"The worse the reality of the economy becomes, the more we take on the reflexive belief in further and dramatic monetary expansion and the more attractive the stock market looks"
Small retail investors, having been burned by two massive drawdowns just six years apart (2003-2009), were extremely reluctant to embrace the post-2008 Disney markets paradigm. Until Trump got elected. He convinced them to go ALL IN at the end of the cycle. Because every fool knows that it's not abuse of monetary and fiscal stimulus when it's benefiting the rich...
"What the wise man does at the beginning (of the cycle), the fool does at the end" - Warren Buffett
"What the wise man does at the beginning (of the cycle), the fool does at the end" - Warren Buffett
History will say that the reason Trump-o-Nomics was an abject failure is because giving more money to the super rich bailout class while raising interest rates for everyone else, is deflationary. It's not reflationary. None of today's economic "experts" understood that 3rd grade concept in 2018 which is why the casino fell -20% "unexpectedly". In 2019, Trump finally got his way - a weaker economy, imploded reflation, and Fed easing. Nevertheless, the middle class still got NOTHING. The super-rich on the other hand got a FULLY monetized tax cut, which generated human history's largest super bubble.
Which they sold into with both hands.
Which they sold into with both hands.
On the other side of implosion, the sheeple and archaeologists will want to know how today's trusted proven morons aka. financial advisors, believed that global trade wars, global slowdown, Coronavirus, China implosion, record valuations, Tech bubble, record low interest rates, and the overall disintegration of Globalization in broad daylight, was a buying opportunity. After all, it will be hard to say no one saw it coming, when those were the justifications for buying in the first place.
They will say it's because they believed that printed money was the secret to effortless wealth.
They will say it's because they believed that printed money was the secret to effortless wealth.
This mass stampede to insanity explains the frustration that the "smart money" has had shorting this market. Case in point, the most shorted stock in this entire cycle - Tesla - literally went off the charts parabolic. Putting an exclamation point on an entire era of insanity. As if to say that anyone who dares question simulated prosperity will be taken to the woodshed. Hence, the vast majority of formerly sane people merely capitulated to the super bubble. After all, 7.5 billion like-minded consumption zombies can't be wrong.
Good times.
Be that as it may, we've seen this movie before, albeit not on this scale. They called it "The Big Short" in 2008. A time when Wall Street played the trend of buying up subprime, until they realized that the meltdown was in progress, and then they flipped their position overnight. To the surprise and consternation of the "smart money" at that time, the premium on subprime packaged crap kept falling in lockstep with the imploding economy, because global central banks were lowering interest rates and bond yields were collapsing. Therefore, the global hunt for yield - also extant today - was putting a firm bid beneath all things crap. For a time.
But then, the short-covering in crap ended. At which point there was NO BID for crap of any kind.
"Raymond James believes the market comeback in the last month has been a “liquidity rally” with investors hiding out in the biggest and most heavily traded stocks."
Investors “want as much liquidity as possible in case they change their mind” and have to sell because of the worsening coronavirus, the report said."
"Where should I hide?"
"Same place as last time"
