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The Moment Wall Street Has Been Waiting For: Retail Is All In

The Moment Wall Street Has Been Waiting For: Retail Is All In

Authored by Charles Hugh Smith via OfTwoMinds blog,

The ideal bagholder is…

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This article was originally published by Zero Hedge
The Moment Wall Street Has Been Waiting For: Retail Is All In

Authored by Charles Hugh Smith via OfTwoMinds blog,

The ideal bagholder is one who adds more on every downturn (buy the dip) and who refuses to sell (diamond hands), holding on for the inevitable Fed-fueled rally to new highs.

Old hands on Wall Street have been wary of being bearish for one reason, and no, it's not the Federal Reserve: the old hands have been waiting for retail--the individual investor-- to go all-in stocks. After 13 long years, this moment has finally arrived: retail is all in.

If you doubt this, just look at record highs in investor sentiment, margin debt and the Buffett Indicator (see chart below). Current valuations are so extreme that the previous extreme in the 2000 dot-com bubble now looks modest in comparison.

I have my own sure-fire indicators for when retail is all-in. One is my Mom's financial advisor recommends shifting her modest nest-egg out of safe bonds into the go-go stocks that are topping out. Back in late 1999, it was Cisco Systems and the other dot-com leaders, today it's the FANGMAN stocks. Sure enough, my Mom just informed me her advisor recommended moving money from bonds into a FANG-dominated stock fund. Bingo, we have a winner.

Second indicator: average people who have never traded stocks are all-in and supremely confident they can't lose. When 20-year college students are trading based on a "genius" 22-year old friend's advice, retail is all-in. When a worker cleaning a wooden deck pauses to put $100,000 in a company he knows nothing about (yes, true story), retail is all-in.

Much is made of meme stocks, but the real driver of retail going all-in is the complete collapse of risk / moral hazard: the Fed will never let the market go down is not a meme, it is an article of secular faith, supported by 13 long years of ceaseless Fed intervention / stimulus, all in service of elevating the stock market.

Since all evidence supports this secular religion--stocks never go down because the Fed will never let them go down--the trick is to rotate into the next blow-out winner or buy the dip in Big Tech or a meme stock. And since something is always shooting up like a rocket, the way to become a millionaire is to simply buy what's hot and buy the dip.

In this secular religion, nothing else matters, all the old stuff is just a distraction: price-earnings ratios, valuation, cash flow, future earnings--none of that old stuff matters. Technical analysis is also a waste of time: just buy the dip and rotate into what's hot, and the millions just pile up on their own.

Every generation that experiences a speculative mania feels it's unique. This is the pattern that repeats. The confluence of forces driving the mania to unprecedented heights is so obviously unique and uniquely powerful that it is literally crazy not to grab a board and ride the wave to riches.

What the newly minted millionaires don't understand is they're the marks and bagholders. Wall Street has been patiently waiting for retail to go all-in so the pros can sell all the over-valued stocks to the euphoric, trusting retail traders, who will continue to buy the dip and rotate into the next hot meme-stock until their fortunes have dwindled to spare change.

The con requires euphoric confidence that stocks only go up forever, and every retail trader is confident in their ability to ride the wave to riches. We're finally at that summit of euphoric confidence, where faith in the Federal Reserve is literally a religious experience.

Robbing Hoods going public is a scriptwriter's touch. (Forgive me if I got the name wrong, I'm working from memory.) Stocks never go down is absolutely true, take it to the bank, until they do. Every share of stock ends up in somebody's account, and the ideal bagholder is one who adds more on every downturn (buy the dip) and who refuses to sell (diamond hands), holding on for the inevitable Fed-fueled rally to new highs.

That's how accounts are destroyed, and the wreckage isn't just financial. The scars of being a bagholder can last a long time. But Wall Street is patient, and a new crop of bagholders eventually catches Fed Fever, and the transfer of over-valued equities to a new generation of bagholders will play out according to the same script.

*  *  *

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Tyler Durden Thu, 07/29/2021 - 06:30

Economics

TSX gains on Trudeau’s re-election, loonie up

Canada s broader TSX Index on Tuesday September 21 lifted post the re-election of Prime Minister Justin Trudeau as investors see it as largely a continuation…

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Canada’s broader TSX Index on Tuesday, September 21, lifted post the re-election of Prime Minister Justin Trudeau as investors see it as largely a continuation of the present economy although few jitters might be witnessed due to the bankruptcy of Chinese property developer, Evergrande. Thus, the TSX Composite Index closed with a gain of 89.75 points or 0.45% to settle at 20,244.29.

Analysis by Kalkine Group

The one-year price chart (as on September 21).

Volume active

Canadian Natural Resources was the most actively traded stock where 16.46 million exchanged hands, followed Cenovus Energy Inc. where 10.30 million exchanged hands, and the National Bank of Canada with 6.31 million shares exchanging hands.

Movers and laggards

Wall Street update

Wall Street was turbulent as traders awaited the Federal Reserve's monetary policy statement on Wednesday. Following the sell-off observed during trading on Monday, stocks exhibited a lack of direction throughout Tuesday's trading session.

The Dow Jones Industrial Average was down 50.63 points or 0.2% to 33,919.84, while the S&P 500 fell 3.54 points or 0.1% to 4,354.19, while the Nasdaq climbed 32.50 points or 0.2% to 14,746.40.

Commodity update

As Evergrande concerns continued, gold climbed 0.82% to $1,778.20. Brent oil rose 0.60% to US$ 74.36/bbl as the aftermath of the US hurricane Ida squeezed supplies, while Crude oil rose 0.38% to US$ 70.56/bbl.

Currency news

The loonie stood higher against the U.S. dollar on Tuesday, while USD/CAD closed at 1.2815, a slide of 0.08%.

The U.S. Dollar Index was down against the basket of major currencies on September 21, and ended in the red at 93.22, falling 0.06%.

Money market:

The U.S. 10-year bond yield traded higher on September 21, and ended in the green at 1.328, up 1.17%.

The Canada 10-year bond yield also gained on Tuesday’s trade and closed at 1.229, up 0.49%.

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Economics

The Market is Deeply Oversold And Looking For A “Dovish” Fed

As we will discuss, the market is deeply oversold and looking for a "dovish" Fed to spark buying. Traders and investors will be laser-focused on the Fed…

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As we will discuss, the market is deeply oversold and looking for a “dovish” Fed to spark buying. Traders and investors will be laser-focused on the Fed meeting adjourning at 2 pm ET. Of importance, the decision on taper and their characterization of the economic recovery and inflation. If they do elect to announce a taper schedule, the pace of tapering and any caveats that may delay tapering will be of utmost importance.

Like yesterday markets are opening up a half to one percent higher. Will they hold onto the gains, unlike yesterday? The answer likely lies with the Fed at 2 pm.

Daily Market Commnetary

What To Watch Today

Economy

  • 7:00 a.m. ET: MBA Mortgage Applications, week ended September 17 (0.3% during prior week)
  • 10:00 a.m. ET: Existing home sales, month-over-month, August (-1.7% expected, 2.0% in July)
  • 2:00 p.m. ET: FOMC policy decision

Earnings

Pre-market

  • 7:00 a.m. ET: General Mills (GIS) is expected to report adjusted earnings of 89 cents per share on revenue of $4.30 billion

Post-market

  •  4:10 p.m. ET: KB Home (KBH) is expected to report adjusted earnings of $1.62 per share on revenue of $1.57 billion
  • 5:05 p.m. ET: BlackBerry (BB) is expected to report adjusted losses of 7 cents per share on revenue of $166.80 million

Politics

Market Deeply Oversold – Looking For Some “Dovish” Tones

The rolling correction over the last 3-weeks has pushed the market into deeply oversold conditions on a short-term basis. Such provides plenty of “fuel” for a decent rally over the next month or two given some news to spark buying. Today, the Fed could do the trick with Jerome Powell delivering his post-FOMC press conference with a “dovish” tone. With Congress battling over the debt ceiling, the Treasury running out of money, and the risk of a Government “Shutdown” looming, the Fed has all it needs to provide plenty of “caveats” to its “taper” plans.

Fear Greed Index Near Lows

Another reason for near-term bullish optimism, is that both the AAII bullish allocation and the “Fear/Greed” index are near their respective lows. Combined with the oversold market conditions, such typically provides a buying catalyst as traders reposition themselves in equity risk.

Trading Game Plan for the S&P 500

The markets are trading well in overnight trading following yesterday’s flat-trading day. The bounce provides us with another set of levels, in addition to the 50, 100, and 200-dmas, to guide our trading. The graph below shows the Fibonacci retracements from the recent high to low. If this rally proves to be a bull trap, it is likely to give up between the 38% retracement (4395) and the 62% retracement (4451). There is also a gap between 4400 and 4430.

It is common for such gaps to fill and then reverse direction. If the market surges higher through the gap and retracement levels, the outlook becomes more bullish. A rally above the 4451 retracement level and well through the 50dma (4436) will likely lead to new highs. Conversely, the 50 dma (4436) may prove to be resistance. The first line of support is yesterday’s lows and the 100dma (4328). A break of the recent low leaves a target of 4106, the 200dma.

Follow Up to Monday Market Mayhem

Easy Lending Standards

Employment and inflation tend to get the headlines as far as rationales for the Fed to take action. As we consider what the Fed may do tomorrow, we should also consider lending standards. The graph below shows the lending standards for large banks’ credit card customers are as easy as they have been in 20 years. On its own, very easy lending standards, as we have, push the Fed toward a more hawkish stance. Easy borrowing conditions incentivize personal consumption. More consumer activity, especially given current supply line problems, is likely to further agitate inflationary conditions.

Chinas & Evergrande. Will They or Won’t They?

In addition to concerns with China, Evergrande, and possible contagion, the markets are also grappling with Wednesday’s Fed meeting. In what was likely a purposeful leak last week, the WSJ laid the groundwork for a taper announcement Wednesday and the reduction in asset purchases in November. With the U.S. and foreign markets skidding yesterday some are asking how the Fed might react. In a Bloomberg interview, ex-New York Fed President, Bill Dudley, warns “They’re not going to react to small market moves and defer the tapering on that basis. They have to change their economic forecast,” he said Monday during an interview on Bloomberg Television with Lisa Abramowicz, Tom Keene and Jonathan Ferro. “At this point, it’s really premature to reach that conclusion.”

The post The Market is Deeply Oversold And Looking For A “Dovish” Fed appeared first on RIA.

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Economics

Looking for the Next Big Crypto to Explode in 2021? Try These 5 Coins

Bitcoin (CCC:BTC-USD) launched on January 3, 2009. The oldest and largest cryptocurrency, prices of this coin have swung wildly since its inception. But…

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Bitcoin (CCC:BTC-USD) launched on January 3, 2009. The oldest and largest cryptocurrency, prices of this coin have swung wildly since its inception. But last year, Bitcoin experienced explosive institutional and retail interest in the space alongside the broader crypto world. Now thousands of altcoin investors are betting that they can pick the next crypto to explode.

Even though Bitcoin recently underwent a correction, trading volume remains strong between $42,000 and $50,000. Of course, that is very expensive, considering the median household income is $62,843 right now. Yes, you can invest in Bitcoin through PayPal (NASDAQ:PYPL) and Square (NYSE:SQ). But the crypto is still expensive when you compare it to several altcoins out there.

Plus, there are over 7,000 cryptocurrencies you can choose from for your portfolio. When it comes to making big gain, it’s easier for a coin to gain 100x if you’re starting from a smaller size, rather than chasing after a rocket that’s already taken off.

Here are 5 coins that could be the next big crypto to explode:

When investing in any crypto, remember to check if there is an inherent utility to the coin. Even cryptos meme coins need developers to crank out regular updates to stay relevant.

The Next Big Crypto to Explode: Ethereum (ETH-USD)

Source: shutterstock

Ethereum is a decentralized, blockchain-based software platform, and its cryptocurrency is called Ether or Ethereum. Ether is the world’s second-largest cryptocurrency and has held this position for a long time now. Recently, Ethereum has been in the news for its hard fork “London upgrade,” a major revamp for the platform. The hard fork comprises five Ethereum Improvement Proposals (EIPs). The upgrades are important, but the most notable is EIP 1559, which reduced Ether supply with every transaction.

In addition, the upgrade will lead to the Ethereum network handling more transactions per second, improving scalability, and bringing down transaction fees. Another major benefit is expected to decrease the total number of ether coins in circulation, making it a deflationary cryptocurrency. In the run-up to the upgrade, Ethereum did very well. However, considering the next upgrade will occur at the end of 2021, there is an upside here that you can exploit.

Binance Coin (BNB-USD)

A Binance Coin (BNB) sits in front of trading charts.Source: Shutterstock

Binance is one of the most successful crypto exchanges globally when ranked by trading volumes, which is why BNB, its native cryptocurrency, is soaring.

Much like Bitcoin, the thing to like about Binance Coin is the hard limit on the total number of tokens in circulation. It has a strict maximum limit of 200 million BNB tokens. As a result, the token price has risen exponentially for the year thus far.

Binance uses around one-fifth of its profits every quarter to eliminate or “burn” BNB tokens. The reason for destroying or “burning,” coins makes sense: it increases the worth of the remaining tokens.

One of the biggest reasons to be optimistic about Binance Coin is its many use cases. Initially, it was developed as a utility token for discounted trading fees in 2017. But now, you can use it to make travel payments, financial services, and entertainment, among others.

The driving force behind any token is its usability and that’s why BNB will be the next crypto to explode.

Tether (USDT-USD)

A concept token for the Tether (USDT) cryptocurrency.Source: DIAMOND VISUALS / Shutterstock.com

Stablecoins are a new breed of crypto gaining prominence. They are a less volatile alternative to Bitcoin because they are linked to an asset like the U.S. dollar, as is the case with Tether. The cryptocurrency allows you to transact in traditional currencies and avoid the complexities of digital currencies.

Tether is designed to bridge fiat currencies and cryptocurrencies, allowing users to transfer other cryptocurrencies back to U.S. dollars in a less complex, faster manner. Tether has a 1-to-1 ratio with the U.S. dollar for valuation.

Consequently, the altcoin is less speculative than popular cryptocurrencies like Bitcoin and Ethereum. For crypto investors who want to avoid the wild swings that are part and parcel of this space, Tether should be right up your alley as the next crypto to explode.

Monero (XMR)

XMR logoSource: Wit Olszewski / Shutterstock.com

Monero is very popular these days because it has the ability to anonymize users. Ring signatures and stealth addresses help in accomplishing this task. Due to the technology at its disposal, the privacy-focused Monero cab hides the identities of the sender and the receiver.

The only problem some might have with Monero’s approach is that privacy isn’t really an option. It enforces anonymity at a fundamental level. That may rub certain people the wrong way.

But there are several people out there who love this feature and want to protect their identity online since this was one of the main initial benefits of blockchain technology — to remain completely anonymous.

Algorand (ALGO-USD)

Algorand logo in light blue against a simple dark-colored, futuristic-looking backgroundSource: shutterstock.com/Shizume

Algorand investors have enjoyed blockbuster returns following an announcement that El Salvador would establish blockchain infrastructure using Algorand.

Italian computer scientist Silvio Micali is the man behind the platform. ALGO-USD has positioned itself as a competitor to Ethereum. One of the biggest things going for it is the proof-of-stake proofing algorithm, which is less energy-intensive to run. One of the main criticisms against Bitcoin is that it consumers a lot of energy. Through using a proof-of-stake mechanism, ALGO-USD sets itself apart from the rest of the altcoins out there.

On the publication date, Faizan Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Faizan Farooque is a contributing author for InvestorPlace.com and numerous other financial sites. Faizan has several years of experience in analyzing the stock market and was a former data journalist at S&P Global Market Intelligence. His passion is to help the average investor make more informed decisions regarding their portfolio.

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The post Looking for the Next Big Crypto to Explode in 2021? Try These 5 Coins appeared first on InvestorPlace.

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