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The Moment Wall Street Has Been Waiting For: Retail Is All In July 28, 2021
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. 
If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com. My new book is available! A Hacker's Teleology: Sharing the Wealth of Our Shrinking Planet 20% and 15% discounts (Kindle $7, print $17, audiobook now available $17.46) Read excerpts of the book for free (PDF). The Story Behind the Book and the Introduction. Recent Videos/Podcasts: AoE Salon #44: We say "Satyagraha", they say "sedition" with author Max Borders (1:03 hrs) My COVID-19 Pandemic Posts My recent books: A Hacker's Teleology: Sharing the Wealth of Our Shrinking Planet (Kindle $8.95, print $20, audiobook $17.46) Read the first section for free (PDF). Will You Be Richer or Poorer?: Profit, Power, and AI in a Traumatized World (Kindle $5, print $10, audiobook) Read the first section for free (PDF). Pathfinding our Destiny: Preventing the Final Fall of Our Democratic Republic ($5 (Kindle), $10 (print), ( audiobook): Read the first section for free (PDF). The Adventures of the Consulting Philosopher: The Disappearance of Drake $1.29 (Kindle), $8.95 (print); read the first chapters for free (PDF) Money and Work Unchained $6.95 (Kindle), $15 (print) Read the first section for free (PDF). Become a $1/month patron of my work via patreon.com. 
Thousands apply for grueling jobs in Amazon warehouses, low-paid serfdom
with only one purpose: increasing the profits of billionaires. Wouldn't it be beneficial if those
people had an alternative source of paid work that served the interests of their family and community?
Many people dismiss my proposed alternative (CLIME) as too idealistic to work in the real world. Nobody says corporations are too idealistic to work in the real world, yet CLIME is a system of community owned and run corporations. The only difference between the two is the purpose and ownership. CLIME: Community Owned Corporations The world has entered an era of profound uncertainty. The Old Normal is gone for good, and the deck is shifting ominously beneath our feet. Now is the moment to ask: what would a fairer, more sustainable system look like? How would it be better for me, humanity and the planet? Even before the global upheavals, our system was failing. Now that it's unraveling, it's time for a new arrangement that's actually sustainable on our resource-depleted planet that doesn't favor wealthy insiders. But those gorging on inequality will never accept reforms that strip away their unearned privileges, and so the only practical way forward is a Hacker's Teleology. What's a Hacker's Teleology? A hack is a workaround in a kludgy, broken system-- a new way of connecting the dots. Teleology means the destination we end up reaching because that's where the dots lead. In this book I connect the dots of my own life experiences to show how a sustainably fair way of organizing human activity would work. In telling my story, I'm also telling our story, because we all share our limited-resources world and the same aspirations for fairness, belonging, getting ahead and a say in our future. So let's get started on an arrangement that actually works for all of us--and our world. Read excerpts of the book for free (PDF). The Story Behind the Book and the Introduction. A Hacker's Teleology: Sharing the Wealth of Our Shrinking Planet 20% and 15% discounts end September 30 (Kindle $7, print $17)
Recent entries: The Moment Wall Street Has Been Waiting For: Retail Is All In July 28, 2021 America Is a Moral Cesspool, and Student Loans Prove It July 26, 2021 America Has Lost the Trade War with China, and the Real Pain Has Yet to Begin July 23, 2021 Have We Reached "Peak Self-Glorifying Billionaire"? July 22, 2021 Big Tech: "Our Terms Have Changed" July 20, 2021 How Breakdown Cascades Into Collapse July 19, 2021 Welcome to the 21st Century Sequel of the Catastrophic 1600s July 16, 2021 Here's Why America's Labor-Shortage Will Drive Inflation Higher July 14, 2021 The $50 Trillion Plundered from Workers by America's Aristocracy Is Trickling Back July 12, 2021 Housing Bubble #2: Ready to Pop? July 8, 2021 A Few Things About Reinforced Concrete High-Rise Condos July 6, 2021 July 4th: Sorry, America, You Lost Me July 4, 2021
Virus Z: A Thought Experiment
July 1, 2021
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"There is no security on this earth; there is only opportunity." (Douglas MacArthur) "We are what we repeatedly do." (Aristotle) "Do the thing and you shall have the power." (Ralph Waldo Emerson) "Any intelligent fool can make things bigger, more complex, and more violent. It takes a touch of genius and a lot of courage to move in the opposite direction." (E.F. Schumacher, via Tom R.) "He who will not risk cannot win." (John Paul Jones) "When we drink coffee, ideas march in like the army." (Honore de Balzac) "Progress is not possible without deviation." (Frank Zappa, via Richard Metzger) "Victory favors those who take pains." (amat victoria curam) "The man who has a garden and a library has everything." (Cicero, via Lee Bentley) "A healthy homecooked family meal and a home garden are revolutionary acts." (CHS) "Do you know what amazes me more than anything else? The impotence of force to organize anything." (Napoleon Bonaparte) "The way of the Tao is reversal" Or "Reversal is the movement of Tao." (Lao Tzu) "Chance favours the prepared mind." (Louis Pasteur) "Success consists of going from failure to failure without loss of enthusiasm." (Winston Churchill) "Where there is ruin, there is hope for treasures." (Rumi) "The realm of gratitude is boundless." (CHS, 11/25/15) "History doesn't have a reverse gear." (CHS, 12/22/15) Smith's Law of Conservation of Risk: Every sustained action has more than one consequence. Some consequences will appear positive for a time before revealing their destructive nature. Some consequences will be intended, some will not. Some will be foreseeable, some will not. Some will be controllable, some will not. Those that are unforeseen and uncontrollable will trigger waves of other unforeseen and uncontrollable consequences. (July 8, 2014)(thanks to Lew G. for retitling the idea.) Smith's Neofeudalism Principle #1: If the citizenry cannot replace a kleptocratic authoritarian government and/or limit the power of the financial Aristocracy at the ballot box, the nation is a democracy in name only. The Smith Corollary to Metcalfe's Law (The Network Effect): the value of the network is created not just by the number of connected devices/users but by the value of the information and knowledge shared by users in sub-networks and in the entire network. (CHS, 4/6/16) My Credo of Liberation: I no longer care if the power centers of our society--the distant, fortified castles of our financial feudal system--are changed by my actions, for I am liberated by the act of resistance. I am no longer complicit in perpetuating fraudulent feudalism and the pathology of concentrated power. I no longer covet signifiers of membership in the Upper Caste that serves the plutocracy. I am liberated from self-destructive consumerist-State financialization and the delusion that debt servitude and obedience to sociopathological Elites serve my self-interests. (Thank you, Klaus-Peter L., for reminding me) "We've become a culture of excuses rather than solutions: solutions always require sustained effort and discipline." (CHS 4/9/16) "Fraud as a way of life caters an extravagant banquet of consequences." (CHS 4/14/16) "Creativity = problem solving = value creation." (CHS 6/4/16) "Truth is powerful because it is the core dynamic of solving problems." (CHS 7/21/17) "We live in a system of human emotions that masquerades as a science (economics)." (CHS 1/1/18) "Always remember, your focus determines your reality." (George Lucas) "Diversity is for poor people. Sameness is for the successful." (GFB) "When power dissipates suddenly, it dissipates completely." (CHS 7/14/19) "Disobedience is the true foundation of liberty. The obedient must be slaves." (Henry David Thoreau) "Markets cannot price in the value of non-monetized natural assets such as diverse ecosystems." (CHS 7/14/19) |
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