The high beta stock recovery has been impressive since the May lows. The broader averages never even flinched. The fundamentals have been decelerating but the market continues to grind higher. The only thing that matters is price and price is laughing at the fundamentals and the bears. I have never seen a market so disconnected from economic reality. At least during the tech mania in 1999/2000 the economy was actually on fire until it wasn’t. Now we use snow as an excuse to explain away a -3% GDP print. Anybody with a brain in their head knows this is a central bank induced bull market and because it is I fear a quick death to this market. As an example I have a friend that manages $20 billion of Large Cap Growth stocks. He called me out of the blue on Thursday asking me how to procure physical gold because he is worried about the dollar collapsing and the government taking his money. He was not joking. I asked him if he was positioning his portfolio for a correction. He said no because the market does not pay attention to fundamentals. That is what I call major cognitive dissonance. He continues to play this stock market game that he does not believe in because he must. The market has punished those who do not follow the merry central bankers. The problem is the central bankers are taking us to a cliff. I wonder how many large participants in this market don’t believe in what they do anymore. The end game here is going to be epic.
All the sentiment indicators and all technical measures indicate that we should see a healthy correction soon. If you are a bull you want to see some of the excesses worked off and some fear come back into the market so you can reload and buy the dip. If we do not have a correction soon then I think we will have the potential for a terminal “phase transition” blow off top that will surely mark the end of this bull market and result in a crash. The odds of a melt up of epic proportions were increased last week when Janet Yellen essentially said “have at it boys I don’t care about bubbles.”
I am mostly cash getting ready to shoot this market in the back (especially high beta tech) or meekly play the blow off top. This is a very dangerous market that is disconnected from reality and is full of Zombies that are following the printing presses.
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The economic reality is — people are gonna line up to buy more iDevices, AAPL will be worth a trillion next year, and I’ll be makin’ bank.
AAPL TO !000
God Bless my son. When did the Zombie bite you? You will be turned soon and you will become a mindless flesh eater.
BlueStar!! Good to see you on the front page. When you have the time, could you point me in the direction of the sentiment indicators that you reference above? I want to make sure I have my eye on them. Best wishes w/ your move to Hawaii!!
All so true. I do my best to be constantly on the look out for the end, but I fear that I will get swept away in it like everyone else.
UncleBuccs – see charts here: http://www.acting-man.com/?p=31559
Also check – fat pitch blog, short side of long, jlyons funds, street talk live… all the same…
UncleBuccs,
I use a bunch of stuff that I subscribe too that I can not publish here. Sorry. Today may be the start of the correction.
Although I completely agree with your overall concern regarding the markets, I’m not sure that owning gold is the ideal safety trade. If the unwind is as rapid as I suspect it potentially could be, margin debt and all this accumulated leverage will be heading south very rapidly and when you can’t sell what you want, you sell what you can. I’m not talking my book here either since I do hold a decent position in PM’s but I guess my overall nagging concern is that things have become so speculative and distorted after six years of zero percent rates that there just may be nowhere to hide.
Sonny,
I agree with you. I am not long gold.
When he stops falling he will start to laugh because its fun.
When the subject subconsciously becomes aware of these
warning signs, the hypnotist will suggest that his mind re-focus; perhaps he will suggest that the
mind begin imagining the area that is in danger of itching has instead become
cold and numb. These days, people tend to be independent thinkers and will resist direct suggestions by unconsciously refusing their
instructions.