Friday Feb 28 2020
Has the Financial Bubble Finally Popped?
.Look for a needed pullback in stock prices and lower oil prices over the next month.
Last line of this column Feb 23
This column and the website, themarketperspective.com, have cataloged numerous examples of ‘top market’ social mood thinking over the last several weeks. We noted that Schwab’s $26 B stock deal for TD Ameritrade, now that many commissions are zero, was typical of how social mood from the last market bottom is ‘unremembered.’ Even more remarkable was J P Morgan’s purchase of E Trade at $13 billion, declaring the wealth manager was ‘ready to take on Fidelity. ‘
Amid a 14% market decline over four days, I just saw my first ever Aston Martin television ad, lease your Vantage for just $1,699 a month (but zero down!). Again this is expansive top of the market evidence.
As always, brokerage firms are recommending all stand pat noting how many times the markets have recovered in months after a big decline. I would remind readers that months before the October 1929 crash, the smart money sold out and left America for extended vacations.
Indeed the same thing has been happening now. The Transports peaked in September 2018. The small cap S & P 600 did so a month before that. Neither has returned to those highs. This is termed distribution as the early buyers sell to those late arrivals
As a matter of full disclosure, while working for Ross Perot as a broker I was on the front lines of the 1973-74 50% DJIA decline. We heard all the same assurances then as now, amid pretty much the same negative social mood. Then scorn was heaped on Nixon, now on Trump.
Here are some reasons to wonder if this is a repeat of 1973-74, 2000-2002, 2008-2009 bear markets, rather than a short term pullback like December 2018. Yes there will be a low and a bounce but will that be repeated over the net two or three years?
Political social mood is irreconcilable. No matter which side wins in November, the other will be even more furious.
There has never been a stock market rise that lasted more than ten years. The two most important indexes peaked over a year ago.
Breadth has been declining with ownership focused on the FANG stocks.
Outlier Tesla recently traded at a price-earnings ratio of 183 to 1 while the S & P as at 20.
Yes brokerages were absorbed in the 1974 sell -of but for nothing. Professionals who should know better paid billions (the sellers were willing to take stock not cash) for companies now already at a discount to that purchase price.
The energy sector is already in a bear market.
Trump has his wish, the FED lowered rates to near nothing. If this is the start of a major bear market, the FED has nothing left to offer in terms of stimulus.
As noted on tehmarketperspective.om,, the next target for oil is the December 2018 low of $42.50. But with prices dropping over a dollar a day, now $45.72, even lower prices seem likely. There is no sign of a technical bottom in oil as of this writing.