Editor’s Note: As Chief Investment Strategist of Total Wealth, Shah believes in making his track record of recommendations easily accessible to all readers within seconds – and that’s why he’s compiled an Archives page.
Last week, we ended down across the board. The Nasdaq, Dow, and S&P closed a combined 8.3% lower, and it had the bears coming off the sidelines and getting ready to make their move.
But the bulls weren’t giving up that easily, not Friday, not today, maybe not ever.
We’ve got a way to go before we’re in bear market, although we’re tapdancing on the edge of a correction, at least when it comes to the Nasdaq Composite. But we still have lower to go, if we end up going lower, that is.
The bears are looking to get in as the hedging unwinds, chasing Big Tech lower, and election madness begins to ramp up.
We could be headed lower… but they key word here is could, and where the markets are headed next lay in the hands of one very specific group: the retail investors.The Battle of the Bulls and the Bears Rages On
Sep 11, 2020
I’m not the kind of guy to say I told you so, but if I was, I’d sure be saying it now.
That’s a joke, kind of. Because I did tell you that Tesla was the poster boy for irrational exuberance and “that one stock is a bellwether for the entire market.”
When Tesla rolled over, when it “corrected,” meaning fell 10%, that was the bell ringing out its warning, that was the time to make sure your stops were locked and loaded, that was the turning point for the market.
As a bellwether it worked perfectly. Tesla hit an all-time high on Monday August 31, two days after I said to watch it. It was up a remarkable 495% in eight months. The next day it fell 4.66%. The next day, Wednesday, as the S&P 500 and Nasdaq Composite were making all-time highs, Tesla fell another 5.82%. The warning couldn’t have been any clearer or louder, while markets were making new highs Tesla was down 10% in correction mode.
This is a true story.
It’s about U.S. mega-cap tech stocks and equity markets melting-up this summer and how one man drove the action, suckered in retail investors, and painted Wall Street’s biggest pros into a corner. It’s also a lesson for retail traders on how the big boys play and how to not get played by them.
Sep 09, 2020
Valuations have been stretched and it’s high time some of that air gets let out of the bubble. The rally could go higher… but it depends on one industry, and that industry could surprise you. Click here to watch.
Last week was entirely an illusion.
The week started out well, got better by Wednesday, but fell apart. And what looked like a nasty storm on Thursday seemed to calm itself down by the end of trading Friday.
But the storm hasn’t passed, and if it doesn’t dissipate quickly, meaning by this week or by the end of next week, it could completely obliterate what progress we’ve made.
And, if all hell breaks loose, we could easily be down 20% or more by the end of next week, or sooner.
Everyone Has a Plan Until They Get Punched in the Mouth: What You Need to Do When the Fed Realizes It’s in Trouble
Just because the master manipulators at the Federal Reserve say they’re going to backstop U.S. bond markets, as well as debt on corporate balance sheets, doesn’t mean they can.
It’s true they’re managing easily enough in the early rounds of the fight to save debt markets, corporations, and the economy, but they’re going to have to do more, including the impossible, when their real opponent comes out swinging.
As Mike Tyson famously said of Evander Holyfield’s fight tactics to beat him in their first bout, “Everyone has a plan until they get punched in the mouth.”
It’s never happened before. It’s totally unprecedented. A mere handful of stocks, six to be precise, are driving equity markets to higher all-time highs.
And it’s happening while COVID-19 still threatens the country and the economy, while the country’s struggling to climb out of the worst, deepest recession in history, and while 15 million of the 20 million Americans that lost their jobs since March remain unemployed.
However, none of that matters to the stocks powering markets higher, or the investors and analysts who say they’re going higher because they’ve benefited from lockdowns. They’ll continue to benefit from paradigm shifts in how we live, work, and play.
The narratives surrounding these companies and their stocks are all one-sided; they’re all positive.
The problem with that is, that positivity has turned to irrational exuberance – or, misled over-positivity. And that’s dangerous.
Sep 02, 2020
December 1996 is when the term “irrational exuberance” was coined, and the market’s are looking a lot like they did in 1996, especially in the tech sector. But it wasn’t until 2000 that the markets headed back down, so we have time to pull profits…
Don’t get me wrong – just because I’ve started to write about how crazy the market’s become, how it’s like déjà vu all over again, doesn’t mean I’m not bullish.
Because I am – bullish, that is.
Because, you know, it’s all good until it isn’t.
Because, “as long as the music is playing, you’ve got to get up and dance.” That’s what Chuck Prince, Citigroup’s chief executive in July 2007, told the Financial Times. The party would end at some point, but there was so much liquidity it wouldn’t be the U.S. subprime mortgage market stopping the music.
It took another 15 months for Prince’s preamble prediction which was, “When the music stops, in terms of liquidity, things will be complicated,” to come true, at least that part. The part about subprime mortgages not being the cause was just a little off. Just a little.
Does that mean we have another 15 months? Maybe.
The Dow was up 723 points last week, or 2.6%. It’s now 3.2% from its all-time highs of last February. The S&P 500 notched another all-time high last week, ending the week up 3.3%. And the Nasdaq Composite hit a record high, ending the week up 3.4%.
Since the March 23, 2020 lows, in only five months, the Dow is up 54.11%, the S&P 500 is up 56.78%, and the Nasdaq Composite, wait for it…is up 70.47%
Aug 31, 2020
Tesla’s market cap is greater than all the car manufacturers in the world, combined, and that’s a little lofty – but the FAANGs are headed higher, and those are the stocks – not TSLA – that are driving the markets up.
Aug 28, 2020
In Wednesday’s Total Wealth,I explained how there is no comparison between the 1999 rally that led to the Tech Wreck of 2000 and the 2020 rally that’s getting ever more irrational.
Of course, there are valid comparisons.
Don’t worry, be happy.
The roaring tech rally of 2020, courtesy of the Great Lockdown, courtesy of COVID-19, is nothing like the roaring tech rally of 1999 that led to the Tech Wreck of 2000.
At least that’s the investing narrative making the rounds now.
The story is, everywhere comparisons are being made between the irrational exuberance that led to the Nasdaq Composite crashing 50% in 2000 and the tech rally of 2020 where five stocks have led millions of investors up the yellow brick road, is that there is no comparison.
Aug 26, 2020
We’re coming out of this recession so far, so good, and if we get a vaccine, the economy, stocks, jobs, will all explode. And the market reflects that.
Ever wish for an “endless summer?”
Of course, you have.
Ever wish for an endless stock market rally?
Of course, you have.
Well, at least one of your wishes has come true.
Now here we are again, facing the end of summer and wondering how many more days, weeks, months, quarters, years, decades the market’s going keep on rallying.
I’ll save you the wondering, the answer is the market’s going to keep on rallying. Until that is, one, or two, or three things happen, either by themselves, but more likely, in conjunction with one another.
Aug 24, 2020
The overall market, the big names, the FAANGs, have been carrying the market higher as little names are still falling. Can they keep the markets up long term? Here’s what Shah says…