The Bubble

davfor

The title caught my eye. This opinion piece provides several reasons to be alert. There are some good visuals. Here is some takeaway advice for traders and market timers (as well as for those like me who act more like buy and hold observers):

Bottomline: We have an asset bubble in tech, dependent on unrealistic multiple expansions as Fed liquidity has prompted a chase in the supposed save havens creating the most divergent stock market in decades.

Buy the dips, sell the rips and watch your back. The natural market is much lower in price and risk remains that the broader market is still in bear market rally mode. As it stands $SPX remains below the June highs, as does $DJIA, $RUT, $NYSE, $BKX, you know, the broader market altogether.

https://northmantrader.com/2020/07/06/the-bubble/

Crash

"liquidity meth lab." THAT is stark and blunt, eh?

FD1000

These articles have been published when the market were lower by 5,10 and 15%. I have heard in the last 10 years that rates can only go up, that the stock market is overvalued for years, that inverted yield signals top, that PE + PE10 are too high.
One day it will be right, I just like to know exactly when

davfor

The author didn't offer an indication of when "the bubble" might burst (perhaps no time soon). But, some of his observations resonated with me. A few examples:

The Fed’s role in managing markets is becoming ever larger and has now expanded into buying $AAPL and $VZ bonds among others in addition to monetizing US debt. Call it what you like, just don’t call it capitalism, rather a nationalization of sorts.

Wall Street analysts have largely been made obsolete as earnings growth metrics have long been rendered irrelevant with everybody bowing to the Fed put as the primary reason for buying stocks.

...the Fed is steadfastly denying against all evidence that it is contributing to ever expanding wealth inequality even though that is precisely what it is doing.

...markets remain beholden to the greatest monetary expansion in human kind making a mockery of the very basic concept of price discovery

Mona

FD1000 said:

These articles have been published when the market were lower by 5,10 and 15%. I have heard in the last 10 years that rates can only go up, that the stock market is overvalued for years, that inverted yield signals top, that PE + PE10 are too high.
One day it will be right, I just like to know exactly when

Thanks for your opinion.

I would also like to read your thoughts on the Morningstar forums. I was told that you were put on suspended status. Has M* lifted the suspension?

FD1000

Davfor, I agree with the author observations

Old_Skeet

Hi @Mona,

I have a couple of questions. Do you (or don't you) feel that FD1000 has brought value to the MFO board?

I for one feel he has because for his perspectives on income funds.

And, my second question. Does it matter if he was (or was not) put on suspension on the M* board?

I was taught not to put others down unless you are putting them down on the Prayer List.

Something to think on.

Peace be with you.

Old_Skeet

Rbrt

One of the commenters suggests we look at SPX V Gold so I did. It would imply that the SPX peaked in late 2018.

https://stockcharts.com/c-sc/sc?s=$SPX:$GOLD&p=D&yr=3&mn=0&dy=0&i=t8724814200c&r=1594128517294

Crash

@davfor Those are precisely the ones that shouted at me, too.