Two Charts Keeping Us On The Beach

I’ve seen fire and I’ve seen rain.  I’ve seen manias the public thought would never end. Until they do.

This ain’t our first rodeo.  We have seen these types of asset bubbles many times during our career, especially when you include our emerging markets daze.  We have learned two certainties:

1. Valuations are the gravity that ultimately brings markets back to reality, i.e., asset prices regress to mean valuations
2.  Very few, and mostly liars top-tick and always get out at the top

The young Python Algo ‘bots driving stocks do not have this kind of context or history.

Supply Driven Bubbles

The current bubbles are slightly different in nature as we perceive them driven by the new supply-side economics, where both public and corporate policies have induced asset shortages of risk-free bonds, stocks, and affordable housing.   They are more steely, , more difficult to pop, and last longing than most think they can.

Trading Versus Investing 

We do recognize trading is different from investing.   Good traders can flip cotton or cotton candy for a profit but even that is getting increasingly difficult with the rise of the ‘bots the modern-day aglo driven market.    We traded “billions and billions” of Apple stock each year during the company’s high growth days back in the day.  And that was just Apple.  No more.

Buy Low, Sell High  

Though we have taken stabs at shorting this mania, we have learned some expensive lessons over the years about  “Milton” Keynes‘ (no, not the town in Buckinghamshire, England) dictum,

There you have it, folks.  Not if, but when.

Until then,  see you on the beach.

P.S.   Just one more thing.   The Gallup chart on Economic Confidence has traditionally been a contrarian indicator.