Monday is Going to Be Interesting for Stocks

Still way too much wild craziness, including the ultimate bag-holder gamble: Why the bottom isn’t anywhere near.

By Wolf Richter for WOLF STREET.

I went out looking for blood in the streets Friday evening after the sell-off to see if markets had hit bottom, but there wasn’t any blood. There was instead chatter about the next rally, about what to buy and when. And there was the relentlessly exuberant pump-and-dump meme-stock crowd hoopla-ing DVD rental company Redbox Entertainment, one of the infamous SPACs, and video-streaming service Chicken Soup for the Soul Entertainment, which is going to acquire Redbox, in an utterly ridiculous crazy-wild game with a deadline (we’ll get there in a moment).

That this game is even played – that this utter nuttiness in the markets continues – indicates that there is still way too much exuberance, way too much liquidity, way too much craziness. And the bottom isn’t in until this kind of craziness is snuffed out.

It took 12 years of money printing and interest rate repression to inflate this Everything Bubble, and it’s going to take years to unwind it.

But markets are making some progress.

The S&P 500 index fell 2.9% on Friday, and 5.1% for the week, the biggest weekly drop since January. Closing at 3,901, the index is down 19% from its January high and is right back at the 52-week closing lows of May 19 and May 20. Monday is going to be interesting: A bounce, or the beginning of the next leg down.

The Nasdaq Composite fell 3.5% on Friday, and 5.6% for the week. At 11,340, it is down 30% from its November high. Its closing low occurred on May 24 at 11,264. Still not there yet.

Even Exxon, which soared along with other energy stocks for months, fell 1.9% for the day, the second day in a row of declines.

Initial bloodletting among the tech and social media giants.

Apple fell 3.9% for the day and 6.8% for the week, is down 25% from the January 3 high, and is closing in on its 52-week low.

Microsoft fell 4.5% for the day and 7.0% for the week, to its 52-week closing low, matching its May 20 close, and is waiting for further instructions on Monday.

My admiration, in terms of executing perfect market timing, goes out to CEO Satya Nadella who’d sold 50% of this Microsoft shares in one day, on November 22, 2021, $285 million in total, thereby nailing the peak in Microsoft shares, which have since then plunged by 27.6%, and nailing the peak of the Nasdaq Composite. Saved him $78 million.

Amazon, despite the 20-for-1 stock split and the large-scale financial engineering project of buying back $10 billion of its shares with borrowed money, fell 5.6% on Friday, and 12.5% for the week, but remained a tad above its two-year low of May 24.

Meta, which is betting its virtual farm on the metaverse and has ditched “Facebook” from everything it can, including in its name and stock ticker, fell 4.6% for the day and 9.5% for the week, and is down 54% from its high, and at $175.57 is right back where it had been in December 2017.

Tesla dropped 3.1% on Friday and 5% for the week, and is down 44% from its November high. Friday evening, it said that it would split its stock 3-for-1, and given the damage that Amazon has suffered since its stock-split announcement, this one is going to be interesting.

That’s another sign: As long as these stock splits are still going on, the market is far from having hit the bottom.

Among the other standouts is Intel, which dropped below $40 on Friday, its lowest closing price since October 2017.

$ Friday from high
Apple [AAPL] 137.13 -3.9% -25.0%
Microsoft [MSFT] 252.99 -4.5% -27.6%
Amazon [AMZN] 109.65 -5.6% -41.9%
Alphabet [GOOG] 2228.55 -3.0% -26.7%
Meta [META] 175.57 -4.6% -54.3%
Tesla [TSLA] 696.69 -3.1% -44.0%
Nvidia [NVDA] 169.74 -5.9% -51.0%
Netflix [NFLX] 182.94 -5.1% -73.9%
Salesforce.com [CRM] 178.45 -6.0% -42.8%
Intel [INTC] 39.18 -2.1% -42.7%

Everything Bubble began deflating in February 2021, it was just hard to see.

The S&P 500 started deflating after its high on January 3, 2022. The Nasdaq started deflating on November 23, the day after Microsoft’s CEO dumped half his Microsoft shares.

But the IPO and SPAC stocks, and assorted other stocks, that had been the biggest and most ridiculous highfliers – and the funds and indices that track them – started deflating in February 2021, with many stocks cratering 70%, 80% and over 90% in a matter of weeks and months, so that by March 2021, I mused, Was That the IPO Stocks Bubble that Just Popped? And it was. And I started collecting stories for my Imploded Stocks column.

The Ark Innovations ETF [ARKK] is another indicator of when markets might approach the bottom, and we’re far from it.

The fund, which tracks a collection of ridiculous highfliers, dropped 7.1% on Friday and 9.7% for the week, to $40.11, above its 52-week closing low of May 11. The fund is down 75% from its high on February 16, 2021 – yes, that February 2021 – and is back where it had first been in May 2017.

Despite the losses, there are still many fervent believers in Cathie Wood and the miracles she’s going to perform with these highfliers that she thinks are offering ‘‘disruptive innovation’’ that “potentially changes the way the world works.” And as long as her funds are still kicking and are still attracting new money, we’re far from the bottom (data via YCharts):

And there will be huge rallies, and they will draw in more money, and it’s not until all this money has gotten incinerated, that we’re getting close to the bottom.

The Renaissance IPO ETF [IPO] dropped 4.5% on Friday and 7.9% for the week, is down 61% from its high on February 16, 2021, and is back where it had first been in May 2018 (data via YCharts):

Neither the Renaissance IPO ETF nor the Ark Innovation fund are old enough to have survived the dotcom bust or the Financial Crisis. They were formed a few years after the Financial Crisis in the era of money printing and interest rate repression and have never known anything else.

Now money printing and interest rate repression are gone, rates are moving higher, and QT has arrived. And we don’t know what the IPO ETF and Ark Innovation will look like when everything is said and done, but they might well end up on the landfill.

Ultimate bag-holder gamble: Why the bottom isn’t anywhere near.

So here’s Redbox again. The DVD rental company went public in October 2021 via merger with a SPAC at $10. The stock [RDBX] spiked to a high of $27.22, and then, in perfect SPAC tradition, kathoomphed 94% to $1.61 by February 24, 2022. This still makes sense.

But get this: On May 11, when Redbox was trading at $2.58, Chicken Soup [CSSE] offered to acquire it for 0.087 Chicken Soup shares per Redbox share. At the time, the acquisition price amounted about $0.69 per share, when Redbox was trading at $2.58 a share. Mmmkay.

It gets crazier – as dissected by Matt Levine on Bloomberg Opinion in an emailed note. Redbox’s controlling shareholder approved the deal. So when the acquisition closes, Redbox shareholders will get 0.087 Chicken Soup shares. That’s the deadline.

On Friday, Chicken Soup shares closed at $8.76, which means at this price, Redbox shareholders would get $0.76 per share when the deal closes.

Wait a minute… meme-stock jockeys have been driving up the price of Redbox, starting in mid-April, and on Friday, shares spiked by another 39% in regular trading and by 3.6% afterhours to $13.67. Since mid-April, the price multiplied by nearly 7.

But whoever ends up holding these shares when the acquisition closes will get 0.087 shares of Chicken Soup for each Redbox share, which today would amount to $0.76 a share. These ultimate shareholders would be the ultimate bag-holders.

The game is to drive Redbox shares up as far as possible and then for everyone to dump them before they end up as bag-holders with 0.087 Chicken Soup shares per each. And this will be a hilarious sight.

But the smart ones will dump it on the way up before everyone else is dumping them because when everyone is dumping them, it will be too late.

The other option for the meme stock jockeys is to also drive up Chicken Soup [CSSE]. On Friday, shares jumped by 19%, and for the week, they jumped by 35%, and over the past month, they jumped by 68%. But at $8.76 on Friday, they’re still down 82% from the high in June 2021, and at this price each bag holder would still only get $0.76 a share of Redbox that they paid $13.67 for today (data via YCharts):

And they all know that this is just a game of crazy-wild speculation, and it doesn’t matter whether it’s this kind of nonsense trade – and the efforts to gang up and manipulate that come with it – or cryptos, or whatever: The only hope is to find a greater fool to sell this stuff to because it’s just all a game.

And as long as this kind of crazy stuff keeps going on, the stock market rout is far from over, and there is still not a drop of blood in the street. There will be huge rallies, and they will draw more people in, and yes, some people already got wiped out, but not nearly enough to end the process of deflating the Everything Bubble.

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  387 comments for “Monday is Going to Be Interesting for Stocks

  1. 2banana says:

    Nancy P went heavy in some big tech stocks last week.

    Rally is coming.

    • Wolf Richter says:

      They sure got the timing wrong on some of their earlier bets.

      • Raj says:

        Re-commenting from last article as its a better fit here.
        Fed dropped rate from 1.5% to 0% in a day. When it came to increasing rates to control inflation, it first argued for 6 months that “Inflation is transitory”, then gave a plan to start 3 months later and then two small rate hikes. So it took a year to go from 0% to 0.75%!

        So Fed seems to be encouraging this game. The slow rate hikes gives wallstreet time to spin up bear market rallies, to suck in “Buy the Dip” retail investors, who then can hold the bag for big institutions!

        I hope that the Fed is not in on this with wallstreet.

        • SI t23 says:

          How can anyone say that with a straight face? The Fed has always been in this with Wall st. But it has been under too much pressure from others, and is changing things, but only in a manner which maximises gains and minimises losses for the usual suspects.

        • Brant Lee says:

          It looks to me like things are already set and in place for the elite so let the chips fall where they may, they don’t care. Larry Ellison owns a Hawaiian Island. Bill Gates owns a majority of the farmland. And so on.

          Members of the Fed are already dirty rich. The ‘Important’ members of government are dirty rich.
          Order more wine.

          Hopefully, they will all look CONCERNED watching the rest of us go down the tubes.

        • zippy says:

          2010 bernacke said purpose of QE was to create wealth effect,,,,, ie trickle down economics but under new name,,,, so if after 14 yrs of zero interest rates and 8 trln of QE,, we have record prices of everything,,,,,,,, if you raise rates and start QT logically prices fall,,,, bear mrkt rallies are just normal process of lower prices

        • Thomas Pained says:

          “Hope is not a strategy”—Napoleon Bonaparte

        • SJ714 says:

          There is an old bedouin proverb about Gold, you only truly own that which you can carry at a dead run in the middle of the night.

        • Jay says:

          The dow bottomed at 19,173 in March 2020. I’ll pop my head up when we get down below 23,000. Just like the 1970’s, this is going to take years to play out. With that said, there will be many opportunities to buy ETFs like EDOW and SPLG for hours or days at a time over the next year. There’s absolutely no clear end in sight hear. The Fed basically is just getting started and they don’t really get ramped up until September. The landing depends primarily on the Fed runoff. I give them about 6-9 months of full $95B runoff until we have an event worse than Oct 2018, a meltdown of the core banking system due to liquidity issues.

        • NBay says:

          SJ
          That’s a good one!

      • SocalJimObjects says:

        100% hit rate is a sure sign of insider trading. These guys aren’t the smartest people, but they are not bottom of the barrel either.

      • historicus says:

        Maybe they bought the calls and shorted the stock….a synthetic “put”?

      • sunny129 says:

        Wolf

        ‘ indicates that there is still way too much exuberance, way too much liquidity, way too much craziness. And the bottom isn’t in until this kind of craziness is snuffed out’

        +100%

        I played the game, kept (mostly) losing while rules got rigged since
        ’09 with ZRP, repeated QEs, stimulus and what NOT!

        Now the unwinding of this surreal Bull ( 3rd largest everything bubble of the 21st century) has JUST begun!

        Long way to go before ‘reversion to the mean’ journey ends. Many are still in delusion. They deserve what’s coming! There are serious consequences for EASY-MONEY financed BULL!

        • Augustus Frost says:

          Not the third largest, largest. It’s also the same one, a continuation.

          US stock mania is at least as large, real estate is definitely bigger than 2006, more speculation than the dot.com bubble by an order of magnitude (crypto and SPAV), and the bond mania (which appears to have ended in 2020) is still much bigger.

      • Cas127 says:

        “their earlier bets”

        With everyone else’s life savings and lives.

      • Jay says:

        As you well know, it took the DOW 9 years, 1973 – 1983, to bottom, with only two meaningful bounces. The forces of inflation appear to be just as strong this time around. The only difference is the willingness of the Fed & Congress to do their respective PUTS. I for one will be extremely surprised if these PUT forces aren’t what lead us to similar bounces but the overall time to decline stays the same, a good 8 years.

        • Augustus Frost says:

          The 1973 peak was the peak in nominal terms. The actual peak in the Dow came on February 9, 1966 with a secondary peak in December 1968. So two bear markets prior to 1973.

          This bear market will last longer than 16 years, a lot longer. The losses will ultimately be much greater but also with bigger intervening bear market rallies. We can be assured that the government and FRB will prolong the agony with more futile policy in an attempt to prevent the inevitable.

      • Seattle Guy says:

        They went long MSFT and APPLE options not stock. Turning out to be a bad trade. Nancy Pelosi and her husband bought 150 Apple ($AAPL, NYSE) call options at an $80 strike price with 100 of those expiring on 3/17/2023 and 50 of them expiring on 6/16/2023 — also MSFT Call options with 180 strike price…same expirations.

      • VintageVNvet says:

        dow OPENED down over 600 Monday morning
        good call Wolf!

    • Mark says:

      You said it took 12 years of money printing to get hear that is true. Will take years to unwind. It won’t we will go to and new monetary system backed by gold and silver God’s money. I really do enjoy you articles. Thanks

      • SoCalBeachDude says:

        The entire total amount of gold ever mined is only around 180,000 metric tonnes which at today’s prices is worth less than $7 trillion even at today’s absurd prices and 70% of that is privately owned in the form of jewelry. Gold has NO FINANCIAL RELEVANCE whatsoever and never will again in the future, particularly in a world where total assets are well about $500 trillion and there are nearly 8 billion people. If all of the physical gold were confiscated and then equally divided among the people’s of the world, everyone would get 1/10 of one ounce.

        • andy says:

          So what you are saying is – gold is totally useless financial asset because it is so scarce. Did I get that right?

        • CRV says:

          The limit on the volume of gold is its strength. There not being a limit on how many dollars can be created is its weakness.
          Looking at ‘today’s price’ of something is not a good way to say it is usable or not. If one thing fails, the other becomes useful all of a sudden. If your hammer breaks, a rock might drive in the nail, so to speak. Gold will be reprices by supply and demand and magic will happen and there will be enough liquidity for the essentials in life. Only not for gambling, the favourite pastime of Wall street.

        • Sams says:

          Or, in the end all the worlds assets will have the value of 180 000 metriske tonnes of gold.😉

        • Brant Lee says:

          Keep your paper assets in the men’s room just in case toilet paper gets scarce again. And some dollars too just in case. But 3 quarters, 2 times and a nickel doesn’t work well if you’re thinking that.

        • Augustus Frost says:

          I’ve read this sentiment from you before. It’s evident you hate gold because it challenges the government fiat money monopoly.

          Gold is overpriced relative to other things now, but the rest of your post is irrelevant. Most people in the past never owned or used gold as money because they were too poor. They used silver and base metal coinage. This also applied in the US.

          Your reference to the nominal value of financial assets is also irrelevant. This “problem” isn’t a lack of gold but the asset and credit mania. Crashing asset values with massive debt defaults and write-offs could sufficiently reduce the ratio. Besides, even during the gold standard and gold exchange standard eras, the monetary value of gold coinage wasn’t enough to cover all financial liabilities, including currency. There were still loans and bonds.

          That’s why there were periodic “panics” which ultimately led to the creation of the Federal Reserve. These “panics” were actually extensions of excessive low quality credit which went into default. Nothing unusual about that, except to bankers who think none of their loans should ever go bad and those who think the government can successfully “manage” the economy to some “equilibrium”.

        • Pancho says:

          “total assets are well about $500 trillion and there are nearly 8 billion people”

          HA! 500 trillion is USD/assets…….a medium that is continously depreciating. They do this so they can slowly but surely steal your labor.

        • kam says:

          World’s assets at $500 Trillion measured by the world’s longest elastic band.
          Yet even an elastic band will break

        • Harry Houndstooth says:

          Thank you!

          I’ll let my wife know how fortunate she is to have more than her fair share.

          I’m thinking about gold plated electrical connectors and gold foil on expensive chocolate deserts.

          But I know how to read a graph and I might be interested in gold above $2000.

          I am pedal to the metal short with SQQQ and SRTY headed into the Monday premarket with my account value at new highs.

          However, Wolf’s wisdom:

          “And there will be huge rallies, and they will draw in more money, and it’s not until all this money has gotten incinerated, that we’re getting close to the bottom.”

          Had Wolf not posted this about an interesting Monday I would have kept silent, happy to rake in the cash.

          I am looking to go back into cash. No human knows where the bottom of this two day stock market downturn is, but I have a responsibility to ratchet up our account value, which is in new high territory. Do not allow your bear market gains to evaporate.

          In a bear market, he who loses the least wins. If you are gaining, you are the winner.

      • Augustus Frost says:

        No, it wasn’t just 12 years. The mania started long before. It didn’t remotely start in 2009.

        This is the same mania as both the dot.com and pre=-GFC, as it never ended.

        • Raj says:

          I feel problems are bigger now. Its not just the 2000 or 2008.
          1. This is the EVERYTHING BUBBLE (Stocks, bond, real estates, Cash, all assets …..)
          2. There is very big inflation that is eating everyone’s lunch.
          3. There is significant drop of labor productivity (with WFH).
          4. The Debt / GDP is way higher and interest rates are going up. (if only MMT folks could calculate simple interest)
          5. Our trade deficit is worst and we have outsourced critical strengths (Technology and Manufacturing).
          6. Our adversaries have improved their military power at faster pace than us.

        • John H. says:

          SCBD-

          If what you say is true — that 1/10 oz. per person is relevant to function as money — then however did it work as well as it did for 3 generations in the late 1800’s?

      • Tony says:

        wow! really? Back to the shiny rock narrative? You do know gold was deemed illegal at one point by the govt.

        • ru82 says:

          Yep. Because the government had determined that gold was the most important financial instrument in the world at that moment and wanted it all to itself.

          They did not make it illegal because it was worthless.

          Sure seems like a good reason to own it at that time.

        • andy says:

          Tony, what happened to price of whiskey during prohibition?

        • andy says:

          Tony,
          Do you know what are properties of sound money? Ever heard of durable, portable, transferable, fungible, generally acceptable, scarce, hard to counterfeit, etc?
          Now tell us what are properties of gold metal? You mentioned
          shiny. What else?

        • Cas127 says:

          (re G made gold illegal)

          The G has been acting illegally for a long time.

          Why should the 80% to 98% of us not in the political class (20% of US “workers” are G hirelings, perhaps 2% in DC) give a crap about what they label things.

        • Wolfbay says:

          Why are central banks and governments buying a shiny rock when all they have to do is print money?

        • robert says:

          Yes, they confiscated gold at 20.67/oz, then immediately after making it illegal to own by citizens they devalued the dollar relative to gold by repricing gold to 35/oz for international transactions only, gold being the settlement of last resort.
          At the same time, all bonds and contracts and Federal Reserve Notes which were redeemable in gold were deemed illegal, and could be only be paid in fiat dollars.
          Essentially a massive devaluation/default of the dollar, the third since Colonial times, the first and second being the Continental and the Greenback.

        • RH says:

          I am amazed that so many people speak of the “government” doing this or that and do not consider who benefits: who is behind and controls the government? Cui bono? They are trying to make their control (which “coincidentally” always benefits them and not 98% of Americans) cute and acceptable now with claims of benevolence. The people atop government are just usually, ideally selected from group loyal to them and just close their eyes and tell themselves that they are moral and benevolent too as they benefit their group/supporters.

      • Apple says:

        You shall not press down upon the brow of labor this crown of thorns! You shall not crucify mankind upon a cross of gold!

        William Jennings Bryan
        July 09, 1896

        • elysianfield says:

          Yeah…what he said….

        • NBay says:

          Re; GOLD

          I’ll take C-H over Au ANY DAY!……and ALL of you also DO every single damned day. You are just so lost in your Econ war you don’t even know it.

          That’s the second part of all you need to know;

          “Don’t follow leaders, and watch the parking meters”

        • NBay says:

          I come to this site to learn more about parking meters and those who run them and play around with them, I have been given no choice in the matter.

        • lyntwo says:

          Understand this against the main monetary problem within the USA at that time. There was not enough currency in circulation.

          The cross of gold was the restriction of the free coinage of Silver. This acted as a brake upon economic growth. The problem presented in odd ways, such as there not being able to acquire enough cash by which to settle or pay local property taxes

        • NBay says:

          And also because I think I deserve that 15 minutes of fame I was promised ;)

        • NBay says:

          Oh, and by “C-H” I don’t just mean fossil fuel, although that’s a biggie.
          I mean FOOD. We are all fires burning in 70% water, which is a damed cool trick, although it did take molecules 4 Billion years to get to where we are now.

          We cannot grasp the very big, the very small, or massive amounts of time…but the effort to do so is fun, as long as it’s not monetized, which it UNFORTUNATELY pretty much all is now.

        • NBay says:

          lyntwo,
          Yeah, it was an East/West beef following Comstock siver discovery.

        • RH says:

          That is precisely what the banksters, financiers, and ultrarich have done to 98% of Americans for many decades (and because so many in the world hold US dollars, in large part through their “Federal” Reserve cartel) to billions around the world: e.g., read in detail about Sri Lanka.

        • eg says:

          Correct, NBay — the fundamental unit of life is the calorie.

        • NBay says:

          Yeah, eg, that covers most all of it, although I could quibble a bit. Viruses, for ex, which because they likely far outnumber all other “life” are too much a part of the game to just ignore.

          Anyway, the Physics guys (whom everybody keeps an eye on) probably would say the fundamental unit FOR life ON Earth is a “something” they now call a PHOTON.

      • There is really nothing the Fed can do to tighten financial conditions, they frontloaded far too much, and any efforts to curb access to money is going to prove disastrous. At this point the best solution is to nudge the economy into making more investment. Any recession we have is likely going to be a growth recession. The comparisons might pullback, the underlying growth and inflation will remain strong. The best way to whip inflation is to grow out of it. The real question is will any new investment be productive for the economy. We don’t need more consumer solutions. The US/NATO will probably have to rebuild Ukraine and then we will own it.

        • MarkinSF says:

          Yeah just like they rebuilt Iraq, Libya & Afghanistan.

        • sunny129 says:

          Ambrose Bierce

          ‘ At this point the best solution is to nudge the economy into making more investment’

          Wishful thinking!
          First the piper has to be paid for ALL the ill thought (crazy credit creation) out monetary policies of Fed (CBers) since ’09!
          Long way to go!

          There was NEVER plan for a ‘productive’ economy, just goose up the mkts! Even Barnake claimed that chart of Russell 200 was proof of strong economy. He is a proxy’ for thinking of all the FOMC members and chair persons since 2000! They all lived in their cocoons and pontificated religiously ‘ our economy is strong’!

          Investors never cared for earnings b/c of Buy-back shares(illegal before 1986). Nearly 50% of rise in S&P since ’09 was due to buy-back shares! Besides, remember ‘Mkt to mkt accounting standard was suspended since ’09. No price discovery and analysis balance sheets means a diddle!

          With debts of Fed – Trillions and the global debt of 31.5 Trillions, where is the prospect for a growth of any kind? Once the Debt to GDP of a Country exceeds 90% it affects growth. That ratio is at least over 130%, if NOT more now!

          Karma is a bitch and sent piper to collect!

        • economicminor says:

          Ambrose,

          Investments are only made when either the money is free and there are no requirements to make a profit (which was the last 20 years). And those kinds of investments can be very sketchy. Most will end up being a waste of resources. Or a patch on the leaky dam that is crumbling.

          OR

          To actually make a ROI (which seems like a foreign concept in today’s environment).

          Today we have greed, corruption, monopolies, conglomerates, and high rates of inflation from years of money created backed by nothing.. We have foreign or entrenched (out of touch, uncaring) elite ownership of many of our critical industries / infrastructures or at least many important parts of them.

          We have a system built upon a total reliance of exponential growth in a overly abused environment on a finite planet. People ignore the reality of the damage to our critical infrastructure in their reliance upon their failed models. Magical Thinking and the Power of Positive Self Centered Group Think are at the root of the problem.

          Nature abhors imbalances and Nature is more powerful than the fed or our leadership’s Magical projections as to how their failed models can be made to provide Nirvana to the poor abused and lied to populous.

          Change is constant and when trying to direct or stop it causes change to be slow or not happen. Change is like water. You can only prevent it, dam it up for so long and you either use that energy for something positive or eventually the dam breaks. We are watching that dam break. Change is going to overwhelm us.

        • NBay says:

          Sunny,

          Both Roosevelts really pissed off the remnants of the Gilded Age. Then us hippies came along and pushed them over the edge.

          Since there were no suicides following the GFC (like in the 29 crash), except for one European Noble unknowingly feeding friends to Madoff, I figure we a now dealing with an even more ruthless breed of cat…..in fact I KNOW we are, I met a lot of them growing up.

      • LK says:

        … God’s money.

        That’s one hell of a belief to hold.

    • Misfit says:

      More like a fed u-turn is coming… with J Pow being pressured by yours truly, Nancy and the democrips

      • RH says:

        To clarify, food and gas inflation will continue, but other inflation may decrease as food becomes more scarce and precious even in the EU and US.

      • unamused says:

        You can scapegoat those democrips for both the recession and inflation.
        You can scapegoat them for pressuring The Fed.
        You can scapegoat them for not pressuring The Fed.

        You’re working way too hard at this. Just do what comes naturally.

        • Tony says:

          You mean how more or less 1/3 of all money in existence right now was printed under Trump’s presidency in 2020? Oh. Let’s not also forget the tariffs. Also don’t forget how Trump also encouraged JPOW to slash rates to zero. Should I keep going?

        • andy says:

          Yes, Tony, keep going. What else do you know?

        • LongTimeReader says:

          They all suck.

        • Anthony A. says:

          Tony, they all suck. They all have the same goals and are there to get rich and powerful.

        • The wealth effect is a Ponzi scheme says:

          LongTimeReader for the win

    • SocalJimObjects says:

      The government is probably going to outsource all their tech needs to Big Tech soon, and Nancy is just making sure that she’ll get a piece of the pie.

    • Shiloh1 says:

      I wouldn’t take any amount of money to be one of those reptiles.

    • Depth Charge says:

      I think she went heavy into the vodka bottle. Her face is melting into her neck.

    • Jay says:

      A short one, maybe. Today, unlike the 1970’s & early 80’s, America was still a powerhouse. Unfortunately, we’re quickly getting replaced by China as well as massive amounts of US debt. The next 10 years or so don’t look good for us, especially when you factor in all the social unrest that lies ahead. There’s no Volcker coming to our rescue.

      • gl says:

        Does anyone really know the extend of China’s debt?

        Figures don’t lie, but liars figure.

      • kam says:

        There would be no China without the U.S. Chamber of Chinese Commerce.

    • Gen Z says:

      Will the Fed enact the plunge protection team for their Members of Congress?

    • Lasse says:

      “Monday is going to Interesting Day for Stocks.”.

      Interesting indeed … Bitcoin -17 % …

  2. phleep says:

    My fingers are still crossed, waiting for some inkling that fools will at last bear a serious cost (other than the costs transferred to me by bailouts for a couple decades now). If the fools, and the institutions bailing them out, do not reach a corrective tripwire somewhere, I am worried. So, all this inflation and chaos and the drawdowns suggest maybe the tripwire is near, and cannot be avoided so “effectively” this time.

    I am amazed this juvenile foolishness with memes it still popping up. The idiocy must be wrung out, but John Q. Average-Retail is probably still breathlessly waiting so the signal to buy the perceived bottom and ride to free-lunch-land again.

    I don’t know how the bond markets could go on strike, given the round-trip of money through the system in pensions and so on. Merely the stock markets going on strike around 2019 induced the Fed to flinch (which has been the flinch signal since 1987). This time is slightly different, with inflation roaring down on our backs. Bonds would be a different, and “interesting,” story.

    • Raj says:

      So seems like bag holders for stocks and bonds will lose paper value.

      What about real problems? Which of the following will correct First?
      1. The housing market (Lets assume correction is just back to 2019 levels)
      2. The job markets (vocal lay offs of thousands of employees (>10% staff from big companies)

      • economicminor says:

        Usually the jobs go first. That causes people to not be able to pay their mortgages and that is when housing starts down.

        This time?

        Maybe it all goes together as so much of housing is in the hands of PE and Pension funds.. Lots of houses sitting empty waiting for that last fool to purchase. No one knows how long this can last before prices start chasing themselves downward.

        Bubbles can POP and when there are so many of our markets all bubbled at the same time, contagion has to be the biggest worry of the fed. Their Dream is to slowly deflate the bubbles but the system just can’t function without growth. Deflation is the opposite of growth. Quite a Dilemma!

    • Winston says:

      “waiting for some inkling that fools will at last bear a serious cost”

      They already are.

      The general public is suffering due to high inflation, the fact that their most lucrative jobs that any average person can do have already been shipped elsewhere, and an incredible debt that has been placed on their tab. The average person always loses in the end having been manipulated by the “elites” to their own advantage. In France, many “elites” literally lost their heads over this, but as can be expected of any really angry idiocracy, things went too far.

      The IQ bell curve and the lack of the learned skill of critical reasoning which is not taught even to most of those on the right hand side of the bell curve are the reasons why they can be so easily manipulated. Willful ignorance is also a large part of it.

      The smarter-than-they-are phones, the perfect propaganda distribution device, the use of which results in what one study found – 6 out of 10 Americans forward links to friends based solely upon the headline of an article they DIDN’T read – also help with that process.

      As George Carlin said about all of this, “Imagine how stupid the average person is and realize that half of them are stupider than that.” And I believe he said that before the widespread use of smart phones.

      However, at least our capitalist system even in its crony capitalist form is still better than any other and in our case results in a Banana Republic with so much wealth that the “skimming” isn’t nearly so obvious, for now at least, as it is in smaller banana republics which don’t have a facade of democracy or a world reserve currency.

      • james wordsworth says:

        The thing in America is that the propaganda is awesome.

        People actually believe the “American dream” crap and so are far less likely to revolt anytime soon, although they should. The country is really not far from being a banana republic.

        As Carlin also said – They call it the American Dream because you have to be asleep to believe it.

        Watched the 2 part Carlin documentary the other night and was reminded about how on point his critiques were/are so many years later.

        • OutWest says:

          The US is the number one destination for immigrants globally as they pursue the American Dream. Depends upon your perspective…first generation immigrants continue to be the most successful cohorts.

        • Einhal says:

          OutWest, some, and a lot of immigrants choose the U.S. because of its robust social safety net. The ability of America, with its terrible fundamentals, to provide that social safety net will evaporate once the dollar loses its reserve status.

        • NBay says:

          Yeah Einhal. I say everyone who can’t trace their roots back to the revolution (which I can, both sides) has to leave. (except Wolf for obvious reasons)

          Of course all my Pomo Indian friends from HS who I learned excessive drinking of most anything from, might disagree.

  3. phleep says:

    My shorts are in place for Monday, but I’m not holding my breath. I can wait.

    Cool to see a nod to Matt Levine at Bloomberg, who alongside Wolf, are my (only) absolute “must see” sources. He has also called the Musk drama with precision.

    • phleep says:

      John Authers has a newsletter at Bloomberg that is quite good (and also free).

      • Raj says:

        Phleep, its a too obvious short, so you will lose money on Monday. I hope, its not on a margin and is an option 3+ months out.

        I feel that markets should go up on Monday, near level on Tuesday, up again on Wednesday (did you not notice market always go up on the day Fed announces rate hikes), flat / slight down on Thursday, big down on Friday after burning most shorts! I may be wrong!

        • phleep says:

          Mine don’t expire Monday. What I am long, in truth, is volatility, fear, and thus short on broad confidence. I am more awaiting the shock event that takes nervousness into outright fear. This year has produced several, profitably for me. The anxiousness for good news and “buy the dip” moments have been an opportunity to buy back into more fear insurance.

          Europe is raising rates (last Wednesday) and such news takes awhile to mash up with other stuff and produce a stew of fear. The southern EU sovereign debt is spiking and there is no clear answer, especially with the inflation pall over Europe. This is overlaid with Putin, Iran, et al.

        • sunny129 says:

          ‘big down on Friday after burning most shorts!’

          Are you kidding? Are you really paying attention to what’s going on?
          Burning all shorts!? Are you in Mars?
          LOL!

          DJIA dropped 880 points on Friday All my shorts ( inverse leveraged – SDOW, DXD – PUTS on DIA++) zoomed up. Will zoom up on Monday or NET positive by the end of next week! Rate increase on Wednesday – 50 or 75 basis points!

          NO more ZRP, NO more Fed’s put, No more QE but QT, inflation raging++!
          Where is the RAINBOW?

    • Wisdom Seeker says:

      I think Wednesday – Fed meeting outcome – will be more significant than Monday.

      But what really gets to me is how the Fed is advocating to Biden Admin against “price controls” … when the Fed’s control of interest rates – literally the price of credit – is the ultimate “price control”!!

      They have no apparent self-awareness of the tragic irony… Price controls don’t work and controlling the cost of credit is no exception.

    • andy says:

      I used this last weak rally to reload on puts. Bought into Nov, Dec, Jan, for half the price of previously sold Sept, Oct (when VIX was over 35). Did similar move three times already this year.

  4. curiouscat says:

    But, but, but…. what about the efficient market hypothesis I learned about in B school?

    (I think I must have missed the death notice.)

    • Anthony A. says:

      I didn’t learn any of this when I got my MBA in 1980. The closest we got was a “cost benefit analysis” course (Government financing) and studied General Motors marketing tactics. Also did some work in Queuing Theory. Us engineers missed all the good stuff.

    • 2banana says:

      Define a market.

      Now define what adding in trillions of fiat does to that market.

      • Tony says:

        Please go look up the definition of fiat currency.

        What is fiat?
        “Fiat money is a government-issued currency that is not backed by a physical commodity, such as gold or silver, but rather by the government that issued it. The value of fiat money is derived from the relationship between supply and demand and the stability of the issuing government, rather than the worth of a commodity backing it.”

        • phleep says:

          > the worth of a commodity backing it

          Um, commodities are really volatile? Like, gasoline, oil, grain, bitcoin (sort of), and that is your answer to the volatility in fiat? (OK, mostly one-way, but still ….)

          As in, take a look at bitcoin as legal tender in Central America, how that is working out?

      • James Charles says:

        “These two charts prove, without a shadow of a doubt, that there has been real underlying fundamental improvement in corporate balance sheets.   We can argue about whether the market is “expensive” or a good “value”, but I think one thing we shouldn’t imply is that the current rally is purely driven by a false underlying driver such as QE.  That’s clearly not entirely accurate.”

        “Further, there is relatively little out of sample evidence to support the asset price and portfolio rebalancing mechanism. While intuitive, there have been cases such as the EMU where QE and monetary policy has been much more aggressive than in the USA and yet asset prices have remained far more subdued. “

        • sunny129 says:

          James Charles

          STOCKS go down (with intervening bounces – bear traps) b/c of deteriorating LIQUIDITY and investor sentiments. Rest including earnings is moot!
          Head winds:
          1. No more Fed’s put
          2. No more QE but QT
          3. No more ZRP but rates rising
          4. Inflation raging, after 40 yrs of deflation. NOT that easy tp control. Fed is way behind the curve, too little too late!
          5. No short term end to Ukraine war
          6. Energy prices keep rising until, acute and deep demand destruction
          7. Inflation in FOOD prices. Shortage of grains seeds and fertilizers
          8. Stocks are still in OVER VALUED zone!
          9. Debts, Record territory since 2008. Fed 9 Trillions. Combined balance sheets of 4 largest global CBers (FED,BOJ,ECB.PBOC) went from 5.1 Trillions to 31.5 Trillions, unlike any time in human history!
          10. Too much underserved HOPIUM and optimism barrative spin from the Fin media!

          If you think the Mkts are in ‘recovery’ stay invested and put more cash into it!
          GOOD LUCK!

        • Augustus Frost says:

          Corporate balance sheets are stable rags, absolutely awful. Only appear “robust” due to artificially cheap money and inflated earnings/cash flow from the mania.

          Don’t worry, once the bear market really gets going and the economy starts tanking, everyone will know what I am telling you. There is a longer runway for a noticeable minority due to more stable revenue and term structure of borrowings, but not for most.

    • Augustus Frost says:

      EMH and Random Walk were always garbage.

      • phleep says:

        EMH and Random Walk work fine on sunny smooth days when you don’t need them. Then things switch (from EMH’s bell curve to fractal distributions), the losses start piling up, and the excuses start pouring out. So it needs a huge patch: increasingly ridiculous bailouts with increasing zeroes trailing the numbers. The faith is resumed, the carry trade (betting on things staying the same, gradually climbing toward sunny heights) resumes.

        We might be casually talking quadrillions in a couple years.

        I bet against the carry trade, and wait for the spikes. I like spikes.

      • sunny129 says:

        Augustus Frost

        They never met:
        -ZRP kept all the way for nearly 13 yrs, multiple QEs. Fed had NEVER bought MBSs in it’s entire history since 1913.
        -3 stimuli of several Trillion dollars
        -Mkt to Mkt accounting standard suspended since ’09.
        -Buy-back shares ( banned before 1986) substituted for real earnings. 50% of rise in S&P since ’09 was predominantly due Buy-back shares
        – EMH and Random walk were ceased to function, when there is no more our good ole, genuine, American Free Mkt Capitalism. That got replaced by CRONY/Predatory capitalism by Fed and other CBers

        Now the piper is waiting to collect due for all those sins by CBers!

      • curiouscat says:

        Augustus Frost:

        “EMH and Random Walk were always garbage.”

        Now you tell me!

      • Bead says:

        Not exactly disinterested garbage, either. Stick ‘‘em up!

    • unamused says:

      Anthony A.: “I didn’t learn any of this when I got my MBA in 1980.”

      You must have had other priorities that day and missed the sermon.

      EMH is either a self-contradiction or a tautology, depending on whether you believe it is true or false or right down the middle.

      Black-Scholes-Merton is believed to be a tautology, but unfortunately it forms the basis of the quadrillion-dollar derivatives market.

      In theory, there’s no difference between theory and practice.
      But in practice, there is.

      • Crazy Chester says:

        “In theory, there’s no difference between theory and practice. But in practice, there is.”

        I love this line!

        Call me and we can work out the rest of the song and reap the rewards of constant grocery store residuals.

        I’m thinking a country lament, say, “Wish I Could Practice My Theory on You”.

        Might take some, well, practice. But that’s how you get it right. In theory, at least. But we might just have ourselves an Anthem ’cause there will be plenty of time for the 20% unemployed to work on their guitar skills at home. Sooner than you think.

        That’s it! That’s the hook: “Sooner than you think. Lookin’ back, it was gone ‘fore I could blink.”

      • VintageVNvet says:

        TOO AMUSING una!!!
        Thanks.

      • Anthony A. says:

        “You must have had other priorities that day and missed the sermon.”

        Yeah, I had a wife and two toddlers and a full time job as Engineering Manager in a 1,000+ person manufacturing plant when I wasn’t in night school getting my MBA.

        Black-Scholes-Merton option theory was not even on my mind back then!

  5. Abe says:

    I am not sure I like your columns because we agree (mostly) or I am just looking for a voice of reason to know I am not alone in these crazy times. Thank you either way.

    Hopefully you will see blood in the streets sooner than later.

    Number of cryptos is now nearly 20,000. Crazies in Congress are pumping them.

    • Iona says:

      Yeah, the poster child for the mania, Bitcoin, did not participate in last week’s rally. Many of the alt coins seem to be taking a beating and that’s keeping the general weighed down.

      RE prices are still insane and have a long way to go to get to normal. Layoffs and earnings downgrades will further crush the market. Bullish on the repo man business.

      • Depth Charge says:

        There is a town where I was going to buy a small lot of land about 5 years ago or so. These are unimproved lots with power/sewer/water. They were selling for $5k to $8k, and it was difficult to find a buyer. I just took a peak and the lowest asking price is $59,000. There are hundreds of them. When these lots have fallen back to $5,000, I’ll know the bubble has popped.

        • andy says:

          How does one look up something like that?

        • El Katz says:

          @andy

          Redfin. Zillow.

          Look at price history on the current listings. Most states show listing date, listing price, date sold, sold price, and any price adjustments in between. Texas doesn’t publish this data, but most other states do.

      • phleep says:

        > Bullish on the repo man business.

        Yeah, but that too is transitory. With no buyers, inventories pile up and sit there. Then the repo people get repo’d.

        In 1932, the banks took back the fancy cars and houses, bought on 1920s innovative consumer credit. Then they took back car dealers and farms. Then the banks went under. The only thing that could repo and reinflate all that was Uncle Sam. Deflation trap, birth of central bankers’ modern phobias of deflation. Birth of the modern bailout and all its ABCDs — agencies, boards, commission, and departments. Massive price fixing, milk and farm price supports, etc. Ever since.

    • ru82 says:

      Yes…the crypto scene now has a lot of money lobbying congress.

      After all, lobbyist make the the rules. If you do not vote in their interest, they give the money to who will. You have to have campaign money to win any election (most of the time).

      I had a neighbor who was a lobbyist. He told me he hated one of our state congressman. I asked why? Was it his platform? Nope. The neighbor was mad because he paid $20k to a golfing event and the $20k bought him some time with the congressman between holes. Anyway when it was my neighbors turn, he was given 2 minutes. LOL He had a 5 minute speech prepared. After 1 minute the congressman said it is my turn to tee-off. Sorry.

      He found out that is all $20k will buy you .

      I just read some crypto big wig is prepared to donate $1 billion in the next presidential campaign. It would be the single biggest donation ever in a presidential campaign. I wonder what his conditions will be for this big donation?

      • phleep says:

        “Funny” when a whole system converted to Ponzi dynamics busts.

      • james wordsworth says:

        In America – everyone is swamped for choice in every direction. Walk down grocery store aisles, surf Amazon etc.

        Except for voting – 2 choices only.

        No wonder the system gives the results it does.

      • jm says:

        A famous legislator once said something like, “If you can’t take their money, drink their whiskey and **** their women and then go up on the hill and vote against them, you don’t have any business being here.”

    • JMM says:

      Can’t wait for Tether to go to hell and drag the rest of the cyptoscam world with it.

      • phleep says:

        I love the German word, “luftmensch.” Air man. Must fall back on selling ice to eskimos.

        • VintageVNvet says:

          ”ice BOXes” to our northern most early peoples leep,,,
          }}} Please,,, let’s at least TRY to keep some semblance of PC AKA social correctness on here, eh? LOL{{{
          but, really, just want to say thanks for the very very succinct summary of the situation in your comment above, in spite of my, no doubt not so great attempt at humour…

  6. Phoenix_Ikki says:

    All I know is PPT better get their A$$ back to work, a lot of catching up to do .

    In the meantime, as some of these high flyers plunge like Tesla, a stock split is announced, wonder what’s the play there?

    • phleep says:

      > stock split … what’s the play there?

      Generate noise, flashing lights, tinsel, like a cheap garish junk food package, in clown colors, attract the customer intelligence level (and small bank account, soon depleted) distracted and attracted to such things.

  7. Dan Romig says:

    “Amazon, … buying back $10 billion of its shares with borrowed money, …”

    That is why I watch the 3 Year Treasury.

    I have no idea what Amazon is paying in interest or how long the borrowing term is on the ten billion dollars, but the 3 Year T is at 3.21% this weekend.

    Taking on debt is not a good idea IMO. The Board of Directors at Amazon believes otherwise, it does appear.

    Thank you for the clear and accurate reporting Wolf.

    • unamused says:

      “Taking on debt is not a good idea IMO.”

      Debt is incurred if it is believed the benefit will be greater than the cost. To generate profits that are more than the interest payments, for example. Or to keep a failing company going so it can be bled. Or if you really want a family home.

      • Dan Romig says:

        unamused,

        Yes, debt does have a time and place where it is a positive, and I should have been more specific:

        “Taking on debt to buy back stock is not a good idea IMO.”

        Taking on debt to finance an investment in a home for oneself or for your family is not bad. I did it once twenty-seven years ago.

        Taking on debt to finance an investment in equipment, for example, to run and/or grow a viable business is not bad.

    • Harrold says:

      It’s too late to pump stocks. Sentiment has turned. So the buybacks will have very little bang for the buck. They better just get out while they can. Most of the 10 billion will be absorbed by anxious sellers and shorts.

      Next week will be interesting because scotus is announcing opinions on monday and wednesday. Will there be rioting if they cancel roe/wade, and a gun control law? The fed meeting is wednesday. So, my bet for a market correction will be thursday.

    • Sit23 says:

      A large percentage of the shares bought back will be the “free” shares given to top executives as part of their employment package. It is just such obvious crookery, but why does the MSM and their Wall St financial press cronies never investigate, discuss or report on it. Oh that’s right. They are all part of the same team.

      • Augustus Frost says:

        Never tracked it but read the same thing. Much of the buybacks doesn’t reduce the shares outstanding. It’s to pay compensation.

    • JD says:

      Credibility helped when math is accurate, 180000 (some estimates >10% higher) * 2205 * 16 is over 6 billion ounces, value $10+ billion, nearly one ounce per person. Or not?

  8. Propheticus says:

    Stock market trading days in terms of untrustworthiness (all market trading days are untrustworthy):

    1. Friday (most untrustworthy)
    2. Monday
    3. Thursday
    4. Wednesday
    5. Tuesday (least untrustworthy)

    • andy says:

      Some say markets do not bottom on Fridays. That is because people brood over their losses over the weekend and place more sell orders. We shall see on Monday I guess.

      • sunny129 says:

        andy

        ‘brood over their losses over the weekend’

        Think of NEGATIVES overwhelming positives out there. I mentioned above under ‘Head winds’

        AS Wolf said, there is Too much HOPIUM and positive narrative spin from the Fin media! GFC will look a just soothing breeze, compared to what’s ahead!

        Mind tyou here definitely will be impressive bounces ( bear traps) along the way. Mr. Mkt always wants more ‘ suckers’ on his band wagon, before taking the next PLUNGE! Just study past Bear mkts!

    • JeffD says:

      I will gladly pay you Tuesday for a hamburger today.

  9. TK says:

    So now the subscription investment newsletters are touting Farmland, crowdfunded loans, some preferreds. But the sell offs will negatively affect them all. So what are the characteristics of a bottom I wonder? I recall the post dot com bust when know one trusted stocks any longer. I suppose that sentiment is as good an indicator as any.

    • Augustus Frost says:

      I don’t remember the exact specifics but would hardly categorize it that “nobody” trusted stocks at the July 2002 or March 2003 lows.

      The S&P only lost about 50% from a mania peak and never got even close to cheap, only somewhat temporarily “fairly valued”. Compare it to the August 1982 low which was the last time when stocks were actually really cheap and sentiment was a lot more bearish.

      Forget about what people say, look at what they do.

      • Harrold says:

        The problem is stocks never look cheap. Even after a big bear correction, earnings drop making P/E ratios still look unattractive.

        You just have to make a gamble that the bottom is in. Dollar cost average on the way up is the way to do it.

        • ru82 says:

          True Harold. PEs look bad at that point in time.

          Would P/S be a good indicator.

          I say that because in 2009, I think Home Depot stock dropped almost 50% yet sales only dropped about 10 to 12%. That told me the stock price drop was overdone.

        • andy says:

          Ru82,
          Ford is like 0.4 times sales now. BMW is also around 0.4×sales. And they will benefit from EV cycle for the next 20 years perhaps. Food for thought.

        • Augustus Frost says:

          Yes, I know that. It’s a matter of relative valuation.

          The reason your statement is true is because stocks have been relatively overvalued to an extreme for so long, most “investors” think it’s “normal”.

          If the cycle has turned as the bond market indicates, the “bargain hunters” are going to find themselves indexed to a multi-decade bear market and catching a falling knife.

          The dividend yield sucks and has for the entire 21st century, balance sheets are mostly garbage meaning dividend cuts are going to happen regularly, and the long-term fundamentals are absolutely awful.

          As for earnings, not only does it lag stock prices (hence the results you stated), its only an accounting number which no one can spend and virtually no one can monetize.

        • VintageVNvet says:

          Not according to JP Morgan H:
          His instructions were very clear and clearly based on his success:
          Buy carefully ”on the way down” but only if you are sure you can ”hold through the bottom”,,, as no one can know the bottom in advance,,,,
          And, similarly, buy on the way up similarly…
          As opposed to suny on here who IMHO gives very very good advice, I have been OUT of the SM since the 1980s,,, but I am still hoping to get back in,,, when and IF,,, ONLY IF, we get some semblance of clarity and RULE BY LAW,,,
          Both of which have certainly been lacking for eva, but especially so the last few decades with all the now, according to ”unamused” quadrillions of ”derivatives” out there these days that nobody,,, repeat NOBODY knows clearly the extent of,,, and thus NO WAY to know the effects OF,,,,
          Good luck and may the Great Spirits help you in every way they can.

      • David Hall says:

        The Fed funds rate was 15% – 11% in 1980-1982.

        Today it is not above 1%. Next week the Fed may raise interest rates..

        The S&P 500 beat EPS estimates in 2022 Q1 and grew 11%. Positive Q2 EPS growth is expected when companies begin reporting in July.

        Housing prices increased 18% in 2022 Q1 (YOY). Last year some said it was a good time to sell a house. Rents are increasing. CPI inflation is 8.6%. Nominal GDP grew in Q1.

        • Augustus Frost says:

          There is absolutely no significance to “beating” estimates. It’s a farce which Wall St uses to rationalize perpetually higher prices, especially since it’s based upon made-up “adjusted” numbers.

          When the bear market is really evident, this shell game will consistently fail to inflate prices.

          Stock prices don’t increase or decrease because of fundamentals, as no “fundamental” ever bought a single share. The only thing that matters is how market participants interpret whatever is considered “news”.

          Read headlines and you will see references to sentiment (not the event) as the driver, all the time. The writers possibly aren’t even aware they are doing it, but they do, all the time. Additionally, any study of a price chart will make it evident that supposed contemporary causal events have limited if any meaningful actual correlation. What I mean by this is if someone knew the event in advance, it wouldn’t make much if any difference with the stock market as a whole. This is less true for individual stocks but still happens regularly, especially with earnings announcements.

          Truth is, in a bull market, the news is mostly interpreted as good because the same psychology has a noticeable impact on behavior associated with economic expansions, such as increasing debt and lowering credit standards which inflates profits and GDP.

          In a bear market, the opposite happens.

          At any point in time, there are always positive and negative fundamentals to justify whatever position anyone wants to take, as the environment is never uniformly good or bad (as most people define it).

          At a mania peak like now, looking to the fundamentals will leave you as a major bag holder indexed to a multi-decade bear market for those who buy and hold. That the fundamentals actually already suck and it’s so evident already is just another piece of evidence of what’s in store.

          Just wait and see what the fundamentals look like later once the bear market is more mature.

    • Ann Drake says:

      Duh, Farmland? A whole bunch of us farmers would like to let you in on a secret. It’s a miserable way to lose a lot of money.

      • Hardigatti says:

        How to make a small fortune growing grapes?

        Answer: Start with a large fortune.

      • james wordsworth says:

        Farming is tough. Owning farmland is quite profitable as an investment.

        US average farm values (crop land) up 75% from 2007 to 2021.

        Should go up even more now that crop prices are sky high.

    • phleep says:

      > So what are the characteristics of a bottom I wonder?

      There was an attempt to historically-statistically track this with some rigor, in the book Anatomy of the Bear by Russell Napier. The current edition I think is 2016 but the main book was written back in 2006 or so I think. So, a couple crises ago. Its 336 pages sell for a pretty high price.

      • Augustus Frost says:

        Neither the GFC nor the pandemic were a real crisis.

        Look at market action Pearl Harbor day. The Dow fell 3% on the day and fell roughly 20% into the April 28, 1942 low which ended the bear market from March of 1937.

        The best explanation for the difference in price action is that stocks were already cheap and sentiment was already very bearish while in 2008 and 2020, stocks were (and still are) obscenely expensive and psychology was (and still is) in a mania.

  10. Double D says:

    A market melt-up is going to ensue very soon, the likes of which have not been seen. S&P, Nasdaq & Dow back up to all time highs and way past that. Then it’s a deflationary bust of epic proportions as all of the foolish speculators get wiped out & lose everything.

    It’s important to preserve what you have, diversify & stack. Very few are adequately preparing for the apocalypse that’s coming.

    • HowNow says:

      Please elaborate. Any specifics or is yours just a gut feeling?

    • MarkB says:

      Uh, the melt up already happened 2020-2021. We’re at the start of the bang-up now.

    • JeffD says:

      Housing appreciation rate is at an all time record. If a 20% national increase in a mostly illiquid asset is not a melt up, then I don’t know what you could use as a more convincing yardstick.

  11. JJ says:

    So the Redbox traders are playing a game of ‘chicken’ driving towards the buyout cliff?
    Is the ‘Chicken soup for the soul’ an irony here? A subconscious association drummed up by the meme traders anchoring the word ‘chicken’ with both the daring fatal game and the Chicken Soup for the Soul company?

    • phleep says:

      Why did the chicken cross the road? To be instantly rendered into somebody’s soup. So much for the soothed soul: smoothed flat into roadkill.

  12. Bj says:

    for IPO and growth stock like ARKK, the magnitude and duration is already similar as .com bubble (with Nasdaq down 78%). While BIG TECH has room to the down side. I am wondering the small growth stocks may close to bottom, but like nasdaq, may take a 10 plus years to recover 2021Feb high

  13. Cobalt Programmer says:

    I was driving around the swamp and saw several advertisements for election season. One county level executive ad read “Stop/Control inflation”. Being an informed reader on wolf street, I am surprised. How a county level executive or mayor can bring down the inflation. If it so, what powers the feds have? Will the voters buy his pitch? I dont know…
    Not only the Microsoft Satya (obviously he must be smart), two divorces in the tech stocks (amazon, MSFT) happened recently. They can sell stocks which will not be considered insider trading because court ordered to liquidate their assets and pay the other party (themselves). What did they knew about the markets?
    Treasury rates are more than 1% for monthly bills but the inflation is 8% which is an underestimation by the way.
    Bad decisions makes good stories…

    • Apple says:

      They can always lower the mill rate.

      • JeffD says:

        That increases inflation. That kind of thinking is exactly why we are in trouble.

        • JeffD says:

          To be clear, the higher the annual carry cost, the lower the rate of return, and the less attractive the investment becomes. If you want investors out of the single family home property market, you would raise property taxes.

    • phleep says:

      > They can sell stocks which will not be considered insider trading because …

      … because they have specific pre-set plans in place that enable them to sell. They made them before the opportunity arose, so they are technically not responding to today’s material non-public info (the definition of insider trading). This loophole is an open secret in the corporate elite/Ponzi/looting community.

      If the stocks tank, they just wait. They have that choice under the plan. So they have a one-sided upside option to legally *insider-trade*. At scale, as we saw with Elon and Satya.

  14. ben sargent says:

    in an inflated everything bubble no place to hide really. Especially for traded assets just look at Redbox

  15. KPL says:

    “My admiration, in terms of executing perfect market timing, goes out to CEO Satya Nadella who’d sold 50% of this Microsoft shares in one day, on November 22, 2021”

    May be he is a follower of Hussman and had read his note on Nov 21, 2021

    • Cookdoggie says:

      Or, I think in some small way Satya caused the decline. When you see an insider of that magnitude dump 50% of his shares, don’t alarm bells go off?

  16. SpencerG says:

    I have always admired the Red Box business model. Don’t assume that a technology is over and done with until there are NO customers for it at all. Turns out that even a dozen years after Blockbuster Video filed for bankruptcy that there are still plenty of people who are willing to rent the latest DVDs for a couple of nights entertainment… and don’t mind doing it from a vending machine.

    • Harvey Mushman says:

      I’ve never used one of those Redbox machines, but I have rented movies from them on my Roku TV. Its just like any other streaming service as far as I can tell.

      • SpencerG says:

        For the life of me I don’t know why Blockbuster didn’t create a streaming channel as well. Or a Red Box competitor. It seems crazy to just let a brand name that well known just wither on the vine.

  17. Augustus Frost says:

    Another spot on article.

    The S&P 500 has a whopping sub-basement level dividend yield of 1.49% as of Friday’s close, still near the lowest ever even near an “official” bear market. It’s still insanely overpriced historically. Can’t use TINA anymore now either as a rationalization with even the 6-month or 1YR UST above this level and headed higher.

    Belief in “buy and hold” is as firm as ever. Also read today that indexing just passed active management for the first time ever, measured by assets under management. The whole purpose of indexing and “buy and hold” is to diversify and “buy and forget”, forever.

    “Investors” buying into this strategy will ultimately find themselves indexed to an unprecedented bear market, whether the peak is in now or not. At the bottom decades from now, virtually no one will believe in it.

    This is just the beginning, but it won’t happen in a straight line. In any long-term bull or bear market, there always interim rallies or declines, some big as covered on this site. The closest analogy to what’s in store in terms of scale is the 1930’s, only larger and longer.

    I’m quite confident the bond mania ended in 2020. I’m somewhat less confident the stock mania also ended though I think it has done so. Bond market should rally for more than just a few weeks or months relatively soon which could provide the rationalization for it.

    • Harrold says:

      Index ETF buy and holders will break even in 2035-40. Maybe longer if Russia and China suceede in breaking the dollar’s dominance.

      • Augustus Frost says:

        My prediction is that American geopolitical hegemony will end with this major bear market and with it will come the end of the Anglo-American era culturally and economically dating from 1815.

        I don’t have any but if anyone does, start teaching your (great) grandchildren Mandarin Chinese and Arabic.

        The bear market I have in mind will last longer or a lot longer than 2035-2040.

        • Harrold says:

          Such a sunny outlook! You must be a riot at parties.

          Joking aside. You may be right. But something that drastic which never happened before is a very bad bet. You might as well bet that any bear market will end just like all the rest. Because if you are right, we are all screwed anyway.

        • Augustus Frost says:

          Harrold,

          The fundamentals which made the US successful in the past have substantially eroded away. In that sense, it’s definitely “different this time”. Today’s America doesn’t resemble the past and the change is definitely not an aggregate improvement.

          Nothing lasts forever meaning there is no reason to believe the US should maintain its leading geopolitical role forever.

          This doesn’t automatically mean everything has to get worse in absolute terms, but thanks to corrupt elites and an overwhelmingly dishonest and self-entitled population, that’s what is going to happen.

        • Happy1 says:

          Mandarin? China is about to peak in population by around 2030 and very clearly has become old before becoming rich. They will be a force for 30 or 40 more years but are already in decline with no bottom in sight.

    • andy says:

      I think this bubble will finally break indexing pipe dream. Not to mention they are stuffing indexes with garbage like Tesla (sp500) at near $Trillion valuation and price/sales of 100.

    • HowNow says:

      Speaking of “buy and hold”, it was believed (back in the late ’80s) that the Japanese investors were rock solid, and that the P/Es that were averaging in the high 50s were NOT overvalued because those investors were so steadfast. Then 1989 showed up.

      • phleep says:

        Hmmm — add an aging population, locked-in falling- birthrates wave, coming to a nation near you ….

        How am I gonna sell my house to a nose-ring meme holder of NFTs? All that oligarch money might start to seem attractive, as it did in the UK ….

        • HowNow says:

          Just tattoo an image of a Harley on your forehead. You’ll get plenty of house offers.

  18. unamused says:

    Where is Sombart when you need him?

    Creative Destruction means you let crappy companies fail and let less crappy companies fail later. It doesn’t mean you turn them into zombie armies so they can waylay people who have more money than brains and have never heard of Sombart.

    • HowNow says:

      Not hearing of Sombart may be a good thing. Aside from his complete disregard of human nature and instincts, he advocated central control and suppression of the individual. How long did that work in the Soviet Union? There were “black markets” operating probably since the time of Lenin, reminding us that human nature is what it is, fundamentally selfish. It just needs moderation, not repression. And Sombart dreamt up an ideology that fit very nicely with the fascist model in Germany.

      • unamused says:

        “My mommy always said there were no monsters. No real ones. But there are.”

  19. Putter says:

    Big bear market bounce coming. It will be Christmas come early for bears to reload!

    • andy says:

      I hope so too, and keeping dry powder to reload. But, from the Remenisences of a Stock Operator (in bear market) – ‘..the rallies grew feebler and feebler.” It’s kind of what we’re seeing now.

  20. Peachy says:

    I was watching “Wealthion” today and they were talking about how housing CPI inflation has peaked and how inflation in general has peaked, even though they already said before that it peaked in April. I think they need you on again Wolf so you can set them straight.

    • Halibut says:

      I saw that too. I think they were just suggesting that disinflation might be taking hold soon, which in no way means that inflation is under control or that “happy days are here again”.

      • phleep says:

        A mirror image of an Everything Bubble is an Everything Sucks Bubble? But not completely. There are pockets of value around if one was not too much the sucker. It doesn’t go in a straight line. But I have to live on these streets. It is not the wise folks I am worried about.

  21. OutWest says:

    Wake me up when the Nasdaq is down well over 50%.

    • Michael Engel says:

      1) The Nasdaq already made 50% correction of the wave up from Mar 2020 low to Nov 2021 high.
      2) After the first reaction to 38% of the wave down, NDX is testing May 20
      low. We don’t know what’s next in the casino :
      3) options #1 : up to 62%.
      4) Option #2 : nonstop plunge.
      5) Option #3 : a Bullwave to a new all time high for several years.

      • JeffD says:

        10% inflation. There will be no all time highs in real terms for at least two years, and probably more. In nominal terms? Well Turkey has an all time high in wealth, each and every day.

        • sunny129 says:

          JeffD

          ‘There will be no all time highs in real terms for at least two years’

          How about a decade or more? Reversion to the mean, taking ALL the excesses built since 2000 and go some more south!

          The return on the S&P in the next decade will be more likely NEGATIVE than positive ( see John Hussman’s blog and the charts!)

        • JeffD says:

          You are thinking linearly. That thinking no longer applies in a 10%+ inflation environment. If the market drops 80%, I can promise you real returns at some point in the middle of that or afterwards.

  22. LordSunbeamTheThird says:

    In the end the stock market will have come down, people will realise houses didn’t magically increase in real value, or salaries, and the only change in real value has been to their pension scheme…

    which has funded the financial sector windfall for decades.. Fleecing with the central bank ignorance?/support.

    • MarkinSF says:

      “and the only change in real value has been to their pension scheme…”

      Exactly. This is the real crime. And once the pension funds have been picked clean by the vultures the real pain begins.

  23. Hyperinflation IS the soft landing says:

    I’ll never understand why market pundits like Wolf act as though the Fed has ceased to exist anytime there’s a significant sell-off (making comments like “it’s going to take years to unwind”) but then aren’t surprised in the least when the Fed steps back to deliver new all time highs.

    So Wolf, “Why the pretense that this is a long crash of financial assets when you know good and well that allowing the everything bubble to pop is an impossibility even from a US Gov tax receipts and yield on the debt perspective?”

    Do you feel that America is so exceptional that hyperinflation of both real & financial assets is not possible here so it must end in deflation? If America isn’t anything special then care to explain how there’s no ‘everything bubble’ in Venezuela as a result of rampant money printing yet there is in the US from the same?

    • Wolf Richter says:

      Thank you for the entertainment. Got a good laugh out it.

      • Ayden says:

        My money is on long inflation too. But the worst won’t be here. There’s no stopping it in the next decade.

    • Richard Greene says:

      The Fed is actually doing things to slow the inflation rate they created. Not enough in my opinion — see data below. Those Fed members who are Democrats don’t want to cause a recession before the 2022 election. Democrats are already in trouble.
      Not likely that CPI inflation will return to 2% without Fed policy that causes a recession, in my opinion.

      Federal Reserve Credit last week added $1.5bn to $8.881 TN. Over the past 143 weeks, Fed Credit expanded $5.154 TN, or 138%. That percentage had peaked at 139%, so at least the percentage is going down.

      Looking at last week’s Federal Reserve Q1 2022 Z.1 “flow of funds” Credit report:

      Non-Financial Debt (NFD) expanded at a 10.2% rate during the quarter. Excluding 2020’s extraordinary first-half Covid stimulus period, there has been only one quarter (Q2 2003’s 10.7%) of double-digit NFD growth since 1986.

    • MyLadyHumps says:

      Those are the facts.

      Either the Fed pays the enormous and growing deficit or no one does.

      Allowing interest rates to be determined by the markets and no longer buying treasuries with mouse click money would render the US government insolvent.

      The Fed will continue to fund the government the same way all failed banana Republics are funded.

      The deflationistas are in denial of the facts or simply incapable of doing simple arithmetic.

  24. JK says:

    I have been pumping oil, natural gas and gasoline futures since 2020. Everyone needs energy.

    • elysianfield says:

      “I have been pumping oil, natural gas and gasoline futures since 2020. Everyone needs energy.”

      Buy forestland. Wood stumpage is the only energy source that an average investor can purchase and control.

    • Richard Greene says:

      This may have little to do with energy futures but I write a monthly column on large corporate insider trades.
      I’m working on one today.
      I see more insider sales of energy stocks in recent weeks than I can remember at any time in the past six months.

      • Wolf Richter says:

        That’s interesting. A few days ago, I heard from someone that is following energy closely, and he said that fast money moved into the energy stocks, and that the moves have been so big since then that he expects the fast money to get out of energy soon, and he was starting to take the other side of the energy trade.

        • Marbles says:

          Been on my mind also. Thanks for the answer yesterday.

        • Richard Greene says:

          This surprised me.
          The Corporate Insider Sell Buy Ratio I calculate (one of seven stock indicators) was Bearish in May, but Neutral so far in June.
          I look at trades of $5 million+ that increase an existing corporate officer insider’s position by 30% or more, higher or lower (THE BIG TRADES). I ignore trades by investment companies with 10% or larger positions.
          My seven market timing indicators are Bearish at -4, with a range of -7 to +7 (I’ve used them since 1977). They were -3 on May 1, 2022. So are even worse now.

          A large number of large insider sales of Chevron (CVX) especially caught my attention. It’s not far from the 52 week high. If I owned that stock I’d sell it in two minutes! Insiders must know something bad. Energy stocks have been rare for insider sales (large or small) in the past six months (I can’t remember more than six months ago)

          My source is:
          http://openinsider.com/

  25. Xaver says:

    Interesting article. Short is right in this market. You have to be prepared for bounces tough. Long way to go.

  26. Tone says:

    I’m not the sharpest knife in the drawer, but I’ve taken too many beatings in the past…Summer is typically fun time for the traders…September…is typically the worst month…and after years of manipulation…it should be back to the norms…and don’t forget December is tax loss season…I’m waiting for these periods to play out…you can fool me 10 times, but I’m older and wiser now 😎

    Cheers

  27. YuShan says:

    “It took 12 years of money printing and interest rate repression to inflate this Everything Bubble, and it’s going to take years to unwind it.”

    I fully agree with this. In my observation most people are still in the denial phase. People are still looking to buy the dip, expect the Fed to rescue them, etc. As they have been conditioned to do for over a decade.

    Looking at the S&P500, it is objectively still VERY expensive by time-tested standards such as Shiller P/E (CAPE), Price to Sales, Market cap to GDP, Sales margins, etc. While this cannot be used to exactly time the market, these are reliable indicators for low (even negative) average returns more than a decade out. John Hussman has great writings on this on his website, which are highly recommended reading for any long term stock market investor.

    • HowNow says:

      John Hussman, imo, is the proverbial “stopped watch”.

      • YuShan says:

        The “broken clock” argument is often unfair (and is certainly unfair in this case, IMO).

        People who called for popping of the dotcom bubble early, or the popping of the housing bubble pre-2008 were also called broken clocks before it happened, but were proven right in the end.

        Important here is that they were proven right because they WERE right. There is a difference between for example predicting five heads occurring in a row while flipping a coin, and a prediction based on abnormalities that cannot last for fundamental reasons (for example: multiples cannot keep expanding forever).

        The guy that calls for five heads in a row is the “broken clock”: he will be proven right eventually for pure statistical reasons. But people who called popping of the dotcom bubble or the housing bubble, nobody now denies that it was madness that couldn’t last. These people were simply right.

        • Island Teal says:

          Ironically I re watched most of the clips from “The Big Short” yesterday and now just read this article and comments.
          I’m with you on this. Bad times are ahead.😟😟

        • Tinky says:

          Well put. Doug Noland, who has been publishing his Credit Bubble Bulletin for years, is another one who is incorrectly criticized in that manner.

          His perspective, and explanations of “bubble dynamics”, are well worth reading.

      • Augustus Frost says:

        The goal of every individual (as opposed to institutions) should be to maintain or increase their living standards and quality of life, not maximize returns or beat the market.

        I have no problem with the majority gambling in this maniacally overpriced market. But like 2008, anyone who does so risks having their portfolio crash, value or their house decline or crash, and then losing their job. This happened to millions and the only thing that bailed them out was reflating the mania. This especially applies to those who were older 14 years ago.

        The problem I do have is when this mania crashes (and it will), most of the people who lose their shirts are then going to demand that those who were prudent bail them out, again.

        Anyone who owns this unprecedentedly overpriced market deserves all the losses they get, just like they kept their gains up to this point.

      • Cookdoggie says:

        Hussman is incredibly smart and very generous in sharing that knowledge. He wandered off course about 10 years ago as many of us did, not believing the “Fed put” could last forever. In a real market with interest rates free from manipulation, things would have turned years ago. The Fed’s successful, abrupt intervention to stop the 2020 market crash just solidified the legend. Indeed, it appears the only thing stronger than the Fed put might be the Inflation Genie, and I am so glad she is finally here. Mr. Powell, tear down this wall of hubris!

      • Richard Greene says:

        But the perma bears have started to sound sensible this year, for the first time since 2008. That’s a bad omen. I also include David Stockman and Michael Snyder. Perma-bears are right once is a while. As a group, US economists ave never predicted a recession — that doesn’t help investors either.

  28. JeffD says:

    If Adobe falls below $330, it will signal the end of the world. I have watched that stock relentlessly march higher on constant overvaluation for over 30 years. If even Adobe can’t do it anymore, it is game over.

  29. Dave k. says:

    I’m still betting on America even with all the doom and gloom here. Look around are any other markets or countries doing better?

    • Augustus Frost says:

      Yes and no, but other stock markets aren’t in an equivalent mania. The US stock market is (and has been) in deep outer space valuation wise and is an outlier versus other stock markets for somewhere around a decade. Same theme prior to the GFC and was also more overvalued at the dot.com peak.

      For the near term and foreseeable future, the fundamentals are more uniformly bad than good globally and might be worse in most of the major economies than in the US.

      Even if your inference is correct, if the mania has ended, anyone who buys the US market will still lose big. Given the much worse overvaluation, my prediction is that the US will lose more value than most major stock markets. Other stock markets have effectively been in a bear market since 1999/2000 or 2007.

      • sunny129 says:

        Augustus Frost

        This is a 3rd largest ‘ everything’ bubble created by insane credit creation by CBers including our Fed!

        This is a GLOBAL event affecting all ASSET classes, especially stocks, bonds and RE!

        Global debt (at minimum) went from 5.1 T to 31.5 Trillions, a record peak, in human history, since 2008

        Reversion to the mean is as natural as $ seasons, will affect ALL, some more than the others!
        Until acute demand destruction affects everything, money is made by going AGAINST the mkts with some hedges!

        Most of the retail investors have become ‘pavloved’ and spoiled by Fed’s easy-peasy monetary policies since ’09.

        They are NOT trained either mentally or other wise to go short against the mkts. Why? Because they are ‘seduced’ by media hype ‘ In the long term ( mine, my children’s or grand children?) will always go up.

        So many retail investors are bound to end up, holding the bags, just like in every bear mkts including 2000 and 2008. The big difference GFC will look like a walk in the park!
        I hope I am wrong but KARMA is a bitch!

        • Happy1 says:

          The US market is much more overvalued than overseas markets. Almost all appreciation in my portfolio is US. It has been a lost 2 decades for overseas markets. Those of us patiently sticking to asset allocation plans including fixed percentages of overseas stock are way overdue for that to pay off, whereas the US market is so incredibly overvalued, it’s hard to see positive returns in the next 20 years.

    • Einhal says:

      We’re only “doing well” in the sense that we can still trade our printed dollars for actual stuff.

    • MyLadyHumps says:

      I’ve gotta bet on Guatemala. If you’re going to bet on a banana Republic pick one that has actual banana production.

      God bless Guatemala. God speed little doodle.

      • Richard Greene says:

        Did you also graduate from the Lame Jokes Academy? I’m a 1985 graduate, voted most likely to bomb at a comedy club.

  30. Marco says:

    How far to go Wolf, at your guess ?

  31. Michael Engel says:

    1) SPX, DOW, IWM weekly DM #7 was cancelled. Wall street fooled
    investors. DM #7 was a bull trap. Most experts believed that the trend is UP !
    2) NDX reached DM #9 intact. SPX, DOW and IWM imitated NDX on the way down.
    3) NDX 30 min : a Lazer down. When breached, a small waterfall.

    • curiouscat says:

      Michael Engel

      I am impressed with your knowledge of acronyms and abbreviations. Would you mind talking in terms that poor inexperienced folks like myself could understand?

  32. Ben Sargent says:

    Market timing wish I could time the markets! The Redbox casino slot looks like fun when trading is free and one can trade on margin!

    Wolf says the facts the best irrational markets, short covering, meme stock end games, smart phones, txt warnings, quant trading, the list goes on and on. Hedge fund closings converting to family wealth funds, the last part is evidence the hedge funds get too big to execute trading for gains so these funds close and preserve the printed wealth.

  33. Ben Sargent says:

    Michael Engel: What does DM#…. mean? I must be a complete imbecile!

  34. Michael Engel says:

    4) NDX weekly : there is a line coming from Aug 31 2020 high to
    Mar 1 2021 low : please, check this line next week.
    5) This line started a channel up : Feb 8 2021 to Apr 12 2021 highs // parallel from Mar 1 2021 low ==> bubble up, bubble down and back to the trend line.
    6) NQ 30 min Lazer down.

  35. georgist says:

    The bubble is longer than 12 years.
    The 2008 bailout was a response to printing from 1997 to 2008.
    Same for housing.

  36. Crush the Peasants! says:

    App Crap Thwap!

  37. Hardigatti says:

    Too much negativity for a Sunday morning. What you guys need are some uplifting thoughts.

    Here we go:

    Quantum theory is our most successful theory explaining reality so far. At the smallest scale, it allows for quantum fluctuations due to Heisenberg’s uncertainty principle. A quantum fluctuation can create an electron and positron pair out of nothing. For a short period of time, then the law of energy conservation has to balance again and the newly created particles get absorbed into the quantum foam again.

    Some physicists believe the entire universe is a quantum fluctuation.

    There you go. Something for nothing. There is a free lunch after all.

    Invest accordingly.

    • Richard Greene says:

      What does that have to do with the stock market?
      I say that theory is all fluxed up.

  38. historicus says:

    Where are the “MMT” (deficit spending doesnt matter) people and the “trade deficits” don’t matter” people?
    Notice the “doesnt matter” common thread. Similar to J Powell saying M2 “doesnt matter”.
    Maybe all these things MATTER!
    Maybe what these people “think” doesnt matter.

    “What could be more absurd than to put important decision making into the hands of those who pay no price for being wrong.” T Sowell

  39. there is still way too much exuberance, way too much liquidity, way too much craziness. And the bottom isn’t in until this kind of craziness is snuffed out.

    It took 12 years of money printing and interest rate repression to inflate this Everything Bubble, and it’s going to take years to unwind it. (well said)

  40. Michael vaughn says:

    Wolf, what’s the level on margin debt? Is It still stratospheric or has it come off a little?

  41. DR DOOM says:

    2 White Squirells appeared in my walnut trees on the day of the Town of Brevard N.C. White Squirell celebration. It rained in Brevard on their side of the mountain but not my side. Brevard’s White Squirells were not in sight. These two Squirells were last sighted on my property 3 days before this Friday’s sell-off. There have been no sightings of the White Squirells on my property over the weekend. My White Squirell Market prediction for Monday is neither good nor bad. If they had appeared today,Sunday,I would be ringing the alarm. I sold some SQQQ shorts on Friday just to ring the cash register a little. I am thinking that there is going to be a long slow painful slide into the crapper.

    • Harry Houndstooth says:

      Good for you, booking the cash from the SQQQ rally. I decided to hold our for at least the premarket on Monday.

      You may be the winner here.

    • phleep says:

      I wanna see white squirrels dancing with black swans! We are almost there.

  42. notdeadyet says:

    In a market like this, I was taught to buy low and buy slow… And… make certain the chickens are laying eggs for you. Oh, and don’t pay more than 10xE for those birds (“E” stands for earnings or eggs).

    • historicus says:

      “In a market like this,”

      I quite sure no one has seen a market like this.

    • YuShan says:

      Also, make sure that you are looking at an “E” that is sustainable. In past years, “E” got artificial boosts from:

      – Stimulus checks
      – Large government deficits
      – Globalization (now reversing)
      – Very high corporate leverage
      – Unsustainable worldwide debt/GDP expansion in general (i.e. demand was pulled forward)

      • Einhal says:

        Not to mention that businesses were able to raise their prices for a period of time prior to employees’ demanding higher pay (either directly or by leaving to go elsewhere, for that higher pay). Higher labor costs will wreak havoc on many public companies’ earnings, especially in those with small margins to begin with, as Target and Walmart have demonstrated.

        • YuShan says:

          Definitely! That is going to be a big theme going forward.

        • COWG says:

          Macys has a big sale going on now on their website…

          Apparently the inventory they couldn’t get has arrived just in time to be useless…

          I think we are going to see more retailers and e-retailers dumping to try to get cost back…

          I look for more layoffs as well as these guys try to figure out the right-size for sales vs employees and protect their stock price…

          I think the wage gain over the last couple of years is going bye-bye…

          Petunia needs to get busy and save us… :)

        • Anthony A. says:

          COWG, a Home Depot near me has so much concrete bock, bagged lawn materials, outdoor pavers, etc, etc, that their rear storage area is overfull and they have taken part of the customer parking lot to store this stuff. Spring is over and no one is doing big yard work now.

          They definitely overstocked for this season. Maybe they paid big prices for that inventory too.

        • Iona says:

          Getting good deals on Amazon, they lowered their minimum purchase to qualify for free shipping and things arrive in a few days instead of a few weeks.

          I had to short consumer discretionary after seeing this everywhere

  43. cd says:

    seems like they are following a mid term election year commonality , I think you might want to be in stocks in late Sept

    Energy is good for 2-5 years in this cycle. A lot of great names still cheap that will wipe debt out fast and be very positive for your portfolio

    long term cycles are hard to gauge. There are sectors you will have to start looking at, biotech is down 60%, I don’t think rates at 5% really play into any well capitalized with phase 2-3 needed drugs…

    MLPS will pay out well for 5 years, the liquidity is there now…
    Cathy Woods was in the eye of the big boys, they started funds to short her funds, inability to change, pompous with picks…

    one warning, there is a lot of money compared to 2007-8 when you saw bear stearns and banks get wiped out. They can move the market how they like but one thing is clear the current admin is non investor along with business friendly.

    • The Real Tony says:

      Energy is good until the war in the Ukraine ends. The speculators will drive the price of oil down to exactly $74 a barrel without ten trading days.

  44. Rico says:

    At some point will there be a credit freeze and what will the Fed do ?

    • Wolf Richter says:

      Rico,

      I think you mean “credit squeeze.” A “credit freeze” is what I put on my credit bureau accounts.

      The Fed is specifically targeting “financial conditions”; they have been ultra-loose, with all this interest rate repression and money-printing. Now the Fed is trying to make them tighter by raising rates and starting QT, and now they’re getting a little tighter, but they’re still historically loose, just not as loose as they were. As the financial conditions tighten further, you might hear the term “credit squeeze.”

      The Fed has only one tool to fight inflation: increase the cost of borrowing, meaning tighten financial conditions, and thereby creating a “credit squeeze.” That is the goal of tightening monetary policy in order to fight inflation.

      • The Real Tony says:

        They can destroy the cryptocurrency market which would push down the inflation rate by making the young people poorer thereby bringing them back into the workforce thus pushing down wages consequently inflation. Last I heard 83 percent of teenagers own Bitcoin. That wouldn’t affect their precious fraud stock market that they only care about.

        • COWG says:

          “ Last I heard 83 percent of teenagers own Bitcoin”

          Last I heard 94% of teenagers had pimples and bought bitcoin because of the ads on the porn sites …

          I don’t think teenagers are going to make a point for you…

          Jus’ sayin’….

        • Depth Charge says:

          “Last I heard 83 percent of teenagers own Bitcoin.”

          I call extreme BS on that number.

      • Rico says:

        Was wondering if there may be a Lehman brothers , AIG situation with all the junk debt out there.

        • Wolf Richter says:

          Rico,

          There are lots of zombie companies out there that need to restructure their excessive debts in bankruptcy court, wipe out their equity investors and some of their debt investors, and emerge with much less debt and more vibrant than before. This process should have happened a long time ago. That’s what this economy really needs: there is way too much corporate debt out there — including commercial real estate debt — and it needs to go away, and the way it goes away in the US is in bankruptcy court.

  45. Old Ghost says:

    No one, not even Wolf, knows how fast (or slow) the crash will be.

    In the late 19th Century, markets were like the teeth on a saw. On one side, a gradual rise. The down side was much quicker (and sharper).

    I don’t think it will take 12 years to crash the stock markets. Once it gets rolling, I would guestimate a bottom in about 3 years time.

    • Wolf Richter says:

      I think it’s plausible that there may be a bottom of sorts in 3 years, and then some kind of increase, maybe not a rally, and then further declines. Look at the stock exchanges of Japan, China, Spain, Italy, Germany’s DAXK, etc. The S&P 500 has been the exception. Other stock markets, after a huge bubble, have remained FAR below the bubble highs for DECADES and STILL remain far below their bubble highs.

      • Trucker Guy says:

        This to me begs the question of backwards looking statistics.

        For decades american retirement has been tied and reliant on stonks only go up. And the compounding interest, dividends, etc. In a world where stocks don’t have such predictable averaged gains every year; Like 1990-2010 Japan, Should young people be putting money into IRAs 401ks etc?

        • Wolf Richter says:

          Young people are very resilient. They can bounce back from just about anything, and then it’s just part of learning the ropes.

        • Petunia says:

          TG,

          I advised my own son to never put a dime into any retirement account and to disregard any match. If you can’t access it readily, you don’t own it. These accounts were designed to be pools of money that provide liquidity and fees to financial firms and can be taxed away in the future.

        • Wolf Richter says:

          Petunia,

          “If you can’t access it readily, you don’t own it.”

          You can sell the funds in your 401k any time and pull all your cash out, no problem. It’s yours aright. You just give up the tax savings and you have to pay a tax penalty (I think the tax penalty was waived during Covid). You can also roll over your 401k into an IRA without any of the tax issues, where the funds are in your brokerage IRA account, and you can invest these funds into anything your broker offers (with some limitations, such as options and shorting, as far as I know).

          The problem with 401ks is the fee structure of certain 401k providers, such as ING which I looked at for my wife years ago. There can be layers and layers of fees, only some of which are readily disclosed, and the others you have to dig out of the small print of pages and pages of documents or find out by contacting the provider.

        • Phil says:

          Petunia must be joking, below. That’s ridiculous. It reduces taxable income and matches are sweet. I have a lot waiting for me when I retire next year. It’s been in cash for a long time.

        • Petunia says:

          Wolf,

          You forgot to mention that the 401K is being used to means test social security and medicare. It will get worse over time, count on it. Also it affects your pension benefits, if you are a govt employee with multiple entitlements. That pool of money has a cost way beyond what you just mentioned.

          I told my son to save his money out of any retirement plan that isn’t funded entirely be the company. I didn’t even mention the bloodbath I took when Bear Stearns went under and that was all company funded in my case.

  46. sunny129 says:

    Coming BEAR and the retail investors

    There is NO more INVESTING just TRADING in the vicious volatility Mkts

    1. Those ( nimble traders) who know and use option trading as a risk management tools, NEVER fear the bear! Volatility is a friend of experienced and nimble traders
    2. Inverse Leveraged ETFs when used appropriately ( matched with the opposite variety as a hedge) work wonders in a secular BEAR mkts
    3. Short/intermediates time frames of PUTS against ‘shifting’ long leap calls (as a hedge) is a good strategy during Bear
    4. Remember there is always BULL mkt some where, amidst the secular BEAR. Study 200 yrs of Mkt history!
    5. When the pendulum of Bull has swinged for one way ‘hard’ for nearly 13 yrs, expect the swing the other way, real hard! Just mkt history!

    Those who cannot the remember the past are condemned to repeat it
    -George Santayana

    • cd says:

      funny, I mentioned this earlier but still in moderation world.. great buys still available in energy sector if you know where to look

      • Sunny129 says:

        Cd

        You think I never knew that? That’s 2 month STALE old news!
        I am still long in option calls short/intermediate terms in select stocks/ETFs.

        Watch out for acute and deep demand destruction either mid or late summer. Prepare for buying the PUTs on them. I have my leap long puts on them! Do you?

      • Petunia says:

        cd,

        Buying a designer handbag 2-5 years ago and not using it, also turned out to be a great investment. You could have doubled your money. Sneakerheads buy at retail for under $200 and resell for thousands. Does any of this make any f’ing sense?

    • The Real Tony says:

      In theory the market should react more like what a ponzi would do when it falls. There is no market, no fundamentals no nothing. The stock market today is completely different than any stock market before around 1994 before it turned into a three ring circus sideshow. Every bet is on what the bankers and the Fed will do next not on world events, the economy, profits or expectations of what will happen in the future. In the past the bankers have taken the short side of anything that made sense so all the stupid people have made money and the quote “smart” people lost their shirts all thanks to the bankers pushing out the longs with all their money on what should have been the wrong trades for the bankers based on common sense or anything rational. This is what you’re up against when you day trade. It isn’t as easy as it was many decades ago.

      • Harry Houndstooth says:

        IMHO, there exists ETFs which simplify shorting the markets.
        “In the old days”, I would have borrow shares to short (in all of the obvious shorts no shares were available) only to get a call when the stock went up that they wanted their shares back.

        SRTY and SQQQ are what I use to time the market.

  47. Uber Driver says:

    If this is the 1970s then stocks should largely trade sideways for the next couple of years. From a global perspective things appear quite bleak. Should we have a 2008 style event by years end then our society has only one solution to that – cut interest rates and hand out free money.

    Without a crash the market will probably be at 4000 years end because there is way way way too much liquidity out there. Should the Fed start cutting then 4400 or higher on the S&P. The P/Es are meaningless because there is too much money out there.

    Inflation inflates everything, not just cans of beans or gasoline.

    • sunny129 says:

      This is NOT 70s ( I was here!) or 2008!

      Conditions are vastly different and Worse!
      Suffice to say, GFC will look like walk in the park!
      Good luck!

      • phleep says:

        End every sentence with an exclamation point! It makes it more true!

      • Happy1 says:

        History does rhyme though. There are elements of the 70s, late 90s, and 2008 right now. All rolled into one.

    • John H. says:

      Uber Driver-

      “Should the Fed start cutting then 4400 or higher on the S&P.”

      There is another a alternative to “cutting” that seems more likely, but would also have a positive effect on the S&P: watch for jawboning and mainstream media echoing of the word “pause.”

      A cut is not really necessary for a market pop…

      • Wolf Richter says:

        John H.

        The first and last reference to a “pause” by a non-voting FOMC member was quickly shot down in unison by voting FOMC members and by the CPI report. People who bought the fake “pause” bounce are now paying for it.

  48. SoCalBeachDude says:

    Folks just need to calm down and enjoy the lovely Spring. Don’t worry. Be happy. This other stuff is just money. Folks seem to be obsessed with Quantatative Frightening. Get over it.

    • sunny129 says:

      ‘Folks seem to be obsessed with Quantatative Frightening. Get over it’

      B/c this the first in Fed’s history QT is being applied and NEVER before!
      The response of the Mkt is UNKNOWN, unlike QE!
      From swimming in LIQUIDITY to LIQUIDIY squeeze!
      Repo is already 2 Trillions/day(night) What next after QT?

      • MyLadyHumps says:

        Actually this is the second QT. We know how the market will react and we know how the Fed will respond.

        1) the market will drop
        2) the Fed will resume QE

        It’s not rocket surgery. Don’t try to over think it.

        • Wolf Richter says:

          Last time the Fed did QE and markets plunged was in 2018, and the Fed ended it in 2019. But at the time, inflation was BELOW the Fed’s target. Now inflation is multiples of the Fed’s Target. You can compare nothing that happened over the past 4 decades to what we have now. You have to got back to the 1970s when inflation was surging.

  49. sunny129 says:

    For the first time, since I am reading this blog, I am seeing MORE bearish comments than bullish, for a change. I have been a semi perma-bear for more than 2 yrs since March of ‘2020, against this surreal bull mkt! I was a lonely voice, where I got phophafed almost every other day! Basically I was a investors based fundamentals most of life (in the mkt since ’82). Not any more after after this February. Just a nimble trader, mostly against the mkt!

    This surreal bull financed, relentlessly by credit creation and ill thought out Fed’s monetary policies, was more than a shock! Utterly insane! My vindication has started on happier note. Gathering back my lost profits very slowly since ’09. Stocks go up on elevators but come down in an elevator.
    One new thing I learned since this February is there is always a furious bounce backs along the secular Bear. One make money properly timing (with options – calls) anticipating these bounces. It is more of an art than science. Always made more $ during bear than bull! Now I am curiously more relieved and less anxious than ever before! B/c the beginning of the END has begun!
    B/w experience is a good teacher but the tuition is very high!

    • Richard Greene says:

      Of seven stock indicators I follow, only one is short term — the AAII Sentiment ratio that I calculate by ignoring Neutral opinions. I’ve used it since 2005.
      It stopped working this year.
      The AAII survey investors (individuals) have been quite bearish for four months — that makes the indicator bullish, because this is a contrary opinion indicator. Yet there was no stock market rally as this indicator continues to predict.

      This indicator was last bullish, and correct, from May 2020 through August 2020. So small investors, by this measure, ARE bearish, but the market refuses to hit a short term bottom, as it would consistently do in the years from 2005 through 2021 — that’s a bad omen.

  50. Mike E says:

    Mike Green watches ETF flows and I’m a believer. Last week, $9B in ETF inflows (stats are on etf dot com).
    Money is still rolling into ETFs, means not enough fear

    • sunny129 says:

      glad to hear that. good for my leveraged inverse ETFs and PUTS!

      Lemmings are fast running towards the cliff! these investors are ‘comatosed’ by pavlovian’ syrup doled out by Fed since ’09!

      Their investing mind is addicted to free money and the ‘Happy days are here again! Rude awakening is ahead. After brief bounces more suckers get it!

  51. Jdog says:

    At some point the average worker will tire of seeing their 401 / IRA decrease in value and begin to make adjustments. As we all know, the average people usually act in unison, and will follow the crowd, that is when the fun will start…..

    • sunny129 says:

      Average worker only sees his/her qtrly statements. Then the bulb gets ON!
      None of the Pension funds, 401K or MFunds can protect investors from the ravage of a Bear. They just CANNOT go against the mkt by SEC rules!

      • ru82 says:

        Most friends I know moved their 401ks to cash at the beginning of the year. Now we are just waiting for a good time to get back in.

        I guess that will be when the FED announces they are finished with interest rate hikes.

  52. Richard Greene says:

    Good article … except I don’t know why Monday would not be interesting. The day after a big decline or rise is usually interesting. Thanks for the easiest to read charts online for those of us who have vision problems.

    The bubble is much more obvious with the high flying stocks you featured in the charts. I can’t understand why that Cathie Wood still gets attention. She seems like a “pump and dump” artist to me.

    Stock valuations remain well above the historical average using the Price to Sales Ratio and Market Capitalization as a Percentage of GDP, both of which work well as market timing indicators for 10 year investing periods, but not for the next year.

  53. The Real Tony says:

    Seemed everyone knew the stock market would drop heavy Friday yet it did fall. Every youtube video said get out of stocks before June 10th and the Bank of Canada which already knew the May inflation and CPI rate in Canada for May before June 10th hinted at a .75 rate hike at the next meeting. Everyone knew it yet the stock market still fell. I guess it was the day anyone who listened to unbiased news made money or couldn’t lose.

    • Cookdoggie says:

      I found it curious that the market fell off strongly Thursday afternoon going into the close as well. Perhaps a leak of the CPI print?

      • The Real Tony says:

        The Bank of Canada leaked everything when they hinted at a .75 percentage rise in the Bank of Canada rate at their next meeting before the May CPI rate comes out in Canada. I told everyone early last week on this blog. Short Canadian bonds and wait for the May CPI figure up in Canada. A short term trade.

  54. sunny129 says:

    BLACK SWAN forming?

    Daily REPO has reached 2 Trillions/day(night)
    More distrust growing between TBTF Banks. Dimon no wonder seeing hurricanes!
    MFund managers who run Money Market accounts no longer want to park their money with the TBTF banks for the simple reason that they see trouble ahead and frankly don’t trust them.

    Some experts claim that this insane level of Fed “support” is due to the TBTF banks off-loading deposits from their balance sheets onto the Fed’s balance sheet in order to meet the Basel 3 requirements.
    Wolf could comment on this!?

    Sadly, the MBS waste of the 2008 era is still lingering and festering in the deep and dark pits of the Fed’s toxic and bloated balance sheet.
    But now Powell wants to unload that MBS waste.
    Great idea, but who wants to buy toxic waste? Their value destined go south with mortgage rates rising! That’s how housing bust 2 starts!

  55. sunny129 says:

    Another trivia on GDP and Fed’ balance sheet

    In the second quarter of 2008, for every one dollar of GDP, there was 6 cents on the Fed’s balance sheet … right before COVID hit, that number was 22 cents … it recently peaked at 37 cents and today stands at 36 cents.

    GS forecast (forever it’s worth!?) Goldman’s balance sheet runoff forecast implies that it will stand at 23 cents at the end of 2024 and 22 cents at the end of 2025.

  56. sunny129 says:

    No bid for MBSs!

    The CPI news this (Frida) morning was so awful that it changed the bond market’s view of Fed trajectory, and the weakest sector broke. In bond jargon, MBS went “no-bid.” No buyers for MBS. Then a few posted prices beyond borrower demand, not wanting to buy except at penalty prices. Overnight the retail consequence has been a leap from roughly 5.50% to 6.00% for low-fee 30-fixed loans.
    Freddie’s weekly survey will not discover today until next Thursday.
    zh
    Wait N Watch!

    • Dan Romig says:

      sunny129,

      Louis S Barnes wrote about this on 10 June, and another site with “good and bad” (in Wolf’s words) picked up on it.

      I found it well-written and he says:

      “Now it’s time for Wile E. Coyote in his Acme sneakers, running off into thin air and all okay until he looks down. Looking down… MBS are such a weird market that the other markets have not fully processed what is happening. Stocks are down 2% today (Friday, 10 June), but would be down a hell of a lot more if considering what a full-stop to housing will mean.”

      As Wolf has said, the Fed never should have been a buyer in the MBS market. Mr. Barnes continues:

      “Today… is it a coincidence that MBS have blown simultaneously with the Fed’s flip from QE buying to allow runoff and threatening to sell?”

      No. It is not a coincidence.

  57. Bobber says:

    Mohamed El-Erian was on Face the Nation today, and he dragged the Federal Reserve through the mud. With inflation out of control, Federal Reserve policy mistakes are now front and center. Its very existence will be questioned by the masses.

    It’s assuring to see people and organizations held accountable for massive mistakes. It needs to happen more often.

    • sunny129 says:

      Fed has got away with murder and will do it again b/c average lawmaker is awfully deficient in an average Financial literacy! It is displayed by the questions they ask to Fed’s chair person and FOMC members! OMG!
      They just want their investing capital growing, at any cost! Wanted always more QEs. stimuli and what NOT!

      Remember what they ( Fed – Barnake, Yellen+) said last during 2008 housing bust!
      “NO ONE SAW THIS COMING”

      Now they have COVID & PUTIN to take blame and hide!

    • Nathan Dumbrowski says:

      Wow. Just read the transcript and you summarized it. I went in with an open eye as I had enjoyed a book by El-Erain recently. He was pretty brutally honest that they let and had a good expectation.

      “…because until you regain credibility, you cannot get on top of inflation expectations…”

      • sunny129 says:

        N Dumbrowski and Bobber

        I agree with you both.

        ECB explained why they were wrong re inflation but our Fed is silent so far. Jaw boning was been used as a policy tool.so often it is a joke now,
        Fed has problem first with their credibility re their repeated pontification – Our economy is strong, echoed by Ms Yellen also, even last week.

        Their tool box is empty. Fed is helpless in negating the effect inflation on food, energy, rent or health/medical care expenses. Historically Fed has NEVER been pro-active, just reactive. The cure lies in demand destruction leading to recession. they are unwilling to accept that bitter reality.

        The biggest flaw (IMHO) is that Fed, since Greenspan down to present Mr Powell (including Barnake and MS Yellen), all believed in ‘wealth effect’ on consumption. Fail to realize that over 90% of Wall St wealth is held by just top 10%! Wrongly perceived the Mkts as a reflection of our economy.
        Barnake is/was on record saying that the chart of Russel 2000 was the true display of a strong economy (of course, he forgot to mention-financed by insane credit creation and NOT by productive growth). The same perception and blind faith has been carried by the current team. I have little faith in them.

        Here after, sadly the Mkts will dictate them and they will just react, with whatever, too late and too little!

        • Bobber says:

          El-Erian is just spouting what Wolf has been saying for a long time. Finally, it is hitting mainstream shows that Average Joe watches, like Face the Nation.

          Nothing goes to heck in a straight line, except Federal Reserve credibility and the USD. The monetary system has hit bottom and now requires a complete revamp. There is no place for interventionist policy, with its bubbles, busts, bailouts, and Wall Street cronyism.

    • Depth Charge says:

      El-Erian is just angry at the FED for cutting him off at the knees and taking away his spiked punch bowl. Now he’s throwing a tantrum like a spoiled, petulant 4 year old who has had everything in life but it’s never enough.

      Go back several months and El-Erian was boldly proclaiming that the FED couldn’t take away the party favors because everything would collapse, so they were, in essence, stuck. Well, now that the FED has left El-Erian without his financial dope, he’s turning white and getting the shakes. And he’s pissed. The FED just broke it off in El-Erian’s behind….

      • sunny129 says:

        Depth Charge

        Mr. El-Erian is a professional experienced investor, more likely he is a trader now, like me in this crazy volatile mkt. He knows how to protect his and his clients’ portfolio with risk management tools like option. I have also done the same from March onwards. Many don’t know option trading. Hence they will be sitting ducks!

        All the macro indicators were flashing RED since late February! But most retail fail to discern this, went on buying with their blind faith in Fed! They deserve what’s coming!

  58. unamused says:

    “Monday is Going to Be Interesting for Stocks”

    In a bad way for people who like asset inflation, but in a good way for people who prefer rational asset valuations. Unless the markets go up. Then the bad and good reverse and then it gets interesting for Tuesday.

    But probably just slightly bad or slightly good. And even with rising interest rates and declining leverage there’s still boatloads of money out there looking for a place to land.

    It would be interesting to know what kind of shenanigans are going on in the derivatives markets, but those are opaque to impenetrability, no doubt because the participants don’t want anybody to know when they’re going to blow up the Financial Industrial Complex, which is to say, the nature of the externalities they intend to offload onto the General Population. They want it to be a surprise.

    • sunny129 says:

      Any one buying on Monday, knowing very well that on Wednesday the rate will go up another 50 basis (75?) and the QT to begin, deserve what they deserve!

      Green in the morning and deep Red by 4pm!
      Right now the futures are RED!

  59. Seattle Guy says:

    Monday is Going to Be Interesting for Stocks -YEP futures gapped down and are down 2% already. Hang on to your shorts….

    • Wolf Richter says:

      Cryptos are getting shookalacked at the moment. Bitcoin at $25.6K

      • SocalJimObjects says:

        Yippeeeeee

      • Depth Charge says:

        BitCON now down to $22.8k. DoggyCON at a nickel.

      • Phoenix_Ikki says:

        Some people are definitely getting rich though, they already got out…afterall there’s only so many diehard Michael Saynor out there..

        “Do Kwon Accused of Cashing out $2.7B Before UST Collapse, Terra Founder Says Allegations Are False”

  60. SoCalBeachDude says:

    Monday is shaping up to be a very fun day in New York. Get out the popcorn, relax, and enjoy!

  61. MiTurn says:

    “And as long as this kind of crazy stuff keeps going on, the stock market rout is far from over, and there is still not a drop of blood in the street. There will be huge rallies, and they will draw more people in, and yes, some people already got wiped out, but not nearly enough to end the process of deflating the Everything Bubble.”

    Concur. One of my sons made me a beer bet. He thinks that the S&P will close tomorrow (Monday) down 5.5% or more. I took the bet thinking that after the early drop “value” buyers will come to the rescue and buy the dip.

    As the poem goes, fools rush in where angels fear to buy…

    • Nathan Dumbrowski says:

      Good wager. All eyes are on the Street and the FED. A weekend to digest the awful figures and get pounded by MSM. Tomorrow I see going south bigly. However I think there are a few rallies left in them. Global equities are being rebalanced at the macro level right now. Hope you get the beer you deserve. Better you bet on beer than your mortgage or life savings

      • Nathan Dumbrowski says:

        Can you taste the beer on your tongue. So close..
        3,749.63
        Real-Time Quote
        As of 4:15pm ET
        -151.23 / -3.88%

    • Richard Greene says:

      Declines over 5% in a day are rare.
      There were a few in March 2020.
      I suspect you will win the bet.

  62. SOL says:

    This weekends crypto market indicates a fleeting exuberance ahead.

    • Nathan Dumbrowski says:

      Crypto lending firm Celsius said Sunday that it would pause withdrawals on its platform, citing market conditions as the price of Ether and other cryptocurrencies tumbled.

    • Wolf Richter says:

      Crypto exuberance is gone when crypto is gone.

      • John H. says:

        From Reuters this AM:
        ________________

        In a blog post, the company said it had frozen withdrawals, as well as transfers between accounts, “to stabilise liquidity and operations while we take steps to preserve and protect assets.”

        “We are taking this action today to put Celsius in a better position to honour, over time, its withdrawal obligations.”
        ________________

        The term “over time” is certainly open-ended and ominous…

        • phleep says:

          Classic echoes of pre-Fed banks suspending withdrawals. Sorry, lockstep-Fed-haters, but it’s true.

          But now the mainstream banking and financial system does have the opposite problem (thanks to Fed’s abuse of its put). But a run is NOT happening on mainstream financial institutions, on a scary stocks day.

        • John H. says:

          Phleep-
          Celsius is a real-time case of old fashioned “Suspension Tension” in the alternative money space.

          Perhaps it’s time to consider resumption of species payment in the bank depository business.

          Might arguably be a step toward some much needed discipline in U.S. Government budgetary process.

          Time for a 21c. Monetary Commission?

      • Phoenix_Ikki says:

        Frozen withdrawals? Hmm..isn’t that what Ponzi scheme do when they are on the verge of collapse? Interesting parallel there..

  63. Kenny Logins says:

    Yeah BTC isn’t doing too well the last two days.

    UK indexes going down nicely today so far. CBOE VIX also spiked up really high late Fri.

    And I think BofE are going to double rate rise this meeting to keep up with FRB.

    It’s nice to have averaged out from Nov… I did a Satya and sold 50% haha… then I did 20% in a few steps towards the first FRB rate rise.

    I’m holding my BTC though. I took profits many times over so happy to gamble on that one.

    • David Hall says:

      The Binance Bitcoin exchange stopped trading. Bitcoin is in a sell off. Bitcoin seems like a Ponzi scheme.

    • phleep says:

      > I’m holding my BTC though. I took profits many times

      I do have to respect a voice with skin in the game. But there is such a thing as profits (and the linked pleasurable neuro-chemicals) being wrung out like a wet rag, to an opposite state. All the disturbance now suggests to me a fair probability of that.

      I am listening for the put to re-awaken and for now I don’t — hear — a thing.

      • phleep says:

        A favorite line: “love’s little nightmare, like.”

      • Happy1 says:

        Ha ha, please, make it stop. BTC is going to ground, it is a worthless speculative nothing, you had best get out while you can.

    • Depth Charge says:

      “I’m holding my BTC though. I took profits many times over so happy to gamble on that one.”

      What about the losses? Oddly, we never hear about them.

  64. SocalJimObjects says:

    The PPT will be out in force today.

  65. SoCalBeachDude says:

    CRYPTO FIRM HALTS WITHDRAWALS
    BITCOIN PLUNGE
    NOW NEARING $23,000…
    WHY IT IT WORTH 23 CENTS?
    CRAPTOS NEED SHUT DOWN

  66. SoCalBeachDude says:

    The only interest rate that matters is the yield (interest rate) on the benchmark 10 year US Treasuries and that is now over 3.23% and rising. It could get to 5.25% much sooner than anticipated which would normalize interest rates and get the US back on sound financial footing. Perhaps by the end of the year.

  67. SoCalBeachDude says:

    Today is a nice day to go shopping for BMWs. We’re going to the local store around 9:30 am and they have one of the best selections ever of both new and used cars and the 535d will be there a few days getting a couple of recall item done including the fuel pump courtesy of BMW so it’ll be a great time this week to really check out the current SoCal BMW market!

    • Depth Charge says:

      Be curious to know how a dealer has “one of the best selections ever of both new and used” in a time when dealers have the smallest and worst selections in history. The local Toyota dealer has less than 20 cars on the whole lot. Normally they have almost 500.

      • DawnsEarlyLight says:

        Don’t be fooled, SoCalBeachDude is there for the waiting room cake and coffee!

      • Wolf Richter says:

        BMW dealers are reasonably well stocked, apparently. Tesla has been eating its lunch for years, hitting BMW’s crucial segments in the bull’s eye: near-luxury and luxury sports sedans and SUVs.

  68. SoCalBeachDude says:

    The Yen is now around 135 to the US Dollar and collapsing fast and is now at a 24 year low.

  69. SoCalBeachDude says:

    As to the markets, it’s fun and wonderful to see them finally doing the one thing they’re supposed to be doing, which is TRUE PRICE DISCOVERY which is now headed beautifully in the right direction towards fair, reasonable, and intelligent pricing based on actual earnings. Happy days are here again!

  70. Brent says:

    Just in:

    “Jay-Z, Jack Dorsey launch Bitcoin academy in public housing”

    Brooklyn, NuYawk of all places 😀

    This is awesome.Like King Leonidas and 300 brave Spartans who died all at Thermophylae, 480 BC.

    Folks, instead of wallowing in schadenfreude, watching plummeting BTC/ETH charts, remember our ancestors at Lexington & Concord:

    “By the rude Bridge that arched the Flood,
    Their Flag to April’s breeze unfurled,
    Here once the embattled Investors stood,
    And fired the Shot heard round the World”

    • phleep says:

      I will defend the crypto holders’ right to their views, to the last crypto holder. With popcorn.

      • Brent says:

        Watching dem damn BTC plummeting charts goes well with background music and Steel Reserve 6-pack.

        Ed Herlihy ponderous intro:

        “When griping griefs the heart would wound,
        And doleful dumps the mind oppress,
        Then Music with her silver sound Is wont with speed to give redress”

        Cue:

        Heavenly Choir followed by quiet measured cadences of “Battle Hymn of the Republic” 😀

      • unamused says:

        Psychologists will tell you that most children will have experienced Schadenfreude by the age of four. It’s a childhood development milestone.

        Men and women alike tend to be attracted to people with negative personality traits, even after having been victimized several times. It is believed this explains rather a lot of investor behavior.

        It is also believed that human cognitive abilities evolved far faster than any corresponding capacity to manage them properly, which explains just about everything that’s wrong with people. Carl Sagan believed this would prove to be the undoing of civilization. Most theories of human personal, social, and political failure cite human cognitive deficiencies.

    • Phoenix_Ikki says:

      hahahaha…well I have plenty of schadenfreude saved up, probably since 2012 especially for the housing markets boom forever peeps, but I got some spare leftover for the likes of Cathie Woodshed and these Crypto bros out there.

      Judging by how the market is cracking lately and at how fast and this is even before official QT start, I might be lucky enough to get to use some if it real soon

    • Seen it all before, Bob says:

      Way back in Dec 2019 when bitcoin was 7K, it was held only by true believers in the concept of freedom of currency.

      Now at 23K (up 3X), it is powered by lemmings.

      • twinkytwonk says:

        My friend tried to get me involved in bitcoin back in summer 2020. I declined but he put his life savings in to it. I spoke to him during the heady days when he had quadrupled his money. He is still up 100% from his original bitcoin purchase but how much longer before he loses that?

    • Turtle says:

      “Jay-Z, Jack Dorsey launch Bitcoin academy in public housing”

      That looks like an Onion headline. But it’s real. LOL

      They going to praise the virtues of cash stores and pawn shops while they’re at it? Maybe install some lottery machines and put up a couple liquor billboards?

      What a joke.

  71. SoCalBeachDude says:

    And now, off to the races for the bottom!

    6:30 AM 6/13/2022

    Dow 30,735.35 -657.44 -2.09%
    S&P 500 3,804.61 -96.25 -2.47%
    Nasdaq 11,340.02 -414.20 -3.52%
    GlobalDow 3,617.05 -86.23 -2.33%
    Gold 1,840.30 -35.20 -1.88%
    Oil 119.51 -1.16 -0.96%

  72. Mendocino Coast says:

    Dow down 500 Starting bell love it or lump it 3/4 Pt short term rates ?

    • COWG says:

      Probably…

      But a full 1 per cent wouldn’t surprise me either…

      9.3% CPI-W last print is now equal to a 7.3% COLA baked in with another 4 months to go…

      But with this bunch it’s “ Don’t just do something, stand there”…

      So who knows what they’re going to do…

      They haven’t begun to feel the pressure yet, but it’s coming…

      • SocalJimObjects says:

        Powell will do a 50 bps cut, and then the market will rally.

        Eventually though they will really be forced to raise 100 to 200 bps in one go, and the market will CRASH HARD.

        • drifterprof says:

          I’m gonna check my old magic 8 ball fortune telling predictor to see if what you say is true.

        • SoCalBeachDude says:

          The Federal Reserve will not be ‘forced’ to do anything, and it doesn’t matter a hoot what its Federal Funds Rate is set to. All that matters if the yield on benchmark 10 year US Treasuries and nothing else at all in the way of interest rates.

  73. Einhal says:

    Why are none of the sycophants who relentlessly asked Wolf about his short here asking about it today? A few more days like this and his short will be in the money.

    • The Real Tony says:

      The shysters who rig the market (bankers et al.) have yet to sell anything so I’m assuming they’re still long stocks.

      • SoCalBeachDude says:

        Banks are not allowed to speculate in stocks in the markets but they do act as BROKERAGES and have sold trillions of dollars of stock on behalf of their clients recently.

  74. Gen Z says:

    Bitcoin just dropped below $23,000 today, by -22% from Friday. Is Bitcoin still muh inflation hedge?

  75. Turtle says:

    Who wants to bet my Ally savings account will yield 5% by Christmas?

    • SoCalBeachDude says:

      Who want to be Ally (GM Financial) will be insolvent by Christmas?

    • Phoenix_Ikki says:

      I bet they won’t. Even if FED funds rate is at 5%, these bank have a way to pay existing customers less interest rate. You might get that if you switch to another bank. I see that now even with the recent rate hike for my bank and CU, they are still at pathetic .75%

  76. sunny129 says:

    It is said’ CHANCE favors the one who is prepared’!

    Well I got shafted by ill thought out monetary policies of this ‘ most wreck less Fed in history’ I was preparing for days like this long time. Anything left in LONG positions was sold slowly since March. Increased my holdings on leveraged inverse ETFs, Option PUTs with a few (long leap) calls as hedge. There will be bounces and I will buy more puts! Mkts have to go the levels before March ’09, before seriously dipping back again!

    Today virtually ALL assets of any type including Energy, natural gas, LNG shipping, grains, seed companies, fertilizers got hit, from the very beginning of this morning!

    Intense FEAR taken over! More selling begets more selling! Most Investors were sitting on profits after unbelievable gain of over 300% since ’09! They should have taken measures to protect the profits and the capital. Those without hedge, should have sold and gone into cash. Those who were greedy are getting, what they deserve!

    • Harris says:

      The Fed cannot let the markets crash because of their wealth effect doctrine. Poor people don’t consume, and don’t borrow. They will have to restart the currency printer soon and that will destroy their last bit of credibility. There’s just no other options left.

      • Wolf Richter says:

        There are STILL some left it seems, LOL.

      • sunny129 says:

        Harris

        “The Fed cannot let the markets crash’

        This is ‘pavlovian’ investor who rode on the tail of Fed’s put (along with ZRP, multiple QEs, stimuli and what NOT) since ’09! Without Fed’s CONTINUIOUS interference/HELP, there would be NO bull mkt built with 3rd largest. ‘everything’ bubble!

        wealth effect doctrine is a illusion & a MYTH sold by Fed by to accept their actions. The top 10% hold over 90% of Wall St wealth! The rest less than 7%! Where the F…. is wealth effect and to whom!

        Now there is no ZRP, no QE instead QT, raging inflation and coming rate increases! Fed is trapped by their own ill thought monetary policies. Fed is scared s..t of the inflation galloping!

        90% who hardly any stocks, don’t care if mkt crashes tomorrow. Yes it may affect their jobs and livelihood but no one shed tears if the top 10%, lose 50% or more!

        Those who stay invested and or add more $, into the mkts deserve what’s coming! reversion to the mean has loooong way to go!

  77. DanS86 says:

    Meanwhile companies like Lumen (off-loaded it pension last year) and Rio Tinto are vastly undervalued and churning out cash like it falls from heaven.

  78. SpencerG says:

    Today was a bloodbath in the markets. I wonder if Wolf gets tired of being so right… so often.

    • sunny129 says:

      Still, a lot of hold outs hoping for miracle from Fed!

      20% loss is NOT enough. It has to be 50% or more (like in GFC) to convince them!

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