....yes, exactly my point, investors always front-run (I had used 'front-end' earlier) the next big thing (sector), or the Fed pivot. Which means, high stock prices on the basis of front-running expectations will eventually wake up to a new reality further from what it had assumed all along. By then, market participants start asking what actually happened and will continue to hope for a return to the good days again.
MAC10
12 hours ago
AI: The Apex Of Idiocy
For fifteen years since the 2009 low, central banks have been fueling an ever larger RISK ON short squeeze. One by one investors have been forced to capitulate to fully Ponzified markets. It was either get onboard or get left behind by the crazy train. This is human history's largest social mood reverse-engineering experiment. The idea that central banks can make people "feel" better about the economy merely by ginning up asset prices into the stratosphere.
The policy-makers undertaking this doomed policy clearly have never heard of Japan and China where monetary heroin eventually ceased to have an impact on markets and the economy - at the apex of debt overdose. Which proves definitively that debt is DEFLATIONARY. China is now officially the ONLY major country in the world actively easing and yet they have the worst performing stock market in the world. Whereas Japan just tightened on the short-end for the first time since 2007 and they have the best performing stock market in the world. And yet, yet, yet...all U.S. investors pray for are rate cuts. Careful what you wish for.
This chart shows homebuilders melting-up into higher rates which makes absolutely no sense and is the exact opposite of what took place during the 2007 housing bubble. However, it proves that investors have "learned" to front-run the Fed to rate cuts. The red line is the high yield spread which is a proxy for financial conditions. Here we see that financial conditions are as loose now as they were at the market top in 2022 when the Fed rate was at 0%! The only impact 20 rate hikes has had is to boost asset prices.
Powell said last week that he is not worried about loose financial conditions. Which means that he is now only one hot inflation report away from losing all credibility.
The next PCE inflation report happens to be released this Friday which is also a market holiday. We can gauge from Bitcoin what the market reaction will be next week, since Bitcoin and AI stocks are now 95% correlated.
Spot Bitcoin ETFs have now accrued $60 billion assets under management since the start of 2024 i.e. three months. Whereas gold has amassed $90 billion assets under management over the course of 20 years. Spot Bitcoin ETFs have the fastest adoption rate in history for any asset class. Which proves that markets are now fully Ponzified. The only "return" is gained when investors flock to an asset class just before it collapses.
Nvidia is up 20x in five years and is approaching $2.5 trillion in market cap, almost equal to Apple. If the stock grows at a mere 30% per year it will be double Apple in three years. As Ed Yardeni figured out, it's the Cisco of this era. However, back in Y2K Cisco imploded long before the internet stopped growing, so future growth alone in a sector is not the sole determinant of stock price. Nvidia is now up 11 weeks in a row, an all time record weekly winning streak.
Last week's Reddit IPO was a seminal event because it put the SEC's stamp of approval on Reddit-driven "meme" stock pump and dump schemes which came back with a vengeance this week. We now have a leading presidential candidate who has his own meme stock which just increased his net worth by $4 billion.
Today (Friday), Sam Bankman will be sentenced for the collapse of the FTX crypto exchange back in 2022. Prior to the collapse, he was the hero of the crypto world, and now he is about to be sentenced to life in prison. Many people were beguiled by Sam Bankman, including "The Big Short" author Michael Lewis who called Bankman a crypto genius right before his book on Bankman came to print. Then the publishers had to delay the book release so Lewis could rewrite the entire story. This being the same author who did a great job of figuring out the subprime debacle AFTER it happened but had no clue it was taking place before it happened. Apparently giving $700k NINJA mortgages to illegal aliens was not on his radar.
By no coincidence the FTX exchange collapsed when Bitcoin and Crypto were at their lows in 2022.
In this final collapse, I believe central bankers will be the new Sam Bankman's - heroes before the crash celebrated for their bailouts, and villified after the crash for malfeasance that should have been obvious to EVERYONE all along.
One then can only imagine what epic scams await discovery.
MAC10
