US indices have spent almost an entire year melting up after the last bear move of 2018. People from all walks of life are entering into the market. People who would have previous considered stocks exotic, confusing and complicated are lulled into the market on the easy promise of low risk, small fee and ever rising Index funds. Uber drivers are giving tips to their fares to get in with Vanguard. People in their 30's - 40's are under the impression they can invest practically risk free as long as they ride out little dips. Lost in the yelling of the crowd there are voices from hedge fund managers like Burry and Dalio saying ... "What are you doing?".
For some time it's been apparent to people the Fed essentially have put on the market, and this has led to complacency from small investors; but worse than that, moral hazard and potentially malinvestment from larger traders. Derivatives are again becoming a concern. Burry noting the derivatives placed on index funds could be impossible to unwind in a downturn mirroring the 2008 crisis. Deutsche bank have announced they are getting back into the CDO market, presumably to try and cover the losses from their other derivatives products, most of which are losing them money.
In 2008 the US used a rapid inflation of debt to get out of a recession caused by having too much debt. Since this point asset prices have went directly up, but real GDP to debt has ratio has consistently gotten worse. There is not the growth to support the gains. People are buying in because they think they can sell later at a profit. The value increases in the asset markets do not sync up with the value increases in the real economy. The decade plus rally from the lows is built on manipulated inflation of price. If and when this stops, it could lead to the biggest crash in US equities we've ever seen - with price making it's bottom under the 2008 lows.
How long this can go on is unsure. the Fed can pump cash into the market for a long time, and make the problem far worse if they do. I think we may be close to the end of it, though. I am starting to take small short positions against US indices now. 3310 is my sell price on the S&P500. For now I am using a strategy of high stops above the highs. If this decides to make a mega spike upwards, I do not want to be short for that. I think we now trade at important technical levels, and if price starts to fall from these levels it might not come back up here. This gives good risk:reward opportunities on small positions. I will add into weaker market.
If this move starts to happen, I will post additional short term trades to follow the momentum through days/weeks
For some time it's been apparent to people the Fed essentially have put on the market, and this has led to complacency from small investors; but worse than that, moral hazard and potentially malinvestment from larger traders. Derivatives are again becoming a concern. Burry noting the derivatives placed on index funds could be impossible to unwind in a downturn mirroring the 2008 crisis. Deutsche bank have announced they are getting back into the CDO market, presumably to try and cover the losses from their other derivatives products, most of which are losing them money.
In 2008 the US used a rapid inflation of debt to get out of a recession caused by having too much debt. Since this point asset prices have went directly up, but real GDP to debt has ratio has consistently gotten worse. There is not the growth to support the gains. People are buying in because they think they can sell later at a profit. The value increases in the asset markets do not sync up with the value increases in the real economy. The decade plus rally from the lows is built on manipulated inflation of price. If and when this stops, it could lead to the biggest crash in US equities we've ever seen - with price making it's bottom under the 2008 lows.
How long this can go on is unsure. the Fed can pump cash into the market for a long time, and make the problem far worse if they do. I think we may be close to the end of it, though. I am starting to take small short positions against US indices now. 3310 is my sell price on the S&P500. For now I am using a strategy of high stops above the highs. If this decides to make a mega spike upwards, I do not want to be short for that. I think we now trade at important technical levels, and if price starts to fall from these levels it might not come back up here. This gives good risk:reward opportunities on small positions. I will add into weaker market.
If this move starts to happen, I will post additional short term trades to follow the momentum through days/weeks
