“Why worry if the price can only go up” – Societe Generale’s Head of Quantitative Equity Research. Now even after companies cut earnings-per-share estimates, their stocks go up. Because everyone believes that everyone believes that….
Sunday, when no one was supposed to pay attention, PayPal sent its account holders an innocuous-sounding email with the artfully bland title, “Notice of Policy Updates.” PayPal didn’t want people to read it – lest they think the NSA is by comparison a group of choirboys.
Margin debt is a crummy predictor of a crash. But it has a bone-chilling habit of peaking right around the time stocks do crash. In the last fifteen years, it spiked three times: during the final throes of the bubbles that imploded in 2000 and 2007; and now.
What can possibly go wrong with stocks these days? Five years of the Fed’s QE and zero-interest-rate policy, and look what happened: risks no longer exist. They’ve been priced out of the equation. But now the illusion is ending.
When BlackRock CEO Larry Fink grumbled about “way too much optimism” in the markets, he wasn’t kidding. An entire mindset is benchmarking today’s record metrics against the splendor of 2000 and 2007: not to warn, but to prove that this time it won’t end in tears.
Shell is already steeped in its Alaska offshore debacle. Now its new boss admitted that fracking in the US, after a huge investment, is a money-losing business.
I’m a coffee lover, and this is getting personal: our latte, espresso, or just plain good coffee is going to bite fiercely into our already mauled pocket book. In one crazy chart.
The stock market has soared for five years, risks have ballooned, home prices have jumped. Gains built on the quicksand of endless liquidity and a lackluster economy. “Irrational exuberance” is back in the Fed’s vocabulary. As the Fed’s Fisher said, it may end “in tears.”
Despite breath-taking hype on Wall Street and President Obama’s budget that assumed economic growth of a glorious 3.1%, corporate executives and directors are quietly dumping their shares in bouts of extreme bearishness, just like they did before the last crash.
“Paranormal liquidity stimulus” leads to “paranormal activity” to deliver that “parabolic overshoot” in asset prices. And there is no bubble in sight, not even in the Nasdaq Biotech index, which is up a cool 375%. Money is once again growing on trees.