Think Global, Act Local?

Since the 2008 financial crisis, U.S. investors have counted on Federal Reserve bailouts, bond buying, and digital money printing. Significantly lower interest rates combined with a huge leap in the money supply sent asset prices (e.g., stocks, bonds, real estate,...

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Discrepancies Everywhere

I recently deposited $1,000 on a Rivian R1T. The deposit is fully refundable. That’s a good thing, since delivery of my electric truck is unlikely before the end of 2022. The Irvine-based company has been all over the news lately. Why? For one thing, this past...

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Can’t-Lose Propositions

Stocks recently hit record highs here in November. Similarly, the volume associated with protecting one's stock portfolio with "put options" has fallen to a new low. What do these trends suggest? They imply that investors believe that things are different than when...

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For What It’s Not Worth

The stock bubble stopped making sense several years ago. Yet, even speculators know, markets can remain irrationally enthusiastic for extended periods of time. For example, Tesla (TSLA) is being valued as though every driver on the planet will own one of their...

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Stocks Disengage from the Real Economy

Ironic? Humorous? The stock bubble continues to hit high after record high, despite the economy showing definitive signs of weakness. Two months earlier, the projection for the 3rd quarter period was 6.1%. Today? The Atlanta Fed is estimating growth of just 0.2%. If...

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Cryptic Caveats

Across 120 years of data, the most overvalued markets occurred in 1905, 1929, 1965, and 2000. This excludes today's stock bubble. (See the purple triangles below.) Interesting enough, when one adjusts for inflation, each of the occurrences led to periods of negative...

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Slip Sliding Away

The federal government is reining in its direct payments to households. Similarly, the Federal Reserve intends to reduce its money printing (QE) policies – the same policies that have created the speculative belief that our central bank can permanently levitate stock...

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When More and More Investors Want Out

Remember the trade war a few years back? The whole goal had been to shrink our trade deficit with China in an effort to enhance the U.S. economy's prospects. Perhaps unfortunately, the U.S. government responded to the coronavirus crisis with far too much stimulus. On...

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Five Huge Headwinds for the Stock Bubble

Is the stock bubble about to pop? Maybe not. Then again, patching all of the pinhole pricks simultaneously could prove difficult. Here are five significant headwinds for stocks: 1. Inflation. Few investors pay attention to things like the Baltic Dry Index. That's a...

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Going Stag

Consumers are already grappling with the highest inflation in 13 years. The Fed believes it is transitory, but when was the last time companies lowered employee wages after raising them? When is the last time service providers – restaurants, bike shops, accounting...

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Shut Up and Dance

Do you ever wonder why bad economic news seems to send stocks higher? For example, industrial production is growing at a slower pace than anticipated. Ditto for manufacturing. Yet stocks seemed to rally on the news. Simply put, poor economic data helps share prices...

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An ‘Unforeseen’ Comeuppance

There are smart people on social media. Brilliant people. Yet, many of them have swallowed the bait whole. They believe that the stock market can only move one direction. Up, up, and away. Everyday folks too. Young, old, educated, uneducated... it does not matter. Buy...

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Baked in the Cake

Since the early 1970s, the S&P 500 has witnessed average year-to-date gains of 6.0% through August 31. Here in 2021? 20.5%. It is not unusual to see big run-ups in the  10 Minute Bitcoin market. Yet the parabolic rise off the pandemic lows of March 2020 has no...

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Borrowed Time

Is the "stock market" really going up? Well, large company share prices are. If you drill down into the mid-sized and small-sized vehicles, however, cracks are beginning to show. Smaller companies are negative on a month-over-month basis. Micro-caps are down even...

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Every Stock Season (Turn, Turn, Turn)

The economy has largely recovered from the 2020 recession. And the Federal Reserve is finally thinking about slowing down its money printing stimulus. Perhaps ironically, the stock market is not too happy about it. The S&P 500 has dropped about 2% from recent...

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Betting the Farm on the Fed

According to an index by Goldman Sachs -- an index that takes into account the value of the dollar as well as interest rates -- U.S. financial conditions are easier than they have ever been. Companies and consumers can "borrow-n-spend" like never before. Ultra-loose...

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Bubbles Are Unbelievably Easy To Spot

Jeremy Grantham is chairman of the board for the well-known asset management firm,  Grantham, Mayo, & van Otterloo (GMO). Yet he is much more than that. He is also an accomplished "bubble-ologist." In a recent interview, Grantham said: "Bubbles are unbelievably...

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For Real

The Federal Reserve explains away rising costs across commodities, shipping, food, retail and rent as "transitory." They might be right. On the flip side, the stock bubble is ignoring inflation-adjusted data as it relates to valuation. Specifically, in the three...

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Stock Storm

The U.S. Federal Reserve has purchased oodles of assets with electronic currency credits. Funny money. Ditto for the Bank of Japan, People’s Bank of China, and the European Central Bank. Not surprisingly, the more that central bankers add assets to their collective...

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Warning: Household Wealth May Be Transitory

Is the stock bubble making investors wealthy? Temporarily. Consider household equity exposure relative to disposable personal income. Investors have more skin in the equity game than they ever have before. What that means is that, with the S&P 500 sitting atop a...

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Up, Up and Away

Theoretically, the extent of corporate success (e.g., sales, profits, cash flow, financial health, etc.) propels stock prices. That is no longer the case. For example, one can examine the price-to-sales metric (P/S) by S&P 500 decile. Low valuation deciles might...

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Prelude to a Bigger Short

Christian Bale played hedge fund manager Michael Burry in The Big Short. The actor's portrayal of an eccentric loner with genius-like qualities was downright riveting. Of course, it was Burry, not Bale, who anticipated the implosion of the housing balloon. It was...

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The Pin That Pricks the Stock Bubble

You hear the stories in everyday life. A neighbor receives $75,000 up and above an astronomical listing price for a home. A friend boasts about making a killing in a crypto like Dogecoin or a meme stock like AMC Entertainment Holdings (AMC). The primary reason for the...

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Minding the Bubble’s Skew

Is the stock market overvalued, undervalued, or fairly valued? One of the most popular metrics for making that call is the cyclically-adjusted price-to-earnings (CAPE) ratio. The CAPE ratio, also known as P/E10, has averaged 17.0 since the 1880s. It reached an epic...

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Excessive Speculation Rarely Ends Well

Speculation drives market activity more today than it did at any previous moment in history. To wit, short-dated single stock option volume is now 5x greater than it used to be. Think about this for a moment. Rather than invest for a long-term stream of cash flows,...

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Bearish on Bonds? Higher Rates Could Crush Stocks

The central bank of the United States, the Federal Reserve, creates digital dollar credits to buy bonds. If you buy bonds to depress interest rates and to inject money into the financial system, you get higher asset prices. Stocks. Bonds. Real Estate. Of course, the...

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The Big Shift to “Value Investing”

The federal government continues to hand out borrowed money to stimulate the economy. It is running monstrous deficits to do so. One consequence of spending too much borrowed money? Inflation. Copper, lumber, oil, gas, livestock, agriculture -- you name it. Stuff...

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Can You Spare An Inflation-Adjusted Dime?

Inflation is ubiquitous. You are seeing it at the gas pump. You are seeing at the grocery store. You are seeing it when you dine out. Interested in building a patio? An addition to your home? You might be shocked by the cost of lumber. And it is not just wood. Get a...

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The Roaring Twenties Redux?

The U.S. economy surged throughout the 1920s. With World War I in the rear-view mirror, consumers spent feverishly on autos, electrical appliances and movies. With the threat of coronavirus fading in 2021, might we be witnessing yet another Roaring Twenties? After...

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The Prices Are Not Alright

When you pump $12.3 trillion (and counting) into an economy, things are going to inflate. For example, commodities are going to be more expensive. Take a look at the vertical leap in prices for copper. And lumber. Home prices themselves become bubbly. Home prices have...

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Will Cap Gain Tax Hikes Burst The Stock Bubble?

The United States government raised taxes to finance the debt that accrued in World War I and World War II. Today, we are not engaged in a military intervention of monumental magnitude. However, the public debt-to-GDP is greater now than at any other point in American...

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Never Has Anyone Ever

Private money management firms often sell at a multiple of revenue. A frequently talked about metric? Price-to-revenue. For example, a wealth management company that generated $1,000,000 over the last year might be valued at 2.25x, or $2,250,000. At least in the...

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Lucky 13

On April 13, 2021, the S&P 500 SPDR Trust (SPY) closed above its opening price for the 13th consecutive session. That has never happened in the 28-year history of the exchange-traded fund. Without question, enthusiasm for stocks is feverish. But is it rational?...

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In Excess

When does extraordinary excess become visible? In hindsight. Consider the stock market at the start of 2000. Despite ridiculous valuations, scores of profitless IPOs, and an absence of common sense, few seemed to recognize the risks ahead of time. The S&P 500...

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The Less Profitable, The Better?

Somewhat surprisingly, 200 of the 1500 largest companies have proffered negative earnings over three consecutive years. Their stock prices must have suffered, right? Hardly. According to the Leuthold Group, investors have piled into unprofitable corporations more than...

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The Harder They Fall

Over the last 40 years, the U.S. government has chosen to spend significantly more money than it takes in. It is the reason that the country must issue trillions of dollars of debt. Spending became particularly obscene during the financial crisis of 2008. And since...

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Rebalancing Act

Institutions -- mutual funds, pensions, insurance companies, corporations, sovereign wealth funds -- often represent smarter money. Indeed, stock prices tend to rise when institutional buying is robust. However, history has been less kind to mom-n-pop investors...

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Scratching the Bubble’s Surface

There is a belief on Wall Street that future corporate earnings can only grow in an environment where borrowing is so cheap. Indeed, inflation-adjusted interest rates (a.k.a. "real rates") are negative, and that means companies are effectively being paid to borrow....

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So Few Protective Puts, So Many Aggressive Calls

There have been a number of stock bubbles in history. Yet few rival the infamy associated with 1929's epic crash or 2000's tech wreck. Perhaps ironically, today's post-pandemic bubble may be more egregious. For example, an average of four measures peg current...

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How a Market Pullback Can Become a Panic

Healthy corporations have manageable debt levels, rising revenue and increasing profits. Less healthy companies? Sales stagnate, earnings diminish and debt loads explode higher. Even before the pandemic, there were signs of corporate stress. Debts relative to gross...

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A Penny for Your Thoughts

There has never been a larger wave of equity inflows. In other words, everybody wants in the stock pool. And not just the largest companies with the strongest balance sheets. Volume for the least viable, most aggressive stock assets -- penny stocks -- has rocketed to...

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Unnerving Excess in 3 Charts

Extremely easy access to cheap money. That's what inflated the dotcom blimp in the late 1990s. That's what pumped up the housing balloon in the 2000s. And that's what is responsible for the "Everything Bubble" today. How frothy? Here are three charts that delineate...

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The Unrestrained Reflation of Today’s Stock Bubble

The stock market appears unstoppable. It is setting all-time records on a daily basis. On the other hand, the number of keyword searches for the term 'stock market bubble' has never been higher. The number of term searches is two times greater than in any other month...

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Searching for a Stock Bubble Pin

When money creating powers flood the financial system with cash and cash equivalents, market participants have a choice to make. They can hold the cash, securing a loss in purchasing power if they hold too long. Or they can acquire assets like high-yielding bonds,...

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When Will the Game Stop?

The more that global central banks create money (a.k.a. "liquidity"), the more that it overwhelms the supply of stock shares. Too much money is chasing a limited amount of shares. Indeed, the dynamics currently favor skyrocketing stock movement. At least as long as...

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Vast Majority Of Insiders Are Selling

Are corporate executives (a.k.a. "insiders") worried that the stock bubble is about to explode? Perhaps. There are more sellers than buyers today than at any previous point in the history of insider transaction data. Executives might be concerned about having too much...

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