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[icon] said:
Speculative market on Steroids?

Are we in a bubble?

Good grief. We had the Fed change the duration of its balance sheet in 2000. Then we had the Fed change the composition of its balance sheet in 2020. The world’s most important central bank has in effect become a mutual fund, buying everything from commercial mortgage-backed securities (CMBS) to investment-grade credit to junk bonds. The average yield in the high-yield bond market is a record-low 4%, whereas even the lowest default rate you would ever see in the most robust of economic expansions would necessitate an interest rate closer to 6%. We are at 4% for an economy whose sole sources of vitality are vaccines and fiscal stimulus checks.

If HY bonds are mispriced, then all risk assets are mispriced, including equities. We have a situation on our hands where U.S. companies that make no money have seen their stock prices soar 19% year-to-date and outperform those which are profitable by 15 percentage points. Okay. Let’s not hurt anyone’s feelings and call it a bubble. Let’s call it a speculative market on steroids.

Here’s the evidence.

Valuation:

The CAPE smoothed P/E multiple has expanded for six straight months. It bottomed at 24.8 in March at the price index trough, closed December at 33.7, then to 34.5 in January, and now to 34.8 in February. By way of comparison, the multiple was 32.3 in March 2001, as the tech wreck bear market really got going; and 32.6 in September 1929. Investors always think they can get out before the peak is in. History rhymes.

Leverage:

Margin debt has soared 42% from a year ago (+115% at an annual rate over the past three months alone). This is exactly what the trend was in August 2007 and September 2000. Right near the market peaks.

Positioning:

The put-call volume ratio has been below 0.60 with near consistency since the middle of November. It’s a stretch we haven’t seen in over eight years. The BofA survey shows that global portfolio managers are running with the lowest cash levels in eight years, and have the highest exposures to equities and commodities in a decade.

Technicals:

As we published on Friday in Technicals with Dave, our technical chart work is still flashing green on the major averages. ‎That is all very near-term and can switch on a dime. For the traders out there: Our Strategizer models are advising caution and foreshadowing subpar returns on a twelve-month basis. All this means is that selling into the strength that we see ahead makes prudent sense. I should add that from my lens, the fact that the S&P 500 is now 13% above its 200-day moving average is an extreme gap worth noting and monitoring — it was 11% back in February 2000, just ahead of the tech mania bust and 7% in October 2018, ahead of the near-20% drawdown heading into the end of that year.

Sentiment:

What do 56 IPOs in less than two months (+180% YoY) at $21.4 billion (+331%) tell you? Or Bitcoin now with over $1 trillion of market value? Need I say more?
 

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I agree with David here. By all measures the markets are now in full bubble territory... Some of the markers I am looking at are:

Speculative option positions are highest on record.

Highest-ever volumes in pink sheet stocks.

Short interest is lowest on record.

Margin debt is highest on record.

Hedge fund gross exposure is highest on record.

Investor optimism is highest on record.

Mutual funds have the lowest cash position in history.

Everyone is all in.

That same reflation bet spills across into a record-short bond position, a record-short dollar position, record inflows into equities, record inflows into emerging markets, record inflows into commodities... the list goes on and on.

The question is whether the market is correct in taking these risks.

The economy is still probably trending at or below zero (the numbers will get screwy YoY for a while) due to huge insolvencies and a still restricted global economy; and structural unemployment is 6-10% (i.e., whether you include the Labor Force Participation rate or not) showing how bad the picture really is. Debts have been temporarily forgiven but not permanently, so those payments are yet to come, and a LOT of demand for durable goods and housing has been brought forward. There is a high chance of payback, and the economy can't survive without stimulus.

The risks are (1) the market trying to price in higher rates (but likely to be capped by the Fed or by more sluggish growth) and (2) a strong potential for the dollar to rise. Both causes upset the speculative reflation party. Or it can wither away if growth comes in weaker than expected. I err towards a rising dollar and weaker growth over time, once stimulus fades.

But, the question I am wrestling with is whether we are even using the right denominator for assets anymore. The massive money printing doesn't show up in CPI due to demographics, debt loads, deflation effects of technology, or globalisation; but it does show up in assets. I'm starting to play around with the idea that the right way to understand what is really going on is to change the denominator to the Fed balance sheet for US equities, or the G4 Central Bank Balance Sheets for global stocks. Since QE started in 2008, stocks have basically traded sideways (i.e., they have offset the balance sheet but have done no more than that).

Only technology stocks have outperformed the balance sheet since 2008 and that suggests that the tech trend is a secular trend, which also makes sense to me.

In gold terms, equities are fairly priced versus the long run average too.

Thus, I'm starting to think we are looking at 2 bubbles: a shorter-term bubble in reflation (that can be corrected by a sharp sell off), and the really big bubble that is distorting everything—central bank balance sheets. When viewed through those two lenses, everything since 2008 makes more sense.
 

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I agree with you. Just look at all the discussion in here. Not that long ago it was mainly about good companies that people felt would increase because they were doing well. We’ve got two separate threads on penny stocks and CYDY. This thread is 90% GME. If that doesn’t worry you, nothing will.

The whole theory on GME/others and fighting hedge shorts seems to not jive as well with the overall short interest at all time lows. Seems that the margin interest may be more of the driver and that’s scary because any large dips get exacerbated. The market came roaring back because of stimulus and the hope that that just means more money coming into the market.

I also agree on tech and the secular trend. If people think that these companies aren’t going to be driving growth and big banks and oil will now be driving don’t get it. Sure things rotate because there’s always a herd but those are short term trends. As a long term investor and someone who was alive and working in software back during the dot com bubble, I can tell you that while I know there will be scores of EV and Genetics companies that die on the vine, they are a big part of the future and the dot com era was a time when valuations had nothing to do with reality. There are a lot of non-profitable or just becoming profitable tech companies, but back then there were way more non-revenue companies. It was early, early in the cycle. Tesla didn’t exist. Google wasn’t close to being a public company. The iPhone didn’t exist, heck the iPod didn’t exist until the market had already started its correction. Netflix was a mailing company and I can’t remember if they existed. Amazon was only a couple years public and didn’t have AWS or anywhere near the breadth of reach/sales. Anyone trying to tie the dot com bubble to the tech market today is way off base, they are not even remotely the same.

Anyway, just my thoughts on the long term market and short term, I have no clue.

 
It hasn’t been the worst idea to buy whatever Carson Block/Muddy Waters shorts after the post-short report pullback. Right now it’s XL Fleet and that tool is on CNBC right now, could be worth a swing.

 
stbugs said:
I agree with you. Just look at all the discussion in here. Not that long ago it was mainly about good companies that people felt would increase because they were doing well. We’ve got two separate threads on penny stocks and CYDY. This thread is 90% GME. If that doesn’t worry you, nothing will.

The whole theory on GME/others and fighting hedge shorts seems to not jive as well with the overall short interest at all time lows. Seems that the margin interest may be more of the driver and that’s scary because any large dips get exacerbated. The market came roaring back because of stimulus and the hope that that just means more money coming into the market.

I also agree on tech and the secular trend. If people think that these companies aren’t going to be driving growth and big banks and oil will now be driving don’t get it. Sure things rotate because there’s always a herd but those are short term trends. As a long term investor and someone who was alive and working in software back during the dot com bubble, I can tell you that while I know there will be scores of EV and Genetics companies that die on the vine, they are a big part of the future and the dot com era was a time when valuations had nothing to do with reality. There are a lot of non-profitable or just becoming profitable tech companies, but back then there were way more non-revenue companies. It was early, early in the cycle. Tesla didn’t exist. Google wasn’t close to being a public company. The iPhone didn’t exist, heck the iPod didn’t exist until the market had already started its correction. Netflix was a mailing company and I can’t remember if they existed. Amazon was only a couple years public and didn’t have AWS or anywhere near the breadth of reach/sales. Anyone trying to tie the dot com bubble to the tech market today is way off base, they are not even remotely the same.

Anyway, just my thoughts on the long term market and short term, I have no clue.
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I hear you, but I dont understand the problem.  Once we allowed the option market to exist, capitalism happens.  Hedgies use it to win, now crowd-sources are using it to win.

Frankly, lets just get rid of the option market.  in addition, get rid of digital trading.  Then we will have a market which serves the public good, not big business.  While we are at it, bring back the gold standard :shrug: . Im serious.

 
JAA said:
There is tremendous about of money and support in the market these days.  Its a huge business.  I believe this model lends itself to a lot of nobodies with a few bucks (like myself) buying 1m shares of triple-0 stocks hoping for tendies for all.
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The honest problem with that is that most penny stocks go out of business. Right now, if a tweet goes out it can quadruple a stock of a horrible company. Right now, may still be good bets, but long term that money will go down the drain, just depends on when you sell. Honestly, that applies to a bunch of companies that aren’t pennies. Look at WKHS. Got trashed a bit but it’s still a $2B company based on $1.39M in total 2020 revenue. It’s very possible that they never do anything considering the already crowded EV truck sector. That’s $2B that could very easily go poof in a few years, assuming they raised capital enough for a bit.

 
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JAA said:
I hear you, but I dont understand the problem.  Once we allowed the option market to exist, capitalism happens.  Hedgies use it to win, now crowd-sources are using it to win.

Frankly, lets just get rid of the option market.  in addition, get rid of digital trading.  Then we will have a market which serves the public good, not big business.  While we are at it, bring back the gold standard :shrug: . Im serious.
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Nothing wrong with derivatives as long as we hold institutional investors to the same standards we hold retail investors. 

 
Wild Young Billy said:
I think that Square becoming a bank is a huge deal. Square serves the underserved SMB and will certainly make some headway by providing financial services to them. SMB are overlooked by the big banks and the small community banks often can't provide the services they need. 

I also think that the whole Banking as a Service (BaaS)  trend has an interesting future. 
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BaaSNBruu agrees.

I hope this works out well for them. I always worry about non-banks opening banks. They rarely realize how much regulators will want to tear into and sometimes change the way they have to manage their existing businesses. 

 
My plan for GME / BB is to trickle in some GME throughout the day.  As BB continues to the moon, I will sell off some to cover the cost of GME and minus any GME intra-day tendies.  If GME slows, I will stop the buy.  If BB slows I will stop the sell.

 
JAA said:
I hear you, but I dont understand the problem.  Once we allowed the option market to exist, capitalism happens.  Hedgies use it to win, now crowd-sources are using it to win.

Frankly, lets just get rid of the option market.  in addition, get rid of digital trading.  Then we will have a market which serves the public good, not big business.  While we are at it, bring back the gold standard :shrug: . Im serious.
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It’s not a problem, just saying that there’s a good chance for a another whack. The whole hedgies short thing seems to be more of a myth for the broader market since short interest is at all time lows. It’s a great story to tell to rally troops but it’s not real. What’s more real is margin usage driving things up and that’s pretty dangerous.

Don’t get me wrong, I don’t care what people do, but there won’t ever be “free” money on bad stocks so just be careful that you aren’t a bag holder because the money you make or lose will come from someone like you.

 
stbugs said:
JAA said:
I hear you, but I dont understand the problem.  Once we allowed the option market to exist, capitalism happens.  Hedgies use it to win, now crowd-sources are using it to win.

Frankly, lets just get rid of the option market.  in addition, get rid of digital trading.  Then we will have a market which serves the public good, not big business.  While we are at it, bring back the gold standard :shrug: . Im serious.
Click to expand...
It’s not a problem, just saying that there’s a good chance for a another whack. The whole hedgies short thing seems to be more of a myth for the broader market since short interest is at all time lows. It’s a great story to tell to rally troops but it’s not real. What’s more real is margin usage driving things up and that’s pretty dangerous.

Don’t get me wrong, I don’t care what people do, but there won’t ever be “free” money on bad stocks so just be careful that you aren’t a bag holder because the money you make or lose will come from someone like you.
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Last I saw SI for GME was in the double digits.

There has always been bag holders, there always will be bag holders.

 
JAA said:
My order hasnt exercised.  Ameritrade showing a $45 entry price, though cant buy.
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This is what they priced at. It’ll take several hours while everything gets allocated before it opens for trading. At that point, retail investors can pay $140 a share or whatever it actually opens at.

 
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stbugs said:
The honest problem with that is that most penny stocks go out of business. Right now, if a tweet goes out it can quadruple a stock of a horrible company. Right now, may still be good bets, but long term that money will go down the drain, just depends on when you sell. Honestly, that applies to a bunch of companies that aren’t pennies. Look at WKHS. Got trashed a bit but it’s still a $2B company based on $1.39M in total 2020 revenue. It’s very possible that they never do anything considering the already crowded EV truck sector. That’s $2B that could very easily go poof in a few years, assuming they raised capital enough for a bit.
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Oh, for sure.

To me, as a novice in this stock world, I've learned A TON since really getting into this last June or so. In that time my brokerage account has doubled based on advice I've received here.

I've made some mistakes, but I've also used a few penny stocks to fund safer plays. Get in - get out - move on.

I'll never forget my high school accounting teacher pounding this into our heads: diversify, diversify, diversify.

And for new investors coming into this market and learning? Well, good for them. They are trying, which at young ages is a great thing. I only wish I had the information at my finger tips when I was fresh out of high school. 

People are going to learn some lessons. But a lot of people are learning how to create wealth. I see that as nothing but a good thing.

 
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McBokonon said:
This is what they priced at. It’ll take several hours while everything gets allocated before it opens for trading. At that point, retail investors can pay $140 a share or whatever it actually opens at.
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I forgot it was a direct listing. Hopefully it’s like PLTR and actually opens near the named price. Tons of hype, though.

 
Basically doubled my position in GME in the first 20 minutes of the day.  Entries at 265 and 290.6632.  Now I need to pay attention.

 
ChiefD said:
Oh, for sure.

To me, as a novice in this stock world, I've learned A TON since really getting into this last June or so. In that time my brokerage account has doubled based on advice I've received here.

I've made some mistakes, but I've also used a few penny stocks to fund safer plays. Get in - get out - move on.

I'll never forget my high school accounting teacher pounding this into our heads: diversify, diversify, diversify.

And for new investors coming into this market and learning? Well, good for them. They are trying, which at young ages is a great thing. I only wish I had the information at my finger tips when I was fresh out of high school. 

People are going to learn some lessons. But a lot of people are learning how to create wealth. I see that as nothing but a good thing.
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Very true, my only worry and I guess it’s less of a worry and more of a could a mass exit hurt my stocks, is that people getting in aren’t diversifying or knowledgeable, they’re just trying to win a game. Some will and the majority won’t. The folks in here are way more educated and likely won’t take a YouTube video or a tweet as gold.

Oh well, I’m sticking to my long term plan and having fun. Last two days has been fun. Only regret might be ignoring my impulse buys on Monday afternoon, if this is the bottom. Plus side is that I have way more invested than what I would have bought so if that was a bottom then it’s still good.

 
JAA said:
BB is 4% pre-market.  Im really on the fence of losing like 17% overall on my original long term BB (like 2-3 year hold) to gamble on GME for a quick buck.  The theory though would be to cash the GME tendies at >500 and then buy the dip of BB when it goes back down to $8.
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I'm with you. I decided against. I think after GME, WSB money gets parked in BB. Gonna DCA down. Wish I would have thought of this at $100 levels.

 
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McBokonon said:
About 13% or so gain since this post. SKLZ does report after market close for the first time today. 
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I got a nice haircut on that since I bought some in January and a little more on the way down. I might add a little more but I think I’ll watch the earnings first. The NFL partnership won’t have any material affect so might not pop. If it does, already own some and feel better about adding. 

 
Charlie Harper said:
JAA said:
BB is 4% pre-market.  Im really on the fence of losing like 17% overall on my original long term BB (like 2-3 year hold) to gamble on GME for a quick buck.  The theory though would be to cash the GME tendies at >500 and then buy the dip of BB when it goes back down to $8.
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I'm with you. I decided against. I think after GME, WSB money gets parked in BB. Gonna DCA down. Wish I would have thought of this at $100 levels.
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This was my original thinking and I doubled my position in BB a few months back.  However, it doesnt look like BB has the brand recognition that GME has.  I mean these meme people are going to GME stores and buying #### up, taking videos, etc.  Im not sure BB will ever be able to deliver that.

BB is only up like 2% ATM.  With the resistance of GME at 290 (did it just break through?) im thinking to keep BB long and not add anymore GME.  #### - I think I increased my cost basis like 20% today.

 
stbugs said:
I got a nice haircut on that since I bought some in January and a little more on the way down. I might add a little more but I think I’ll watch the earnings first. The NFL partnership won’t have any material affect so might not pop. If it does, already own some and feel better about adding. 
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Yeah, I sold what I added Monday because I want to see how they do.

 
AYRWF at a huge discount today.  I have a $31.50 trigger setup to buy more.  May hit anytime here.

 
Swaymoney said:
Anyone know a good site that can give you good stock price amounts on when to sell?
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So this is an interesting question.  There was a study done (don't ask for link - no idea where it is) that showed mutual fund managers outperformed the market in buying good stocks, but underperformed the market in selling.  So even the pros suck at this part of investing.  This makes it a very hard question to answer.

The best answer is probably "when your investment thesis breaks down".  In my case the answer is "almost never".  I tend to hold things for a long time and only sell when the stock shows stagnation over a period of years.  I just cut loose YUM because it really wasn't moving much over a fairly long period.

 
The only time I sell is when I buy a stock for a short period. I set a number in my mind I want it to hit and when it does I’m gone. 
 

Some like amazon are obviously long-term holds. 

 
Sand said:
Swaymoney said:
Anyone know a good site that can give you good stock price amounts on when to sell?
Click to expand...
So this is an interesting question.  There was a study done (don't ask for link - no idea where it is) that showed mutual fund managers outperformed the market in buying good stocks, but underperformed the market in selling.  So even the pros suck at this part of investing.  This makes it a very hard question to answer.

The best answer is probably "when your investment thesis breaks down".  In my case the answer is "almost never".  I tend to hold things for a long time and only sell when the stock shows stagnation over a period of years.  I just cut loose YUM because it really wasn't moving much over a fairly long period.
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I didnt respond to the question cause I thought it was kinda weird.

You sell when you dont like the stock.  Seriously, no schtick.

I bought GE like 10 years ago and Im currently underwater.  I havnt sold the stock because I like the company GE.  I bought TSLA and sold it after Elon called the kid-saving diver a pedio.  I didnt like Elon at that point and it ended up costing me like $20k last I checked.  I buy pennies with the expectation I will lose the entire investment.  I forget about the money, its like a 5-game parley.  They RARELY pay out.  If any of those pennies pay out it will be some real FU money.  IMHO this is the best way to diversify.  Dont simply buy blue chips or you will be at the mercy of the hedgies.  Spread it around.

 
JAA said:
I didnt respond to the question cause I thought it was kinda weird.

You sell when you dont like the stock.  Seriously, no schtick.

I bought GE like 10 years ago and Im currently underwater.  I havnt sold the stock because I like the company GE.  I bought TSLA and sold it after Elon called the kid-saving diver a pedio.  I didnt like Elon at that point and it ended up costing me like $20k last I checked.  I buy pennies with the expectation I will lose the entire investment.  I forget about the money, its like a 5-game parley.  They RARELY pay out.  If any of those pennies pay out it will be some real FU money.  IMHO this is the best way to diversify.  Dont simply buy blue chips or you will be at the mercy of the hedgies.  Spread it around.
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Are these Wheat Pennies you are referring to?

 
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Buckna said:
3 minutes ago, JAA said:
I didnt respond to the question cause I thought it was kinda weird.

You sell when you dont like the stock.  Seriously, no schtick.

I bought GE like 10 years ago and Im currently underwater.  I havnt sold the stock because I like the company GE.  I bought TSLA and sold it after Elon called the kid-saving diver a pedio.  I didnt like Elon at that point and it ended up costing me like $20k last I checked.  I buy pennies with the expectation I will lose the entire investment.  I forget about the money, its like a 5-game parley.  They RARELY pay out.  If any of those pennies pay out it will be some real FU money.  IMHO this is the best way to diversify.  Dont simply buy blue chips or you will be at the mercy of the hedgies.  Spread it around.
Expand  
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Are these Wheat Pennies you are referring to?
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Shoot - I have 3 sacks of those hidden in the floorboards covered with a pullman blanket

 
JAA said:
This was my original thinking and I doubled my position in BB a few months back.  However, it doesnt look like BB has the brand recognition that GME has.  I mean these meme people are going to GME stores and buying #### up, taking videos, etc.  Im not sure BB will ever be able to deliver that.

BB is only up like 2% ATM.  With the resistance of GME at 290 (did it just break through?) im thinking to keep BB long and not add anymore GME.  #### - I think I increased my cost basis like 20% today.
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I hope this is a small investment for you. GME is not worth $20B 

 
Desert_Power said:
JAA said:
This was my original thinking and I doubled my position in BB a few months back.  However, it doesnt look like BB has the brand recognition that GME has.  I mean these meme people are going to GME stores and buying #### up, taking videos, etc.  Im not sure BB will ever be able to deliver that.

BB is only up like 2% ATM.  With the resistance of GME at 290 (did it just break through?) im thinking to keep BB long and not add anymore GME.  #### - I think I increased my cost basis like 20% today.
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I hope this is a small investment for you. GME is not worth $20B 
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Currently valued 10% of my Ameritrade account

The shorts and retail disagree with your marketcap statement.  I mean, what does "worth" mean?

 
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