Monday, October 19, 2020

Tech Wreck 2020

This stimulus fantasy is reminiscent of the TARP vote in October 2008, except that bailout was real...

Not a day goes by now when the stimulus talks are not a catalyst for a gap open rally. Fake hope springs eternal. Clearly neither side wants be seen as "giving up" on stimulus ahead of the election, so both sides keep the dialogue open if only for appearance sake. If they DON'T arrive at an agreement before the election, value/cyclicals will implode. If they do arrive at an agreement, the selloff in Tech will accelerate. Many people seem to forget that the first TARP vote failed back in October 2008. Stocks of course tanked, but then they rallied back into the second vote a week later. When the second vote passed, the market collapsed.

Few saw that coming. 

Back to the Tech wreck, over the weekend I showed the whiplash reversal in futures net speculative that took place last week. Many other commentators noticed it as well. This author below calls these people "the smart money". Apparently being long at the September top and then getting record short at the bottom just before a massive two week rally is "smart". Imagine what the dumb money was doing. 

"After establishing one of their biggest short positions in U.S. tech stocks in more than a decade earlier this month, hedge-fund managers poured their money into Nasdaq futures at a near-record rate, according to Commodity Futures Trading Commission"

Notice the Bloomberg chart they show indicating the week over week net change in speculative positioning. This past week was the second largest reversal. The largest was in 2007.

Here is what that data looks like when you strip out the noise and show only the two largest position reversals on record.

Any questions?

It gets worse. Or better depending how smart you are.

This asinine article also appeared on Marketwatch today. ETF newcomer "Ark Funds" has staked their claim to fame and fortune in this bubble by making the most outlandishly bullish predictions. Because in this society nothing is more rewarded than fraudulent predictions:

Every generation of gamblers has a cheerleader. This generation has several, among them Jim Cramer, Dave Portnoy, Suze Orman, and CNBC; however this Cathie Wood of Ark Invest takes the Madoff award for biggest Ponzi schemer. 

Here we see the amount of volume that has flowed into this death trap in 2020.

When this ETF implodes, the whole Ponzi market, including Tesla, Nvidia, Zoom, Peloton, Semiconductors, MAGA stocks etc. are going to implode. 

Those who were not gambling during Y2K have likely never heard of people such as Mary Meeker and Henry Blodget who made similarly outlandish claims of future performance as the bubble was peaking:

2001: Where Mary Meeker Went Wrong:

"Anointed by Barron's as "Queen of the Net," lovingly profiled by The New Yorker, equated with Alan Greenspan and Warren Buffett as a market mover by the Wall Street Journal, Meeker was the unquestioned diva of the Internet Age. Tech companies begged her to cover them. Morgan Stanley paid her an eye-popping $15 million in 1999. Ordinary investors hounded her for autographs. During the dot-com craze, Mary Meeker was by far the most important voice for the Internet--and the notion that companies without earnings could transform the world and climb to the moon.

That was then. Today Meeker, 41, has become something else entirely: the single most powerful symbol of how Wall Street can lead investors astray. For the past year, as Internet stocks have crumbled and entire companies have vaporized, Meeker has maintained the same upbeat ratings on her companies that characterized her research reports in the glory days. For instance, of the 15 stocks Meeker currently covers, she has a strong buy or an outperform rating on all but two. Among the stocks she has never downgraded are Priceline, Amazon, Yahoo, and FreeMarkets--all of which have declined between 85% and 97% from their peak"

Good times. 

This past weekend, the "Big Money Poll" in Barron's was roundly bullish going into bonus season.

Go figure.

As we know, Team Groupthink has an impeccable track record for being consensus wrong:

In summary: