The things that do not change:
Every up day in the market and every reversal comes with the shouts of “the bottom.” There will come a time when they are correct. Keep in mind, when the DOW drops 2,000 points in a few days, it will bounce viciously.
Rallies are sharp, quick, make you feel good, suck you in and bury soon after. Almost 500 DOW points in 45 minutes to the close Friday and over 300 this morning on the open. That’s 800 points in 45 minutes Friday and an open this morning.
The mucky mucks in Davos will be preaching to us about climate change while we see pictures of hundreds of private jets. Love these people. They don’t give a crap what it looks like. By they way, there are plenty of commercial flights into Zurich.
The president will continue to say weird stuff that gets rolled back almost immediately…and on vital stuff like China/Taiwan.
Analyst target prices continue to come down but to show you how bad things are, they are still way above current price on many things.
Bill de Blasio, whose popularity is a wee bit lower than a red ant hill is going to run for office again because he did such a marvelous job with New York City. “Tax the hell out of the wealthy” time.
Twitter will not be bought by Musk at $54.20. Not at $44.20. $34.20 anyone?
The president calls for OPEC to raise production but continues to ignore places like the Permian basin that only has an estimated 20 billion barrels. President Kaltbaum would be front and center calling for the 11 million barrels produced each day ramped up to over 15 million each day. Wouldn’t happen immediately but just on that message, watch investors, speculators and traders sell price and even short price.
Egomaniacal central bankers will continue to not shut up, telling us all will be ok. Not a mention that maybe, just maybe they are the problem. In fact, some keep saying they have done a fine job. Last week, we counted over 100 quotes on markets, inflation and rates from them. Our favorites are when they say markets are functioning well.
Biased media will continue to play down the causes of inflation with one coming out all but saying no biggie because Americans received plenty of cake from the government. (Hear that Harwood?) Tell that to one of our drivers in NYC who pays for his own gas and says to us and we quote, ” I don’t even know what discretionary spending is any more.”
The one thing that has changed.
My son Aaron is now married. A great weekend for the family. Aaron and Marissa Kaltbaum are now official. We are busting with pride and joy.
Now that the bear market is finally evident:
We noted from the get go:
Massive money printing causing massive greed, massive leverage, massive buy at any price, massive distortions in yield as junk bonds paying 5% that should have been paying 9%. We noted margin (borrowed money to buy assets) going Eiffel Tower, a clear indication of late stage. Margin is your best friend in bull markets but a gargantuan enemy in bear markets as the leverage has to come off first, accentuating the drops. Margin has been sinking like a stone as the many deleverage into lower prices.
Climactic runs and tops starting in February 2021 and into the following months in weed, SPACs, most China ADRs (some a few months before), 3D , meme stocks, coins and just a ton of what we call”hunks of junk!” Those are just companies with little or no sales and losing a ton of money. One of our main rules of bear markets is that in bear markets, anything that loses money or has no sales will be crushed. They have been crushed. SPACs were one of the biggest money grabs we have seen in a long time as SPAC after SPAC announced mergers with another electric vehicle or battery company. Sure! It is so easy to start auto companies. With the meme stocks crashing, there went Robin Hood stock.
Ridiculously priced IPOs then started to crumble. Many are down 75%+ as the manic public bought at any price. This culminated with the nonsense called RIVIAN (RIVN) after coming public, having a valuation of almost GM and FORD put together even though GM and FORD had $260 billion of revenues while at that time, RIVIAN delivered a total 42 vehicles to employees. We railed against the stock valuation on tv and radio. It has since dropped from $179 to $26 and change and that $26 and change is after its recent bounce. VALUATION ALWAYS MATTERS IN THE END.
Our mantra that 90% of the coins will drop 90% or more with most going to zero has also come to fruition. Just remember, there is nothing behind the coins except someone willing to pay a higher price. All the way down, the tout artists have been trying to convince anyone who would listen to not worry and it is the next great thing. Based on what? What the hell is a Dogecoin? We thought there was an estimated 12,000 coins trying to be foisted upon the public. We are now told there are over 19,000 with most at zero. Miami does a Miami coin and watches it crash. El Salvador switches to bitcoin and is going broke. Athletes taking salaries in coins getting killed. Keep in mind, they first pay tax on that money. And now we get things called “stable” coins tanking, destroying wealth. They had to put a suicide hotline number on the site because of this. We railed against COINBASE when it came public (nothing personal) at another ridiculous valuation as they were invented to trade bubbles. The bubbles popped. COINBASE and the rest of the coin-type stocks also popped.
What the hell is an NFT and why are people paying millions? NFT numbers have crashed in recent months.
We then saw every leading stock in the technology arena, one by one, top out and then amazingly crash. “Crash” is not hyperbole when 6% of the NASDAQ dropped 90%, 22% dropped 75% and over 50% dropped over 50% from their highs. This stunned even us. Just showed you how over-owned, over-loved, over-leveraged and over-valued they became after a strong run.
And the unwind of the distortions we railed against. What distortions? The money printing. What was the distortion’s outcome? Inflation. Who is supposed to try and fight off inflation? The people that caused it. When it hit? No worries. It will be transitory. When markets knew it wasn’t transitory and that they were either lying or stupid, what did the markets do? They sank. Not only stocks but bonds. Bonds had to account for not only the inflation but for their utter stupidity in not knowing it even though it was right in front of their face. Credibility matters to markets. Yields went on an unprecedented move to account for their stupidity, their laziness and to this day, doing nothing to fight it. As we write this, fed funds remain below 1% while the 10 year is near 3% yet they don’t shut up talking like they are on top of things. All this past week, fed head after fed head were out telling us they were not behind the curve. Stand up comedy indeed but it is not that funny. This past couple of weeks, our family handed out thousands in gas cards to families in need. Their faces lit up. We knew right then and there how tough it is out there. There is nothing funny about what they have wrought. The president is of no help shutting down leases, begging nefarious scumbags like Maduro and whomever in the Middle East to pump more when there are an estimated 20 billion barrels sitting around West Texas/ SE New Mexico in the Permian Basin. The president is of no help telling us “The buck stops…over there!” We are actually surprised the President has not put out an executive order to get rid of price signs at every gas station as their is no worse marketing for he and his party when 228 million licensed drivers either pass a gas station or fill up at one.
Back to October. We noted that at the all-time highs for the NASDAQ/NDX, there were actually 500 new yearly lows, one of the worst divergences we had ever seen. The NASDAQ/NDX topped within a day as the biggies were masking serious weakness. We noted the top 5 names in the NDX were over 40% of the index. When they weakened, look out. They weakened. ADOBE, NETFLIX, FACEOOK (they shouldnt have changed the name) was the start. They topped the all-important SOX and then the rest.
The beginning of the year saw a continued meltdown while commodities emerged and went skyward with rates. A 1-2 punch that is very tough to take and very tough to ignore. But a guy named Powell did ignore. The rest is history as the average stock is so much worse than the indices. Throughout this year, leadership has been limited to commodities and a bunch of defensive areas. As we write this, the strongest names away from energy are the most recession-resistant. Kelloggs, Post, General Mills, Hersheys, Hostess, Campbells Soup. Thrilled yet?
Near term, we may have had another one of those near-term lows. Just keep in mind, this low comes from the NASDAQ dropping almost 20% in about 3 week’s trading, the S&P over 14% and the DOW over 12% in that same time. During that time, the DOW actually had a 900 point up day, an 800 point up day and a couple huge reversal days to the upside and that didn’t help. Bounces/rallies can happen at any time in bear markets. They will tend to be sharp and quick but fail soon after. A few will last weeks.
Next up? We watch housing as the 1-2 punch of much higher mortgage rates and a clear lack of affordability because of the ridiculous amounts of easy money that created asinine price movement could cause trouble. Powell and the rest are now in prayer mode as nothing good happens if rates and energy prices keep going up. So far, both stay elevated and quite higher than what markets have been used to.
Next up? The wealth effect in reverse. Global bond markets have dropped over $8 trillion and depending on which rusty abacus you use, stocks markets are around $20-25 trillion+. That’s a lot of cake.
Hoping for better but we have zero confidence on those running the show. They are lucky to have the hard work of the American people. The problem is they are our headwind…ALL OF THEM! We really wish they would just get out of our way. Of course, wishful thinking!