Saturday, February 13, 2021

The Dumb Money Always Comes In At The End

While the Reddit horde is busy "democratizing" markets one pump and dump at a time, in the tradition of the bagholder, they are the ones buying out the hated "elites", at the very top...

Almost exactly one year later from the COVID meltdown and market conditions are even more dire than they were at the beginning of lockdown. 

This market has more red flags than a Chinese parade.

One of the basic concepts taught by William J. O'Neill in the seminal book "How To Make Money In Stocks" is the concept of distribution. Institutions require high volume and liquidity to move money around, otherwise they move the market. So whenever they see newbies bidding up the market to asinine valuations, they raise cash. Which is conveniently always at the top. O'Neill calls this risk transfer mechanism "distribution". 

I think we all see where I'm going with this.

"Over the last 20 days, an average 15.8 billion shares have traded each day on all U.S. exchanges, according to data compiled by Bloomberg. That’s just below the 16.1 billion average hit on March 25, which was the highest in at least over a decade, the data show"

“We’re seeing so many signs of frenzied speculation...This is part of the retail trader explosion.”


Millennial newbies who have never seen a bear market have been Portnoyed into believing their studied ignorance is the key to success. Which is why they are ignoring all of the warning signs. 

There has been no better time in history for institutions to dump record amounts of stock:

"The “Buffett Indicator” is a simple ratio: The total market capitalization of U.S. stocks divided by the total dollar value of the nation’s gross domestic product."

With U.S. market cap more than double the level of estimated GDP for the current quarter, the ratio has surged to the highest-ever reading above its long-term trend"

“It highlights the remarkable mania we are witnessing in the U.S. equity market”

The assiduous belief of the day that valuations don't matter is running into the brick wall of institutions dumping record stock on ignorant bagholders.

Recall several months ago Dave Portnoy claimed that he is a far greater investor than Warren Buffett. Now he has competition from another pump and dump leader:


"As a leader in the ongoing SPAC surge and Reddit trader movement, the founder of the VC firm Social Capital has been the talk of the markets lately."

It's ok, most people didn't listen to Buffett in 2000 either when he eschewed Tech stocks. Value investing is dead. Fundamentals don't matter. Buffett had the last laugh. Those who ignored him got obliterated.

Speaking of the SPAC surge, it's literally off the charts. Including this week's latest listings, 2021 has already eclipsed the 2020 record for SPAC issuance. As it was in early 2000, Wall Street is taking full advantage of this market frenzy to dump massive amounts of junk:

Mike Santoli of CNBC penned this article articulating all of the insane risks that abide this Ponzi market and then he rationalizes them away with the now standard argument that record crazy can always get crazier.

"For all the unprecedented events and unforeseen consequences of the past year, market conditions today rhyme rather closely with those of mid-February 2020, when stocks peaked right before the Covid crash."

Some of this energy was already starting to flow a year ago, but it hadn’t gained nearly as much momentum or taken on as much of a viral volumes are surging even with the indexes rallying – the reverse of the typical pattern and harkening back to a similar pattern from the late 1990s.  Equity inflows in the latest week set a new record."

Let’s be clear that noting the similar market set-up now is not remotely to predict anything like a repeat of the market collapse"

And they lived happily ever after.

The record will show that February 2021 was a fifth wave blow-off top in global risk assets.

Crypto market cap is up 50% in two weeks. To put that into perspective it took all of 2020 to achieve the same increase in market cap that took place in the past two weeks:


Pot stocks were up 100% in eight trading days this month, and are now imploding:

Weak bears just got rinsed deja vu of last year. What they get for ignoring this blog.

What has truly changed from one year ago, is that this is the end of the cycle and central banks are ALL IN along with stoned gamblers - ALL of whom believe that printed money is the secret to effortless wealth.