Stock market is a "fully-fledged epic bubble" and will burst

[BorkBorkBork]

dmahu said:

Mr Whippy said:

Surely every equity bear market for the last 100 years was “priced in” and thus is just a figment of our imagination?

As I noted earlier, you have to remember a whole load of participants are buying indiscriminately, and as the price of particular equities goes up, you’ll end up buying more of it (!) in these global funds based on market caps.

Plus, the entire market isn’t rational.

And the price people, in aggregate, are willing to pay is based on sentiment as much as technicals, and sentiment is fluid.

S&P500 is already down by 20% for the year as all of this bad news has come to fruition. I think it’s the worst YTD since the 1960s, a bloodbath in some sectors.

There is no trader or investor on the planet who doesn’t expect to see more rate rises, quantitative tightening and a recession. Markets are forward looking and have had crystal clear forward guidance.

If there is another leg down it will be due to new information such as this weeks missed CPI reading, not because recessions finally show up, rates rise and the housing market dips.

Edited by dmahu on Friday 16th September 20:07

What happened just a few weeks ago after Powell’s speech at Jackson Hole suggests otherwise. The FED chair had already made clear what their plan was, but he had to be pretty blunt at JH for the markets to take any notice whatsoever. Even though it had been pretty obvious to everyone except the markets what he was going to say. The reaction to that speech was very telling.

And some traders are already again talking about an easing in rate rises, even though Powell categorically said otherwise. The market really is a monster that’s currently going through a period of utter delusion.

[ooid]

lizardbrain said:

Does anyone have a link to august RICs residential survey or is it embargoed?

For some reason there is no house prices thread in finance

Give them a break, like everyone else, RICS also deserve a proper holiday after being locked down with over-priced staycations in Cornwall...

Here is the August summary punchline though:

"Buyer enquiries and sales continue to fall but prices remain underpinned at this stage”

[clubsport]

clubsport said:

Mr Whippy said:

loafer123 said:

markiii said:

what the hell is VIX?

It’s a traded measure of fear and volatility…VIX is high, everyone is panicking the world is ending….if it’s low, everyone is chilled.

The interesting thing is, just like real life panic, it always subsides back to normal eventually.

Chicago Bank Option Exchange, Volatility Index (iirc)

So I think it’s measuring the volatility on prices of options on that exchange?
I assume that exchange has a lot of options to trade and so it’s meaningful… or maybe the particular index is a measure of stuff across many exchanges and types of investments?

Have a look at this, a laymans interpretation of the Vix index. https://www.investopedia.com/terms/v/vix.asp

When pricing & trading options, you consider the "greeks" explanation here; https://www.investopedia.com/trading/getting-to-kn...

The one thing you have to assume in pricing an option is the "impled" volatility. Movement in this obviously affects the underlying price of the option, hence the importance of volatility & Vix index. As vol is implied, this can be seen as a fear index?

Now you are intrigued by financial options(?) Today is special. it ls triple witching day! https://www.investopedia.com/terms/t/triplewitchin...

This can lead to some interesting prices on the underlying future as indices and assets close above/below an options strike price.

The CFTC committmnet of traders report (under Dodd Frank regulation) has now been released stateside, showing an additional 42k contracts short in S&P, 10k in Ndx and Vix short rising by 10k on the week!

Primed for a bouncy, short squeeze?

[bmwmike]

loafer123 said:

markiii said:

what the hell is VIX?

It’s a traded measure of fear and volatility…VIX is high, everyone is panicking the world is ending….if it’s low, everyone is chilled.

The interesting thing is, just like real life panic, it always subsides back to normal eventually.

Alternative ticker is FUD if you can't find VIX

[Mr Whippy]

dmahu said:

Mr Whippy said:

Surely every equity bear market for the last 100 years was “priced in” and thus is just a figment of our imagination?

As I noted earlier, you have to remember a whole load of participants are buying indiscriminately, and as the price of particular equities goes up, you’ll end up buying more of it (!) in these global funds based on market caps.

Plus, the entire market isn’t rational.

And the price people, in aggregate, are willing to pay is based on sentiment as much as technicals, and sentiment is fluid.

S&P500 is already down by 20% for the year as all of this bad news has come to fruition. I think it’s the worst YTD since the 1960s, a bloodbath in some sectors.

There is no trader or investor on the planet who doesn’t expect to see more rate rises, quantitative tightening and a recession. Markets are forward looking and have had crystal clear forward guidance.

If there is another leg down it will be due to new information such as this weeks missed CPI reading, not because recessions finally show up, rates rise and the housing market dips.

Edited by dmahu on Friday 16th September 20:07

I still think you’re giving too much weighting to professional traders/investors, or no consideration to swathes of retail investors, or all the other investments that are indiscriminate, like people just buying a global tracker month on month, irrespective of it’s price.

Very clearly Powell was ignored by enough of ‘the market’ at the last FOMC and re-iterating the factual information but with more stern and repeated adjectives at the interim meeting, that there was a change in the markets.
Thus either the pros are trying to front-run a move to easing, or non-pros who are numerous enough to move markets are trying to front run easing, or a combination of both.

In either case, the market isn’t good enough to price in based on empirical evidence and information… there are clearly emotional drivers at play.

We can see this mentality in the FOMC projections… each meeting revised to a bleaker picture.
At any given point their best analysis says X, but it’s wrong each time, consistently.
But they’re not now getting it right, the methodology is clearly wrong.

But again, I believe this is their mode of operation.
They want high rates, jobs destruction and a recession.
But they don’t want to be seen as the cause of it, and they don’t want to be so effective that they get a soft landing, they just want to be seen as trying to stop it after someone/thing else caused it.

[gotoPzero]

S&P 500.....

FWIW I watch this heat map

https://finviz.com/map.ashx

Then to look at whats happening I look at the 10 year treasury yield, 200 day moving average, VIX and reverse repo..

If you then combine that with employment rates and interest rates you can get a good picture.

There are loads of other charts (oil etc) but it depends how long you have!

[loafer123]

Two completely contrasting charts in an excellent blog I subscribe to…





I tend to err on the former, which is the interest rate cycle is peaking, whereas the market expectations showing a way to go are more emotion led.

[Mr Whippy]

I’d argue the situations on those charts aren’t comparable to today.

We’ve had an economy on the rocks for a decade driven by QE and effective zero interest rates.
It hasn’t overheated and caused inflation through salary rises and increased demand, it’s been over-stimulated to provide demand with a supply side shock.

The timing of events is off vs previous tightening cycles too.

The headroom to ease is tiny against real inflation.
We’re still at negative 5% or more. Easing now will just fuel inflation.


I find WolfStreet a great resource for the USA’s economy and looking at the numbers.
Good article from yesterday.
https://wolfstreet.com/2022/09/18/the-wolf-street-...

[loafer123]

Interesting perspective.

I do find the latest retail sales numbers illuminating…we are already hard on the economic brakes, so raising rates too much more is likely to overshoot on the downside.

I am seeing the same in both the online retail and asset management businesses I am involved in…it’s almost as if sentiment has been used as a quicker alternative to rate rises.

[Phooey]

This is worth signing up to (Free) if you like recent chart content - https://chartstorm.substack.com/p/weekly-s-and-p50...


And the latest Pensioncraft vid is an interesting one (Super Bubble) - https://www.youtube.com/watch?v=zXJewIRzSMU

Edited by Phooey on Monday 19th September 09:08

[loafer123]

Phooey said:

This is worth signing up to (Free) if you like recent chart content - https://chartstorm.substack.com/p/weekly-s-and-p50...


And the latest Pensioncraft vid is an interesting one (Super Bubble) - https://www.youtube.com/watch?v=zXJewIRzSMU

Edited by Phooey on Monday 19th September 09:08

Thanks - love the chartstorm, and have subscribed.

[Phooey]

loafer123 said:

Thanks - love the chartstorm, and have subscribed.

[Digga]

loafer123 said:

Interesting perspective.

I do find the latest retail sales numbers illuminating…we are already hard on the economic brakes, so raising rates too much more is likely to overshoot on the downside.

I am seeing the same in both the online retail and asset management businesses I am involved in…it’s almost as if sentiment has been used as a quicker alternative to rate rises.

Yes IMHO the brakes started to hit a lot of discretionary domestic spending as early as June. I think certain things like home improvements hit the buffers as soon as inflation bit. You can be talking of significant changes in budget.

[BorkBorkBork]

The rates need to rise much further yet. Inflation won’t be resolved until rates are much closer to the rate of inflation. Yes, some of it is pass through from energy prices, but the BoE need to at least match the Fed. I’d like to see at least 5%, but ideally higher, for an extended period, into 2024.

[loafer123]

BorkBorkBork said:

The rates need to rise much further yet. Inflation won’t be resolved until rates are much closer to the rate of inflation. Yes, some of it is pass through from energy prices, but the BoE need to at least match the Fed. I’d like to see at least 5%, but ideally higher, for an extended period, into 2024.

Energy prices are the major thing to show through in inflation, but you do little to reduce those by increasing rates.

[BorkBorkBork]

loafer123 said:

BorkBorkBork said:

The rates need to rise much further yet. Inflation won’t be resolved until rates are much closer to the rate of inflation. Yes, some of it is pass through from energy prices, but the BoE need to at least match the Fed. I’d like to see at least 5%, but ideally higher, for an extended period, into 2024.

Energy prices are the major thing to show through in inflation, but you do little to reduce those by increasing rates.

Yes you do. It’s about demand. If you reduce demand you reduce the pass through. That’s why rates have to go up across the US, the EU and the UK.

[loafer123]

BorkBorkBork said:

Yes you do. It’s about demand. If you reduce demand you reduce the pass through. That’s why rates have to go up across the US, the EU and the UK.

Diverting large amounts of spending power (personal and commercial) to energy costs has reduced demand massively for everything else.

[BorkBorkBork]

loafer123 said:

BorkBorkBork said:

Yes you do. It’s about demand. If you reduce demand you reduce the pass through. That’s why rates have to go up across the US, the EU and the UK.

Diverting large amounts of spending power (personal and commercial) to energy costs has reduced demand massively for everything else.

And demand has to reduce further still. It’s going to be painful.

[loafer123]

BorkBorkBork said:

loafer123 said:

BorkBorkBork said:

Yes you do. It’s about demand. If you reduce demand you reduce the pass through. That’s why rates have to go up across the US, the EU and the UK.

Diverting large amounts of spending power (personal and commercial) to energy costs has reduced demand massively for everything else.

And demand has to reduce further still. It’s going to be painful.

I don’t agree - demand is already massively curtailed. The only reason to raise interest rates is to defend the currency, and as soon as the US stops raising rates we will too, with a sigh of relief.

[Digga]

loafer123 said:

BorkBorkBork said:

loafer123 said:

BorkBorkBork said:

Yes you do. It’s about demand. If you reduce demand you reduce the pass through. That’s why rates have to go up across the US, the EU and the UK.

Diverting large amounts of spending power (personal and commercial) to energy costs has reduced demand massively for everything else.

And demand has to reduce further still. It’s going to be painful.

I don’t agree - demand is already massively curtailed. The only reason to raise interest rates is to defend the currency, and as soon as the US stops raising rates we will too, with a sigh of relief.

Agreed. Expected near future rates of inflation, energy aside, are low. Demand is already dropping. There are more businesses insolvencies this year than last. I think things are already moving.