If you are like me, or the rest of the trading world, you have been scratching your head in disbelief, while watching not only the major indices regain what they lost after the beginning of the COVID pandemic, but for some like the NASDAQ, go to new highs.
Let’s remember the markets were considered overvalued before this started. By the way…I’m referencing ONLY the UNITED STATES in this BLOG. I will come back to this.
Ok, the virus has caused things to escalate at lighting speeds. Trends that would have taken 5 years are happening in 5 weeks. Working remotely, e-commerce, telemedicine, and remote care have been thrust to the fore-front. As always, when one door closes another one opens. However, what I am poking fun at are the markets and the constant drumbeat of those “experts” trying to explain it.
I will argue that the market…and I mean no market can ever be controlled. It can be manipulated in the short run, but never in the long run. I think the Hunt Brothers proved that in the 1980’s silver market. If you are wondering who they were, you are exactly the people I am talking to. The fact that the trading platform RobinHood has some 40,000 new Tesla traders yesterday on a platform for retail traders tells me a temporary top is close. Hey… you 30-somethings…markets can go down and there is something called inflation. Your parents were not stupid when they bought the family house at 7% mortgage rates…FYI: those were considered CHEAP!
It’s not different this time. The day of financial reckoning will come! You know why? Because Human psychology does not change. Its still fear and Greed.
Back to the point that markets were over valued before this and we are back to the same place. I have to admit, one thing has changed; the world banks and governments have flooded the systems with a sea of liquidity and support. But remember…this time it made it to individuals and not stored as excess reserves. They pulled out ALL the stops and are about to again!
They had (have) to.
So, for one second, let’s forget that the markets are forward looking (because they are already into the year 2100). Let me ask you? What happens when the government won’t pay you to stay at home (where, by the way many people get more for not working than actually working!) While you were working from home and not going to the bar, and not getting a haircut, and not going to the movies(etc.)…what happened to the owners, waitresses, hairstylists, clothes makers, etc. When one person is at home, how many people does that affect? There has been a dramatic decrease in the velocity of money.
Velocity of money: https://youtu.be/BKEp1pzwTsg
I will argue the other shoe has not dropped… yet. We have just kicked the can down the road. Restaurants cannot operate at 50%, let alone 30%. Stores cannot operate on curb side pickup. Doctors cannot wait for, what is classified as elective surgeries to comeback for ever. (I promise you…if you are having a heart attack, and you need a stent…you don’t consider it elective, nor does the woman who is diagnosed with a lump in her breast and waiting for surgery).
Ok…here is my rant:
I believe we have not even begun to see the REAL employment numbers or the REAL number of bankruptcies. Personally, I think the hangman is coming for payment as far back as 2008, when we dodged that bullet. The U.S. has no leadership, in fact less than no leadership, and has someone in denial and a blindfold and earplugs. The U.S. has people that refuse to utilize any kind of protective wear (aka masks) to protect them or their neighbour. Corruption is at every pillar, including justice, with the checks and balances erased.
My previous blogs of saying you can’t have King Trump were based on the fact that the majority of people would stay sane. When one car company (producing a total…start to finish of 1 Million cars) is worth more than Volkswagen, Toyota, and Honda combined. Just for your benefit, Honda produced 2Million cars last year.
Ok…so what does all this mean?
All other things equal, the market, to be trading here should have the same fundamentals in my mind as March 1st. That would make sense, right?
Instead, we have 13million more people unemployed vs then (so they say!)
We have 1 /2-2/3 less people going out
We have no travel to speak of
No hotel business (at around 30% at the best numbers I here globally)
The list can go on and on.
Nothing makes any sense, because things are being artificially manipulated. You need to understand this and stand aside. That is my recommendation, as sometimes its better to keep the powder dry.