The gambling-class are wearing rose coloured welding goggles. Fantasy narratives have been chasing capital around the globe for an entire year now. But don't take my word for it...
"Any comparisons to past overheated markets are ridiculous"
"world growth will continue to be good"
Despite the fact that the Yen is now the world's strongest currency...
Bueller?
"Any comparisons to past overheated markets are ridiculous"
"world growth will continue to be good"
Despite the fact that the Yen is now the world's strongest currency...
Bueller?
Recall last November, prior to the election, market pundits unanimously predicted an election victory for Hillary Clinton. Which meant that the deflation trade was on in full force. They also predicted that a Trump victory would pound stocks at least 10% lower. Upon Trump's election, the S&P overnight futures were limit down on the news. It appeared that a Black Swan event had just occurred. However, by the time the U.S. markets opened, most of the overnight losses were erased and the market was racing higher.
Because on that day, the deflation trade - dividend yield and growth - got tossed out the window in favour of the beaten down Financials, Energies, and cyclicals which had been shorted for almost eight years straight. It was a colossal short-covering rally. In the event, Emerging markets got pounded lower (wave b, below) since reflation was a U.S.-only party at that time. The Fed went into full rate hike mode, raising in December, March and June of this year. Of course, U.S. reflation turned out to be a mirage further dimmed by the massive backing up in long-term treasury yields - an instantaneous tax increase on the middle class via mortgage rates.
So, by January of this year, despite the Fed's misplaced optimism, Wall Street cast about for a new narrative - which became U.S. reflation is dead, but global reflation is now the next big trade. That latest fantasy, attendant with global yields backing up and monetary tightening in many countries, drove the past seven months of global risk rally.
In other words, the entire past year consisted of capital rotation followed by after-the-fact invented narrative. Meanwhile of course, speculation was rampant in IPOs, small cap stocks, EM stocks, crypto-currencies, internet stocks and anything else that wasn't bolted down to 0%. Low quality junk stocks vastly outperformed higher quality dividend stocks.
As it was in Y2K, critics were roundly scorned and otherwise derided into non-existence. The crowd was stampeding and the only option for anyone managing a P&L was to get out of the way. Now of course there are no voices of reason in the public sphere, there are only sycophants and con men willing to ride the momentum train straight into the side of the mountain.
As it was in Y2K, critics were roundly scorned and otherwise derided into non-existence. The crowd was stampeding and the only option for anyone managing a P&L was to get out of the way. Now of course there are no voices of reason in the public sphere, there are only sycophants and con men willing to ride the momentum train straight into the side of the mountain.
Words of warning can't compete with fantasy and misallocated capital.
