph of William McKinley" (Simon & Schuster, 2015).

M

Maria Stepanova

I don't believe policies matter any more. In 2020, democrats secured a permanent upper hand for themselves which is mail-in ballots.
Kenneth Johnson
WSJ headline---"Yes, It's Still The Economy, Stew ped"

If....by the summer of 2022....inflation is 4%+....we're in a recession....and unemployment is 6%+....the Democrats will lose the midterms....I hope.

If none of those things is true....they may 'dodge a bullet'.
Any other opinions?

Ron Hoelscher
They have lost the culture war and do not seem to realize it.

As far as spending, when an economy evolves to have very few people controlling the 90% of the economy then the governing party must resort to handouts to the 90% to stay in power.

I think the Romans called it "bread and circuses." Trump was the circus, now people want some bread.

[May 28, 2021] DoJ Launches Criminal Investigation Into Archegos Blowup - ZeroHedge

May 27, 2021 | www.zerohedge.com

Archegos' prime brokers initially attempted to try and avoid a market panic by coordinating their sales of the massive blocks of shares their had accumulated on behalf of Archegos via a complicated series of swap arrangements. But when Goldman Sachs and Morgan Stanley broke ranks and opted to be the first out the door, Credit Suisse, which had the biggest exposure to Archegos, was ultimately left with more than half of the $10 billion+ in losses that banks were stuck with (while Hwang reportedly lost his entire 11-figure fortune).

Right now, it's not exactly clear what laws prosecutors suspect Archegos and the prime brokers of breaking.

While authorities haven't accused Archegos or its banks of breaking any laws in their dealings, the episode has drawn public criticism from regulators, as well as some inquiries behind the scenes from watchdogs around the world. The implosion shows Wall Street has grown too complacent about potential threats building up in the economy, Michael Hsu, the new acting chief of the Office of the Comptroller of the Currency, said last week.

But the DoJ isn't the only agency poking around: Investigations are ongoing across the globe.

The Securities and Exchange Commission launched a preliminary investigation into Hwang in March, a person familiar with the matter said at the time. The agency has since explored how to increase transparency for the types of derivative bets that sank the firm.

And in the U.K., the Prudential Regulation Authority has been asking firms including Credit Suisse, Nomura and UBS Group AG to hand over information related to their lending to Archegos, people familiar with the matter have said.

While investigators will undoubtedly focus on what happened, some believe that the real concerns lie in current vulnerabilities in the world of equity finance. The team at Risky Finance recently calculated that some $3 trillion in hidden Archegos-style exposure is out there in the market, just waiting to explode if stocks sell off.

...

It should serve as a warning. 14 years ago, obscure corners of banking businesses became hotbeds of regulatory arbitrage, speculation and leverage. The contagion of US subprime brought the financial system to its knees. Now, after years of low or negative interest rates, equity finance may have become a similar hotbed.


[May 28, 2021] Warren Tears Into Fed on Credit Suisse Oversight Before Archegos

May 26, 2021 | finance.yahoo.com

(Bloomberg) -- Senator Elizabeth Warren ripped the Federal Reserve for its oversight of Credit Suisse Group AG in the run-up to Archegos Capital Management's implosion, arguing the regulator badly blundered when it freed the bank from heightened monitoring.

Warren pointed out at a Tuesday Senate hearing that the Fed knew Credit Suisse had problems estimating its potential trading losses because the agency had flagged the Swiss bank over that issue in its 2019 stress tests. She questioned why Credit Suisse, under the watch of Fed Vice Chairman for Supervision Randal Quarles, was among foreign banks released last year from oversight by the Large Institution Supervision Coordinating Committee, which keeps tabs on lenders that pose the greatest risk to the U.S. financial system.

"So you now agree that you made the wrong decision to weaken supervision?" the Massachusetts Democrat asked Quarles, who was testifying before the Senate Banking Committee.

"We did not weaken supervision," he responded, saying the shrinking U.S. footprint of Credit Suisse and other foreign banks prompted the Fed's decision. Quarles further argued that the billions of dollars in losses that Credit Suisse suffered in relation to Archegos -- trader Bill Hwang's family office -- weren't a result of faulty Fed oversight.

"The losses you are referring to didn't occur in the United States," he said.

Warren scoffed at the idea that missteps involving overseas lenders don't lead to U.S. consequences. She reminded Quarles his term as vice chairman ends in five months, and said, "our financial system will be safer when you are gone."

[May 28, 2021] No More Easy Money for speculators? It's too early to tell

May beyes, but may there is will the Last Hurrah move up...
Even if the S&P 500 stays flat for the rest of 2021, this year would mark its third consecutive year of double-digit gains. The index has only one such three-year period since the dot-com bubble burst in 2000.
May 26, 2021 | finance.yahoo.com

This week, LPL Research analyst Jeff Buchbinder said investors should expect stock market gains to slow significantly in the second half of 2021 as inflationary pressures and rising interest rates weigh on investor sentiment.

[May 28, 2021] Stock Market Leverage Hits WTF High while the Fed hypocritically warn about danger of

Notable quotes:
"... In April, it exploded to a new WTF high of $847 billion, up by $188 billion in six months, having ascended to the zoo-has-gone-nuts level: ..."
"... Leverage creates buying pressure and drives up prices. As prices rise, the collateral can be leveraged up further, and leverage builds with rising asset prices. And then when prices decline, the leveraged bets are sold to pay down the debt, and the selling triggers more price declines, and forced selling sets in. This is when Archegos blew up. ..."
"... It's ironic that the Fed, out of the other side of its mouth, is warning about the results of its policies, including the ballooning leverage that isn't known until it blows up. ..."
"... Greed, I think. For instance, the uber rich have lots of influence over the frothing finance media. The media pumps up a stock and the wealthy play around that pumping, shorting or selling or what have you. Talking heads sell BS to suckers. ..."
"... Capital begets capital and the cycle continues. ..."
"... Who wins? Not you. Who loses? Not them. Motivation behind letting this happen? Byproduct of averting complete collapse. ..."
"... I started looking at market capitalization data yesterday after reading Wolf's post. The Finra data is easy, just have to find a free source for historical market cap. Intuitively, a level use of margin would cause the dollar value to rise with the dollar value of the market, but if margin grows faster it could be a warning. Unless I'm misreading this chart, it suggests they're tracking. ..."
"... Exactly. Adjusted for market cap its not quite as scary although cos market cap is ebbing a little now maybe it would look like its starting to get concerning. ..."
"... Yes. What is different this time is that it is tracking it with no delay since the March 2020 FED hail marys thrown to prevent Mr Market's melt down. He hasen't sobered up since. When the hangover starts, it's going to be a doozy. ..."
"... The leverage is trying to reconcile the big gap between the 10 year paying sub 1.75% and the actuarial expectation of 6-7% annual returns of pretty much any big player out there insurance companies, pension funds etc. ..."
"... All the regulators need to do is to explicitly state stock exposure via derivatives must be included in regulatory reporting requirements/foreign ownership limits. ..."
"... Come on sheeple: you can't willfully inflate share prices WITHOUT willfully inflating sales and earnings to match! ..."
"... we most assuredly had inflation and crap earnings. ..."
May 22, 2021 | www.nakedcapitalism.com

Known Stock Market Leverage Hits WTF High. Out the Other Side of Its Mouth, the Fed Warns About Hidden Leverage that Blew up Archegos Posted on May 19, 2021 by Yves Smith

Yves here. We haven't been too concerned about stock market frothiness because overvalued stock markets, in and of themselves, don't do tons of damage when they fizzle"¦except when the purchases have been fueled by borrowing. That's the key difference between the 1929 crash and the dot-bomb era.

While we are not up to Roaring Twenties style leverage on leverage (trust me, it was widespread), the borrowing is getting into nervous-making territory. The chart below, from Advisor Perspectives, is through April and compares margin debt levels to the S&P 500 (not a perfect comparison, but a consistent proxy over time). The relationship isn't quite as whacked as Wolf's post suggests, but the recent trajectory is worrisome. It has a blowoff look about it.

By Wolf Richter, editor of Wolf Street . Originally published at Wolf Street

Stock market margin debt jumped by another $25 billion in April, to a historic high of $847 billion, according to FINRA data. It has exploded by $188 billion in six months, and by 61% year-over-year, and by 55% from February 2020:

Excess leverage is the precise and predictable result of the policies the Fed is promoting out of one side of its mouth with its interest rate repression and asset purchases.

Out of the other side of its mouth, the Fed "" via its blissfully ignored Financial Stability Report "" is warning about leverage, stock market leverage, and particularly the vast and unknown parts of leverage among hedge funds and insurance companies.

It named names: The family office Archegos, a private hedge fund that has to disclose very little, and that then blew up because none of the brokers providing it with leverage knew about the other brokers also providing leverage, and no one knew how much total leverage the outfit had. The amount of leverage didn't come out until it blew up.

And this form of hidden leverage is not included in the known stock market margin debt reported monthly by FINRA, based on reports by its member brokerage firms.

This known stock market leverage is an indicator of the trend in leverage, the tip of the iceberg. History shows that a big surge in margin balances preceded and perhaps was a precondition for the biggest stock market declines.

In April, it exploded to a new WTF high of $847 billion, up by $188 billion in six months, having ascended to the zoo-has-gone-nuts level:

In this type of chart that covers two decades during which the purchasing power of the dollar has dropped, long-term increases in absolute dollar amounts are not the focal point; but the steep increases in margin debt before the selloffs are.

Leverage creates buying pressure and drives up prices. As prices rise, the collateral can be leveraged up further, and leverage builds with rising asset prices. And then when prices decline, the leveraged bets are sold to pay down the debt, and the selling triggers more price declines, and forced selling sets in. This is when Archegos blew up.

And so the Fed says in its Financial Stability Report that "measures of hedge fund leverage are somewhat above their historical averages, but the data available may not capture important risks from hedge funds or other leveraged funds." And it recounts the Archegos fiasco, in terms of how this hidden leverage works:

"In a separate episode in late March, a few banks took large losses when a highly leveraged family office, Archegos Capital Management, was unable to meet margin calls related to total return swap agreements and other positions financed by prime brokers. Price declines in the concentrated stock positions held by Archegos triggered the margin calls, prompting sales of the stock positions, which led to further declines in the prices of affected stocks and, ultimately, substantial losses for some banks."

"The episode highlights the potential for material distress at NBFIs [Nonbank Financial Institutions such as hedge funds] to affect the broader financial system," the Fed's report said.

It's ironic that the Fed, out of the other side of its mouth, is warning about the results of its policies, including the ballooning leverage that isn't known until it blows up.

Ha, and then says the Fed, still speaking out of the other side of its mouth, if that risk appetite declines "from elevated levels," and outfits want to get out from this leverage, or are forced to get out from under this leverage, "a broad range of asset prices could be vulnerable to large and sudden declines, which can lead to broader stress to the financial system."


Alfred , May 19, 2021 at 10:07 am

I really am puzzled at this point. Who wins, who loses, what is the motivation behind letting this happen again and again? Is there an "economy" that the Fed administers that protects and enables this activity?

cocomaan , May 19, 2021 at 11:12 am

Greed, I think. For instance, the uber rich have lots of influence over the frothing finance media. The media pumps up a stock and the wealthy play around that pumping, shorting or selling or what have you. Talking heads sell BS to suckers.

Capital begets capital and the cycle continues.

Alfred , May 19, 2021 at 11:50 am

That's all true. I don't see how the banks (dark pools), hedge funds and the Fed fit into a legitimate scenario though if leveraging just escalates each time. If all this continuation is dependent on how the Fed reacts? Is the Fed the only thing that stands between the bad actors crapping out or "The House" fronting them more chips?

cocomaan , May 19, 2021 at 12:02 pm

Pretty much my interpretation yeah! The Fed is just a college of banks, they are just there to have a structured, bureaucratic method for providing more liquidity when there's a liquidity crisis. All that stuff about full employment is bull.

They were built to prevent the smoke filled meetings that JP Morgan and his buddies held during the 1907 crash, where they put a gun to Teddy Roosevelt's head and told him to approve mergers or else.

But in reality, the Fed is just a more structured smoke filled room. It's still a group of elites getting together to make decisions on liquidity. Their job is also to smooth out the frequent crashes of the 19th century, but honestly, since I turned working age, it's been one crash after another, so clearly they are failing.

Alfred , May 19, 2021 at 12:47 pm

So reallly what they are doing now has become a way of doing business. And Powell is their PR man.

cocomaan , May 19, 2021 at 12:54 pm

Yeah, to me, it's just a federally sanctioned smoke filled room that has a veneer of academic economics at play in decision making.

I'm not a hotshot economics major or economic reporter, just a dude, but that's what I see. Anyone reading these comments can feel free to correct me.

Duck1 , May 19, 2021 at 6:30 pm

https://admiralcod.blogspot.com/2016/05/my-favorite-day.html

cocomaan , May 20, 2021 at 6:36 am

I found my new profile picture!

Dugless , May 19, 2021 at 10:26 pm

Jerome Powell is an extremely wealthy investment banker with a net worth (via internet search) of between 20 and 55 million dollars. Whose side do you think he is on?

Felix_47 , May 20, 2021 at 1:27 pm

BA from Princeton and Law degree from Georgetown. That is why people try so hard to get their kids into the Ivy League. Schumer"¦"¦Harvard 1970 I think. On and on. It is a special club and you are not in it which george carlin pointed out.

Gulag , May 19, 2021 at 3:32 pm

Jonathan Levy in his new book "Ages of American Capitalism" maintains that what you are talking about is what he call the The Great Repetition.

He characterizes the Fed as an administrative agency outside democratic control, by design and that it is now the most powerful economic policy making institution in the country. He believes that we are now trapped in a recurring economic pattern dependent upon converting leveraged asset price inflation into fresh incomes built out of the credit cycle.

Liquidity is now a product of state power lodged inside the U.S. central bank. However this repetitive stabilizer may have now become a great destabilizer, in the sense of creating an ever accelerating economic inequality through its policies of offering never-ending liquidity for speculative assets.

juno mas , May 19, 2021 at 12:18 pm

"Who wins?" Well, most of these arch-egos playing the financial game ALWAYS believe it will be them. Whether by some cunning short-play or leveraged long-play. In the end, the losers are EVERYONE because of the disruption in the economic system. But if you live close to the bone with little financial cushion, then the blade will feel the sharpest.

Alfred , May 19, 2021 at 12:53 pm

Yes, you are right about the impact. The resources to prepare and recover have really suffered also for those close to the bone.

notabanker , May 19, 2021 at 10:01 pm

Who wins? Not you. Who loses? Not them. Motivation behind letting this happen? Byproduct of averting complete collapse.

21T of QE BEFORE the covid helicopters were released.
FED has been in self preservation mode since 2008. FED = Financial System = Economy. It's all the same thing. Don't mistake it for the term you look up in the dictionary.

Knute Rife , May 20, 2021 at 11:57 am

Who can tie their money up in cash and readily get financing so they can snap up assets on the cheap when the dumping starts? There's your answer.

Socal Rhino , May 19, 2021 at 10:30 am

I started looking at market capitalization data yesterday after reading Wolf's post. The Finra data is easy, just have to find a free source for historical market cap. Intuitively, a level use of margin would cause the dollar value to rise with the dollar value of the market, but if margin grows faster it could be a warning. Unless I'm misreading this chart, it suggests they're tracking.

Harry , May 19, 2021 at 2:14 pm

Exactly. Adjusted for market cap its not quite as scary although cos market cap is ebbing a little now maybe it would look like its starting to get concerning.

cnchal , May 19, 2021 at 3:51 pm

> Unless I'm misreading this chart, it suggests they're tracking.

Yes. What is different this time is that it is tracking it with no delay since the March 2020 FED hail marys thrown to prevent Mr Market's melt down. He hasen't sobered up since. When the hangover starts, it's going to be a doozy.

Also, note how in previous eras margin debt grew at a rate faster than the price Mr Market was selling for, at least some of the time.

Mikel , May 19, 2021 at 11:06 am

When I heard about it, I didn't think Archegos was some kind outlier that had discovered something no one else had thought of. It wasn't an outlier at all"¦it was a clue.

LilD , May 19, 2021 at 1:51 pm

Don't worry, there's only one cockroach

Alfred , May 19, 2021 at 2:42 pm

and only one rat

Tom Stone , May 19, 2021 at 12:55 pm

It does look like a blow off top. doesn't it?
And the Real estate Market sure looks like it's at a top.
I see one heck of a lot of leverage and lots of fraud in all of the markets ( Paper gold is reliable that way) and quite a few threads unraveliing, Greensill and Archegos among them.
There's nothing rational about these markets, it's straight up fear and greed and the suckers are ripe for the plucking.
I will stick by my call of June for the top, with the numbers starting to show up in July.

Taurus , May 20, 2021 at 5:39 am

"The markets can stay irrational longer than [most of us] can stay solvent"

The leverage is trying to reconcile the big gap between the 10 year paying sub 1.75% and the actuarial expectation of 6-7% annual returns of pretty much any big player out there insurance companies, pension funds etc.

Between the dollar depreciating and the interest rates repression by the Fed, there isn't much left. Except real estate but that carries its own "" very substantial- risks.

MD , May 20, 2021 at 9:12 am

As my specialization was investment compliance at one of the larger fund shops (Blackrock level), swaps and CFD exposure is reflected at its mark-to-market exposure in a NAV and can be effectively considered as off-balance sheet exposure. The fund accounting treatment between leverage via derivatives vs loans also lends itself to masking derivatives' leverage issues.

In Europe, regulators require semi-annual risk reporting categorizing derivative notional values but the Archegos issue also involves exchange/country-level aspects.

For instance, legal teams would go through each country's rules and regulations to see whether there was a case to be made that derivatives exposures did not need to be included such that capacity limits can be worked around. All the regulators need to do is to explicitly state stock exposure via derivatives must be included in regulatory reporting requirements/foreign ownership limits.

kiers , May 20, 2021 at 11:34 am

You're forgetting the flip side: You use "funny QE Money" to boost share prices is necessarily correlated with using "funny QE Money" to prop up sales, gross margins, and ebitda, and "¦.earnings!

Who is auditing all the leaders of the S&P 500 with foreign operations? WHo will monitor if loans are taken, say overseas, and disguised as "sales", or "ebitda" flowing eventually to earnings?

Come on sheeple: you can't willfully inflate share prices WITHOUT willfully inflating sales and earnings to match!

We're living through forced price inflation. But yet, total revenues are UP? NO make sense! But some co's are reporting "foreign sales" hugely up that nicely coincide with the shortages and price jack-ups domestically!

Yves Smith , May 20, 2021 at 11:41 am

No, not correct at all. First, you are confusing QE, which is an asset swap, with net spending. So this is what Lambert would call a category error. Second, we most assuredly had inflation and crap earnings. Go look at the 1970s stagflation. Corporate profits were lousy (and not even clear if they meant what they appeared to mean due to the lack of good inflation accounting) and stock prices were in the toilet.

athingtoconsider , May 21, 2021 at 11:41 am

First, you are confusing QE, which is an asset swap, with net spending. Yves

What about the profit (or less loss) the asset "swap" may make for the asset seller? Granted a rich asset owner has less propensity to spend but cash for trash enables them to buy other assets like apartments and houses to grind the poor for rents.

Anyway, fiat creation for other than the general welfare is gross violation of equal protection under the law. Not to mention there are ethical means to increase liquidity such as equal fiat distributions to citizens.

Sound of the Suburbs , May 20, 2021 at 12:58 pm

At the end of the 1920s, the US was a ponzi scheme of inflated asset prices. The use of neoclassical economics, and the belief in free markets, made them think that inflated asset prices represented real wealth.

1929 -- Wakey, wakey time. The use of neoclassical economics, and the belief in free markets, made them think that inflated asset prices represented real wealth, but it didn't.
It didn't then, and it doesn't now.

Somecallmetim , May 20, 2021 at 1:58 pm

The greed vs fear dynamics bring to mind a mascot for this discussion:

https://encrypted-tbn0.gstatic.com/images?q=tbn:ANd9GcR1BF-5Vf7-24CZVnoDbM9m8ZiOhAN95OyN-A&s

There's a good reason it's wearing a top hat.

McWatt , May 20, 2021 at 4:54 pm

All: I have been getting 8-10% price increase's from my suppliers the last few days. There is some serious inflation going on.

[May 28, 2021] Dedollarization is a serious threat to the US neoliberal empire

May 23, 2021 | www.moonofalabama.org

Max , May 23 2021 15:45 utc | 7

How can one ignore all the noise in the media to focus on the crux of the situation, implications, and the future outcomes?

One can only understand the impact of events better and envision the future by exploring plausible scenarios and identifying signals which over time will enable one to size up the probabilities of outcomes.

INTERNATIONAL -- MONETARY IMPERIALISM

Geopolitical relationships are frosty & flammable. All the narratives can be summed up into a few SCENARIOS:

The probabilities of these scenarios will be defined by the following SIGNALS:

Any new scenarios & signals? What probabilities would one assign to various scenarios? What will be the construct of scenarios and signals at the national level?

The Dollar Empire likes to initiate a conflict during Olympics when they are held in its adversaries:

  1. 2008, Georgia conflict
  2. 2014, Ukraine conflict
  3. 2022, ?

[May 28, 2021] The Fed Is Playing With Fire, by Christian Broda and Stanley Druckenmiller

Notable quotes:
"... With its narrow focus on inflation expectations, the Fed seems to be fighting the last battle. Just because the Fed hasn't faced big trade-offs in recent decades doesn't mean trade-offs aren't coming or that they no longer exist. ..."
"... The long-term risks from asset bubbles and fiscal dominance dwarf the short-term risk of putting the brakes on a booming economy in 2022. ..."
May 11, 2021 | www.wsj.com

Clinging to an emergency policy after the emergency has passed, Chairman Powell courts asset bubbles.

...With its narrow focus on inflation expectations, the Fed seems to be fighting the last battle. Just because the Fed hasn't faced big trade-offs in recent decades doesn't mean trade-offs aren't coming or that they no longer exist.

Chairman Jerome Powell needs to recognize the likelihood of future political pressures on the Fed and stop enabling fiscal and market excesses.

The long-term risks from asset bubbles and fiscal dominance dwarf the short-term risk of putting the brakes on a booming economy in 2022.

Mr. Broda is a partner at Duquesne Family Office LLC, where Mr. Druckenmiller is chairman and CEO.

[May 26, 2021] U.S. stocks are demonstrating most of the characteristics of a bubble, but don't sell yet, says strategist

May 26, 2021 | www.marketwatch.com

... .,. ,,,

Stefan Hofrichter, head of global economics and strategy at German fund management giant Allianz Global Investors, put together a 10-point checklist for bubbles that he says was inspired by Charles Kindleberger, the author of the 1978 classic, "Manias, Panics, and Crashes." In the table below, you can see what that list is, as well as the color-coded rating he assigned to them.

At the end of April, the S&P 500 SPX, 0.20% traded at a cyclically adjusted price-earnings ratio of 37, a level not seen since the dot-com bubble of 1998, and the Nasdaq Composite COMP, 0.59% was at an even more-staggering 55. (European, Japanese and Asian equities, by contrast, are trading at or below their long-term valuation multiples.) And he doesn't agree that the valuations are justified by low bond yields. "Low real yields have historically typically implied rather low multiples, since low yields point to a slow-growth environment and a higher risk of recession," says Hofrichter. "Monetary policy over the decades has lifted investors' risk appetite to extremes, powering the run-up in equities," he says.

Also on the bubble list is that multiple asset classes are overvalued, noting that the term premium for longer-dated sovereign bonds remains around 100 basis points below the long-term average. Another sign of bubbles is that they tend to occur alongside the perception of a new era, which clearly is the case now with artificial intelligence. Ultra-easy monetary policy, the advent of new financial instruments like special-purpose acquisition companies and cryptocurrencies, and what he calls "overtrading" -- exponential price movements and signs of above-average risk taking -- also are illustrative of bubbles.

So with all these bubble signs, isn't it a time to sell? "History has shown that bubbles only burst once central banks start to hike rates or take other steps to rein in their 'easy money' policies." Until the Fed starts tapering its bond purchases, "we think there is a reasonable chance that U.S. equities will continue bubbling up further. As a result, we stay nervously 'risk on' for now, gravitating towards risk assets. And we have a bias for value stocks, which are trading at a multidecade discount to growth stocks," he says.

Subtle shift at the Fed

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Tim Duy, chief U.S. economist at SGH Macro Advisors, analyzed the wave of comments from Federal Reserve officials, including Vice Chair Richard Clarida. "Notice how slowly the Fed is moving in the tapering direction, mixing in talking about tapering with policy still being in a good place and not seeing substantial progress 'just yet.' This is by design. It's enough that if you are watching for it and you know what to look for, you see the subtle shift but not enough to be any kind of game-changer," he said. Duy expects the formal pivot toward tapering to be announced at the Jackson Hole, Wyo. conference in August, with the actual reductions starting in the first quarter of 2022, or possibly the final quarter of 2021.

Fed Vice Chair for Supervision Randal Quarles has two speeches, the first on insurance regulation and the second on the economic outlook.

The chief executives of Wall Street banks -- including Bank of America BAC, 0.37% , Goldman Sachs GS, 1.01% and JPMorgan Chase JPM, 0.35% -- will testify in front of the Senate Banking Committee on the topic of oversight.

Read : Big bank CEOs to be grilled on diversity and woke capitalism.

What the News Means for You and Your Money Understand how today's business practices, market dynamics, tax policies and more impact you with real-time news and analysis from MarketWatch. SUBSCRIBE NOW: 50% OFF 1 YEAR MarketWatch on Multiple devices

Amazon AMZN, 0.48% struck a deal to buy studio MGM for $8.45 billion, with Amazon saying the purchase rationale was the "treasure trove of IP in the deep catalog that we plan to reimagine."

Dick's Sporting Goods DKS, 14.98% jumped 8% after hiking its earnings outlook. Zscaler ZS, 12.18% rose 11%, after the cybersecurity company's quarterly results and higher full-year outlook breezed past Wall Street expectations. Retailer Nordstrom JWN, -5.54% fell 5%, after reporting a wider loss than forecast.

After the close, graphics chip maker Nvidia NVDA, 0.24% , database software maker Snowflake SNOW, 2.21% and identity management company Okta OKTA, 1.07% release their latest numbers.

Bitcoin reclaims $40,000 level

U.S. stock futures ES00, 0.16% NQ00, 0.30% rose, with the yield on the 10-year Treasury TMUBMUSD10Y, 1.578% at 1.56%.

Bitcoin BTCUSD, 3.15% , the volatile cryptocurrency, rose over 7% to reclaim the $40,000 level.

Random reads

How parking requirements ruin cities.

A new reality-television series will offer the chance to become an astronaut .

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Read Next Inflation 'surprises' are 'almost off the chart' as data runs hotter than expected

Federal Reserve officials seem to be having some success in calming investor fears over inflation --- a chart from Deutsche Bank illustrates why that was a tall task. More On MarketWatch

About the Author Steve Goldstein

Steven Goldstein is based in London and responsible for MarketWatch's coverage of financial markets in Europe, with a particular focus on global macro and commodities. Previously, he was Washington bureau chief, directing MarketWatch's economic, political and regulatory coverage. Follow Steve on Twitter: @MKTWgoldstein.

[May 18, 2021] Former WaMu CEO sees a housing bubble forming because the Fed is 'hooked' on low interest rates

May 18, 2021 | finance.yahoo.com

'Everybody wants to have asset prices forever going up and the cost of financing to be next to nothing,' Kerry Killinger says.

Like many other banks, Washington Mutual rode the wave of low-interest rates to grow its mortgage business during the housing boom of the early 2000s. During Kerry Killinger's time as CEO, WaMu grew to have more than $300 billion in assets.

But when the subprime bubble burst, the bank's fortunes quickly turned. In September 2008, at the height of the financial crisis, Killinger was forced out by the company's board, and ultimately the bank was seized by federal regulators. It still stands as the largest bank failure in U.S. history.

In their new book, "Nothing Is Too Big to Fail: How the Last Financial Crisis Informs Today," Kerry Killinger and his wife Linda, who previously served as the vice chair of the Federal Home Loan Bank of Des Moines, explore WaMu's failure, the government's response to the last crisis and where there is growing risk in today's econom

... In the book, the Killingers raise concerns about asset bubbles they believe are forming in a wide range of asset classes, including stocks, art and luxury items -- and housing. MarketWatch spoke with Kerry and Linda Killinger about the book, the Federal Reserve and how to avoid another global financial crisis like the 2008 meltdown.

...

Linda Killinger: I wanted to write a book about this because it was such an unusual, crazy experience. Back in the '80s I was a partner in an international accounting firm, and the regulators would call me in to do plans for banks that were failing in that time. I noticed that the regulators would do everything they could to help a bank get liquidity, or to help save a bank that had not been consumed in crime or problems. But in this crisis of 2008, it just seemed like nobody wanted to help community banks. In fact, they just did the opposite. They really went after them. I thought it was important to write about the difference and how important it is to help community banks in a crisis like this.

Kerry Killinger: My focus was more on public policy -- about being sure we learned all the lessons we possibly can. I've become very concerned that some of the policies currently being adopted by the Federal Reserve and the regulators in government may be leading us to a new financial crisis.

'Some of the policies currently being adopted by the Federal Reserve and the regulators in government may be leading us to a new financial crisis.'

-- Kerry Killinger

MW : In your book, you explain that you see another bubble forming in residential real-estate -- just one of the many asset bubbles you warn about. What do you believe caused the last housing bubble that led to the Great Recession and how does it compare to what's going on now?

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Kerry Killinger: We've lived through a lot of housing cycles in our careers, and including the big bubble that that was created in the early 2000s. The housing bubble was primarily caused in the early 2000s by the Fed keeping the fed funds rate below the rate of inflation for several years. They did that in 2000 through 2003, and that lowered mortgage payments so low and led to housing prices increasing because housing affordability was good with very low mortgage payments. That caused housing prices to rise much more quickly than the rate of inflation.

From 2000 to 2006 nationally housing prices rose about 83%. Over that same period, the rate of inflation was up about 20%. So a huge increase faster than the rate of inflation, and over the long run, housing prices ought to rise at about the rate of inflation, which was about 2% a year or so. Clearly it was a speculative period where prices were rising too quickly, and speculators and investors increasingly jumped on board.

To help fuel it, underwriting standards were reduced by Fannie and Freddie, the FHA, VA, Wall Street, bank portfolio lenders, and all that. Then on top of that we had this growth of subprime lending. Keeping rates so low for so long was the most important driving force in my opinion.

[Today] the similarities are that the Fed has pursued this policy of ultra-low interest rates with the fed funds rates. Increasingly, the Fed is keeping mortgage rates at an artificially low level for 30-year fixed rates by purchasing assets in their own portfolio, including mortgage-backed securities and an increasing array of guarantees that the Fed has done as part of its policies to fight an economic downturn.

Those actions have led to what I'm calling ultra-low mortgage payments, and that naturally led to a surge in housing prices. Since 2015 housing prices nationally were up about 36% -- more than three times the rate of inflation over that period.

Another similarity is we're seeing speculators and investors jumping in. This go-around it's large entities wanting to buy tracts of homes to use as rental housing. So the non-owner-occupied part of the market, which is the investor side, has gone up from 31.9% to 34.4% in the past year. We're getting a repeat of speculation coming in at this stage with investors coming in in a major way.

Now, subprime lending is not the same factor it was the last go-around fortunately, but we do know that there's an increasing amount of subprime lending going on by the FHA, VA and some of the government enterprises. On the good news side, I think underwriting standards have remained better, much better, than they were in the last go-around. But my caution is underwriting standards are all based on housing prices that are, I believe, inflated because of these ultra-low-interest mortgage rates.

MW: You wrote about how, in your view, the Fed's response last time around exacerbated the financial crisis. And just now, you spoke about how the Fed is contributing to the rise in home prices. So what role do you think the Fed should play in addressing the bubble that you argue is forming now?

Kerry Killinger: This go around I think the Fed has learned that it needs to provide plenty of liquidity to keep from having a crisis. My concern is I think the Fed has gotten hooked on these expansive policies of ultra-low interest rates, asset guarantees, asset purchases and flooding the system with liquidity for a long period of time. And those policies are very appropriate for helping get an economy out of a recession in order to get things stabilized, but their use over extended periods of time always leads to an escalation in inflation and the creation of asset bubbles.

'The Fed has gotten hooked on these expansive policies of ultra-low interest rates, asset guarantees, asset purchases and flooding the system with liquidity for a long period of time.'

-- Kerry Killinger

They are caught in a conundrum now. The policies that were appropriate to help get us beyond COVID-19 -- the longer they keep using those same policies, I think they just keep inflating these bubbles. And it will be very difficult to manage them down in an orderly manner. All assets go through these kinds of ups and downs -- the key is how do we manage them in a way that doesn't cause immediate implosion, like they did in 2008? The longer they allow these bubbles to keep growing, the bigger challenge they're going to have at some point in the future.

MW: You're both strong proponents of community banks and have argued that they should play an important role in the mortgage industry. But following the Great Recession, many banks have reduced or eliminated their mortgage businesses, citing the steep cost of regulation, and non-bank mortgage companies have risen up to fill that void. Should the federal government make it easier for community banks to lend mortgages, and how should it go about doing so?

Linda Killinger: Well, it depends. I think, if it looks like a bank, it smells like a bank and does mortgages like a bank, it should be regulated like a bank. Unless there's some incredible service that they provide that banks don't provide -- otherwise, they're doing the same thing as community banks but they're not being regulated.

The problem with that is things are going pretty well right now because they're selling mostly to Fannie and Freddie. Fannie and Freddie's guidelines are pretty good right now, but at any point in time [non-banks] could couple up with unregulated hedge funds or other entities from Wall Street and start securitizing loans themselves, lowering standards and trying to attract more people.

Especially if the Congress and the new president want to have more affordable housing, it depends on what they do when they want to push for more. There needs to be more affordable housing, but it shouldn't be handled in the way that it was last time. Last time they had Fannie Mae in the 90s saying well 33% of your loan should be [low- and middle-income (LMI)] loans, and by 2008 it was 60% should be LMI. So there's a tremendous pressure on Fannie and Freddie from Congress and the other regulators to really crank out more LMI lending. We really have to be careful about how we do that in the future. Community banks should be involved because they know how to do it right.

MW: When the COVID-19 pandemic began, federal lawmakers and regulators were quick to roll out forbearance options to homeowners who suddenly lost income as a result of the economic shock. A year later, many homeowners are still not making their monthly mortgage payments and are in forbearance. With the foreclosure moratorium still in place, homeowners aren't yet at risk of losing their homes, but that possibility lingers. What should we be doing right now to stave off another foreclosure crisis?

Linda Killinger: During the crisis in 2007, when it started to collapse, Kerry put together a $3 billion fund [at WaMu] to help subprime borrowers stay in their homes. He lowered the payments, and he lowered the amount that was owed, so it was manageable and they could stay in their home. I think that's a responsibility of banks to do that. It's going to be hard when the forbearance goes away -- unless banks and organizations are willing to really write down the principal or lower the payments just to help people a little bit more.

Kerry Killinger: Over the long run you are far better off to do everything you can to keep somebody in a home, if they can possibly afford it. And the last route you want to have to go through is foreclosure, because the costs are painful for everybody involved. We always used to try to do anything possible to keep people into the homes as long as we possibly can, and I think that is a very positive thing what the government and everyone did when COVID hit. Some of those solutions are very appropriate for the short term when you've got a crisis going on, but I think over time they need to be brought back to a more normal environment in which you will always have a small percentage of homes that will have to go through foreclosure. They were just the wrong home for the wrong people at the wrong time.

People don't even think about that anymore, but home prices will fall again in some markets for some reason. Given the rapid escalation we have seen in the last five years, especially in the last 12 months, these are unsustainable price increases that will be subject to some kind of correction when interest rates start to return to more normal levels. Probably one of the more controversial things I'll say here is if you assume that we're going to have about a 2% inflation rate and a GDP growing over the long term at about 2% to 2.5%, then mortgage interest rates on 30-year fixed-rate mortgages should be more in the 4.5% to 5% range.

MW: Do you think consumers are willing to stomach mortgage rates at that level, after so many years in which mortgage rates have remained so low?

Kerry Killinger: Look, all of us want to have the good times roll. Everybody wants to have asset prices forever going up and the cost of financing to be next to nothing. That's something that a lot of people wish for. We're just putting the warnings out that seldom do things go up forever. Right now you have borrowing costs substantially below the rate of inflation and way below historic norms, and that's unlikely to last forever.

I don't know if it's a matter of whether the consumers like it or not, but equilibrium would be closer to 4.5% to 5% on long-term mortgages. I just put out there that if that happens, for whatever reason, the affordability of housing will become much more stressed and mortgage payments will grow. That will have a tendency to put downward pressure on home prices. I don't think we're likely to repeat the problems that hit in 2008 because I think the Fed is smart enough now not to pull liquidity to a point that causes a downward spiral. But you could certainly see a period over several years of some downward pressure on prices as affordability becomes more difficult because of rising monthly mortgage payments.

'Right now you have borrowing costs substantially below the rate of inflation and way below historic norms, and that's unlikely to last forever.'

-- Kerry Killinger

MW: What else about the market and the economy right now is a source of concern to you?

Kerry Killinger: I do think that the economy is both stabilized and now back into a strong growth mode, and I think we're going to see very strong economic activity for the balance of this year and into next year. Inflation is picking up and will be higher than what many think at this point. Businesses are telling me that they are having more price increases today than they have had in the last decade. So I think the concern about inflation is real.

And these growing asset bubbles just continue to escalate to the point to where the assets are selling well above reasonable estimates of intrinsic value. That always presents a certain amount of risk. And finally, we're seeing more and more speculative products and speculators in the market -- not necessarily just in housing.

Look at certain parts of the stock market DJIA, -0.36% SPX, -0.40% . Look at bitcoin BTCUSD, -4.31% . Look at SPACs. Look at NFTs. I can just go through a litany of assets that have risen in price very, very dramatically. Whenever you have a combination of rapidly rising price and increasing speculative activity, you have to raise the red flags. Are bubbles being created here?

Linda Killinger: Yes, and are pension plans buying some of those bubble products?

Kerry Killinger: A fair bit of that build-up of buyers for those single-family homes are pension plans doing it directly to have that asset category. Because with the Fed keeping interest rates artificially low, they can't afford to put into riskless assets like Treasury securities. They have to keep searching out yields. One of them is increasingly into residential real estate.

[May 13, 2021] Investors Double Down on Stocks, Pushing Margin Debt to Record

This was in December 2020 but the same was true in March of 2020. Now chicken might come to roost
Dec 29, 2020 | www.wsj.com

Investors Double Down on Stocks, Pushing Margin Debt to Record : Chasing bigger gains, some have exposed themselves to potentially devastating losses through riskier plays, such as concentrated positions and trading options.

[May 12, 2021] The Most Hyped Corners Of The Stock Market Come Unglued - ZeroHedge

May 12, 2021 | www.zerohedge.com

Authored by Wolf Richter via WolfStreet.com,

Once upon a time last year, there was the EV startup hype-boom that found its way to the SPAC hype-boom, and the two combined and generated miraculously swift and spectacular results; and their collapse has been equally swift and spectacular.

And they're joined by the IPO hype-boom stocks, including the spectacularly hyped highflyers that got shot down, such as Zoom (-49% from peak), Coinbase (-29%), or Airbnb (-35%), and they're in turn joined by the ARK Innovation ETF (-34%). This whole thing has come unglued.

The EV SPAC boom-and-bust is reflected in the WOLF STREET EV SPAC Index, which has collapsed by 57% since its peak on February 17. The index tracks seven EV-related companies that have gone public via a merger with a SPAC: Nikola, QuantumScape (batteries for EVs), Canoo, Lordstown Motors, Romeo Power (batteries for EVs), XL Fleet (EV drive systems for fleets), and Lucid Motors. Since February 17, these seven stocks combined have shed $35 billion in value, which they should have never had in the first place. Easy come, easy go, except when it's your money (data via YCharts ):

[May 12, 2021] Cathie Wood's ARK Wasn't Built for a Flood - WSJ

May 12, 2021 | www.wsj.com

...Ms. Wood's "disruptive innovation" jargon may be somewhat novel. What her investors are experiencing isn't. Fund managers like Gerald Tsai in the 1960s who rode Polaroid and Xerox to stardom or various dot-com visionaries in the late 1990s wound up doing poorly for clients who discovered them after they became hotshots. The culprit is unrealistic expectations and reversion to the mean for the bubbly sectors that got them there. Analyst Meb Faber points out that not one of the five Morningstar "fund managers of the decade" through 2010 even managed to beat the market in the next 10 years. The best of the bunch, Bruce Berkowitz's Fairholme Fund, became the worst.

Star managers can be dangerous to your wealth.

Write to Spencer Jakab at spencer.jakab@wsj.com

[May 11, 2021] If Everyone Sees It, Is It Still A Bubble

May 11, 2021 | www.zerohedge.com

Authored by Lance Roberts via RealInvestmentAdvice.com,

"If everyone sees it, is it still a bubble?" That was a great question I got over the weekend. As a "contrarian" investor, it is usually when "everyone" is talking about an event; it doesn't happen.

As Mark Hulbert noted recently , "everyone" is worrying about a "bubble" in the stock market. To wit:

"To appreciate how widespread current concern about a bubble is, consider the accompanying chart of data from Google Trends. It plots the relative frequency of Google searches based on the term 'stock market bubble.' Notice that this frequency has recently jumped to a far-higher level than at any other point over the last five years."

What Is A Bubble?

"My confidence is rising quite rapidly that this is, in fact, becoming the fourth 'real McCoy' bubble of my investment career. The great bubbles can go on a long time and inflict a lot of pain, but at least I think we know now that we're in one." – Jeremy Grantham

What is the definition of a bubble? According to Investopedia:

"A bubble is a market cycle that is characterized by the rapid escalation of market value, particularly in the price of assets. Typically, what creates a bubble is a surge in asset prices driven by exuberant market behavior. During a bubble, assets typically trade at a price that greatly exceeds the asset's intrinsic value. Rather, the price does not align with the fundamentals of the asset. "

This definition is suitable for our discussion; there are three components of a "bubble." The first two, price and valuation, are readily dismissed during the inflation phase. Jeremy Grantham once produced the following chart of 40-years of price bubbles in the markets. During the inflation phase, each was readily dismissed under the guise "this time is different."

We are interested in the "third" component of "bubbles," which is investor psychology.

A Bubble In Psychology

As Howard Marks previously noted:

"It's the swings of psychology that get people into the biggest trouble. Especially since investors' emotions invariably swing in the wrong direction at the wrong time. When things are going well people become greedy and enthusiastic. When times are troubled, people become fearful and reticent. That's just the wrong thing to do. It's important to control fear and greed."

Currently, it's difficult for investors to become any more enthusiastic about market returns. ( The RIAPro Fear/Greed Index compiles measures of equity allocation and market sentiment. The index level is not a component of the measure that runs from 0 to 100. The current reading is 99.9, which is a historical record.)

Such is an interesting juxtaposition. On the one hand, there is a rising recognition of a "bubble," but investors are unwilling to reduce "equity risk" for "fear of missing out or F.O.M.O." Such was a point noted explicitly by Mark:

"Rather than responding by taking some chips off the table, however, many began freely admitting a bubble formed. They no longer tried to justify higher prices on fundamentals. Rather, they justified it instead in terms of the market's momentum. Prices should keep going up as FOMO seduces more investors to jump on the bandwagon."

In other words, investors have fully adopted the "Greater Fool Theory."

Okay, Boomer!

I know. The discussion of "valuations" is an old-fashioned idea relegated to investors of an older era. Such was evident in the pushback on Charlie Munger's comments about Bitcoin recently:

" While Munger has never been a bitcoin advocate, his dislike crystalized into something close to hatred. Looking back over the past 52 weeks, the reason for Munger's anger becomes apparent with Berkshire rising only 50.5% against bitcoin's more than 500% gain." – Coindesk

In 1999, when Buffett spoke out against "Dot.com" stocks, he got dismissed with a similar ire of "investing with Warren Buffett is like driving 'Dad's old Pontiac.'"

Today, young investors are not interested in the "pearls of wisdom" from experienced investors. Today, they are "out of touch," with the market's "new reality."

"The big benefit of TikTok is it allows users to dole out and obtain information in short, easily digestible video bites, also called TikToks. And that can make unfamiliar, complex topics, such as personal finance and investing, more palatable to a younger audience.

That advice runs the gamut, from general information about home buying or retirement savings to specific stock picks and investment ideas. Rob Shields, a 22-year-old, self-taught options trader who has more than 163,000 followers on TikTok, posts TikToks under the username stock_genius on topics such as popular stocks to watch, how to find good stocks, and basic trading strategies." – WSJ:

Of course, the problem with information doled out by 22-year olds is they were 10-year olds during the last "bear market." Given the lack of experience of investing during such a market, as opposed to Warren Buffett who has survived several, is the eventual destruction of capital.

Plenty Of Analogies

"There is no shortage of current analogies, of course. Take Dogecoin, created as a joke with no fundamental value. As a recent Wall Street Journal article outlined , the Dogecoin 'serves no purpose and, unlike Bitcoin, faces no limit on the number of coins that exist.'

Yet investors flock to it, for no other apparent reason than its sharp rise. Billy Markus, the co-creator of dogecoin, said to the Wall Street Journal, 'This is absurd. I haven't seen anything like it. It's one of those things that once it starts going up, it might keep going up.'" – Mark Hulbert

That exuberance shows up with professionals as well. As of the end of April, the National Association Of Investment Managers asset allocation was 103%.

As Dana Lyons noted previously:

" Regardless of the investment acumen of any group (we think it is very high among NAAIM members), once the collective investment opinion or posture becomes too one-sided, it can be an indication that some market action may be necessary to correct such consensus. "

Give Me More

Of course, margin debt, which is the epitome of " speculative appetite," soared in recent months.

As stated, "bubbles are about psychology," which the annual rate of change of leverage shows.

Another form of leverage that doesn't show up in margin debt is ETF's structured to multiply market returns. These funds have seen record inflows in recent months.

With margin debt reaching levels not seen since the peak of the last cyclical bull market cycle, it should raise some concerns about sustainability. It is NOT the level of leverage that is the problem as leverage increases buying power as markets are rising. The unwinding of this leverage is critically dangerous in the market as the acceleration of "margin calls" leads to a vicious downward spiral.

Importantly, this chart does not mean that a massive market correction is imminent. I t does suggest that leverage, and speculative risk-taking, are likely much further advanced than currently recognized.

Pushing Extremes

Prices are ultimately affected by physics. Moving averages, trend lines, etc., all exert a gravitational pull on prices in both the short and long term. Like a rubber band, when prices get stretched too far in one direction, they have always eventually "reverted to the mean" in the most brutal of manners.

The chart below shows the long-term chart of the S&P 500 broken down by several measures: 2 and 3-standard deviations, valuations, relative strength, and deviations from the 3-year moving average. It is worth noting that both standard deviations and distance from the 3-year moving average are at a record.

During the last 120-years, overvaluation and extreme deviations NEVER got resolved by markets going sideways.

The only missing ingredient for such a correction currently is simply a catalyst to put "fear" into an overly complacent marketplace. Anything from economic disruption, a credit-related crisis, or an unexpected exogenous shock could start the "panic for the exits."

Conclusion

There is more than adequate evidence a "bubble" exists in markets once again. However, as Mark noted in his commentary:

'I have no idea whether the stock market is actually forming a bubble that's about to break. But I do know that many bulls are fooling themselves when they think a bubble can't happen when there is such widespread concern. In fact, one of the distinguishing characteristics of a bubble is just that."

However, he concludes with the most important statement:

"It's important for all of us to be aware of this bubble psychology, but especially if you're a retiree or a near-retiree. That's because, in that case, your investment horizon is far shorter than for those who are younger. Therefore, you are less able to recover from the deflation of a market bubble."

Read that statement again.

Millennials are quick to dismiss the "Boomers" in the financial markets today for "not getting it."

No, we get it. We have just been around long enough to know how these things eventually end.

[May 10, 2021] Many layers of leverage stacked on top of each other increase the probability of dollar collapse

Notable quotes:
"... "It's just unbelievable that central banks are actively encouraging this." ..."
"... Good point. Many times we look at charts and say WTF but once you normalize to inflation, maybe this is not as bad as originally it appeared ..."
"... reminds me of an abusive husband telling his beaten wife, "See what you made me do!" ..."
"... Hussman says the right way to do that is to look at margin debt to GDP ration, which is a record. GDP is doubling rate is about every 20 years now at nominal 3.5% ..."
"... That description applies to most Wall Streeters and banksters, whose titanic egos are amazing given the fact that most are parasites that contribute less than a woodlouse to society. Still, I dread the coming US debt collapse discussed in this website, which I would term a debt explosion as all of the bubbles start to pop and so many debtors and former creditors (like lessors, banks, etc.) become publicly known to be legally insolvent. ..."
"... I have invested carefully but we will all lose much or most of our savings. ..."
"... It is very irritating to think of the trillions that the banksters' deceptively named, "Federal" Reserve has been transferring to its ultra-rich owners for decades. They will probably even avoid most taxation again. ..."
Apr 26, 2021 | wolfstreet.com

YuShan Apr 18, 2021 at 3:13 am

Exactly. It is way more scary than even Wolf's charts suggest because there are so many layers of leverage stacked on top of each other.

People taking out margin debt on stock portfolios that they bought by re-mortgaging their bubbled houses to buy stocks with record corporate debt, collaterised (if at all) with bubble assets, at record valuations driven itself by leverage etc etc

It's just unbelievable that central banks are actively encouraging this.

historicus Apr 18, 2021 at 5:06 am

"It's just unbelievable that central banks are actively encouraging this."

Indeed. It's QUITE believable that the politicians love the free money and would never be bold enough to say .

"Hey Fed. Your mandates say you are to FIGHT inflation (stable prices) NOT PROMOTE inflation."

Moosy Apr 17, 2021 at 6:13 pm

The amount of margin debt is not a WTF amount if you use the prices-double each 11 year rule of thumb.

This 11 year period is strikingly accurate if you take the price of the New York Times since 1900 (I have a booklet with frontpages of each year and discovered this when looking at the selling prices). Having said that, the current 800B is the same as the previous inflation corrected peaks of 2009 and around 1999.

So yes, Wolf is 100% correct with the prediction on what is coming. It is just not a WTF amount but a history-repeats-itself moment

ru82 Apr 17, 2021 at 11:45 pm

Good point. Many times we look at charts and say WTF but once you normalize to inflation, maybe this is not as bad as originally it appeared

cas127 Apr 18, 2021 at 5:06 am

"normalize to inflationary, maybe not as bad as originally it appeared"

I know what you mean, but then the (major) problem is that the inflation itself shouldn't be viewed as "normal". Kinda reminds me of a gvt program defending doubled budget over 8 yrs because of "inflation" when in point of fact it is likely that G printing/policy has *created* the inflation in the first place (to help fund the program now pointing at inflation).

Also, reminds me of an abusive husband telling his beaten wife, "See what you made me do!"

Old School Apr 19, 2021 at 6:08 am

Hussman says the right way to do that is to look at margin debt to GDP ration, which is a record. GDP is doubling rate is about every 20 years now at nominal 3.5%

K Apr 17, 2021 at 9:10 pm

That description applies to most Wall Streeters and banksters, whose titanic egos are amazing given the fact that most are parasites that contribute less than a woodlouse to society. Still, I dread the coming US debt collapse discussed in this website, which I would term a debt explosion as all of the bubbles start to pop and so many debtors and former creditors (like lessors, banks, etc.) become publicly known to be legally insolvent.

It is unfortunate that it may happen at the worst possible time, when we face an adversary worse and more powerful than the Soviet Union or Nazi Germany ever was. I have invested carefully but we will all lose much or most of our savings.

It is very irritating to think of the trillions that the banksters' deceptively named, "Federal" Reserve has been transferring to its ultra-rich owners for decades. They will probably even avoid most taxation again.

I do not like to even think how many Americans will wind up. Remember the saying "There but for the grace of god, go I." Many of us will be saying that a lot in the coming years if we are very fortunate.

[May 10, 2021] Stock Market Leverage in La-La Land, Rises to Historic WTF High

Notable quotes:
"... the popping of the US's bubbles and then the debt-fueled collapse is probably being delayed temporarily by the fear of a certain threat. ..."
"... The loss of the US dollar's reserve status may thus be delayed by the reliability of our current leaders. The smarter, justifiably terrified, wealthy, foreign investors can keep us afloat given the growing nature of the threat, so the hyperinflation and financial collapse that our Wall Streeters and the deceptively named "Federal" Reserve have caused may be kept in abeyance. ..."
Apr 26, 2021 | wolfstreet.com
K Apr 17, 2021 at 9:34 pm

Amen. It is hilarious and I will not elaborate and inadvertently help opponents, but the popping of the US's bubbles and then the debt-fueled collapse is probably being delayed temporarily by the fear of a certain threat. That threat has its own problems, which prevent its taking strong action against our financial markets.

The loss of the US dollar's reserve status may thus be delayed by the reliability of our current leaders. The smarter, justifiably terrified, wealthy, foreign investors can keep us afloat given the growing nature of the threat, so the hyperinflation and financial collapse that our Wall Streeters and the deceptively named "Federal" Reserve have caused may be kept in abeyance.

It is like a video from Africa that I saw in which the attack by one predator is inadvertently foiled by the attack of another predator on a helpless prey. Sadly, we are the prey. :-)

Therefore, I would not short things right now.

Jacklynhunter Apr 18, 2021 at 5:08 am

Accounting fixes this.

[May 10, 2021] Investors are borrowing a record amount on margin to bolster their stock portfolios

Notable quotes:
"... Margin debt saw an annual surge of 49% in February, which was the fastest jump since 2007. Prior to 2007, the fastest jump in margin debt was in 1999. Both instances were just prior to an epic melt-down in the stock market, amid the Great Financial Crisis of 2008 and the dot-com bubble unwind in 2000. ..."
Apr 26, 2021 | markets.businessinsider.com

Matthew Fox Apr. 8, 2021, 04:21 PM


A record surge in margin debt is raising eyebrows as the stock market continues to surge to new all-time-highs.

Investors borrowed $814 billion against their investment portfolios at the end of February, according to data from FINRA cited in a report in the Wall Street Journal on Thursday. That's a record high reading for margin debt, well above January's record of $799 billion.

It's common for margin debt to rise and fall with the stock market, as increased portfolio values afford investors more leverage to take on from their brokers. But the record rise in margin debt is also one of the fastest on record.

Margin debt saw an annual surge of 49% in February, which was the fastest jump since 2007. Prior to 2007, the fastest jump in margin debt was in 1999. Both instances were just prior to an epic melt-down in the stock market, amid the Great Financial Crisis of 2008 and the dot-com bubble unwind in 2000.

Leverage is a double-edged sword for investors, as many take on the debt to buy more stocks. That is a winning strategy in a bull market, but a market correction can spell doom for investors who have too much leverage and need to sell equities or deposit more cash to meet margin calls, which can further exacerbate a downturn in stocks.

That dynamic was on full display last month, after a downturn in ViacomCBS spurred a massive $20 billion liquidation event for family office Archegos Capital, which was long shares of the media company. That epic unwind by a number of prime brokers that serviced Archegos led to billion dollar losses for banks that were slow to unwind the positions, like Nomura and Credit Suisse.

But until a broad market decline materializes, expect margin debt to continue its surge to record highs as it's led by new highs in the stock market.

[May 08, 2021] he cryptocurrency talk, reminds me of the 1990s: We don't have profits, probably never will, but we have clicks. And that's what matters.

May 08, 2021 | www.wsj.com

SUBSCRIBER 3 hours ago Some of this, especially the cryptocurrency talk, reminds me of the 1990s: We don't have profits, probably never will, but we have clicks. And that's what matters. Like thumb_up 3 Reply Share link Report D


he cryptocurrency talk, reminds me of the 1990s: We don't have profits, probably never will, but we have clicks. And that's what matters. SUBSCRIBER 3 hours ago

Some of this, especially the cryptocurrency talk, reminds me of the 1990s: We don't have profits, probably never will, but we have clicks. And that's what matters.
he cryptocurrency talk, reminds me of the 1990s: We don't have profits, probably never will, but we have clicks. And that's what matters. SUBSCRIBER 3 hours ago
Some of this, especially the cryptocurrency talk, reminds me of the 1990s: We don't have profits, probably never will, but we have clicks. And that's what matters.
he cryptocurrency talk, reminds me of the 1990s: We don't have profits, probably never will, but we have clicks. And that's what matters. SUBSCRIBER 3 hours ago
Some of this, especially the cryptocurrency talk, reminds me of the 1990s: We don't have profits, probably never will, but we have clicks. And that's what matters.
he cryptocurrency talk, reminds me of the 1990s: We don't have profits, probably never will, but we have clicks. And that's what matters. SUBSCRIBER 3 hours ago
Some of this, especially the cryptocurrency talk, reminds me of the 1990s: We don't have profits, probably never will, but we have clicks. And that's what matters.
he cryptocurrency talk, reminds me of the 1990s: We don't have profits, probably never will, but we have clicks. And that's what matters. SUBSCRIBER 3 hours ago
Some of this, especially the cryptocurrency talk, reminds me of the 1990s: We don't have profits, probably never will, but we have clicks. And that's what matters.
he cryptocurrency talk, reminds me of the 1990s: We don't have profits, probably never will, but we have clicks. And that's what matters. SUBSCRIBER 3 hours ago
Some of this, especially the cryptocurrency talk, reminds me of the 1990s: We don't have profits, probably never will, but we have clicks. And that's what matters.
he cryptocurrency talk, reminds me of the 1990s: We don't have profits, probably never will, but we have clicks. And that's what matters. SUBSCRIBER 3 hours ago
Some of this, especially the cryptocurrency talk, reminds me of the 1990s: We don't have profits, probably never will, but we have clicks. And that's what matters.
he cryptocurrency talk, reminds me of the 1990s: We don't have profits, probably never will, but we have clicks. And that's what matters. SUBSCRIBER 3 hours ago
Some of this, especially the cryptocurrency talk, reminds me of the 1990s: We don't have profits, probably never will, but we have clicks. And that's what matters.
he cryptocurrency talk, reminds me of the 1990s: We don't have profits, probably never will, but we have clicks. And that's what matters. SUBSCRIBER 3 hours ago
Some of this, especially the cryptocurrency talk, reminds me of the 1990s: We don't have profits, probably never will, but we have clicks. And that's what matters.
he cryptocurrency talk, reminds me of the 1990s: We don't have profits, probably never will, but we have clicks. And that's what matters. SUBSCRIBER 3 hours ago
Some of this, especially the cryptocurrency talk, reminds me of the 1990s: We don't have profits, probably never will, but we have clicks. And that's what matters.
he cryptocurrency talk, reminds me of the 1990s: We don't have profits, probably never will, but we have clicks. And that's what matters. SUBSCRIBER 3 hours ago
Some of this, especially the cryptocurrency talk, reminds me of the 1990s: We don't have profits, probably never will, but we have clicks. And that's what matters.
he cryptocurrency talk, reminds me of the 1990s: We don't have profits, probably never will, but we have clicks. And that's what matters. SUBSCRIBER 3 hours ago
Some of this, especially the cryptocurrency talk, reminds me of the 1990s: We don't have profits, probably never will, but we have clicks. And that's what matters.
he cryptocurrency talk, reminds me of the 1990s: We don't have profits, probably never will, but we have clicks. And that's what matters. SUBSCRIBER 3 hours ago
Some of this, especially the cryptocurrency talk, reminds me of the 1990s: We don't have profits, probably never will, but we have clicks. And that's what matters.

[May 08, 2021] It's not the return on my money I'm concerned with, it's the return of my money that I'm concerned with

May 08, 2021 | www.wsj.com

inflation is here. Lumber is up 450% in a year. Other components are also up. Inflation metrics will eventually recognize reality.

J

It's not the return on my money I'm concerned with, it's the return of my money that I'm concerned with

inflation is here. Lumber is up 450% in a year. Other components are also up. Inflation metrics will eventually recognize reality.

J J Seders
"It's not the return on my money I'm concerned with, it's the return of my money that I'm concerned with." Will Rogers, circa 1930. How easily we all forget. V
It's not the return on my money I'm concerned with, it's the return of my money that I'm concerned with

inflation is here. Lumber is up 450% in a year. Other components are also up. Inflation metrics will eventually recognize reality.

J J Seders
"It's not the return on my money I'm concerned with, it's the return of my money that I'm concerned with." Will Rogers, circa 1930. How easily we all forget. V
It's not the return on my money I'm concerned with, it's the return of my money that I'm concerned with

inflation is here. Lumber is up 450% in a year. Other components are also up. Inflation metrics will eventually recognize reality.

J J Seders
"It's not the return on my money I'm concerned with, it's the return of my money that I'm concerned with." Will Rogers, circa 1930. How easily we all forget. V
It's not the return on my money I'm concerned with, it's the return of my money that I'm concerned with

inflation is here. Lumber is up 450% in a year. Other components are also up. Inflation metrics will eventually recognize reality.

J J Seders
"It's not the return on my money I'm concerned with, it's the return of my money that I'm concerned with." Will Rogers, circa 1930. How easily we all forget. V
It's not the return on my money I'm concerned with, it's the return of my money that I'm concerned with

inflation is here. Lumber is up 450% in a year. Other components are also up. Inflation metrics will eventually recognize reality.

J J Seders
"It's not the return on my money I'm concerned with, it's the return of my money that I'm concerned with." Will Rogers, circa 1930. How easily we all forget. V

[May 08, 2021] What Happens to Stocks and Cryptocurrencies When the Fed Stops Raining Money by Greg Ip

Everybody is afiad to say that this is another dot-com bubble which will eventually birst. Because after it burst there will be a lot of blood on the floor.
But the current situation can be defined as a crazy financial mania with cryptocurrencies as the poster child of this mania. "The S&P 500 stock index now trades at about 22 times the coming year's profits, according to FactSet, a level only exceeded at the peak of the dot-com boom in 2000."
And the shadlow of "Long-Term Capital Management" is all over Wall Street.
May 08, 2021 | www.wsj.com
An unprecedented fiscal and monetary stimulus led by the Federal Reserve is fueling a new investor euphoria. Is this a new bubble? And when could it burst?

To veterans of financial bubbles, there is plenty familiar about the present. Stock valuations are their richest since the dot-com bubble in 2000. Home prices are back to their pre-financial crisis peak. Risky companies can borrow at the lowest rates on record. Individual investors are pouring money into green energy and cryptocurrency.

This boom has some legitimate explanations, from the advances in digital commerce to fiscally greased growth that will likely be the strongest since 1983. . ..

the Federal Reserve.... is buying hundreds of billions of dollars of bonds. As a result, the 10-year Treasury bond yield is well below inflation -- that is, real yields are deeply negative -- for only the second time in 40 years.

....Harvard University economist Jeremy Stein... "while I don't think we're headed for sustained high inflation it's completely possible we'll have several quarters of hot readings on inflation."

Since stocks' valuations are only justified if interest rates stay extremely low, how do they reprice if the Fed has to tighten monetary policy to combat inflation and bond yields rise one to 1.5 percentage points, he asked. " You could get a serious correction in asset prices." C


What Happens to Stocks and Cryptocurrencies When the Fed Stops Raining Money By Greg Ip

Everybody is afiad to say that this is another dot-com bubble which will eventually birst. Because after it burst there will be a lot of blood on the floor.
But the current situation can be defined as a crazy financial mania with cryptocurrencies as the poster child of this mania. "The S&P 500 stock index now trades at about 22 times the coming year's profits, according to FactSet, a level only exceeded at the peak of the dot-com boom in 2000."
And the shadlow of "Long-Term Capital Management" is all over Wall Street.
May 8, 2021
An unprecedented fiscal and monetary stimulus led by the Federal Reserve is fueling a new investor euphoria. Is this a new bubble? And when could it burst?

To veterans of financial bubbles, there is plenty familiar about the present. Stock valuations are their richest since the dot-com bubble in 2000. Home prices are back to their pre-financial crisis peak. Risky companies can borrow at the lowest rates on record. Individual investors are pouring money into green energy and cryptocurrency.

This boom has some legitimate explanations, from the advances in digital commerce to fiscally greased growth that will likely be the strongest since 1983. . ..

the Federal Reserve.... is buying hundreds of billions of dollars of bonds. As a result, the 10-year Treasury bond yield is well below inflation -- that is, real yields are deeply negative -- for only the second time in 40 years.

....Harvard University economist Jeremy Stein... "while I don't think we're headed for sustained high inflation it's completely possible we'll have several quarters of hot readings on inflation."

Since stocks' valuations are only justified if interest rates stay extremely low, how do they reprice if the Fed has to tighten monetary policy to combat inflation and bond yields rise one to 1.5 percentage points, he asked. " You could get a serious correction in asset prices." C Cam Dipalo

I was reading a book from the late 1800 early 1900s, "Unforeseen Tendencies of Democracy". Describing the election / selection process of political leadership in America (more than one hundred years ago), I was struck by "the certitude of the salary [provided by office] to the great multitude who in every country either fail in life, or shrink from the conflicts which the competitive system makes necessary, is very attractive; it soon converted the civil service into what has been called "spoils"; that is, booty won by victories at the polls". Roll forward one hundred years and we can only be in a worse spot: bigger, more complex problems are being addressed by even less qualified individuals. The result is that when I go to the grocery store now, I am paying 1.5x what I used to pay 2 years ago. And that is the only inflation measure I trust.
What Happens to Stocks and Cryptocurrencies When the Fed Stops Raining Money By Greg Ip
Everybody is afiad to say that this is another dot-com bubble which will eventually birst. Because after it burst there will be a lot of blood on the floor.
But the current situation can be defined as a crazy financial mania with cryptocurrencies as the poster child of this mania. "The S&P 500 stock index now trades at about 22 times the coming year's profits, according to FactSet, a level only exceeded at the peak of the dot-com boom in 2000."
And the shadlow of "Long-Term Capital Management" is all over Wall Street.
May 8, 2021
An unprecedented fiscal and monetary stimulus led by the Federal Reserve is fueling a new investor euphoria. Is this a new bubble? And when could it burst?

To veterans of financial bubbles, there is plenty familiar about the present. Stock valuations are their richest since the dot-com bubble in 2000. Home prices are back to their pre-financial crisis peak. Risky companies can borrow at the lowest rates on record. Individual investors are pouring money into green energy and cryptocurrency.

This boom has some legitimate explanations, from the advances in digital commerce to fiscally greased growth that will likely be the strongest since 1983. . ..

the Federal Reserve.... is buying hundreds of billions of dollars of bonds. As a result, the 10-year Treasury bond yield is well below inflation -- that is, real yields are deeply negative -- for only the second time in 40 years.

....Harvard University economist Jeremy Stein... "while I don't think we're headed for sustained high inflation it's completely possible we'll have several quarters of hot readings on inflation."

Since stocks' valuations are only justified if interest rates stay extremely low, how do they reprice if the Fed has to tighten monetary policy to combat inflation and bond yields rise one to 1.5 percentage points, he asked. " You could get a serious correction in asset prices." C Cam Dipalo

I was reading a book from the late 1800 early 1900s, "Unforeseen Tendencies of Democracy". Describing the election / selection process of political leadership in America (more than one hundred years ago), I was struck by "the certitude of the salary [provided by office] to the great multitude who in every country either fail in life, or shrink from the conflicts which the competitive system makes necessary, is very attractive; it soon converted the civil service into what has been called "spoils"; that is, booty won by victories at the polls". Roll forward one hundred years and we can only be in a worse spot: bigger, more complex problems are being addressed by even less qualified individuals. The result is that when I go to the grocery store now, I am paying 1.5x what I used to pay 2 years ago. And that is the only inflation measure I trust.
What Happens to Stocks and Cryptocurrencies When the Fed Stops Raining Money By Greg Ip
Everybody is afiad to say that this is another dot-com bubble which will eventually birst. Because after it burst there will be a lot of blood on the floor.
But the current situation can be defined as a crazy financial mania with cryptocurrencies as the poster child of this mania. "The S&P 500 stock index now trades at about 22 times the coming year's profits, according to FactSet, a level only exceeded at the peak of the dot-com boom in 2000."
And the shadlow of "Long-Term Capital Management" is all over Wall Street.
May 8, 2021
An unprecedented fiscal and monetary stimulus led by the Federal Reserve is fueling a new investor euphoria. Is this a new bubble? And when could it burst?

To veterans of financial bubbles, there is plenty familiar about the present. Stock valuations are their richest since the dot-com bubble in 2000. Home prices are back to their pre-financial crisis peak. Risky companies can borrow at the lowest rates on record. Individual investors are pouring money into green energy and cryptocurrency.

This boom has some legitimate explanations, from the advances in digital commerce to fiscally greased growth that will likely be the strongest since 1983. . ..

the Federal Reserve.... is buying hundreds of billions of dollars of bonds. As a result, the 10-year Treasury bond yield is well below inflation -- that is, real yields are deeply negative -- for only the second time in 40 years.

....Harvard University economist Jeremy Stein... "while I don't think we're headed for sustained high inflation it's completely possible we'll have several quarters of hot readings on inflation."

Since stocks' valuations are only justified if interest rates stay extremely low, how do they reprice if the Fed has to tighten monetary policy to combat inflation and bond yields rise one to 1.5 percentage points, he asked. " You could get a serious correction in asset prices." C Cam Dipalo

I was reading a book from the late 1800 early 1900s, "Unforeseen Tendencies of Democracy". Describing the election / selection process of political leadership in America (more than one hundred years ago), I was struck by "the certitude of the salary [provided by office] to the great multitude who in every country either fail in life, or shrink from the conflicts which the competitive system makes necessary, is very attractive; it soon converted the civil service into what has been called "spoils"; that is, booty won by victories at the polls". Roll forward one hundred years and we can only be in a worse spot: bigger, more complex problems are being addressed by even less qualified individuals. The result is that when I go to the grocery store now, I am paying 1.5x what I used to pay 2 years ago. And that is the only inflation measure I trust.
What Happens to Stocks and Cryptocurrencies When the Fed Stops Raining Money By Greg Ip
Everybody is afiad to say that this is another dot-com bubble which will eventually birst. Because after it burst there will be a lot of blood on the floor.
But the current situation can be defined as a crazy financial mania with cryptocurrencies as the poster child of this mania. "The S&P 500 stock index now trades at about 22 times the coming year's profits, according to FactSet, a level only exceeded at the peak of the dot-com boom in 2000."
And the shadlow of "Long-Term Capital Management" is all over Wall Street.
May 8, 2021
An unprecedented fiscal and monetary stimulus led by the Federal Reserve is fueling a new investor euphoria. Is this a new bubble? And when could it burst?

To veterans of financial bubbles, there is plenty familiar about the present. Stock valuations are their richest since the dot-com bubble in 2000. Home prices are back to their pre-financial crisis peak. Risky companies can borrow at the lowest rates on record. Individual investors are pouring money into green energy and cryptocurrency.

This boom has some legitimate explanations, from the advances in digital commerce to fiscally greased growth that will likely be the strongest since 1983. . ..

the Federal Reserve.... is buying hundreds of billions of dollars of bonds. As a result, the 10-year Treasury bond yield is well below inflation -- that is, real yields are deeply negative -- for only the second time in 40 years.

....Harvard University economist Jeremy Stein... "while I don't think we're headed for sustained high inflation it's completely possible we'll have several quarters of hot readings on inflation."

Since stocks' valuations are only justified if interest rates stay extremely low, how do they reprice if the Fed has to tighten monetary policy to combat inflation and bond yields rise one to 1.5 percentage points, he asked. " You could get a serious correction in asset prices." C Cam Dipalo

I was reading a book from the late 1800 early 1900s, "Unforeseen Tendencies of Democracy". Describing the election / selection process of political leadership in America (more than one hundred years ago), I was struck by "the certitude of the salary [provided by office] to the great multitude who in every country either fail in life, or shrink from the conflicts which the competitive system makes necessary, is very attractive; it soon converted the civil service into what has been called "spoils"; that is, booty won by victories at the polls". Roll forward one hundred years and we can only be in a worse spot: bigger, more complex problems are being addressed by even less qualified individuals. The result is that when I go to the grocery store now, I am paying 1.5x what I used to pay 2 years ago. And that is the only inflation measure I trust.
What Happens to Stocks and Cryptocurrencies When the Fed Stops Raining Money By Greg Ip
Everybody is afiad to say that this is another dot-com bubble which will eventually birst. Because after it burst there will be a lot of blood on the floor.
But the current situation can be defined as a crazy financial mania with cryptocurrencies as the poster child of this mania. "The S&P 500 stock index now trades at about 22 times the coming year's profits, according to FactSet, a level only exceeded at the peak of the dot-com boom in 2000."
And the shadlow of "Long-Term Capital Management" is all over Wall Street.
May 8, 2021
An unprecedented fiscal and monetary stimulus led by the Federal Reserve is fueling a new investor euphoria. Is this a new bubble? And when could it burst?

To veterans of financial bubbles, there is plenty familiar about the present. Stock valuations are their richest since the dot-com bubble in 2000. Home prices are back to their pre-financial crisis peak. Risky companies can borrow at the lowest rates on record. Individual investors are pouring money into green energy and cryptocurrency.

This boom has some legitimate explanations, from the advances in digital commerce to fiscally greased growth that will likely be the strongest since 1983. . ..

the Federal Reserve.... is buying hundreds of billions of dollars of bonds. As a result, the 10-year Treasury bond yield is well below inflation -- that is, real yields are deeply negative -- for only the second time in 40 years.

....Harvard University economist Jeremy Stein... "while I don't think we're headed for sustained high inflation it's completely possible we'll have several quarters of hot readings on inflation."

Since stocks' valuations are only justified if interest rates stay extremely low, how do they reprice if the Fed has to tighten monetary policy to combat inflation and bond yields rise one to 1.5 percentage points, he asked. " You could get a serious correction in asset prices." C Cam Dipalo

I was reading a book from the late 1800 early 1900s, "Unforeseen Tendencies of Democracy". Describing the election / selection process of political leadership in America (more than one hundred years ago), I was struck by "the certitude of the salary [provided by office] to the great multitude who in every country either fail in life, or shrink from the conflicts which the competitive system makes necessary, is very attractive; it soon converted the civil service into what has been called "spoils"; that is, booty won by victories at the polls". Roll forward one hundred years and we can only be in a worse spot: bigger, more complex problems are being addressed by even less qualified individuals. The result is that when I go to the grocery store now, I am paying 1.5x what I used to pay 2 years ago. And that is the only inflation measure I trust.
What Happens to Stocks and Cryptocurrencies When the Fed Stops Raining Money By Greg Ip
Everybody is afiad to say that this is another dot-com bubble which will eventually birst. Because after it burst there will be a lot of blood on the floor.
But the current situation can be defined as a crazy financial mania with cryptocurrencies as the poster child of this mania. "The S&P 500 stock index now trades at about 22 times the coming year's profits, according to FactSet, a level only exceeded at the peak of the dot-com boom in 2000."
And the shadlow of "Long-Term Capital Management" is all over Wall Street.
May 8, 2021
An unprecedented fiscal and monetary stimulus led by the Federal Reserve is fueling a new investor euphoria. Is this a new bubble? And when could it burst?

To veterans of financial bubbles, there is plenty familiar about the present. Stock valuations are their richest since the dot-com bubble in 2000. Home prices are back to their pre-financial crisis peak. Risky companies can borrow at the lowest rates on record. Individual investors are pouring money into green energy and cryptocurrency.

This boom has some legitimate explanations, from the advances in digital commerce to fiscally greased growth that will likely be the strongest since 1983. . ..

the Federal Reserve.... is buying hundreds of billions of dollars of bonds. As a result, the 10-year Treasury bond yield is well below inflation -- that is, real yields are deeply negative -- for only the second time in 40 years.

....Harvard University economist Jeremy Stein... "while I don't think we're headed for sustained high inflation it's completely possible we'll have several quarters of hot readings on inflation."

Since stocks' valuations are only justified if interest rates stay extremely low, how do they reprice if the Fed has to tighten monetary policy to combat inflation and bond yields rise one to 1.5 percentage points, he asked. " You could get a serious correction in asset prices." C Cam Dipalo

I was reading a book from the late 1800 early 1900s, "Unforeseen Tendencies of Democracy". Describing the election / selection process of political leadership in America (more than one hundred years ago), I was struck by "the certitude of the salary [provided by office] to the great multitude who in every country either fail in life, or shrink from the conflicts which the competitive system makes necessary, is very attractive; it soon converted the civil service into what has been called "spoils"; that is, booty won by victories at the polls". Roll forward one hundred years and we can only be in a worse spot: bigger, more complex problems are being addressed by even less qualified individuals. The result is that when I go to the grocery store now, I am paying 1.5x what I used to pay 2 years ago. And that is the only inflation measure I trust.
What Happens to Stocks and Cryptocurrencies When the Fed Stops Raining Money By Greg Ip
Everybody is afiad to say that this is another dot-com bubble which will eventually birst. Because after it burst there will be a lot of blood on the floor.
But the current situation can be defined as a crazy financial mania with cryptocurrencies as the poster child of this mania. "The S&P 500 stock index now trades at about 22 times the coming year's profits, according to FactSet, a level only exceeded at the peak of the dot-com boom in 2000."
And the shadlow of "Long-Term Capital Management" is all over Wall Street.
May 8, 2021
An unprecedented fiscal and monetary stimulus led by the Federal Reserve is fueling a new investor euphoria. Is this a new bubble? And when could it burst?

To veterans of financial bubbles, there is plenty familiar about the present. Stock valuations are their richest since the dot-com bubble in 2000. Home prices are back to their pre-financial crisis peak. Risky companies can borrow at the lowest rates on record. Individual investors are pouring money into green energy and cryptocurrency.

This boom has some legitimate explanations, from the advances in digital commerce to fiscally greased growth that will likely be the strongest since 1983. . ..

the Federal Reserve.... is buying hundreds of billions of dollars of bonds. As a result, the 10-year Treasury bond yield is well below inflation -- that is, real yields are deeply negative -- for only the second time in 40 years.

....Harvard University economist Jeremy Stein... "while I don't think we're headed for sustained high inflation it's completely possible we'll have several quarters of hot readings on inflation."

Since stocks' valuations are only justified if interest rates stay extremely low, how do they reprice if the Fed has to tighten monetary policy to combat inflation and bond yields rise one to 1.5 percentage points, he asked. " You could get a serious correction in asset prices." C Cam Dipalo

I was reading a book from the late 1800 early 1900s, "Unforeseen Tendencies of Democracy". Describing the election / selection process of political leadership in America (more than one hundred years ago), I was struck by "the certitude of the salary [provided by office] to the great multitude who in every country either fail in life, or shrink from the conflicts which the competitive system makes necessary, is very attractive; it soon converted the civil service into what has been called "spoils"; that is, booty won by victories at the polls". Roll forward one hundred years and we can only be in a worse spot: bigger, more complex problems are being addressed by even less qualified individuals. The result is that when I go to the grocery store now, I am paying 1.5x what I used to pay 2 years ago. And that is the only inflation measure I trust.
What Happens to Stocks and Cryptocurrencies When the Fed Stops Raining Money By Greg Ip
Everybody is afiad to say that this is another dot-com bubble which will eventually birst. Because after it burst there will be a lot of blood on the floor.
But the current situation can be defined as a crazy financial mania with cryptocurrencies as the poster child of this mania. "The S&P 500 stock index now trades at about 22 times the coming year's profits, according to FactSet, a level only exceeded at the peak of the dot-com boom in 2000."
And the shadlow of "Long-Term Capital Management" is all over Wall Street.
May 8, 2021
An unprecedented fiscal and monetary stimulus led by the Federal Reserve is fueling a new investor euphoria. Is this a new bubble? And when could it burst?

To veterans of financial bubbles, there is plenty familiar about the present. Stock valuations are their richest since the dot-com bubble in 2000. Home prices are back to their pre-financial crisis peak. Risky companies can borrow at the lowest rates on record. Individual investors are pouring money into green energy and cryptocurrency.

This boom has some legitimate explanations, from the advances in digital commerce to fiscally greased growth that will likely be the strongest since 1983. . ..

the Federal Reserve.... is buying hundreds of billions of dollars of bonds. As a result, the 10-year Treasury bond yield is well below inflation -- that is, real yields are deeply negative -- for only the second time in 40 years.

....Harvard University economist Jeremy Stein... "while I don't think we're headed for sustained high inflation it's completely possible we'll have several quarters of hot readings on inflation."

Since stocks' valuations are only justified if interest rates stay extremely low, how do they reprice if the Fed has to tighten monetary policy to combat inflation and bond yields rise one to 1.5 percentage points, he asked. " You could get a serious correction in asset prices." C Cam Dipalo

I was reading a book from the late 1800 early 1900s, "Unforeseen Tendencies of Democracy". Describing the election / selection process of political leadership in America (more than one hundred years ago), I was struck by "the certitude of the salary [provided by office] to the great multitude who in every country either fail in life, or shrink from the conflicts which the competitive system makes necessary, is very attractive; it soon converted the civil service into what has been called "spoils"; that is, booty won by victories at the polls". Roll forward one hundred years and we can only be in a worse spot: bigger, more complex problems are being addressed by even less qualified individuals. The result is that when I go to the grocery store now, I am paying 1.5x what I used to pay 2 years ago. And that is the only inflation measure I trust.
What Happens to Stocks and Cryptocurrencies When the Fed Stops Raining Money By Greg Ip
Everybody is afiad to say that this is another dot-com bubble which will eventually birst. Because after it burst there will be a lot of blood on the floor.
But the current situation can be defined as a crazy financial mania with cryptocurrencies as the poster child of this mania. "The S&P 500 stock index now trades at about 22 times the coming year's profits, according to FactSet, a level only exceeded at the peak of the dot-com boom in 2000."
And the shadlow of "Long-Term Capital Management" is all over Wall Street.
May 8, 2021
An unprecedented fiscal and monetary stimulus led by the Federal Reserve is fueling a new investor euphoria. Is this a new bubble? And when could it burst?

To veterans of financial bubbles, there is plenty familiar about the present. Stock valuations are their richest since the dot-com bubble in 2000. Home prices are back to their pre-financial crisis peak. Risky companies can borrow at the lowest rates on record. Individual investors are pouring money into green energy and cryptocurrency.

This boom has some legitimate explanations, from the advances in digital commerce to fiscally greased growth that will likely be the strongest since 1983. . ..

the Federal Reserve.... is buying hundreds of billions of dollars of bonds. As a result, the 10-year Treasury bond yield is well below inflation -- that is, real yields are deeply negative -- for only the second time in 40 years.

....Harvard University economist Jeremy Stein... "while I don't think we're headed for sustained high inflation it's completely possible we'll have several quarters of hot readings on inflation."

Since stocks' valuations are only justified if interest rates stay extremely low, how do they reprice if the Fed has to tighten monetary policy to combat inflation and bond yields rise one to 1.5 percentage points, he asked. " You could get a serious correction in asset prices." C Cam Dipalo

I was reading a book from the late 1800 early 1900s, "Unforeseen Tendencies of Democracy". Describing the election / selection process of political leadership in America (more than one hundred years ago), I was struck by "the certitude of the salary [provided by office] to the great multitude who in every country either fail in life, or shrink from the conflicts which the competitive system makes necessary, is very attractive; it soon converted the civil service into what has been called "spoils"; that is, booty won by victories at the polls". Roll forward one hundred years and we can only be in a worse spot: bigger, more complex problems are being addressed by even less qualified individuals. The result is that when I go to the grocery store now, I am paying 1.5x what I used to pay 2 years ago. And that is the only inflation measure I trust.
What Happens to Stocks and Cryptocurrencies When the Fed Stops Raining Money By Greg Ip
Everybody is afiad to say that this is another dot-com bubble which will eventually birst. Because after it burst there will be a lot of blood on the floor.
But the current situation can be defined as a crazy financial mania with cryptocurrencies as the poster child of this mania. "The S&P 500 stock index now trades at about 22 times the coming year's profits, according to FactSet, a level only exceeded at the peak of the dot-com boom in 2000."
And the shadlow of "Long-Term Capital Management" is all over Wall Street.
May 8, 2021
An unprecedented fiscal and monetary stimulus led by the Federal Reserve is fueling a new investor euphoria. Is this a new bubble? And when could it burst?

To veterans of financial bubbles, there is plenty familiar about the present. Stock valuations are their richest since the dot-com bubble in 2000. Home prices are back to their pre-financial crisis peak. Risky companies can borrow at the lowest rates on record. Individual investors are pouring money into green energy and cryptocurrency.

This boom has some legitimate explanations, from the advances in digital commerce to fiscally greased growth that will likely be the strongest since 1983. . ..

the Federal Reserve.... is buying hundreds of billions of dollars of bonds. As a result, the 10-year Treasury bond yield is well below inflation -- that is, real yields are deeply negative -- for only the second time in 40 years.

....Harvard University economist Jeremy Stein... "while I don't think we're headed for sustained high inflation it's completely possible we'll have several quarters of hot readings on inflation."

Since stocks' valuations are only justified if interest rates stay extremely low, how do they reprice if the Fed has to tighten monetary policy to combat inflation and bond yields rise one to 1.5 percentage points, he asked. " You could get a serious correction in asset prices." C Cam Dipalo

I was reading a book from the late 1800 early 1900s, "Unforeseen Tendencies of Democracy". Describing the election / selection process of political leadership in America (more than one hundred years ago), I was struck by "the certitude of the salary [provided by office] to the great multitude who in every country either fail in life, or shrink from the conflicts which the competitive system makes necessary, is very attractive; it soon converted the civil service into what has been called "spoils"; that is, booty won by victories at the polls". Roll forward one hundred years and we can only be in a worse spot: bigger, more complex problems are being addressed by even less qualified individuals. The result is that when I go to the grocery store now, I am paying 1.5x what I used to pay 2 years ago. And that is the only inflation measure I trust.
What Happens to Stocks and Cryptocurrencies When the Fed Stops Raining Money By Greg Ip
Everybody is afiad to say that this is another dot-com bubble which will eventually birst. Because after it burst there will be a lot of blood on the floor.
But the current situation can be defined as a crazy financial mania with cryptocurrencies as the poster child of this mania. "The S&P 500 stock index now trades at about 22 times the coming year's profits, according to FactSet, a level only exceeded at the peak of the dot-com boom in 2000."
And the shadlow of "Long-Term Capital Management" is all over Wall Street.
May 8, 2021
An unprecedented fiscal and monetary stimulus led by the Federal Reserve is fueling a new investor euphoria. Is this a new bubble? And when could it burst?

To veterans of financial bubbles, there is plenty familiar about the present. Stock valuations are their richest since the dot-com bubble in 2000. Home prices are back to their pre-financial crisis peak. Risky companies can borrow at the lowest rates on record. Individual investors are pouring money into green energy and cryptocurrency.

This boom has some legitimate explanations, from the advances in digital commerce to fiscally greased growth that will likely be the strongest since 1983. . ..

the Federal Reserve.... is buying hundreds of billions of dollars of bonds. As a result, the 10-year Treasury bond yield is well below inflation -- that is, real yields are deeply negative -- for only the second time in 40 years.

....Harvard University economist Jeremy Stein... "while I don't think we're headed for sustained high inflation it's completely possible we'll have several quarters of hot readings on inflation."

Since stocks' valuations are only justified if interest rates stay extremely low, how do they reprice if the Fed has to tighten monetary policy to combat inflation and bond yields rise one to 1.5 percentage points, he asked. " You could get a serious correction in asset prices." C Cam Dipalo

I was reading a book from the late 1800 early 1900s, "Unforeseen Tendencies of Democracy". Describing the election / selection process of political leadership in America (more than one hundred years ago), I was struck by "the certitude of the salary [provided by office] to the great multitude who in every country either fail in life, or shrink from the conflicts which the competitive system makes necessary, is very attractive; it soon converted the civil service into what has been called "spoils"; that is, booty won by victories at the polls". Roll forward one hundred years and we can only be in a worse spot: bigger, more complex problems are being addressed by even less qualified individuals. The result is that when I go to the grocery store now, I am paying 1.5x what I used to pay 2 years ago. And that is the only inflation measure I trust.
What Happens to Stocks and Cryptocurrencies When the Fed Stops Raining Money By Greg Ip
Everybody is afiad to say that this is another dot-com bubble which will eventually birst. Because after it burst there will be a lot of blood on the floor.
But the current situation can be defined as a crazy financial mania with cryptocurrencies as the poster child of this mania. "The S&P 500 stock index now trades at about 22 times the coming year's profits, according to FactSet, a level only exceeded at the peak of the dot-com boom in 2000."
And the shadlow of "Long-Term Capital Management" is all over Wall Street.
May 8, 2021
An unprecedented fiscal and monetary stimulus led by the Federal Reserve is fueling a new investor euphoria. Is this a new bubble? And when could it burst?

To veterans of financial bubbles, there is plenty familiar about the present. Stock valuations are their richest since the dot-com bubble in 2000. Home prices are back to their pre-financial crisis peak. Risky companies can borrow at the lowest rates on record. Individual investors are pouring money into green energy and cryptocurrency.

This boom has some legitimate explanations, from the advances in digital commerce to fiscally greased growth that will likely be the strongest since 1983. . ..

the Federal Reserve.... is buying hundreds of billions of dollars of bonds. As a result, the 10-year Treasury bond yield is well below inflation -- that is, real yields are deeply negative -- for only the second time in 40 years.

....Harvard University economist Jeremy Stein... "while I don't think we're headed for sustained high inflation it's completely possible we'll have several quarters of hot readings on inflation."

Since stocks' valuations are only justified if interest rates stay extremely low, how do they reprice if the Fed has to tighten monetary policy to combat inflation and bond yields rise one to 1.5 percentage points, he asked. " You could get a serious correction in asset prices." C Cam Dipalo

I was reading a book from the late 1800 early 1900s, "Unforeseen Tendencies of Democracy". Describing the election / selection process of political leadership in America (more than one hundred years ago), I was struck by "the certitude of the salary [provided by office] to the great multitude who in every country either fail in life, or shrink from the conflicts which the competitive system makes necessary, is very attractive; it soon converted the civil service into what has been called "spoils"; that is, booty won by victories at the polls". Roll forward one hundred years and we can only be in a worse spot: bigger, more complex problems are being addressed by even less qualified individuals. The result is that when I go to the grocery store now, I am paying 1.5x what I used to pay 2 years ago. And that is the only inflation measure I trust.
What Happens to Stocks and Cryptocurrencies When the Fed Stops Raining Money By Greg Ip
Everybody is afiad to say that this is another dot-com bubble which will eventually birst. Because after it burst there will be a lot of blood on the floor.
But the current situation can be defined as a crazy financial mania with cryptocurrencies as the poster child of this mania. "The S&P 500 stock index now trades at about 22 times the coming year's profits, according to FactSet, a level only exceeded at the peak of the dot-com boom in 2000."
And the shadlow of "Long-Term Capital Management" is all over Wall Street.
May 8, 2021
An unprecedented fiscal and monetary stimulus led by the Federal Reserve is fueling a new investor euphoria. Is this a new bubble? And when could it burst?

To veterans of financial bubbles, there is plenty familiar about the present. Stock valuations are their richest since the dot-com bubble in 2000. Home prices are back to their pre-financial crisis peak. Risky companies can borrow at the lowest rates on record. Individual investors are pouring money into green energy and cryptocurrency.

This boom has some legitimate explanations, from the advances in digital commerce to fiscally greased growth that will likely be the strongest since 1983. . ..

the Federal Reserve.... is buying hundreds of billions of dollars of bonds. As a result, the 10-year Treasury bond yield is well below inflation -- that is, real yields are deeply negative -- for only the second time in 40 years.

....Harvard University economist Jeremy Stein... "while I don't think we're headed for sustained high inflation it's completely possible we'll have several quarters of hot readings on inflation."

Since stocks' valuations are only justified if interest rates stay extremely low, how do they reprice if the Fed has to tighten monetary policy to combat inflation and bond yields rise one to 1.5 percentage points, he asked. " You could get a serious correction in asset prices." C Cam Dipalo

I was reading a book from the late 1800 early 1900s, "Unforeseen Tendencies of Democracy". Describing the election / selection process of political leadership in America (more than one hundred years ago), I was struck by "the certitude of the salary [provided by office] to the great multitude who in every country either fail in life, or shrink from the conflicts which the competitive system makes necessary, is very attractive; it soon converted the civil service into what has been called "spoils"; that is, booty won by victories at the polls". Roll forward one hundred years and we can only be in a worse spot: bigger, more complex problems are being addressed by even less qualified individuals. The result is that when I go to the grocery store now, I am paying 1.5x what I used to pay 2 years ago. And that is the only inflation measure I trust.
What Happens to Stocks and Cryptocurrencies When the Fed Stops Raining Money By Greg Ip
Everybody is afiad to say that this is another dot-com bubble which will eventually birst. Because after it burst there will be a lot of blood on the floor.
But the current situation can be defined as a crazy financial mania with cryptocurrencies as the poster child of this mania. "The S&P 500 stock index now trades at about 22 times the coming year's profits, according to FactSet, a level only exceeded at the peak of the dot-com boom in 2000."
And the shadlow of "Long-Term Capital Management" is all over Wall Street.
May 8, 2021
An unprecedented fiscal and monetary stimulus led by the Federal Reserve is fueling a new investor euphoria. Is this a new bubble? And when could it burst?

To veterans of financial bubbles, there is plenty familiar about the present. Stock valuations are their richest since the dot-com bubble in 2000. Home prices are back to their pre-financial crisis peak. Risky companies can borrow at the lowest rates on record. Individual investors are pouring money into green energy and cryptocurrency.

This boom has some legitimate explanations, from the advances in digital commerce to fiscally greased growth that will likely be the strongest since 1983. . ..

the Federal Reserve.... is buying hundreds of billions of dollars of bonds. As a result, the 10-year Treasury bond yield is well below inflation -- that is, real yields are deeply negative -- for only the second time in 40 years.

....Harvard University economist Jeremy Stein... "while I don't think we're headed for sustained high inflation it's completely possible we'll have several quarters of hot readings on inflation."

Since stocks' valuations are only justified if interest rates stay extremely low, how do they reprice if the Fed has to tighten monetary policy to combat inflation and bond yields rise one to 1.5 percentage points, he asked. " You could get a serious correction in asset prices." C Cam Dipalo

I was reading a book from the late 1800 early 1900s, "Unforeseen Tendencies of Democracy". Describing the election / selection process of political leadership in America (more than one hundred years ago), I was struck by "the certitude of the salary [provided by office] to the great multitude who in every country either fail in life, or shrink from the conflicts which the competitive system makes necessary, is very attractive; it soon converted the civil service into what has been called "spoils"; that is, booty won by victories at the polls". Roll forward one hundred years and we can only be in a worse spot: bigger, more complex problems are being addressed by even less qualified individuals. The result is that when I go to the grocery store now, I am paying 1.5x what I used to pay 2 years ago. And that is the only inflation measure I trust.

[May 07, 2021] Consumer Credit Explodes Higher As Americans Rediscover Their Love For Credit Cards

May 07, 2021 | www.zerohedge.com

Just yesterday, we showed that only a few quarters after banks effectively shut down, refusing to give out C&I, credit card or auto loans and mortgages to virtually anyone as a result of record Draconian credit standards, credit standards saw a complete U-turn and as of April, lending standards for credit cards and autos were the loosest on record.

This was not lost on US consumers who after suffering through a miserable 12 months in which they dutifully repaid their credit card debt like total idiots who acted responsibly (instead of doing what US corporations are doing and loading up on even more debt to ensure they all get bailed out during the next crisis), in March aggregate consumer credit surged by $25.8BN, smashing expectations for the 2nd month in a row ( as a reminder February was the biggest beat on record ) and barely slowing down from last month's massive $26.1BN increase.

... non-revolving credit - i.e., student and auto loans - continued its relentless ramp higher, increasing by $19.4BN in March, the most since June of 2020...


Just a Little Froth in the Market 10 minutes ago

"Americans are once again highly confident about the future, and are spending far beyond their means, as they always tend to do."

Ah no, they are using credit cards because they have no real money. Asinine article.

Archimedes bathwater PREMIUM 7 minutes ago

If Americans use their credit cards for the same stuff as last year, but everything costs 20% more, is that also called an explosion in consumer credit? MOAR WINNING??!

nsurf9 8 minutes ago (Edited) remove link

Well, the average revolving credit card rate is only 16%.

brian91145 12 minutes ago

lol so no one is working and everyone is using credit cards? Sounds like a great economy!

[May 07, 2021] From Dutch Tulips to Internet Stocks, How to Spot a Financial Bubble by Jon Hilsenrath

finance.yahoo.com

... ... ...

Charles Kindleberger, the late MIT professor who wrote the popular book, "Manias, Panics and Crashes," called such speculation and crisis a hardy perennial.

"Periods of great innovation are interesting from an investor's perspective because you can justify a wide range of valuations," says Robin Greenwood, a Harvard Business School professor who has studied bubbles. He says another classic example was a 1920s boom in closed-end funds, investment portfolios that trade on an exchange. Before the 1929 stock crash, issuance of closed-end funds soared and the prices on the funds raced ahead of the underlying values of their investment holdings.

Swindlers are oftentimes attached to the financial boom, too. That included Robert Knight, who helped cook the books of the South Sea Company, fled England and landed in an Antwerp prison for a time. Then there was Bernie Madoff, who cooked up his own investment Ponzi scheme that crashed in December 2008. He died in jail last month.

.... The problem might be when investment in the vehicle is fueled by a surge in borrowing. "Leverage is the killer," Mr. Buiter said.

That was certainly the case for the 2000s, when collateralized debt obligations helped fuel mortgage borrowing. Between 2000 and 2008, debt in the financial sector more than doubled from $8.7 trillion to $18 trillion; among households it doubled from $7.2 trillion to $14.1 trillion, according to Federal Reserve data.

This time the pattern is different. Though government debt is rising fast, debt in the financial sector remains below its 2008 peak and household debt has been rising more slowly than in the 2000s. Between 2012 and 2020, household debt rose to $16.6 trillion, from $13.6 trillion. That is something that gives Mr. Buiter some peace of mind.

"There are signs, indicators of excess, but they haven't led us down the path of an unsustainable credit boom yet," Mr. Buiter said. C


From Dutch Tulips to Internet Stocks, How to Spot a Financial Bubble by Jon Hilsenrath

Dogecoin is completely worthless in the grand scheme. Unlimited dogecoins can exist (first red flag of many). It was created as a joke. Yet people are buying for one reason and one reason only: They think someone will come behind them and pay even more. Until that stops happening the sky is the limit. If this is not a sign of the bubble I do not knw what is...

... ... ...

Charles Kindleberger, the late MIT professor who wrote the popular book, "Manias, Panics and Crashes," called such speculation and crisis a hardy perennial.

"Periods of great innovation are interesting from an investor's perspective because you can justify a wide range of valuations," says Robin Greenwood, a Harvard Business School professor who has studied bubbles. He says another classic example was a 1920s boom in closed-end funds, investment portfolios that trade on an exchange. Before the 1929 stock crash, issuance of closed-end funds soared and the prices on the funds raced ahead of the underlying values of their investment holdings.

Swindlers are oftentimes attached to the financial boom, too. That included Robert Knight, who helped cook the books of the South Sea Company, fled England and landed in an Antwerp prison for a time. Then there was Bernie Madoff, who cooked up his own investment Ponzi scheme that crashed in December 2008. He died in jail last month.

.... The problem might be when investment in the vehicle is fueled by a surge in borrowing. "Leverage is the killer," Mr. Buiter said.

That was certainly the case for the 2000s, when collateralized debt obligations helped fuel mortgage borrowing. Between 2000 and 2008, debt in the financial sector more than doubled from $8.7 trillion to $18 trillion; among households it doubled from $7.2 trillion to $14.1 trillion, according to Federal Reserve data.

This time the pattern is different. Though government debt is rising fast, debt in the financial sector remains below its 2008 peak and household debt has been rising more slowly than in the 2000s. Between 2012 and 2020, household debt rose to $16.6 trillion, from $13.6 trillion. That is something that gives Mr. Buiter some peace of mind.

"There are signs, indicators of excess, but they haven't led us down the path of an unsustainable credit boom yet," Mr. Buiter said. C curt meinecke

Whenever I got that panicked feeling that I was missing out on crazy returns (dot-com stocks in the 90s, housing in the 2000s), it always ended with a crash. I got that feeling with crypto currency. I know to resist the urge. I did.
From Dutch Tulips to Internet Stocks, How to Spot a Financial Bubble by Jon Hilsenrath
Dogecoin is completely worthless in the grand scheme. Unlimited dogecoins can exist (first red flag of many). It was created as a joke. Yet people are buying for one reason and one reason only: They think someone will come behind them and pay even more. Until that stops happening the sky is the limit. If this is not a sign of the bubble I do not knw what is...

... ... ...

Charles Kindleberger, the late MIT professor who wrote the popular book, "Manias, Panics and Crashes," called such speculation and crisis a hardy perennial.

"Periods of great innovation are interesting from an investor's perspective because you can justify a wide range of valuations," says Robin Greenwood, a Harvard Business School professor who has studied bubbles. He says another classic example was a 1920s boom in closed-end funds, investment portfolios that trade on an exchange. Before the 1929 stock crash, issuance of closed-end funds soared and the prices on the funds raced ahead of the underlying values of their investment holdings.

Swindlers are oftentimes attached to the financial boom, too. That included Robert Knight, who helped cook the books of the South Sea Company, fled England and landed in an Antwerp prison for a time. Then there was Bernie Madoff, who cooked up his own investment Ponzi scheme that crashed in December 2008. He died in jail last month.

.... The problem might be when investment in the vehicle is fueled by a surge in borrowing. "Leverage is the killer," Mr. Buiter said.

That was certainly the case for the 2000s, when collateralized debt obligations helped fuel mortgage borrowing. Between 2000 and 2008, debt in the financial sector more than doubled from $8.7 trillion to $18 trillion; among households it doubled from $7.2 trillion to $14.1 trillion, according to Federal Reserve data.

This time the pattern is different. Though government debt is rising fast, debt in the financial sector remains below its 2008 peak and household debt has been rising more slowly than in the 2000s. Between 2012 and 2020, household debt rose to $16.6 trillion, from $13.6 trillion. That is something that gives Mr. Buiter some peace of mind.

"There are signs, indicators of excess, but they haven't led us down the path of an unsustainable credit boom yet," Mr. Buiter said. C curt meinecke

Whenever I got that panicked feeling that I was missing out on crazy returns (dot-com stocks in the 90s, housing in the 2000s), it always ended with a crash. I got that feeling with crypto currency. I know to resist the urge. I did.
From Dutch Tulips to Internet Stocks, How to Spot a Financial Bubble by Jon Hilsenrath
Dogecoin is completely worthless in the grand scheme. Unlimited dogecoins can exist (first red flag of many). It was created as a joke. Yet people are buying for one reason and one reason only: They think someone will come behind them and pay even more. Until that stops happening the sky is the limit. If this is not a sign of the bubble I do not knw what is...

... ... ...

Charles Kindleberger, the late MIT professor who wrote the popular book, "Manias, Panics and Crashes," called such speculation and crisis a hardy perennial.

"Periods of great innovation are interesting from an investor's perspective because you can justify a wide range of valuations," says Robin Greenwood, a Harvard Business School professor who has studied bubbles. He says another classic example was a 1920s boom in closed-end funds, investment portfolios that trade on an exchange. Before the 1929 stock crash, issuance of closed-end funds soared and the prices on the funds raced ahead of the underlying values of their investment holdings.

Swindlers are oftentimes attached to the financial boom, too. That included Robert Knight, who helped cook the books of the South Sea Company, fled England and landed in an Antwerp prison for a time. Then there was Bernie Madoff, who cooked up his own investment Ponzi scheme that crashed in December 2008. He died in jail last month.

.... The problem might be when investment in the vehicle is fueled by a surge in borrowing. "Leverage is the killer," Mr. Buiter said.

That was certainly the case for the 2000s, when collateralized debt obligations helped fuel mortgage borrowing. Between 2000 and 2008, debt in the financial sector more than doubled from $8.7 trillion to $18 trillion; among households it doubled from $7.2 trillion to $14.1 trillion, according to Federal Reserve data.

This time the pattern is different. Though government debt is rising fast, debt in the financial sector remains below its 2008 peak and household debt has been rising more slowly than in the 2000s. Between 2012 and 2020, household debt rose to $16.6 trillion, from $13.6 trillion. That is something that gives Mr. Buiter some peace of mind.

"There are signs, indicators of excess, but they haven't led us down the path of an unsustainable credit boom yet," Mr. Buiter said. C curt meinecke

Whenever I got that panicked feeling that I was missing out on crazy returns (dot-com stocks in the 90s, housing in the 2000s), it always ended with a crash. I got that feeling with crypto currency. I know to resist the urge. I did.
From Dutch Tulips to Internet Stocks, How to Spot a Financial Bubble by Jon Hilsenrath
Dogecoin is completely worthless in the grand scheme. Unlimited dogecoins can exist (first red flag of many). It was created as a joke. Yet people are buying for one reason and one reason only: They think someone will come behind them and pay even more. Until that stops happening the sky is the limit. If this is not a sign of the bubble I do not knw what is...

... ... ...

Charles Kindleberger, the late MIT professor who wrote the popular book, "Manias, Panics and Crashes," called such speculation and crisis a hardy perennial.

"Periods of great innovation are interesting from an investor's perspective because you can justify a wide range of valuations," says Robin Greenwood, a Harvard Business School professor who has studied bubbles. He says another classic example was a 1920s boom in closed-end funds, investment portfolios that trade on an exchange. Before the 1929 stock crash, issuance of closed-end funds soared and the prices on the funds raced ahead of the underlying values of their investment holdings.

Swindlers are oftentimes attached to the financial boom, too. That included Robert Knight, who helped cook the books of the South Sea Company, fled England and landed in an Antwerp prison for a time. Then there was Bernie Madoff, who cooked up his own investment Ponzi scheme that crashed in December 2008. He died in jail last month.

.... The problem might be when investment in the vehicle is fueled by a surge in borrowing. "Leverage is the killer," Mr. Buiter said.

That was certainly the case for the 2000s, when collateralized debt obligations helped fuel mortgage borrowing. Between 2000 and 2008, debt in the financial sector more than doubled from $8.7 trillion to $18 trillion; among households it doubled from $7.2 trillion to $14.1 trillion, according to Federal Reserve data.

This time the pattern is different. Though government debt is rising fast, debt in the financial sector remains below its 2008 peak and household debt has been rising more slowly than in the 2000s. Between 2012 and 2020, household debt rose to $16.6 trillion, from $13.6 trillion. That is something that gives Mr. Buiter some peace of mind.

"There are signs, indicators of excess, but they haven't led us down the path of an unsustainable credit boom yet," Mr. Buiter said. C curt meinecke

Whenever I got that panicked feeling that I was missing out on crazy returns (dot-com stocks in the 90s, housing in the 2000s), it always ended with a crash. I got that feeling with crypto currency. I know to resist the urge. I did.
From Dutch Tulips to Internet Stocks, How to Spot a Financial Bubble by Jon Hilsenrath
Dogecoin is completely worthless in the grand scheme. Unlimited dogecoins can exist (first red flag of many). It was created as a joke. Yet people are buying for one reason and one reason only: They think someone will come behind them and pay even more. Until that stops happening the sky is the limit. If this is not a sign of the bubble I do not knw what is...

... ... ...

Charles Kindleberger, the late MIT professor who wrote the popular book, "Manias, Panics and Crashes," called such speculation and crisis a hardy perennial.

"Periods of great innovation are interesting from an investor's perspective because you can justify a wide range of valuations," says Robin Greenwood, a Harvard Business School professor who has studied bubbles. He says another classic example was a 1920s boom in closed-end funds, investment portfolios that trade on an exchange. Before the 1929 stock crash, issuance of closed-end funds soared and the prices on the funds raced ahead of the underlying values of their investment holdings.

Swindlers are oftentimes attached to the financial boom, too. That included Robert Knight, who helped cook the books of the South Sea Company, fled England and landed in an Antwerp prison for a time. Then there was Bernie Madoff, who cooked up his own investment Ponzi scheme that crashed in December 2008. He died in jail last month.

.... The problem might be when investment in the vehicle is fueled by a surge in borrowing. "Leverage is the killer," Mr. Buiter said.

That was certainly the case for the 2000s, when collateralized debt obligations helped fuel mortgage borrowing. Between 2000 and 2008, debt in the financial sector more than doubled from $8.7 trillion to $18 trillion; among households it doubled from $7.2 trillion to $14.1 trillion, according to Federal Reserve data.

This time the pattern is different. Though government debt is rising fast, debt in the financial sector remains below its 2008 peak and household debt has been rising more slowly than in the 2000s. Between 2012 and 2020, household debt rose to $16.6 trillion, from $13.6 trillion. That is something that gives Mr. Buiter some peace of mind.

"There are signs, indicators of excess, but they haven't led us down the path of an unsustainable credit boom yet," Mr. Buiter said. C curt meinecke

Whenever I got that panicked feeling that I was missing out on crazy returns (dot-com stocks in the 90s, housing in the 2000s), it always ended with a crash. I got that feeling with crypto currency. I know to resist the urge. I did.

[May 05, 2021] Banks in Archegos Aftermath Tighten Credit Lines, Scrutinize Swaps

May 05, 2021 | www.wsj.com

Banks including Goldman Sachs Group Inc., Morgan Stanley and UBS are focused on hedge funds with very concentrated positions, including those that attempt to increase their returns by borrowing a significant amount of money, fund managers said. Some are running stress tests to see where they could have shortfalls if some of a fund's positions precipitously drop. Newly empowered credit-risk departments are reviewing clients with portfolios that are far more diversified than Archegos's.

Several banks are starting to rework agreements with a number of clients to change the terms of equities total-return swaps, said prime-brokerage executives and advisers to funds. Total-return swaps are derivative contracts that helped Archegos anonymously amass huge positions across multiple lenders, without the knowledge of those lenders and with little money upfront. Archegos's collapse has sparked calls for tougher regulation of such swaps.

Swaps give their holders exposure to the profits and losses of the securities underlying the agreements but not ownership. In the case of Archegos, for example, the family office had swap agreements with multiple banks giving it exposure to ViacomCBS Inc. But the banks actually held the shares.

As things stand now, some margin requirements are fixed. Going forward, some clients will be regularly required to post additional collateral based on the changing market value of their portfolios or factors such as increases in volatility or concentration. Many swaps agreements already have such a margin requirement, though some larger clients with more negotiating power don't.

Elizabeth Schubert, a partner at Sidley Austin LLP who advises hedge-fund clients on negotiating their trading relationships with dealers, said she has seen several banks recently move to look at a client's cash and swaps positions together when determining the collateral required.

The change comes with trade-offs, she said.

me title=

For dealers, "it gives them more control from a risk-management perspective -- but clients lose a lot of control and transparency about the margin they have to post," Ms. Schubert said. She added that fund managers who lived through the failure of Lehman Brothers, which tied up some funds' assets for years, remain wary about posting more than a minimal amount of margin.

Several banks, including Morgan Stanley, have spoken with clients about fully or partly terminating swaps, said people briefed on the conversations. Such moves could help lower the lenders' exposure to swaps and in instances reduce the leverage a fund is using.

J

Banks in Archegos Aftermath Tighten Credit Lines, Scrutinize Swaps

Banks including Goldman Sachs Group Inc., Morgan Stanley and UBS are focused on hedge funds with very concentrated positions, including those that attempt to increase their returns by borrowing a significant amount of money, fund managers said. Some are running stress tests to see where they could have shortfalls if some of a fund's positions precipitously drop. Newly empowered credit-risk departments are reviewing clients with portfolios that are far more diversified than Archegos's.

Several banks are starting to rework agreements with a number of clients to change the terms of equities total-return swaps, said prime-brokerage executives and advisers to funds. Total-return swaps are derivative contracts that helped Archegos anonymously amass huge positions across multiple lenders, without the knowledge of those lenders and with little money upfront. Archegos's collapse has sparked calls for tougher regulation of such swaps.

Swaps give their holders exposure to the profits and losses of the securities underlying the agreements but not ownership. In the case of Archegos, for example, the family office had swap agreements with multiple banks giving it exposure to ViacomCBS Inc. But the banks actually held the shares.

As things stand now, some margin requirements are fixed. Going forward, some clients will be regularly required to post additional collateral based on the changing market value of their portfolios or factors such as increases in volatility or concentration. Many swaps agreements already have such a margin requirement, though some larger clients with more negotiating power don't.

Elizabeth Schubert, a partner at Sidley Austin LLP who advises hedge-fund clients on negotiating their trading relationships with dealers, said she has seen several banks recently move to look at a client's cash and swaps positions together when determining the collateral required.

The change comes with trade-offs, she said.

me title=

For dealers, "it gives them more control from a risk-management perspective -- but clients lose a lot of control and transparency about the margin they have to post," Ms. Schubert said. She added that fund managers who lived through the failure of Lehman Brothers, which tied up some funds' assets for years, remain wary about posting more than a minimal amount of margin.

Several banks, including Morgan Stanley, have spoken with clients about fully or partly terminating swaps, said people briefed on the conversations. Such moves could help lower the lenders' exposure to swaps and in instances reduce the leverage a fund is using.

J John Reilly
Are we suppose to believe that Credit Suisse, Morgan Stanley, Goldman Sachs, et al, were really blindly investing billions with a family office? Is it really true that the head of the office had had his brokerage license taken away by the SEC and only recently restored by the Trump administration?

Goldman Sachs apparently knew enough to pull their money out in time.
The real issue is whether investment bankers were taking advantage of the less stringent regulation of a family office in order to manipulate the markets. Manipulation like the creation of short squeezes on target stocks. Is that even legal?

Banks in Archegos Aftermath Tighten Credit Lines, Scrutinize Swaps

Banks including Goldman Sachs Group Inc., Morgan Stanley and UBS are focused on hedge funds with very concentrated positions, including those that attempt to increase their returns by borrowing a significant amount of money, fund managers said. Some are running stress tests to see where they could have shortfalls if some of a fund's positions precipitously drop. Newly empowered credit-risk departments are reviewing clients with portfolios that are far more diversified than Archegos's.

Several banks are starting to rework agreements with a number of clients to change the terms of equities total-return swaps, said prime-brokerage executives and advisers to funds. Total-return swaps are derivative contracts that helped Archegos anonymously amass huge positions across multiple lenders, without the knowledge of those lenders and with little money upfront. Archegos's collapse has sparked calls for tougher regulation of such swaps.

Swaps give their holders exposure to the profits and losses of the securities underlying the agreements but not ownership. In the case of Archegos, for example, the family office had swap agreements with multiple banks giving it exposure to ViacomCBS Inc. But the banks actually held the shares.

As things stand now, some margin requirements are fixed. Going forward, some clients will be regularly required to post additional collateral based on the changing market value of their portfolios or factors such as increases in volatility or concentration. Many swaps agreements already have such a margin requirement, though some larger clients with more negotiating power don't.

Elizabeth Schubert, a partner at Sidley Austin LLP who advises hedge-fund clients on negotiating their trading relationships with dealers, said she has seen several banks recently move to look at a client's cash and swaps positions together when determining the collateral required.

The change comes with trade-offs, she said.

me title=

For dealers, "it gives them more control from a risk-management perspective -- but clients lose a lot of control and transparency about the margin they have to post," Ms. Schubert said. She added that fund managers who lived through the failure of Lehman Brothers, which tied up some funds' assets for years, remain wary about posting more than a minimal amount of margin.

Several banks, including Morgan Stanley, have spoken with clients about fully or partly terminating swaps, said people briefed on the conversations. Such moves could help lower the lenders' exposure to swaps and in instances reduce the leverage a fund is using.

J John Reilly
Are we suppose to believe that Credit Suisse, Morgan Stanley, Goldman Sachs, et al, were really blindly investing billions with a family office? Is it really true that the head of the office had had his brokerage license taken away by the SEC and only recently restored by the Trump administration?

Goldman Sachs apparently knew enough to pull their money out in time.
The real issue is whether investment bankers were taking advantage of the less stringent regulation of a family office in order to manipulate the markets. Manipulation like the creation of short squeezes on target stocks. Is that even legal?

[May 04, 2021] Why the stock market might give back its April gains

It's almost impossible to predict the direction of the ten year note in the short or long term.
May 04, 2021 | finance.yahoo.com

big institutions are currently selling into strength.

2) May and June (especially the second half of June) tend to be challenging months for the market. After the first week of May, approximately 80% of S&P 500 companies will have reported their earnings. The news cycle will then shift away from fundamentals to politics, interest rates, and any geopolitical concerns. Speaking of interest rates, as the economy slowly gets back to normal, it wouldn't surprise me to see the 10-year yield return to its levels from January 2020 (around 1.8%-2.0%). If this happens, it will lead to further compression in the multiples of growth stocks.

3) The IRS deadline for filing tax returns was extended this year to May 17. We will likely see tax selling prior to this because 2020 was a strong year for the markets, and many people will have capital gains taxes to pay by this date. On a related note, the new administration seems determined to raise taxes, specifically capital gains taxes. I don't believe they will get any of these new proposals approved, but the continuous headlines could keep some pressure on the market over the near-term.

4) The S&P 500 ( ^GSPC ) historically averages a 10% return per year. So far this year, it is up over 11%. It wouldn't be unreasonable to see a normal correction or some technical digestion before heading higher later in the year. Also, since 1980, the average intra-year correction is -14.3%.

5) A few sentiment measures are showing high levels of bullishness. For example, the latest NAAIM Exposure Index , which measures exposure by active investment managers, is at its highest level in over two months. Any minor pullback would shake out some of this excess bullishness, as investors are still quick to rush out the door when the market starts to drop.


Art 14 hours ago The major fundamental issue now is the soon-to-be-obvious inflation triggered by the six trillion dollar man and the always wrong federal reserve policies. Ultimately, fundamentals decide stock market valuations. Reply 13 2 Allen 1 day ago If Apple's earnings couldn't lift the market then nothing will. Look the market is near or at all time highs and valuations are stretched to say the least. The easy money has already been made the current risk reward is to the downside. The market is way overdue for at least a 10-20% correction which would be healthy. "As they say... stairs up elevator down." Reply 7 1 EmEs 1334 14 hours ago Several things wrong with the article. First, some Biden taxes will pass, because budget reconciliation process works for taxing and spending. Not clear whether they will be retroactive or when they will take effect, but I'd say next year. People with gains might be induced to sell this year to take advantage of disappearing low cap gains rates - and selling puts downward pressure on the market. Very little about that, here. Very little here about fundamentals, like stretched P/E or CAPE ratios. Very little here about the tremendous amount of money in the system from the Fed and from the fiscal stimulus bills that are pushing the market higher, both because of more money chasing assets and because of expectations that the economy will launch into hyper-drive because of the stimulus. Instead, this guy just thinks that prices return to a mean of 10% per year - many years it is more and many it is less, so that is no measure at all. Infantile analysis. But he could be right about the run-up running out of steam. It certainly would be nice if the froth was skimmed off because I'd like a buying opportunity and buying any stocks at these prices is pretty crazy. I'd by TAIL. Reply 4 DoublinDown 1 day ago Think you nailed it. Quality growth stocks selling off after great ER's points to weakness underneath. This doesn't bode well for the overall market in the near term.

[May 03, 2021] The Housing Market Looks Like a Bubble. It s Time for the Fed to Worry

May 03, 2021 | finance.yahoo.com

When the Federal Open Market Committee begins its two-day meeting on Tuesday, it ought to consider whether its policies aimed to bolster housing may be having negative side effects. With the market for new and existing homes red hot, the rationale for subsidizing the mortgage market has largely passed. Indeed, the Fed’s policies may be hurting home affordability as much as they’re helping.

[May 03, 2021] Inflation is the 800-pound gorilla that will kill this aging bull; insiders are selling shares

Highly recommended!
Notable quotes:
"... Deluard points out that the level of stock gains we are seeing now is unprecedented, with one exception: the Great Depression. After passing 4,000 points for the first time this month, the S&P 500 is on track to soon double its COVID-19 pandemic low of 2,237 points 14 months ago. ..."
"... individual investors have been throwing money at the market while insiders are getting out. An unprecedented $105 billion flowed into U.S. equity exchange-traded funds in the last eight weeks, Deluard says. Meanwhile, the strategist says equity offerings raised a record $262 billion in the first quarter and Nasdaq insiders sold $41.5 billion in the past three quarters. ..."
"... The strategist also points to inflation as a worrying sign. He believes the argument that COVID-19 is distorting inflation is flawed, and that the current level of inflation, such as in commodity prices, represents more than normalization from the pandemic shock ..."
May 03, 2021 | www.marketwatch.com

Our call of the day , from strategist Vincent Deluard at broker StoneX, takes a close look at the big question hovering above these recent market gains. Are we seeing a new roaring economic cycle that started in March 2020, or “the spectacular apotheosis of a decade plus-long expansion and overvalued bull market”?

The strategist uses “the duck test” " which follows from the saying, “if it looks like a duck, swims like a duck, and quacks like a duck, then it probably is a duck.” His conclusion isn’t good news for stocks.

Deluard points out that the level of stock gains we are seeing now is unprecedented, with one exception: the Great Depression. After passing 4,000 points for the first time this month, the S&P 500 is on track to soon double its COVID-19 pandemic low of 2,237 points 14 months ago.

There have been 12 major bear markets in the last century, according to Deluard, and stock prices never doubled in the ensuing rally after five of them. In the seven cases where stock prices in the post-bear market doubled, it took an average of four years.

“There is only one precedent in history for such a rapid doubling, when U.S. stocks doubled between June and September 1932,” Deluard says. “A 40% correction quickly followed, and then another 100% + rally in a confusing sequence of brutal bear markets and dazzling rebounds which lasted until the battle of Stalingrad turned the fate of World War II.”

Another troubling sign is that the recent, spectacular rebound in corporate earnings amid the wider economic recovery from the pandemic hasn’t led to a rise in share buybacks, which are still 30% below pre-pandemic levels, according to Deluard. “As a result, the total shareholder yield (buybacks & dividend divided by market cap) of U.S. large-caps is at its lowest level in a generation,” Deluard says.

Further to that, individual investors have been throwing money at the market while insiders are getting out. An unprecedented $105 billion flowed into U.S. equity exchange-traded funds in the last eight weeks, Deluard says. Meanwhile, the strategist says equity offerings raised a record $262 billion in the first quarter and Nasdaq insiders sold $41.5 billion in the past three quarters.

Chart via StoneX.

The strategist also points to inflation as a worrying sign. He believes the argument that COVID-19 is distorting inflation is flawed, and that the current level of inflation, such as in commodity prices, represents more than normalization from the pandemic shock

The last point Deluard makes is that banks’ loan-to-deposit ratio has collapsed to 50%, which is half of its pre-2007 levels. This is a red flag for “trapped kinetic energy” that will be unleashed by steeper yield curves, stronger demand for loans, and other factors, according to the strategist. Deluard notes that the big four banks would need to issue an additional $2.1 trillion in loans to return to the pre-pandemic loan-to-deposit ratio average.

“Inflation is the 800-pound gorilla that will kill this aging bull,” Deluard says.

[May 03, 2021] US Financial Markets Have Become A Giant Mirage Built On A Foundation Of Fraud

May 03, 2021 | www.zerohedge.com

US Financial Markets Have Become A Giant Mirage Built On A Foundation Of Fraud BY TYLER DURDEN SATURDAY, APR 17, 2021 - 11:00 AM

Authored by Michael Snyder via The Economic Collapse blog,

Would you pay more than 100 million dollars for a single deli in rural New Jersey that had less than $36,000 in sales during the last two years combined? I know that sounds like a completely ridiculous question, but the stock market apparently thinks that deli is worth that much. On Thursday, the Dow Jones Industrial Average closed above 34,000 for the first time in history, and investors all over the country cheered. But this financial bubble is not real. It is a giant mirage that is built on a foundation of fraud.

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Einhorn Sees Broken Markets in N.J. Deli’s $105 Million Valuation

Investors have lost all touch with reality, and in this sort of euphoric environment a small deli in rural New Jersey can literally be valued at more than 100 million dollars …

The Paulsboro, New Jersey-based Your Hometown Deli is the sole location for Hometown International, which has an eye-popping market value despite totaling $35,748 in sales in the last two years combined, according to securities filings.

“Someone pointed us to Hometown International (HWIN), which owns a single deli in rural New Jersey … HWIN reached a market cap of $113 million on February 8. The largest shareholder is also the CEO/CFO/Treasurer and a Director, who also happens to be the wrestling coach of the high school next door to the deli. The pastrami must be amazing,†Einhorn said in a letter to clients published Thursday.

For young people getting ready to graduate from high school and go to college, don’t waste your time.

Just open up a small deli and go public.

Soon you will be a multi-millionaire.

Alternatively, you could start a fake cryptocurrency as a joke and watch it become worth billions of dollars.

To me, what is happening with “Dogecoin†is completely and utterly insane …

The digital currency Dogecoin surged by more than 85 percent so far this week in thrilling scenes for fans of the bizarre coin. Launched in 2013 and created by Jackson Palmer and Billy Markus as a joke, the cryptocurrency has never seen the highs of rival coins like bitcoin, which is currently worth $63,531.49. But a growing fanbase has helped kickstart the meme coins value, and today has seen the prices skyrocket.

Looking at it objectively, I don’t know why any rational investor would ever put one red cent into Dogecoin.

But in 2021, rational investors are being left in the dust, and those that foolishly rush in are getting filthy rich.

I know that it may be hard to believe, but at this point Dogecoin has a market cap that is greater than 22 billion dollars …

According to CoinDesk, Dogecoin has surged by 49.96 percent in 24 hours to $0.171956, as of 9.02pm on April 15.

In GBP, Dogecoin stands at £0.124731.

The market cap for Dogecoin is currently $22.19 billion in USD and £16.10 billion in GBP.

Someday Dogecoin will be worthless, but for now this “meme currency†is shocking the world.

Speaking of ridiculous valuations, Coinbase just went public, and it is currently valued at more than 85 billion dollars …

Coinbase was briefly valued at as much as $100 billion in its Nasdaq debut Wednesday, a landmark event for the cryptocurrency industry. The stock closed at $328.28 per share, valuing Coinbase at $85.8 billion on a fully diluted basis.

Don’t you wish that you would have been the one to launch Coinbase?

Of course all of these absurd valuations are just temporary.

This bubble will inevitably pop, and those that did not sell at the top of the market will be kicking themselves.

In the financial markets, enormous fortunes are being won and lost all the time, but none of this is real.

What is real are the riots that are happening in our streets on a nightly basis. Last night, rioters “waved a pig’s head†at police officers in Minnesota…

DAUNTE Wright protesters waved a pig’s head at cops as chaos again erupted in Brooklyn Center, with hundreds storming the police station.

Demonstrators came out for the fourth night in a row since Wright, 20, was fatally shot by police officer Kim Potter during a traffic stop on Sunday.

Sadly, instead of trying to calm the violence BLM leaders are actually arguing that rioting and looting are legitimate forms of political expression …

A prominent activist who supports the Black Lives Matter movement has appeared to support violent protests, arguing that rioting and looting are ‘a legitimate, politically-informed response to state violence’.

Bree Newsome, 35, made the passionate remarks in a series of tweets this week, arguing that police are not limited to non-violence, and that a violent response to injustice can be appropriate and justified.

And do you want to know what else is real?

As I discussed a couple days ago , social decay is transforming city streets all over America into drug-infested wastelands …

Homeless men lie on the sidewalk while others wearing blankets and rags loiter on a street strewn with garbage, feces, and drug paraphernalia along the notorious Kensington Avenue drag in Philadelphia.

Video posted online on March 10 shows people living out of suitcases on the sidewalks in the area adjacent to the entrance to the Somerset train station along the Market-Frankford train line while others openly brandish needles.

Cardboard boxes with trash bags stacked on top of them lie feet away from the entrances to various pawn shops, check-cashing stores, delis, and bodegas.

The financial bubble that we are experiencing right now will go away, but the problems on our streets are not going away.

In fact, they are only going to get worse in the months and years ahead.

But if you don’t want to believe this, go ahead and pour your life savings into Hometown International or Dogecoin and see what happens.

You only make money in the markets if you get out in time, and time is quickly running out for those that have put their faith in this financial bubble.

* * *

Michael’s new book entitled “Lost Prophecies Of The Future Of America†is now available in paperback and for the Kindle on Amazon.


Educated_Redneck 12 hours ago (Edited)

This article is late by 13 years (i.e. 2008 financial crisis) or dare I say 49 years (i.e. 1972 leaving the gold standard) or maybe 108 years (i.e. 1913 FED creation). Pick your favorite year.

Lordflin 12 hours ago

Our civilization is now run on fraud...

People expect fraud... depend on it... entire industries are built around it...

What hasn't fraud touched...?

chunga 12 hours ago

A few years ago I was semi-obsessed with looking for it. If you look you will see it is literally everywhere. It is what it is.

Lordflin 12 hours ago

Sadly...

In too many situations over the past thirty years it has come looking for me...

From my experience in education to my experience at the hands of the justice system here in Idaho...

And I have been trying to mind my own business... imagine what I could accomplish if I were actually looking for trouble...

Kreditanstalt 12 hours ago (Edited)

They're not "filthy rich" until they successfully sell their Dogecoins to some other fool...which might one day become difficult.

It's a Ponzi scheme and only the early entries get rich

truthseeker47 12 hours ago

I would not call it a bubble; looks more like a Ponzi Scheme to me.

[May 03, 2021] This Bull Market Has a Troubling Reliance on Speculation by James Mackintosh

Highly recommended!
See also Investors Big and Small Are Driving Stock Gains With Borrowed Money - WSJ The stock market definitely has gambling problem. Just look at Yahoo Finance coverage. It is insane. They cheerleading reckless behaviour and ignore each and every warning sign.
Notable quotes:
"... In Minsky's third phase, borrowers take loans where they can't afford to pay either the interest or principal from income, in the hope of capital gains big enough to make up the gap. Land speculators are a prime example. ..."
"... The parallel in the stock market is the hunt for the greater fool . Sure, GameStop shares bear no relation to the reality of the company, but I can make money from buying an overpriced stock if I can find someone willing to pay even more because they 'like the stock.' ..."
"... The concern for investors: How much of the market's gain is thanks to this pure speculation, and how much to the justifiable gains of the improving economy and low rates? If too much comes from speculation, the danger is that we run out of greater fools and prices quickly drop back. ..."
Mar 26, 2021 | www.wsj.com

In Minsky's second stage, borrowers plan only to repay the interest, and refinance when the main debt is due to be repaid; much company debt works like this. It is taken out with a plan to roll it over indefinitely. Interest rates matter a lot: If they go down when the company needs to refinance, it will pay less.

The equity parallel is to gains in valuation due to lower long-term rates. As with corporate debt, this is entirely justified and sustainable so long as rates stay low, because future earnings are now more appealing. The danger is that rates rise, in which case the stock might be hit no matter how earnings pan out.

A big chunk of the gains in stocks in the past year came from the sharply lower rates in the first response to the pandemic when the Federal Reserve flooded the system with money. Price-to-forward-earnings multiples soared. From the S&P 500's low on March 23 to the end of June, the market went from 14 to more than 21 times estimated earnings 12 months ahead, even as those estimated earnings fell amid lockdown gloom. The yield on the 10-year Treasury, already down sharply from mid-February's high, fell further as stocks rebounded.

In Minsky's third phase, borrowers take loans where they can't afford to pay either the interest or principal from income, in the hope of capital gains big enough to make up the gap. Land speculators are a prime example.

The parallel in the stock market is the hunt for the greater fool . Sure, GameStop shares bear no relation to the reality of the company, but I can make money from buying an overpriced stock if I can find someone willing to pay even more because they 'like the stock.'

Wild bets became obvious this year, as newcomers armed with stimulus, or 'stimmy,' checks drove up the price of many tiny stocks, penny shares and those popular on Reddit discussion boards.

The concern for investors: How much of the market's gain is thanks to this pure speculation, and how much to the justifiable gains of the improving economy and low rates? If too much comes from speculation, the danger is that we run out of greater fools and prices quickly drop back.

... ... ...

Write to James Mackintosh at James.Mackintosh@wsj.com

[May 03, 2021] New home bubble? Home Prices Soar 18% To An All Time High

Apr 27, 2021 | www.zerohedge.com

Builders are struggling to construct new homes given an ongoing lumber shortage. Without more homeowners listing, buyers are scrambling to compete for the limited number of homes on the market, which continues to drive prices up to new heights.

[May 03, 2021] Harry Dent -- Biggest Crash Ever Likely by End of June

Trying to guess when the bubble burst is fools game. But the fact support the idea that this is a huge bubble.
Notable quotes:
"... 'Fake earnings, fake GDP, fake interest rates and super-high valuations' make for an increasingly untenable situation, he warns. The expanding market bubble has been building since 2008. But the Federal Reserve keeps averting the next huge crisis by continuously 'printing money,' declares the Harvard Business School MBA. ..."
"... It's the riskiest market since 1929. The difference is that '29 wasn't as global. This is an everything bubble. And with the $1.9 trillion fiscal stimulus bill, we're wiling to stimulate 40-something percent of GDP just to prevent a slowdown in the economy. That's going to go down in history as the most insane thing ever. They'll say, 'What were they smoking?' ..."
"... The next crash will be worse than the last one because it will come from higher levels and [plummet] to lower levels. ..."
"... If you're willing to take more risk, you'll have one bucket in long-term U.S. Treasury bonds and maybe in a few other good governments, like Sweden or Australia. Triple-A corporate could go in there too. Then you'll have another bucket '" of short stocks, not leveraged. ..."
"... Jeremy Grantham [GMO co-founder] said [on Jan. 5] this level of euphoria means you're within months '" not years '" of a major bubble peak. You're at the end. ..."
"... The only reason people are spending is because the government handed businesses and consumers tons of money. But it will get to a point where it's not going to matter how much money is printed '" and then you'll have an avalanche. A huge collapse is coming. ..."
"... Loans will fail by the boatload. Then money disappears. That causes bank and business failures. We have to get all the financial leverage, financial assets and debt out of our economy. Twenty percent of public companies are zombies. They can't even pay their debt service in a growth economy. ..."
Mar 10, 2021 | thinkadvisor.com

That's what 'The Contrarian's Contrarian, as Dent has been dubbed, tells ThinkAdvisor in an interview.

The strategist correctly called Japan's 1989 bubble bust and recession, the dot-com crash and the populist swell that made Donald Trump president.

What could be 'the biggest crash ever,' he argues, will hit by the end of June, if not sooner. It will be 'the initiation of the next big economic downturn,' Dent predicts.

'Fake earnings, fake GDP, fake interest rates and super-high valuations' make for an increasingly untenable situation, he warns. The expanding market bubble has been building since 2008. But the Federal Reserve keeps averting the next huge crisis by continuously 'printing money,' declares the Harvard Business School MBA.

His HSD Publishing, an independent research firm, generates monthly newsletters that he and Rodney Johnson, HSD president, each write.

In the interview, Dent delivers his prescription for investing amid the weakened economy and impending disaster, as he sees it: Zero in on long-term Treasurys.

'What's better than sleeping with 30-year Treasury bonds,' he exults. They'll 'magnify your money.'

He then describes a portfolio allocation for the investor that's 'willing to take more risk.' As for the notion of high inflation, 'no way in hell,' he says.

Dent, whose latest book is ' What to Do When the Bubble Pops: Personal and Business Strategies for the Coming Economic Winter ' (G&D Media-April 2020), also tells ThinkAdvisor his considered opinions on cryptocurrency ('a big trend long term'), the GameStop frenzy ('stupid but admirable') and Sen. Elizabeth Warren's wealth tax bill ('First of all, those assets are going to crash.')

ThinkAdvisor interviewed Dent on March 5. He was speaking by phone from his base in San Juan, Puerto Rico, where he has resided for the last several years. When the conversation pivoted to folks who attack him for his frequently inaccurate predictions, he offered some choice words and an explanation, then described key indicators he employs that show 'very clear cycles.'

Here are highlights of our interview:

THINKADVISOR: How much risk is there in the stock market right now?

HARRY DENT JR.: It's the riskiest market since 1929. The difference is that '29 wasn't as global. This is an everything bubble. And with the $1.9 trillion fiscal stimulus bill, we're wiling to stimulate 40-something percent of GDP just to prevent a slowdown in the economy. That's going to go down in history as the most insane thing ever. They'll say, 'What were they smoking?'

Please elaborate on the extent of the risk you see.

This may be the biggest bubble crash ever: stocks, commodities, real estate. The next crash is the initiation of the next big [economic] downturn, which will be much worse than the one in 2008-2009.

When do you think the next crash will occur?

It will likely come by the end of June, probably sooner. The S&P falls to 2,100 '" lower than the March 2020 low '" and that would be a 47% to 48% drop from recent highs, though it may go to 4,000 first. The next crash will be worse than the last one because it will come from higher levels and [plummet] to lower levels.

Why will the downturn that you see be so harsh?

The only reason the 2008 downturn didn't turn into a depression was that they turned on the monetary spigots so hard and blew us out of it, which kept the bubble going. They kept printing money and put it off. Now we've got a bigger bubble. This downturn is going to be the Great Depression that the deep recession of 2008 was [falling into].

How long do you think the depression will last?

If the economy finally falls apart after this much stimulus, economists will flip from being endlessly bullish to endlessly bearish. They'll say, 'Now we're in a decade-long-plus depression, like the 1930s.' But I'll say, 'Nope, this thing will be hell: It's going to do its work very fast. By 2024, it will be over.' By 2023 or 2024, we're going to be coming out of it into what I call the next Spring Boom.

Right now, you favor investing in Treasury bonds. What's your strategy?

Man, what's better than sleeping with 30-year Treasury bonds '" the safest investment in the reserve currency of a country that's in big trouble '" but not as much as Europe and Japan are in and nowhere near as much as China is in. We're in the best house in a bad neighborhood.

What will happen to the 30-year Treasury bond during the massive crash you foresee?

It's going to fall to half a percent and maybe zero. It will expand your money 30%, 40%, 50%, while stocks are crashing 70%, 80%, 90%. Real estate will go down 30%, 40%, 50%. Commodities are already down 50% and are going down another 30% or 40%. Everything is going to default. Cash will preserve your money. The 30-year Treasury will magnify your money.

So, do you think 50% of an investment portfolio should be in Treasurys?

If you're willing to take more risk, you'll have one bucket in long-term U.S. Treasury bonds and maybe in a few other good governments, like Sweden or Australia. Triple-A corporate could go in there too. Then you'll have another bucket '" of short stocks, not leveraged.

Stocks are very volatile on the way down. You can also be in REITs that are in very solid areas, like multi-family housing in affordable cities and medical facilities because those will hold up the best.

There's a discernable euphoria now among investors. But John Templeton, the renowned investor and fund manager, famously said that 'bull markets die on euphoria.' Do you agree with that?

Yes. And Jeremy Grantham [GMO co-founder] said [on Jan. 5] this level of euphoria means you're within months '" not years '" of a major bubble peak. You're at the end.

Wil cryptocurrency be part of that huge crash?

Yes. I think Bitcoin is the big thing long term and that crypto and blockchain is a big trend. It's like the internet of finance '" money and assets '" instead of information. So it's a big deal '" but in its early stages.

Bitcoin is going to go to 58 [thousand], 60, 80 '" and then end up back at 3,000 to 4,000. I would buy it long term, a couple of years from now. I wouldn't touch it between now and then.

What are your expectations for the economy once the pandemic substantially fades?

Some industries are never going to come back. We're not back to where we were before COVID '" by GDP or any other major indicator. Everybody is acting like 'When we get over COVID, we'll be back better than ever.' The stock market is already anticipating that. But it's wrong.

The only reason people are spending is because the government handed businesses and consumers tons of money. But it will get to a point where it's not going to matter how much money is printed '" and then you'll have an avalanche. A huge collapse is coming.

What specifically will cause it?

There's is no way you can [keep] having fake earnings, fake GDP, fake interest rates and super-high valuations. Financial assets have to come down to reality.

What are the implications?

Loans will fail by the boatload. Then money disappears. That causes bank and business failures. We have to get all the financial leverage, financial assets and debt out of our economy. Twenty percent of public companies are zombies. They can't even pay their debt service in a growth economy. They're already dead. We've just keeping them alive with embalming.

[May 03, 2021] Parts of the U.S. equity market are in a bubble

May 03, 2021 | www.zerohedge.com

Bridgewater 's co-chief investment officer Greg Jensen warned investors that parts of the U.S. equity market are in a bubble , but shorting too early is the "easiest place to die" for an investor.

Jensen joined Bloomberg's "What Goes Up" podcast to discuss this week's Federal Reserve meeting and how ample liquidity from the central bank, combined with a booming economic rebound, make conditions ripe for markets to get more bubbly.

Q. Bubbles are a very strange phenomenon because the risk-reward relationship is so interesting. It almost seems that as an investor, you have to participate in bubbles. Because if you think it's a bubble too early, you really miss the best returns from them. How do you know when it's time to get out of an overvalued market?

A: All along through Bridgewater's history we've been systematic. So we've taken the kind of discussion we're having now -- a very qualitative view of the world -- but translated into ways to measure it. So you take something like a bubble, right? A classic qualitative thing. What do you mean by bubble? How do you measure that it's a bubble? Is it enough to say prices are high relative to history, or what's the actual measure? And then how reliable is it?

And we have six gauges of a bubble that we use all over the world. Then you could apply it to cryptocurrency. You can apply it to anything you wanted in the world to stocks, to bonds to anything. Our basic scoreboard is: Are prices high relative to traditional measures? Are prices discounting unsustainable conditions?

So, as an example today, there's something like 10% of stocks that are pricing in more than 20% revenue growth and margin expansion. If you look at history, 2% of stocks actually achieved that. That's an extremely hard thing to do.

Q: That's not counting the base effects from last year, right?

A: No. I'm talking about ongoing growth rates without the base effect. It doesn't happen. That's very, very unlikely to happen. Potentially with inflation or something you might, but in a normal kind of forward-looking picture, you don't get that. So that's an example of discounting unsustainable conditions. They can't, as a group, actually achieve that condition.

The third thing is new buyers entering the market. How many new buyers are there? How big a part of the market are they? There's the broad sentiment measures. There's purchases being financed by leverage and buyers and businesses sort of making extended forward purchases . That's all part of our checklist for a bubble. And you see today a fair amount of the equity market in the U.S. in a bubble, but not the aggregate.

There are definitely pockets that meet those standards and that's dangerous. And then, like you said, what do you want to do, buy or sell them? Well, that's a whole other dangerous thing.

And that's where, when we had a drawdown in 2000-2001 associated with the bubble -- both the dollar and the equity market and how that was playing out at the time -- that really forced us to get into flows, which is basically how we measure bubbles today. Where's the money coming from? Who are the buyers and sellers? What are their balance sheets? How much more money can they put into this bubble versus how much income they're getting and when does that start to flip? And so for us, that process of being able to look at the balance sheets of the buyers and sellers and think about when they've been stretched to an extreme -- where they won't have the money, where there's more supply coming than possible demand."

So you look at the IPO pipeline, you look at the creation of new instruments, how fast those balance sheets are growing. And that's how we try to measure that criss-cross. And it's still a very, very dangerous game, like you're saying.

So the third part is be careful and be conservative in your thinking around the ability to time those things, because that's kind of the easiest place to die in asset prices is trying to be short a bubble too early.

Click here to listen to the full podcast...

[May 03, 2021] Is the U.S. Student Loan Program Facing a $500 Billion Hole -- One Banker Thinks So.

Highly recommended!
Notable quotes:
"... Mr. Courtney's calculation was one of several supporting the disclosure in a Journal article last fall that taxpayers could ultimately be on the hook for roughly a third of the $1.6 trillion federal student loan portfolio. This could amount to more than $500 billion, exceeding what taxpayers lost on the saving-and-loan crisis 30 years ago. ..."
May 03, 2021 | www.wsj.com

The federal budget assumes the government will recover 96 cents of every dollar borrowers default on. That sounded high to Mr. Courtney because in the private sector 20 cents would be more appropriate for defaulted consumer loans that aren't backed by an asset.

He asked Education Department budget officials how they calculated that number. They told him that when borrowers default, the government often puts them into new loans. These pay off the old loans, and this is considered a recovery, even though in many cases the borrowers haven't repaid anything and default on the new loans as well.

In reality, the government is likely to recover just 51% to 63% of defaulted amounts, according to Mr. Courtney's forecast in a 144-page report of his findings, which was reviewed by The Wall Street Journal.

"If you accounted this way in the private sector, you wouldn't be in business anymore," Mrs. DeVos said in a December interview. "You'd probably be behind bars."

Mr. Courtney's calculation was one of several supporting the disclosure in a Journal article last fall that taxpayers could ultimately be on the hook for roughly a third of the $1.6 trillion federal student loan portfolio. This could amount to more than $500 billion, exceeding what taxpayers lost on the saving-and-loan crisis 30 years ago.

If Mr. Courtney is right, there are big implications for taxpayers and families alike. While defaulted student loans can't cause the federal government to go bankrupt the way bad mortgage lending upended banks during the financial crisis, they expose a similar problem: Billions of dollars lent based on flawed assumptions about whether the money can be repaid.

[May 03, 2021] When to Invest in a Stupid Idea

There are periods when you should sit on your money, despite inflation. This is probably one of those. When no one believes in the future, that's an opportunity. When everyone does, sell
Notable quotes:
"... Take Quantumscape, which went public via a SPAC and produces solid-state lithium metal batteries. Bill Gates and Volkswagen are investors. In 2020 it had no revenue and lost more than $1 billion. Quantumscape had a peak valuation of $50 billion last December. ..."
Apr 20, 2021 | www.wsj.com

When I read that technology can construct an image of your face from your DNA, my initial reaction was: That's the stupidest thing I've ever heard.

Fortunately, I've had a lifetime of stupidest-things-I've-heard things ( like Bleep ) became reality. Like the Kübler-Ross stages of grief -- denial, anger, bargaining, depression, acceptance -- technology goes through similar phases.

My phases of techno-hype: Incredulous. Will never happen. Dread. I'll try it. Booster. Overhype. Failed expectations.

On to the next paradigm. Understand these before plunking money into passing fancies. We know the famous will-never-happen predictions.

Understand these before plunking money into passing fancies.

We know the famous will-never-happen predictions. IBM 's Thomas Watson : "I think there is a world market for maybe five computers." Digital's Ken Olsen : "There is no reason anyone would want a computer in their home." Funny now, but not unreasonable at the time.

I've learned to harness those knee-jerk denials when I know that technology performance will increase and costs decrease. Classic scale. I'm actually suspicious of things that aren't controversial from the start. I live in those denial phases -- ask my wife. Why? Because almost every time, no one believes in the future. That's the time to invest. Until everyone believes it and then some. Then it's probably time to sell.

I live in those denial phases -- ask my wife. Why? Because almost every time, no one believes in the future. That's the time to invest. Until everyone believes it and then some. Then it's probably time to sell.

Think of the 2007 iPhone introduction. Typing on glass, are you kidding me? So many white-collar warriors hurdling through airports were thumb-writing on BlackBerry s -- aka Crackberrys. Take away my keyboard, even though it's tiny and painful to use? Over my dead body. Well, we know how that turned out. BlackBerry is now worth $5 billion. Apple a bit more.

Same for electric cars. It's my God-given right to guzzle gas and shift gears with abandon. I don't want a car that works like a high school electronics lab with a battery and a fan. No way. Yet batteries got cheaper, and range went up.

It wasn't that long ago that everyone was dubious of autonomous cars. The 2005 Darpa Grand Challenge saw Stanley, a Stanford robot, win $2 million in a 132-mile self-driving race. But on real streets with bicyclists and old ladies? No way. Well, we're not there yet, but it's certainly accepted that it will happen.

The stock market allocates capital to those ideas it believes are winners. Remember investing guru Benjamin Graham's stock market as a short-run voting machine, long-run weighing machine? So where are we now -- especially amid a Fed-fueled feeding frenzy? When markets overpay, they're voting that all that good stuff is practically guaranteed to happen. Huge expectations are built into many stock prices.

Entrepreneurs, naturally, love the overhype stage -- almost free money thrown at them at billion-dollar valuations. But it's the most dangerous time for investors. HBO has a show named "Euphoria." It's about teen drug use, but no matter; the show's best line is by the main character, Rue: "Every time I feel good, I think it will last forever . . . but it doesn't."

Expectations eventually get dashed. Reality bites. Stocks come down. Even if the market or product ends up successful, I've noticed that overhyped stocks can return to their peak values, but five to 10 years later. That's a long time to wait for hype to become real.

Take Quantumscape, which went public via a SPAC and produces solid-state lithium metal batteries. Bill Gates and Volkswagen are investors. In 2020 it had no revenue and lost more than $1 billion. Quantumscape had a peak valuation of $50 billion last December. Now it's $13.5 billion. It could work. I hope it does work. But unless something radical changes, I think it will take a long time for the company to be worth $50 billion again.

There are plenty of overhyped things to choose from, many with zero revenue. Some may be successful, others certainly won't: Air taxis (Archer and Joby). Hydroponic vertical farms (AeroFarms). Space travel (Momentus). Gamestop 's turnaround.

My advice is always to invest in the fog. When everyone else is incredulous, look for scale. Usually, no one else can see it. Squint hard, but don't make stuff up. If you can see something that everyone dismisses, and that will get cheaper over a long period of time, maybe decades, buy in cheap and go along for the long ride. Others will eventually overpay.

On the flip side, when the fog clears and we've moved from the acceptance to hype, it's time to unload your shares to those late to the party. One hint is that stocks are now worth twice gross domestic product. You might sell early. So what? No one ever lost money taking a profit. But please, know which phase we're in -- don't be the last one in the pool. Instead, start hunting for the next wave no one believes in.

But constructing a face from DNA? That'll never happen. Well, maybe . . .

[May 02, 2021] Another sign of bubble

May 02, 2021 | www.wsj.com

Originally from: Americans Can't Get Enough of the Stock Market - WSJ

Individual investors are holding more stocks than ever before as major indexes climb to fresh highs. They are also upping the ante by borrowing to magnify their bets or increasingly buying on small dips in the market.

Stockholdings among U.S. households increased to 41% of their total financial assets in April, the highest level on record. That is according to JPMorgan Chase & Co. and Federal Reserve data going back to 1952 that includes 401(k) retirement accounts.

... A survey by the American Association of Individual Investors showed that investors' allocations to the stock market hit around a three-year high of 70% in March. And margin debt -- or money that investors borrow to buy securities -- stood at a record as of March , Financial Industry Regulatory Authority figures show.

... "Retail investors have made a lot of money on many things including equities over the past year. At some point, given how high their equity allocation is, the risk is they decide to get out and take profits," said Mr. Panigirtzoglou, a managing director at JPMorgan. "That is effectively what happened before in 2000."

R

Another sign of bubble

Originally from: Americans Can't Get Enough of the Stock Market - WSJ

Individual investors are holding more stocks than ever before as major indexes climb to fresh highs. They are also upping the ante by borrowing to magnify their bets or increasingly buying on small dips in the market.

Stockholdings among U.S. households increased to 41% of their total financial assets in April, the highest level on record. That is according to JPMorgan Chase & Co. and Federal Reserve data going back to 1952 that includes 401(k) retirement accounts.

... A survey by the American Association of Individual Investors showed that investors' allocations to the stock market hit around a three-year high of 70% in March. And margin debt -- or money that investors borrow to buy securities -- stood at a record as of March , Financial Industry Regulatory Authority figures show.

... "Retail investors have made a lot of money on many things including equities over the past year. At some point, given how high their equity allocation is, the risk is they decide to get out and take profits," said Mr. Panigirtzoglou, a managing director at JPMorgan. "That is effectively what happened before in 2000."

R Ray Noack
I believe there is 60% chance we put in a top before May 17 th . I'm not sure th@t all the day traders from 2020 have actually put aside enough money to pay their taxes . Those gains were all short term ordinary income .
We won't crash , we will have just put a high in that may not be breached for many years . Of course all bets are off if Biden pays every one's taxes for them and gives them an extra " stimmy" .
Another sign of bubble

Originally from: Americans Can't Get Enough of the Stock Market - WSJ

Individual investors are holding more stocks than ever before as major indexes climb to fresh highs. They are also upping the ante by borrowing to magnify their bets or increasingly buying on small dips in the market.

Stockholdings among U.S. households increased to 41% of their total financial assets in April, the highest level on record. That is according to JPMorgan Chase & Co. and Federal Reserve data going back to 1952 that includes 401(k) retirement accounts.

... A survey by the American Association of Individual Investors showed that investors' allocations to the stock market hit around a three-year high of 70% in March. And margin debt -- or money that investors borrow to buy securities -- stood at a record as of March , Financial Industry Regulatory Authority figures show.

... "Retail investors have made a lot of money on many things including equities over the past year. At some point, given how high their equity allocation is, the risk is they decide to get out and take profits," said Mr. Panigirtzoglou, a managing director at JPMorgan. "That is effectively what happened before in 2000."

R Ray Noack
I believe there is 60% chance we put in a top before May 17 th . I'm not sure th@t all the day traders from 2020 have actually put aside enough money to pay their taxes . Those gains were all short term ordinary income .
We won't crash , we will have just put a high in that may not be breached for many years . Of course all bets are off if Biden pays every one's taxes for them and gives them an extra " stimmy" .
Another sign of bubble

Originally from: Americans Can't Get Enough of the Stock Market - WSJ

Individual investors are holding more stocks than ever before as major indexes climb to fresh highs. They are also upping the ante by borrowing to magnify their bets or increasingly buying on small dips in the market.

Stockholdings among U.S. households increased to 41% of their total financial assets in April, the highest level on record. That is according to JPMorgan Chase & Co. and Federal Reserve data going back to 1952 that includes 401(k) retirement accounts.

... A survey by the American Association of Individual Investors showed that investors' allocations to the stock market hit around a three-year high of 70% in March. And margin debt -- or money that investors borrow to buy securities -- stood at a record as of March , Financial Industry Regulatory Authority figures show.

... "Retail investors have made a lot of money on many things including equities over the past year. At some point, given how high their equity allocation is, the risk is they decide to get out and take profits," said Mr. Panigirtzoglou, a managing director at JPMorgan. "That is effectively what happened before in 2000."

R Ray Noack
I believe there is 60% chance we put in a top before May 17 th . I'm not sure th@t all the day traders from 2020 have actually put aside enough money to pay their taxes . Those gains were all short term ordinary income .
We won't crash , we will have just put a high in that may not be breached for many years . Of course all bets are off if Biden pays every one's taxes for them and gives them an extra " stimmy" .
Another sign of bubble

Originally from: Americans Can't Get Enough of the Stock Market - WSJ

Individual investors are holding more stocks than ever before as major indexes climb to fresh highs. They are also upping the ante by borrowing to magnify their bets or increasingly buying on small dips in the market.

Stockholdings among U.S. households increased to 41% of their total financial assets in April, the highest level on record. That is according to JPMorgan Chase & Co. and Federal Reserve data going back to 1952 that includes 401(k) retirement accounts.

... A survey by the American Association of Individual Investors showed that investors' allocations to the stock market hit around a three-year high of 70% in March. And margin debt -- or money that investors borrow to buy securities -- stood at a record as of March , Financial Industry Regulatory Authority figures show.

... "Retail investors have made a lot of money on many things including equities over the past year. At some point, given how high their equity allocation is, the risk is they decide to get out and take profits," said Mr. Panigirtzoglou, a managing director at JPMorgan. "That is effectively what happened before in 2000."

R Ray Noack
I believe there is 60% chance we put in a top before May 17 th . I'm not sure th@t all the day traders from 2020 have actually put aside enough money to pay their taxes . Those gains were all short term ordinary income .
We won't crash , we will have just put a high in that may not be breached for many years . Of course all bets are off if Biden pays every one's taxes for them and gives them an extra " stimmy" .
Another sign of bubble

Originally from: Americans Can't Get Enough of the Stock Market - WSJ

Individual investors are holding more stocks than ever before as major indexes climb to fresh highs. They are also upping the ante by borrowing to magnify their bets or increasingly buying on small dips in the market.

Stockholdings among U.S. households increased to 41% of their total financial assets in April, the highest level on record. That is according to JPMorgan Chase & Co. and Federal Reserve data going back to 1952 that includes 401(k) retirement accounts.

... A survey by the American Association of Individual Investors showed that investors' allocations to the stock market hit around a three-year high of 70% in March. And margin debt -- or money that investors borrow to buy securities -- stood at a record as of March , Financial Industry Regulatory Authority figures show.

... "Retail investors have made a lot of money on many things including equities over the past year. At some point, given how high their equity allocation is, the risk is they decide to get out and take profits," said Mr. Panigirtzoglou, a managing director at JPMorgan. "That is effectively what happened before in 2000."

R Ray Noack
I believe there is 60% chance we put in a top before May 17 th . I'm not sure th@t all the day traders from 2020 have actually put aside enough money to pay their taxes . Those gains were all short term ordinary income .
We won't crash , we will have just put a high in that may not be breached for many years . Of course all bets are off if Biden pays every one's taxes for them and gives them an extra " stimmy" .
Another sign of bubble

Originally from: Americans Can't Get Enough of the Stock Market - WSJ

Individual investors are holding more stocks than ever before as major indexes climb to fresh highs. They are also upping the ante by borrowing to magnify their bets or increasingly buying on small dips in the market.

Stockholdings among U.S. households increased to 41% of their total financial assets in April, the highest level on record. That is according to JPMorgan Chase & Co. and Federal Reserve data going back to 1952 that includes 401(k) retirement accounts.

... A survey by the American Association of Individual Investors showed that investors' allocations to the stock market hit around a three-year high of 70% in March. And margin debt -- or money that investors borrow to buy securities -- stood at a record as of March , Financial Industry Regulatory Authority figures show.

... "Retail investors have made a lot of money on many things including equities over the past year. At some point, given how high their equity allocation is, the risk is they decide to get out and take profits," said Mr. Panigirtzoglou, a managing director at JPMorgan. "That is effectively what happened before in 2000."

R Ray Noack
I believe there is 60% chance we put in a top before May 17 th . I'm not sure th@t all the day traders from 2020 have actually put aside enough money to pay their taxes . Those gains were all short term ordinary income .
We won't crash , we will have just put a high in that may not be breached for many years . Of course all bets are off if Biden pays every one's taxes for them and gives them an extra " stimmy" .
Another sign of bubble

Originally from: Americans Can't Get Enough of the Stock Market - WSJ

Individual investors are holding more stocks than ever before as major indexes climb to fresh highs. They are also upping the ante by borrowing to magnify their bets or increasingly buying on small dips in the market.

Stockholdings among U.S. households increased to 41% of their total financial assets in April, the highest level on record. That is according to JPMorgan Chase & Co. and Federal Reserve data going back to 1952 that includes 401(k) retirement accounts.

... A survey by the American Association of Individual Investors showed that investors' allocations to the stock market hit around a three-year high of 70% in March. And margin debt -- or money that investors borrow to buy securities -- stood at a record as of March , Financial Industry Regulatory Authority figures show.

... "Retail investors have made a lot of money on many things including equities over the past year. At some point, given how high their equity allocation is, the risk is they decide to get out and take profits," said Mr. Panigirtzoglou, a managing director at JPMorgan. "That is effectively what happened before in 2000."

R Ray Noack
I believe there is 60% chance we put in a top before May 17 th . I'm not sure th@t all the day traders from 2020 have actually put aside enough money to pay their taxes . Those gains were all short term ordinary income .
We won't crash , we will have just put a high in that may not be breached for many years . Of course all bets are off if Biden pays every one's taxes for them and gives them an extra " stimmy" .
Another sign of bubble

Originally from: Americans Can't Get Enough of the Stock Market - WSJ

Individual investors are holding more stocks than ever before as major indexes climb to fresh highs. They are also upping the ante by borrowing to magnify their bets or increasingly buying on small dips in the market.

Stockholdings among U.S. households increased to 41% of their total financial assets in April, the highest level on record. That is according to JPMorgan Chase & Co. and Federal Reserve data going back to 1952 that includes 401(k) retirement accounts.

... A survey by the American Association of Individual Investors showed that investors' allocations to the stock market hit around a three-year high of 70% in March. And margin debt -- or money that investors borrow to buy securities -- stood at a record as of March , Financial Industry Regulatory Authority figures show.

... "Retail investors have made a lot of money on many things including equities over the past year. At some point, given how high their equity allocation is, the risk is they decide to get out and take profits," said Mr. Panigirtzoglou, a managing director at JPMorgan. "That is effectively what happened before in 2000."

R Ray Noack
I believe there is 60% chance we put in a top before May 17 th . I'm not sure th@t all the day traders from 2020 have actually put aside enough money to pay their taxes . Those gains were all short term ordinary income .
We won't crash , we will have just put a high in that may not be breached for many years . Of course all bets are off if Biden pays every one's taxes for them and gives them an extra " stimmy" .
Another sign of bubble

Originally from: Americans Can't Get Enough of the Stock Market - WSJ

Individual investors are holding more stocks than ever before as major indexes climb to fresh highs. They are also upping the ante by borrowing to magnify their bets or increasingly buying on small dips in the market.

Stockholdings among U.S. households increased to 41% of their total financial assets in April, the highest level on record. That is according to JPMorgan Chase & Co. and Federal Reserve data going back to 1952 that includes 401(k) retirement accounts.

... A survey by the American Association of Individual Investors showed that investors' allocations to the stock market hit around a three-year high of 70% in March. And margin debt -- or money that investors borrow to buy securities -- stood at a record as of March , Financial Industry Regulatory Authority figures show.

... "Retail investors have made a lot of money on many things including equities over the past year. At some point, given how high their equity allocation is, the risk is they decide to get out and take profits," said Mr. Panigirtzoglou, a managing director at JPMorgan. "That is effectively what happened before in 2000."

R Ray Noack
I believe there is 60% chance we put in a top before May 17 th . I'm not sure th@t all the day traders from 2020 have actually put aside enough money to pay their taxes . Those gains were all short term ordinary income .
We won't crash , we will have just put a high in that may not be breached for many years . Of course all bets are off if Biden pays every one's taxes for them and gives them an extra " stimmy" .
Another sign of bubble

Originally from: Americans Can't Get Enough of the Stock Market - WSJ

Individual investors are holding more stocks than ever before as major indexes climb to fresh highs. They are also upping the ante by borrowing to magnify their bets or increasingly buying on small dips in the market.

Stockholdings among U.S. households increased to 41% of their total financial assets in April, the highest level on record. That is according to JPMorgan Chase & Co. and Federal Reserve data going back to 1952 that includes 401(k) retirement accounts.

... A survey by the American Association of Individual Investors showed that investors' allocations to the stock market hit around a three-year high of 70% in March. And margin debt -- or money that investors borrow to buy securities -- stood at a record as of March , Financial Industry Regulatory Authority figures show.

... "Retail investors have made a lot of money on many things including equities over the past year. At some point, given how high their equity allocation is, the risk is they decide to get out and take profits," said Mr. Panigirtzoglou, a managing director at JPMorgan. "That is effectively what happened before in 2000."

R Ray Noack
I believe there is 60% chance we put in a top before May 17 th . I'm not sure th@t all the day traders from 2020 have actually put aside enough money to pay their taxes . Those gains were all short term ordinary income .
We won't crash , we will have just put a high in that may not be breached for many years . Of course all bets are off if Biden pays every one's taxes for them and gives them an extra " stimmy" .
Another sign of bubble

Originally from: Americans Can't Get Enough of the Stock Market - WSJ

Individual investors are holding more stocks than ever before as major indexes climb to fresh highs. They are also upping the ante by borrowing to magnify their bets or increasingly buying on small dips in the market.

Stockholdings among U.S. households increased to 41% of their total financial assets in April, the highest level on record. That is according to JPMorgan Chase & Co. and Federal Reserve data going back to 1952 that includes 401(k) retirement accounts.

... A survey by the American Association of Individual Investors showed that investors' allocations to the stock market hit around a three-year high of 70% in March. And margin debt -- or money that investors borrow to buy securities -- stood at a record as of March , Financial Industry Regulatory Authority figures show.

... "Retail investors have made a lot of money on many things including equities over the past year. At some point, given how high their equity allocation is, the risk is they decide to get out and take profits," said Mr. Panigirtzoglou, a managing director at JPMorgan. "That is effectively what happened before in 2000."

R Ray Noack
I believe there is 60% chance we put in a top before May 17 th . I'm not sure th@t all the day traders from 2020 have actually put aside enough money to pay their taxes . Those gains were all short term ordinary income .
We won't crash , we will have just put a high in that may not be breached for many years . Of course all bets are off if Biden pays every one's taxes for them and gives them an extra " stimmy" .
Another sign of bubble

Originally from: Americans Can't Get Enough of the Stock Market - WSJ

Individual investors are holding more stocks than ever before as major indexes climb to fresh highs. They are also upping the ante by borrowing to magnify their bets or increasingly buying on small dips in the market.

Stockholdings among U.S. households increased to 41% of their total financial assets in April, the highest level on record. That is according to JPMorgan Chase & Co. and Federal Reserve data going back to 1952 that includes 401(k) retirement accounts.

... A survey by the American Association of Individual Investors showed that investors' allocations to the stock market hit around a three-year high of 70% in March. And margin debt -- or money that investors borrow to buy securities -- stood at a record as of March , Financial Industry Regulatory Authority figures show.

... "Retail investors have made a lot of money on many things including equities over the past year. At some point, given how high their equity allocation is, the risk is they decide to get out and take profits," said Mr. Panigirtzoglou, a managing director at JPMorgan. "That is effectively what happened before in 2000."

R Ray Noack
I believe there is 60% chance we put in a top before May 17 th . I'm not sure th@t all the day traders from 2020 have actually put aside enough money to pay their taxes . Those gains were all short term ordinary income .
We won't crash , we will have just put a high in that may not be breached for many years . Of course all bets are off if Biden pays every one's taxes for them and gives them an extra " stimmy" .
Another sign of bubble

Originally from: Americans Can't Get Enough of the Stock Market - WSJ

Individual investors are holding more stocks than ever before as major indexes climb to fresh highs. They are also upping the ante by borrowing to magnify their bets or increasingly buying on small dips in the market.

Stockholdings among U.S. households increased to 41% of their total financial assets in April, the highest level on record. That is according to JPMorgan Chase & Co. and Federal Reserve data going back to 1952 that includes 401(k) retirement accounts.

... A survey by the American Association of Individual Investors showed that investors' allocations to the stock market hit around a three-year high of 70% in March. And margin debt -- or money that investors borrow to buy securities -- stood at a record as of March , Financial Industry Regulatory Authority figures show.

... "Retail investors have made a lot of money on many things including equities over the past year. At some point, given how high their equity allocation is, the risk is they decide to get out and take profits," said Mr. Panigirtzoglou, a managing director at JPMorgan. "That is effectively what happened before in 2000."

R Ray Noack
I believe there is 60% chance we put in a top before May 17 th . I'm not sure th@t all the day traders from 2020 have actually put aside enough money to pay their taxes . Those gains were all short term ordinary income .
We won't crash , we will have just put a high in that may not be breached for many years . Of course all bets are off if Biden pays every one's taxes for them and gives them an extra " stimmy" .
Another sign of bubble

Originally from: Americans Can't Get Enough of the Stock Market - WSJ

Individual investors are holding more stocks than ever before as major indexes climb to fresh highs. They are also upping the ante by borrowing to magnify their bets or increasingly buying on small dips in the market.

Stockholdings among U.S. households increased to 41% of their total financial assets in April, the highest level on record. That is according to JPMorgan Chase & Co. and Federal Reserve data going back to 1952 that includes 401(k) retirement accounts.

... A survey by the American Association of Individual Investors showed that investors' allocations to the stock market hit around a three-year high of 70% in March. And margin debt -- or money that investors borrow to buy securities -- stood at a record as of March , Financial Industry Regulatory Authority figures show.

... "Retail investors have made a lot of money on many things including equities over the past year. At some point, given how high their equity allocation is, the risk is they decide to get out and take profits," said Mr. Panigirtzoglou, a managing director at JPMorgan. "That is effectively what happened before in 2000."

R Ray Noack
I believe there is 60% chance we put in a top before May 17 th . I'm not sure th@t all the day traders from 2020 have actually put aside enough money to pay their taxes . Those gains were all short term ordinary income .
We won't crash , we will have just put a high in that may not be breached for many years . Of course all bets are off if Biden pays every one's taxes for them and gives them an extra " stimmy" .
Another sign of bubble

Originally from: Americans Can't Get Enough of the Stock Market - WSJ

Individual investors are holding more stocks than ever before as major indexes climb to fresh highs. They are also upping the ante by borrowing to magnify their bets or increasingly buying on small dips in the market.

Stockholdings among U.S. households increased to 41% of their total financial assets in April, the highest level on record. That is according to JPMorgan Chase & Co. and Federal Reserve data going back to 1952 that includes 401(k) retirement accounts.

... A survey by the American Association of Individual Investors showed that investors' allocations to the stock market hit around a three-year high of 70% in March. And margin debt -- or money that investors borrow to buy securities -- stood at a record as of March , Financial Industry Regulatory Authority figures show.

... "Retail investors have made a lot of money on many things including equities over the past year. At some point, given how high their equity allocation is, the risk is they decide to get out and take profits," said Mr. Panigirtzoglou, a managing director at JPMorgan. "That is effectively what happened before in 2000."

R Ray Noack
I believe there is 60% chance we put in a top before May 17 th .