Long time readers will remember the headline as the start of one of my favorite aphorisms: “When my phone doesn’t ring – I know it’s them.”
Why this phrase is so poignant to me, is its consistency. Or said differently, whenever things appear to be falling off a cliff – my phone would begin ringing off the hook with questions for my analysis. On the contrary, if those things appear to be going to their satisfaction, and in the opposite direction I may have called for caution, my phone would be silent of this same crowd.
There was a time this irked me, but as I’ve grown older (and hopefully wiser) the line from Elvis Costello’s great “Red Shoes” comes to mind…
“Oh I used to be disgusted, and now I try to be amused…”
I seem to hum that line far more often today than I had when I used to crank up the radio when it first came out. Funny how some of you favorite music evolves, no? But I digress.
“So why is this ‘poignant’ today?” you may be asking. Great question, and it’s this…
Just how the current rally in the “markets” are both being viewed, as well as reported. e.g., “BTFD (but the f’n dip) is back, baby!”
Here’s my thought: Be careful what you wished for.
Here’s the reasoning for why this BTFD is not quite the same as all the prior BTFD’s so many approached buying stocks horns-over-hooves this last decade…
The Fed. broke something, possibly far worse than they may be able to fix with just more printing. e.g., Banks. And it’s still evolving, and far from being “solved” as the clown shows of the mainstream business/financial media like to pose. i.e., It’s just beginning (my conjecture).
This initial knee-jerk “Buy everything with a ticker symbol” isn’t really that anymore, either. Basically, this entire push has been concentrated in about 5 to 10 stocks known as “mega-tech.” You know them as Apple™, Google™, etc., etc. That’s what’s driving this entire rally, and that’s not the only reason why. As I’ve also stated ad nauseam: Never underestimate the shenanigans Wall Street will play in order to pump up either a month-end or quarter-end numbers. Why? Because that’s how they get paid. Period, full stop.
That’s what you’ve just witnessed. Again, all my conjecture, of course.
Wall Street has been, relatively, under invested since the end of 2022 (remember how that all started off and then ended, sound eerily familiar?) and much of the push off those initial lows going into January was what is called the “wash effect.” i.e., what was sold prior for tax purposes could be bought back after the time penalty was satisfied for what’s tantamount for a win-win. And that initial push morphed into a full-on stampede, then, it fell apart into a full blown crisis of confidence ending with bank failures the like we have not witnessed since the beginning of the “Great Financial Crisis” that roiled in 2008.
And now, The Fed. has subsequently had to just about reverse any and all prior reductions of both its balance sheet and more with new bailouts, credit lines, swaps and more. (already nearing half a $Trillion in just weeks, negating nearly everything it implied i.e., “would be like watching paint dry.”).
So Wall Street took that new “printing” as a stampede call for buying anything and everything going into this period, regardless of whether it’s actually prudent or even sane. i.e., nothing trumps Wall Street’s penchant for solidifying it’s own “bonus.” Repeat – nothing.
Remember that other quip I used to state back in the day? It went something like this…
“If you lose money in the markets, to you – that’s a tragedy. For your broker to lose the ability to earn their paycheck – with your money – that’s a travesty that shall not stand!”
We are now back to these phrases and idioms becoming more relevant as every day now passes. And if past is prologue – it ain’t gonna end well.
As always, we shall see. But I think you’re going to see first-tells in the very near future.
Count on it.
© 2023 Mark St.Cyr
Note: This is not trading or investing advice of any sort. This commentary is for “big picture” discussion purposes only. Please read, or re-read the “About This Site” page for any questions or clarifications.