In 1999 there were hardly any retail investors with margin accounts capable of participating in the options market, and even fewer that had accounts at the CBOE or CME for trading futures and other derivatives. The only ones that could take down large lots of options contracts were the long/short hedge funds and other large speculative companies involved in the Equities markets. Even institutional investors like insurance companies were hesitant to use derivatives at the time due to the lack of liquidity they would experience. A retail investor with a margin account was a rare observation in 1999, and the 2000 bubble pop delivered us something we have today that we didn't have then: The Pattern Day Trader rule and it's pre-requisite $25k account balance. Fast forward to now, this is a dramatically different environment.
We also, did not have a Federal Reserve that would even contemplate rescuing a bank or financial institution that bit off too much risk. That's why they're the FED and the banks were their customers. Add a few more financial crisis' to the mix after LTCM in 1998 and abracadabra: A Nonstop Two Decade Long and counting Keynesian Orgy commences. Monetary policy tools and the views of those managing it - are very different. In the Late 90's Japan's struggles were underway, but not nearly where they would wind up now, and nobody thought Japan was taking a prudent path forward. Most of us with brains still don't, but now we are not just sleeping in the same bed, we vertically integrated that bed and it's living in the Federal Reserve's board room.
Are we too distracted? Well, most of the money sitting in retirement accounts with BlackRock, StateStreet and Vanguard is 100% distracted unless they're about to retire... then they're terrified they don't have any easy way to reinvest those portfolios for producing income because we still don't have any meaningful or reliable yield in the fixed income markets. Never mind the fact that the lack of sound monetary theory will move the dollar to the basement and send government debt into the main septic line with it. That's just ONE distraction. Want a few more distractions? OK, you asked for it: Pandemic that comes seemingly out of nowhere, All world Governments reacting by following China's ideal approach to pandemic response. Once they found compliance amongst terrified populations, they doubled down and decided to take us to pound town with their new dreams of an authoritarian wet dream, and boy have they managed to do that. Some people are standing up, but the spread of government power centralizing globally has leaked its tentacles into every protected civil liberty we still have, and this obviously is a distraction as it starts to impact our children and every day to day life out there.
The potential catalysts are too numerous to list but a few I was able to think of:
a) China v Taiwan - if this happens, I don't think it would take much else to kick the ball down the mountain.
b) Russia cuts supply of energy to Europe as a show of political power.
c) Biden dies while in office, leaving our woefully inadequate VP to take the helm as our new fearless leader.
d) Off balance sheet credit risk - Bill Hwang 2.0 - Off B/S credit risk has popped many market bubbles so far in history that we can't bet against a tried and true winner like these guys. What dumbass bank has leant money to an irresponsible person who then dumps the loan into a speculative market hoping to become the next George Soros? We don't know, but we do know that no amount of regulation and government oversight has kept this from happening, and in fact might have caused encouragement in the past.
These are simple thoughts I am glad I have an outlet to share, because they keep me up at night for realz.
It's impossible to know what exactly is going to pop our bubble economy; but your point that we are "weaponizing" financial instruments like call options is great. I'm fifty years old and I lived through the Dot Com bubble and I don't remember call buying being a thing like it is today, at all. But, when you think about it, our entire economy has been "financialized" and CENTRALIZED to such a degree that it's become even more fragile than it was back then. I remember the "Maestro," Alan Greenspan, talking about irrational exuberance, etc., but I don't remember hearing from the Treasury Secretary ever other day; not to mention other Fed presidents. These central planners are the creators and also the cheerleaders of this financial edifice. My problem with all this is that central planning always seems to end badly. The Maestro didn't look so smart after the Dot Com bubble, did he?
Thanks for the feedback, Chris. Just glad I'm not the only person that sees it. Sometimes I feel like I'm outnumbered a trillion to one on just identifying things that are literally right in front of our faces.
Thanks for the article. I have exactly the same thoughts. Its been a tough month. I have been short tesla since 750....and really just hope the FED meeting soon will knock a spanner in this run by announcing an earlier than expected increase in interest rates. A lot of these analysts need to be in prison. The constant raising of targets based on nothing new esp with regards to Tesla is just fueling the stock price. Eventually, when this bubble bursts, it will be the biggest burst ever. Hedge funds are leveraged 10 times + and with retail on significant leverage (which will be banned after the explosion) it will lead to a plethora of margin calls which will lead to stocks getting annihilated. By that time, mostly retail investors will be in stocks and they will get slaughtered. The banks who made billions will get miniscule fines and in another decade we will have exactly the same.
I can’t imagine a repeat of 2008. Too many more high middle class people (myself included) are fully invested. A retraction back to 666 will basically mean the pitch forks will be back on the table. The FED will need to crank to infinity and not allow that to happen. They’ll do what Japan does and buy everything in site. As the dumbass Kashkari said, the FED has unlimited supplies of money. I don’t disagree with you on the crash. The outcome will be epic. But the little guy will not be letting bankers get away with it again.
When I studied economics long ago (later 1990's) our professor stated that when the government started monetizing the debt, that would be a sign that we were really getting into trouble. Somehow that certainty of doom has now been re-labeled "Quantitative Easing", a genius level euphemism that starts with "Quantitative" a word with practically no real meaning of its own that sends a subliminal message that all non-math brained people should go to sleep and ignore what follows. And then there is "Easing", which sounds like Preparation H for our economy. Great stuff. We have amazing geniuses running our economy who have mastered large scale mind control for many years now. With people so smart running things we must face the reality that we can never be doomed by anything.
Umm...Tesla! Need I say anything more? If valuation is in same league as Apple, Microsoft, and Amazon...BUT not like Honda or Toyota...something is not right. But the Wall Street casino is short on common sense...just like the real casinos along Las Vegas Blvd....
Well said. While people don't realize TSLA has the value of all legacy automakers combined, it STILL doesn't make sense something is wrong. So be it...
I am a CPA and remember going to an open house back in 2001 where a Real Estate broker asked me if there was anyway to take the $1.5M Capital Loss that he had from the dot com bust. When this ends there are going to be a lot of people with $3000 deductions for the rest of their lives. The problem is that This new generation of HODLers will ride their gains into losses and then capitulate at the bottom. Only Margin calls will force them to sell. If what you say about a lack of foundation is true then the extreme Margin debt might make things accelerate very quickly.
Well said. And no one knows that panic until we're there. For many, who have never seen a bear market in their lives, it's inconceivable to even consider.
What was the catalyst for the crash in march of 2000? Wasn't it just several months of topping patterns and then womp-womp? I was in high school at the time. All of my teachers were day trading. It's all they talked about. Heading into Xmas break in 1999, it seemed to reach its crescendo. Coming back in January, things were muted. The chatter was still there I guess, but the exuberance was gone. A couple of months later, you never heard a whisper about "my E*trade" account ever again." HAH!
Agree with you but probably has another 2 -3 years to go and you need to compare it to 1927-1929, not 1999. There may or may not be a specific catalyst to get it started. When it's over, it's over! We'll be much more ebullient and even more bloated in debt. It won't take much to have the system collapse upon itself. In the months leading up to the peak in 2007 we all knew it wasn't going to end well with housing and mortgages. We all have the same feeling about the current situation. This one is going to be much worse and take longer to recover from.
The article is completely silent on the increase in money supply. Larger denominator (money supply) means larger numerator (asset prices). I think if you're trying to place a fair value on assets, it's important to remember that there's more money circulating in the system. All of those historical examples never saw the sort of money printing that we're seeing today. I think this time is, in fact, different.
Isn't the rise in the markets a function of inflation? Those countries that experience hyper inflation experience increasing markets? Is not hyper valuations on the markets hyperinflation? Over valued goods (in USD reserve currency) the same as over valued stocks? I would think this is all a product of the USD losing value, not stocks or goods increasing in value.
Thanks for your article. Back in 1999 the underlying economy was much more sound than today. Since GFC 2008-2009 the US economy has been on QE (or life support) that the large banks had access to which were available to be borrowed by large financial institutions and family offices to bid up paper assets knowing that the Central Banks will cover their backs...until they can't...which is when inflation and stagflation rears their ugly heads. The big boyz also have inside information, as to when Central Banks will not have a choice but to raise interest rates to combat inflation, to unload the paper asset holdings on the unsuspecting masses who will be left to hold the empty bags to be fleeced one last time before they enslaved in Central Bank CBDC and global governance. Precious metal anyone to opt out of slavery?
Is Telsa REALLY worth $400 Billion dollars more (50% stock valuation increase) because it sold a measly 100,000 car to a rental car company, 3 weeks ago? This is 1000 times worse than Sun Micro (were I worked in 2000.)
I had one of those undercapitalized margin accounts that wiped out in 2001. I ended up sending them a check. It just reached peak exhaustion, and the market died. I was short TSLA at $40 or so. Learned my lesson from 2001 - take the loss, walk away. TSLA could hit $2000+ before it hits $200. I think (and hope) it ends like the nifty fifty with a grinding bear market for ten years. Otherwise I focus on the real economy and real companies with real profits and wait for the madness to cease.
Read and understand Exodus 5, then search for “God Jesus Holy Ghost NOTQ” on YouTube (watch it on a BIG screen, pause on each page).
Watch/read/understand that THEY have manufactured EVERYTHING you talked about in this post. Nothing is happening by mistake. And nothing can stop what’s coming. Thank you for sounding the alarm. I hope more people read this to know and understand the TRUTH.
Tesla being valued worth more than the next 12 biggest Automakers globally is a 1999 minute. Where are the darlings of 1999 now like AOL, Cisco and Nortel.
Quote I came up with today after my buddy pinged me.
“When the most uniformed garbage can starts to give stock predictions and says he wants to make a career change in a bull market, a crash can’t be too far”
In 1999 there were hardly any retail investors with margin accounts capable of participating in the options market, and even fewer that had accounts at the CBOE or CME for trading futures and other derivatives. The only ones that could take down large lots of options contracts were the long/short hedge funds and other large speculative companies involved in the Equities markets. Even institutional investors like insurance companies were hesitant to use derivatives at the time due to the lack of liquidity they would experience. A retail investor with a margin account was a rare observation in 1999, and the 2000 bubble pop delivered us something we have today that we didn't have then: The Pattern Day Trader rule and it's pre-requisite $25k account balance. Fast forward to now, this is a dramatically different environment.
We also, did not have a Federal Reserve that would even contemplate rescuing a bank or financial institution that bit off too much risk. That's why they're the FED and the banks were their customers. Add a few more financial crisis' to the mix after LTCM in 1998 and abracadabra: A Nonstop Two Decade Long and counting Keynesian Orgy commences. Monetary policy tools and the views of those managing it - are very different. In the Late 90's Japan's struggles were underway, but not nearly where they would wind up now, and nobody thought Japan was taking a prudent path forward. Most of us with brains still don't, but now we are not just sleeping in the same bed, we vertically integrated that bed and it's living in the Federal Reserve's board room.
Are we too distracted? Well, most of the money sitting in retirement accounts with BlackRock, StateStreet and Vanguard is 100% distracted unless they're about to retire... then they're terrified they don't have any easy way to reinvest those portfolios for producing income because we still don't have any meaningful or reliable yield in the fixed income markets. Never mind the fact that the lack of sound monetary theory will move the dollar to the basement and send government debt into the main septic line with it. That's just ONE distraction. Want a few more distractions? OK, you asked for it: Pandemic that comes seemingly out of nowhere, All world Governments reacting by following China's ideal approach to pandemic response. Once they found compliance amongst terrified populations, they doubled down and decided to take us to pound town with their new dreams of an authoritarian wet dream, and boy have they managed to do that. Some people are standing up, but the spread of government power centralizing globally has leaked its tentacles into every protected civil liberty we still have, and this obviously is a distraction as it starts to impact our children and every day to day life out there.
The potential catalysts are too numerous to list but a few I was able to think of:
a) China v Taiwan - if this happens, I don't think it would take much else to kick the ball down the mountain.
b) Russia cuts supply of energy to Europe as a show of political power.
c) Biden dies while in office, leaving our woefully inadequate VP to take the helm as our new fearless leader.
d) Off balance sheet credit risk - Bill Hwang 2.0 - Off B/S credit risk has popped many market bubbles so far in history that we can't bet against a tried and true winner like these guys. What dumbass bank has leant money to an irresponsible person who then dumps the loan into a speculative market hoping to become the next George Soros? We don't know, but we do know that no amount of regulation and government oversight has kept this from happening, and in fact might have caused encouragement in the past.
These are simple thoughts I am glad I have an outlet to share, because they keep me up at night for realz.
It's impossible to know what exactly is going to pop our bubble economy; but your point that we are "weaponizing" financial instruments like call options is great. I'm fifty years old and I lived through the Dot Com bubble and I don't remember call buying being a thing like it is today, at all. But, when you think about it, our entire economy has been "financialized" and CENTRALIZED to such a degree that it's become even more fragile than it was back then. I remember the "Maestro," Alan Greenspan, talking about irrational exuberance, etc., but I don't remember hearing from the Treasury Secretary ever other day; not to mention other Fed presidents. These central planners are the creators and also the cheerleaders of this financial edifice. My problem with all this is that central planning always seems to end badly. The Maestro didn't look so smart after the Dot Com bubble, did he?
Chris Meola
Thanks for the feedback, Chris. Just glad I'm not the only person that sees it. Sometimes I feel like I'm outnumbered a trillion to one on just identifying things that are literally right in front of our faces.
Just imagine being Peter Schiff...
Thanks for the article. I have exactly the same thoughts. Its been a tough month. I have been short tesla since 750....and really just hope the FED meeting soon will knock a spanner in this run by announcing an earlier than expected increase in interest rates. A lot of these analysts need to be in prison. The constant raising of targets based on nothing new esp with regards to Tesla is just fueling the stock price. Eventually, when this bubble bursts, it will be the biggest burst ever. Hedge funds are leveraged 10 times + and with retail on significant leverage (which will be banned after the explosion) it will lead to a plethora of margin calls which will lead to stocks getting annihilated. By that time, mostly retail investors will be in stocks and they will get slaughtered. The banks who made billions will get miniscule fines and in another decade we will have exactly the same.
I can’t imagine a repeat of 2008. Too many more high middle class people (myself included) are fully invested. A retraction back to 666 will basically mean the pitch forks will be back on the table. The FED will need to crank to infinity and not allow that to happen. They’ll do what Japan does and buy everything in site. As the dumbass Kashkari said, the FED has unlimited supplies of money. I don’t disagree with you on the crash. The outcome will be epic. But the little guy will not be letting bankers get away with it again.
When I studied economics long ago (later 1990's) our professor stated that when the government started monetizing the debt, that would be a sign that we were really getting into trouble. Somehow that certainty of doom has now been re-labeled "Quantitative Easing", a genius level euphemism that starts with "Quantitative" a word with practically no real meaning of its own that sends a subliminal message that all non-math brained people should go to sleep and ignore what follows. And then there is "Easing", which sounds like Preparation H for our economy. Great stuff. We have amazing geniuses running our economy who have mastered large scale mind control for many years now. With people so smart running things we must face the reality that we can never be doomed by anything.
Umm...Tesla! Need I say anything more? If valuation is in same league as Apple, Microsoft, and Amazon...BUT not like Honda or Toyota...something is not right. But the Wall Street casino is short on common sense...just like the real casinos along Las Vegas Blvd....
Well said. While people don't realize TSLA has the value of all legacy automakers combined, it STILL doesn't make sense something is wrong. So be it...
I am a CPA and remember going to an open house back in 2001 where a Real Estate broker asked me if there was anyway to take the $1.5M Capital Loss that he had from the dot com bust. When this ends there are going to be a lot of people with $3000 deductions for the rest of their lives. The problem is that This new generation of HODLers will ride their gains into losses and then capitulate at the bottom. Only Margin calls will force them to sell. If what you say about a lack of foundation is true then the extreme Margin debt might make things accelerate very quickly.
Well said. And no one knows that panic until we're there. For many, who have never seen a bear market in their lives, it's inconceivable to even consider.
What was the catalyst for the crash in march of 2000? Wasn't it just several months of topping patterns and then womp-womp? I was in high school at the time. All of my teachers were day trading. It's all they talked about. Heading into Xmas break in 1999, it seemed to reach its crescendo. Coming back in January, things were muted. The chatter was still there I guess, but the exuberance was gone. A couple of months later, you never heard a whisper about "my E*trade" account ever again." HAH!
Agree with you but probably has another 2 -3 years to go and you need to compare it to 1927-1929, not 1999. There may or may not be a specific catalyst to get it started. When it's over, it's over! We'll be much more ebullient and even more bloated in debt. It won't take much to have the system collapse upon itself. In the months leading up to the peak in 2007 we all knew it wasn't going to end well with housing and mortgages. We all have the same feeling about the current situation. This one is going to be much worse and take longer to recover from.
The article is completely silent on the increase in money supply. Larger denominator (money supply) means larger numerator (asset prices). I think if you're trying to place a fair value on assets, it's important to remember that there's more money circulating in the system. All of those historical examples never saw the sort of money printing that we're seeing today. I think this time is, in fact, different.
TLDR; this bubble could be the new normal.
Isn't the rise in the markets a function of inflation? Those countries that experience hyper inflation experience increasing markets? Is not hyper valuations on the markets hyperinflation? Over valued goods (in USD reserve currency) the same as over valued stocks? I would think this is all a product of the USD losing value, not stocks or goods increasing in value.
Thanks for your article. Back in 1999 the underlying economy was much more sound than today. Since GFC 2008-2009 the US economy has been on QE (or life support) that the large banks had access to which were available to be borrowed by large financial institutions and family offices to bid up paper assets knowing that the Central Banks will cover their backs...until they can't...which is when inflation and stagflation rears their ugly heads. The big boyz also have inside information, as to when Central Banks will not have a choice but to raise interest rates to combat inflation, to unload the paper asset holdings on the unsuspecting masses who will be left to hold the empty bags to be fleeced one last time before they enslaved in Central Bank CBDC and global governance. Precious metal anyone to opt out of slavery?
Is Telsa REALLY worth $400 Billion dollars more (50% stock valuation increase) because it sold a measly 100,000 car to a rental car company, 3 weeks ago? This is 1000 times worse than Sun Micro (were I worked in 2000.)
I had one of those undercapitalized margin accounts that wiped out in 2001. I ended up sending them a check. It just reached peak exhaustion, and the market died. I was short TSLA at $40 or so. Learned my lesson from 2001 - take the loss, walk away. TSLA could hit $2000+ before it hits $200. I think (and hope) it ends like the nifty fifty with a grinding bear market for ten years. Otherwise I focus on the real economy and real companies with real profits and wait for the madness to cease.
Read and understand Exodus 5, then search for “God Jesus Holy Ghost NOTQ” on YouTube (watch it on a BIG screen, pause on each page).
Watch/read/understand that THEY have manufactured EVERYTHING you talked about in this post. Nothing is happening by mistake. And nothing can stop what’s coming. Thank you for sounding the alarm. I hope more people read this to know and understand the TRUTH.
Tesla being valued worth more than the next 12 biggest Automakers globally is a 1999 minute. Where are the darlings of 1999 now like AOL, Cisco and Nortel.
Quote I came up with today after my buddy pinged me.
“When the most uniformed garbage can starts to give stock predictions and says he wants to make a career change in a bull market, a crash can’t be too far”