Never Go Full Retard

The recognition that this market is in a bubble (something I’ve been writing about extensively) has gone mainstream and banks are recognizing is now too.

This week JP Morgan’s Kolonavic is also raising the alarm bell:

“The bubble we are describing is expressed in equity factors … We caution investors that this bubble will likely collapse, i.e. this time is not ‘different,’
..some tech names are trading at “unsustainable valuations” supported by record level of speculative call option activity.”

“Bonds, momentum stocks, and low volatility stocks rallied – pushing the valuation spread between defensive and cyclical stocks to a level 2x worse than during the peak of the late-’90s tech bubble”

And yes the market continues to party like it’s 1999 and the signs are mounting that the market has gone full retard. But as everybody knows: You never go full retard. This market just went full retard.

Yesterday’s renewed rally to new all time highs completely ignoring $AAPL’s revenue warning from the day before caused Jim Cramer to wonder:

The market remains on autopilot ignoring everything negative around it, from collapsing economic growth in Asia, to mounting earnings and revenue warnings. I maintain that the larger issue is structural:

And central banks are in full panic mode trying to prevent the next recession. In their failure to normalize balance sheets and rates they’ve done into full retard mode themselves, easing everywhere with rates cuts and balance sheet expansions and daily interventions everywhere, consequences be damned. All in the name of defending the global economy, but in process they have created the largest  asset bubble ever seen and asset valuations are exploding higher totally unsupported by the fundamentals.

The eventual implosion of this asset bubble will eventually hurt all of us as the reversion will bring about the recession central banks have sought to avoid. But because of their reckless actions they invited investors to engage in full retard behavior and create market distortions the size of which risk a coming implosion potentially greatly amplifying any recession they sought to avoid.

Markets are now 100% dependent on daily central bank intervention:

Without which the entire market construct would implode.

Some signs of a market in full retard mode below:

BofA asset bubble history chart:

Price to Sales ratios at all time highs:

Market cap to GDP move over 158%, by far the highest ever recorded:


Retail, perhaps prompted by free commissions and FOMO, catching the call options bug:

Cash balances are at a 6 year low:

Complacency is high as seen by the virtual lack of any interest in protection:

Optimism about future returns is the highest ever:

Individual momentum stocks are being chased with no regard to any fundamental backdrop, all based on future optimism.

Examples of year to date performances not even 2 months into the year:

Meanwhile great distortions are mounting and historical correlations have broken down:

The ratio of equal weight versus the leaders has become entirely distorted:

The smart money index has given up all historical correlation:

And yields versus the $DJIA are not even pretending to be on the same page any longer:

While the market is ever more reliant on literally a handful of stocks holding up the earnings equation as the larger market is chipping away:

Yes, the broader market is correcting while indices crank out new highs driven by a few stocks:

Why is the larger market correcting? Because the signs are mounting that this aging business cycle is in trouble:

Job openings are showing negative growth:

And the yield curve, now dismissed as it’s different this time, has inverted again:

If it’s different this time it has to be spectacularly different as investors are chasing tech complete one way mode:

And all of this as the $DJIA is wedged between 2 massive long term technical trends demanding an epic resolution to come:

“this time is not ‘different’” JP Morgan’s Kolonavic says and I agree with him and I’ve called this market an unfolding tragicomedy.

Will equities peak here in February or in March as they did in 2000 or even in March as they did in 1937? Or will this bubble worsen held up by politics interests into the US election?

We can’t know until after the fact. From my perch this market is the most dangerous we’ve seen since 2000. A market in full retard mode, utterly removed from any economic foundation, artificially propelled by knucklehead central bankers who are refusing to take responsibility for the reckless investor animal spirits they have unleashed resulting in the largest asset bubble of our time.

Never go full retard. This market just went full retard.

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Categories: Opinion

3 replies »

  1. Maybe the biggest insanity is in bonds….I mean who would have thought we ever would see negative yields? Anyway, books will be written about today’s madness…

  2. Great post and you show the data to back up your assertions. Thank you for being “a voice in the wilderness.”

    1) “Investors” (aka Pavlovian speculators) are only responding at a primitive level to central bank and government cattle prods with BTFD/FOMO. How is that a “market” (How is that not a “casino”?) How can there ever markets without price discovery? Are we really surprised by record valuations and all of this insanity?

    2) Central banks and governments have completed the journey to fully centrally-planned, command economics, aka economic Socialism. This is true for virtually all nations today. The invisible hand of the markets has morphed into the visible hand of nefarious central bank interventions, machinations, and repressions. We all know that Socialism has failed throughout history. Financial/economic Socialism isn’t different.

    3) The global economy was already slowing in 2019, well before COVID-19. Apparently healthy balance sheets don’t matter anymore; no one needs assets, since liabilities (aka, debt) don’t matter. This will only exacerbate the downturn. However, the central banks own it, since they created “The Everything Bubble.” A pox upon them all.

    4) It’s not different this time and it will not end well.

    “A fool and his money are soon parted.” – idiom (derived from Proverbs 21:20)

    “There’s a sucker born every minute.” – P.T. Barnum

    “Fidelity bought with money is overcome by money.” [Lat., Pretio parata vincitur pretio fides.] 
Source: Agamemnon (287)

    “Prosperity asks for fidelity; adversity exacts it.” [Lat., Poscunt fidem secunda, at adversa exigunt.] 
Source: Agamemnon (934)

    “I abandoned free market principles to save the free market system.” – George W. Bush, on CNN, December 16, 2008

    ‘It became necessary to destroy the town to save it” as reported by Peter Arnett, Tet Offensive, 1968

    “If money isn’t loosened up, this sucker could go down,” – George W. Bush, Sept. 25, 2008

    “An ounce of prevention is worth a pound of cure.” – Benjamin Franklin

    “It’s no use closing the barn door after the horse is gone.” – John Heywood

    “You can’t put the toothpaste back in the tube.” – H. R. Haldeman

    “You can ignore reality, but you can’t ignore the consequences of reality.”  – Ayn Rand

    “Sooner or later everyone sits down to a banquet of consequences.” – Robert Louis Stevenson

    “There are no rewards or punishments — only consequences.” – W. R. [William Ralph] Inge


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