Exponential Price Insanity
One of the features of a stock bubble? Staggering price gains over relatively short periods of time. Apple (AAPL), for example, is a phenomenal company. Its smartphone, music and television platforms are addictive to hundreds of millions of people. Should it really be...
Five Stock Steps Beyond?
During stock bubbles, market participants abandon bargains to chase the hottest trends. And this bubble is no different. For example, during periods of relative equanimity, there may not be much of a difference between the pursuit of high-flying momentum and the...
George Soros Abandons the Stock Bubble
Despite a worldwide pandemic, astronomical stock valuations, the deepest recession since the Great Depression and a contentious U.S. election in November, the S&P 500 has rallied back to within 0.25% of a record high. As I type, in fact, the S&P 500 could...
The Invincibility of Apple
Apple is a phenomenal company. From smart phones to tablets, from music to television, the world loves what this corporation offers. And it loves the stock. In fact, Apple (AAPL) may soon hit a market capitalization of $2 trillion. On the flip phone side, are market...
How Skewed is the Stock Market?
Large-scale bankruptcies have been slamming the U.S. economy. Worse yet, the expectation is that many companies, particularly in energy, retail, and tourism, will not be able to outrun the slow-growing economy going forward. How can one tell that the economy is still...
For Whom The Bubble Bursts
One can decide to chase a stock bubble for the potential windfall. Yet only investors with sell disciplines have any chance of coming out unscathed. Consider the relationship between growth stocks and value stocks. Over time, one tends to receive more affection than...
Lighten Up on the Nasdaq 100 (QQQ)
On Wednesday (7/29/2020), the Federal Reserve left its overnight lending rate at the zero-bound range of 0.00%-0.25%. The Fed also reasserted its commitment to a wide array of lending and asset purchasing programs via digital money printing. No surprises there. There...
Big Tech No Longer Requires Downside Protection
When you combine the technology sector with the likes of Facebook, Google and Amazon, you're defining the mega-cap space. Some refer to it as "Big Tech." The parabolic move higher for Big Cap Tech in 2020 is extraordinarily similar to what investors experienced in...
Are Permanent Business Closures Good For Stocks?
You will not hear the media talk about unemployment at 20%. Nevertheless, nearly 20% of the labor force (160 million) currently receives jobless benefits. Some would like you to see an improving jobs picture. Yet key data points throughout May, June and July beg to...
For What It’s Worth (Or Not Worth)
The comparisons between the 2020 stock bubble and the 2000 stock bubble are striking. For example, you have to go back 20 years to the dot-com disaster to find a time when the Nasdaq 100 (QQQ) traded this far above its 100-day moving average. Executive insiders at...
Mark Cuban and the ‘Cubes’
Mark Cuban is a billionaire. He's also an enigmatic investor on the business reality television series, "Shark Tank." In a candid interview (7/20/20) regarding the comparisons between the 2000 dot-com bubble and the 2020 Nasdaq, Mr. Cuban said, "In some respects, it’s...
Mega-Cap Stock Madness
There are times when one ought to look beneath the covers. For example, if you merely scroll the headlines (7/16/20), you’d read that initial jobless claims fell to a post-pandemic low of 1.3 million. Never mind the persistently high claims above one million. Things...
The Other 490 Stocks in the S&P 500
One of the most startling features of the current stock bubble? An unquenchable thirst for exposure to mega-cap growth has masked extraordinary weakness in the rest of the market. In particular, the S&P 490 (S&P 500 ex mega cap growth) is down roughly 15% on...
Debunking Phony Government Statistics
A whopping 23% of the US civilian workforce collects unemployment payments. These folks are not working, nor are they retired. Yet, somehow, the official government stat for the U.S. unemployment rate is a tick higher than 11%. What gives? Due to the pandemic, the...
Could History Repeat or Rhyme?
Trillions upon trillions of dollars in central bank liquidity have ignited one of the biggest stock bubbles in U.S. history. But how exactly does the money get into stocks? The Federal Reserve dumped a mind-numbing quantity of digital dollars into Treasury bonds and...
Are You Being Bamboozled?
Some experts pretend that the 2020 stock bubble has its roots in what companies are earning right now or what they will earn going forward. Is that even possible when half of those corporations have no ability to forecast their business profitability going forward? In...
Greed’s Epic Comeback
Consumer confidence has bounced back from the lows seen during the depths of coronavirus despair. Conversely, business confidence continues to descend. Do businesses know something that consumers have yet to figure out? Possibly. For example, the jobs picture may be...
The Nasdaq is a Crazy Train
Some analysts have resorted to rationalizing the stock bubble with never-before-seen valuation measures. To wit, if one ignores the past 12 months (Trailing P/E), and disregards projections for the next 12 months (Forward P/E), the 24-month forward “guestimate” for...
The Long and Winding Stock Recovery
Occasionally, there are volatile sell-offs on renewed coronvirus fears and/or tensions with China. That happened here on Friday, June 26. Yet the Nasdaq still logged an all-time high time this week. Meanwhile, the S&P 500 is only 9%-11% off its February record....
The Nasdaq Crazy Train
Here in 2020, market participants are willingly paying an enormous premium for profits. In particular, corporate profitability is roughly the same as it was nine years ago. In Q2 of 2011, however, the S&P 500 traded around 1300, not 3000+. The speculative risk...
No Stock Price is Too High
Some analysts have resorted to rationalizing the stock bubble with never-before-seen valuation measures. To wit, if one ignores the past 12 months (Trailing P/E), and disregards projections for the next 12 months (Forward P/E), the 24-month forward "guestimate" for...
Ree-coh-la… Nee-coh-la (NKLA)!
Today, Bloomberg News suggested that the CEO of wannabe electric truck maker, Nikola (NKLA), lied at a 2016 event about having a big-rig prototype that was "fully functional." The stock bubble barely blinked. In fact, NKLA actually rose 1.8%. The company has yet to...
No Reckoning for Wall Street’s Worst
Wall Street is unabashedly loony at the moment. Stocks remind me of Clark Griswold's famous line in National Lampoon's Vacation, “This is crazy, this is crazy, this is crazy.” In every previous recession, corporations reduced their leverage to shore up their balance...
“This is Crazy, This Is Crazy, This is Crazy”
In every recession, corporations reduce their leverage to shore up their balance sheets. Until now. US corporate debt is heading for 50% of GDP. That's not merely a new record... it's other-worldly. In 2000 as well as 2008, bubbly asset price excesses reversed course...
No Jobs, No Profit Margins, No Problem
Roughly half of all U.S. employees work for small businesses. What's more, small businesses account for roughly half of net job creation. So the fact that small businesses anticipate starting 2021 with three-quarters of the head count that existed at the start of 2020...
Way Beyond Overvalued And Extremely Overbought
Not only is the 2020 stock bubble trading at the most overvalued levels in U.S. history, but stocks are also extremely overbought on relative strength (RSI) indications. Investors would be hard-pressed to ignore the number of S&P 500 constituents that are trading...
Irrational Stock Prices Meet Exuberant Investors
Reasonable estimates suggest that our consumer-based economy will not recover its 2019 GDP glory until 2023. Why stocks trade at 2023 levels in 2020 is bizarre. In truth, households continue to struggle to pay regular bills, with more than one third looking to delay...
Reopening the Economy is Not Enough
Americans will surely spend some money when the economy "opens back up." Yet, how much will they consume? As it stands, households are dramatically increasing their savings. And according to a number of surveys, approximately 40% of savers are doing so because they do...
The Higher They Climb…
Households continue to struggle to pay regular bills, with more than one third looking to delay rent, cell phone charges and other utility payments. That will put a strain on discretionary spending. They certainly don't seem to be in the market for new cars. And...
Small Stock Fever
Suddenly, small caps are all the rage. Never mind the job losses or the unfathomable overvaluation. Investors are choosing to pay the highest price in history for small company exposure. Granted, small stocks are still down roughly 15% from all-time highs. And they...
Stock Bubble Sidesteps the Tough Questions
The S&P 500 crossed back above the 3000 marker, despite extraordinary stock overvaluation and economic malaise. It is almost as if investors have decided that the hope for a vaccine can override the credit cycle's downturn. For example, when ratings agencies...
The W-Shaped Recovery For U.S. Stocks
The notion that the bear market for U.S. stocks has ended is fanciful. For example, is it really the case that financial firms are on the mend? They're restricting access to credit, increasing reserves for loan losses and showing few signs of resilience beyond a...
The Most Expensive Stock Market Ever
Many describe the U.S. as a consumer-oriented economy. That is because consumer spending, not manufacturing, accounts for two-thirds to three-fourths of economic growth. It follows that consumers need to spend for the economy to do well. Yet, at the moment, one-third...
Stock Bubble Ignores Consumer Discomfort
Correlation may not be causation. Nevertheless, there has often been a high correlation between the movement of the Consumer Comfort Index and the stock market (S&P 500). Until now. Despite Consumer Comfort plummeting more than 50%, the S&P 500 has rallied...
Buffett and the Optionality of Cash
Can trillions of Fed liquidity overcome the probability of a deluge in corporate insolvencies? Fed Chairman Jerome Powell just acknowledged that additional government fiscal stimulus, not Fed stimulus, may be the only way to lessen this pain. “The passage of time is...
The Stock Bubble’s Price-to-Book
In 2016, oil prices fell dramatically, sending shivers down and up the spines of energy bondholders. Investors worried that a slew of energy companies would go belly up. In 2020, weak demand for oil is only part of the economic concern. Fragile demand across a wide...
Maximum ‘FOMO,’ Minimum Scrutiny
The most recent data on revolving consumer credit showed a record decline by $28 billion in March. That will continue to get worse as April and May data come in. Essentially, consumers will spend much less and lending standards will keep tightening. Of course, the...
The Great Disconnect: Stocks Vs. Real Life
Leading into 2020, the economy was growing at a modest pace (1.9%). By the end of the 2nd quarter, the economy will have recoiled at its quickest clip (-25%+) since the 1930s. Similarly, at the start of the year, unemployment for working-aged individuals was 3.5%. By...
Money Oversupply
During the Great Financial Crisis of 2008, the Federal Reserve began adding like crazy to the supply of money (M1) via quantitative easing (QE). The Fed effectively added trillions of dollars to M1 Money Supply over the 2008-2019 period, indirectly supporting stock...
The Consumer Will Not Recover Quickly
Consumers who do not express confidence about economic prospects are likely to decrease their spending. Here in 2020, you'd have to go back to 1973's ugly recession to find more discouraging data. In the 2020 U.S. economy, where consumers account for three-fourths of...
The Sickly Financial System
In 2008, we learned about the toxic debts on the books of financial firms. And for the most part, those toxic debts were synonymous with mortgage-backed securities. The financial sector via the SPDR Financial Sector ETF (XLF) weakened relative to the S&P 500...
When Lenders Tighten The Reins
Lenders continue tightening their belts. For example, it's getting harder and harder to procure a jumbo mortgage loan, as its availability has cratered by 37%. Even if one qualifies for a jumbo, he/she will see higher rates than conventional loans for the first time...
Is the Nasdaq Being Nasty?
The Nasdaq's unique status grows curiouser and curiouser. Here in 2020, the market capitalization value for Nasdaq-listed stocks surpassed the collective value of ALL foreign shares in existence. It's as if tech mania can do no wrong. During the raging stock bull, you...
‘The World is More Than 15% Screwed Up’
Howard Marks is a billionaire investor as well as the top dog at Oaktree Capital Management. He views April's stock market rally as "inappropriately positive." Mr. Marks specifically pointed to the worst pandemic in 100 years, extraordinary recessionary pressures...
Oil Prices and the Stock Market’s Reaction
Events that we have never witnessed before are coming to fruition in the current economic downturn. For instance, for the first time ever, WTI crude oil futures traded at a negative price. Perma-bulls are already pointing out that the technical anomaly does not mean...
Who Will Win? Economic Gravity or the Fed-Reflated Bubble
Economic reality? We've already hit 18% unemployment. We're likely to hit 20%-25%. Bubble reflation reality? The Nasdaq is now positive in 2020, as tech is apparently immune to extraordinary overvaluation. Economic reality? Small companies, which make up the bulk of...
The Bear Will Not End Until The Fed Is Buying Stock ETFs
We already know that the economic deterioration will be far more severe than the Great Recession. That's why the federal government has served up freakish amounts of stimulus. In a similar vein, the Federal Reserve intends to do whatever it takes to stimulate stock...
Revisionist Market History
In the last three weeks alone, nearly 17 million made it to the jobless claims tally. There are likely another eight million coming over the next two weeks. Net result? Unemployment is likely to hit 20%. Think about the adverse impact on consumption. People will need...
Retracement
Retracements represent short-term rallies against the primary trend. Yet once the retracement rally exhausts itself, it returns to the primary trend. (In this instance, we should see a return to the bear market downtrend.) The retracement rally to watch? 2811 on the...
How Long Before the Fed Buys Stock ETFs?
Corporate debt downgrades are accelerating. The three-week tally for unemployment claims hit 17 million (4/9/20). And annual rate estimates for 2nd quarter GDP are circling around -30%. Yet the data points have not stopped the Federal Reserve's resolve to reflate the...