Sadly, in a proven Idiocracy, there is no strength in numbers...
Bears have been stampeded by rampant short covering. Bearish capitulation has created the illusion of a new bull market. Once again, hedge fund managers have been forced by the Reddit mob to chase risk higher. However, there are a multitude of indications that this rally is the ultimate fool's errand. Begin with the fact that we have now achieved a consensus of idiots that this is a new bull market. Below, it's clear that value investing has morphed into momentum investing during the past 15 years of continuous monetary bailout. If only investing was as easy as buying what every other dunce is buying:
Here we see the average U.S. stock remains in death cross on a weekly basis. A perfect predictor of S&P crash over the past 30 years:
Not only is breadth lagging within the cyclical sectors, but it's also lagging within the leading Tech sector itself. This week, the Nasdaq finally passed the 61.8% retracement of the all time high, after a nine month rally. Even among the largest cap Tech stocks, only three of Cramer's "Magnificent Seven" have made new all time highs: Apple, Microsoft, and Nvidia. Whereas, Meta (Facebook), Google, Amazon and Tesla are all trading well below their all time highs. Investing is now "so darned easy", that now you could buy just three stocks and trounce the "market".
Last week's bullish hubris has morphed into this week's extreme buffoonery:
Unlike the bond market which has been warning of recession via the inverted yield curve for the past year, stock gamblers have no such concerns. Leave aside the fact that the U.S. Federal deficit at 5.5% is the largest deficit outside of EVERY recession since World War II. In other words, this tepid expansion is ALL borrowed money. History will ascribe this generation's continual moral degeneration for ignoring the incipient economic implosion.
Worse yet, stock gamblers continue to evince unquestioned faith in a Fed that made a policy error in 2021 keeping rates too low for too long, and is making a policy error right now in jacking up rates far too quickly. All while their balance sheet remains pinned near all time highs. It's clear that the Fed has totally underestimated the trickle down fake wealth effect. Coincidence? I think not. For decades Fed policies have been extremely regressive, meaning favoring the wealthy at the expense of every one else. Whenever wages start going up, that's when rate hikes must end the party.
All of which is why Fed rate hikes have succeeded in collapsing headline inflation at the fastest rate since the 2008 recession. Which is confirming the inverted yield curve.
Stock buying opportunity?
It's just so darned easy to believe.
