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Markets Are Bubbly – The Economy, Not So Much

Not a Bubble?  The equity markets have been driven by momentum and speculation these past few weeks, not by underlying business fundamentals.  We had GameStop, followed by Silver, then Pot stocks, and now SPACs, all driven by retail.  PE ratios are in the top 1% of their historical range.  Junk bond yields are at all-time-record low levels (sub 4%).  In January, the worst stocks based on business fundamentals, significantly outperformed …Read More

Bubble Markets Display Bizarre Behavior

Right Before They Tumble Like the Dot.Com bubble of the late ‘90s, the typical signs of an approaching bubble bust were on full display in the equity markets last week (week ending January 29th).   GameStop (GME) and other failing or troubled companies (AMC, Blackberry, Nokia, Bed Bath) have become the darlings of the WallStreetBets (WSB) crowd (a gang of small retail investors tethered together via social media).  Last week, they …Read More

We Don’t Live in “Normal” Times

The equity markets are in one of those rare moods where they continue to rise no matter the news, even when there are riots in the nation’s capitol complex, and when non-farm payrolls fall -140K.  Would you say this is “normal?” Regarding inflation expectations, interest rates rose rapidly along the Treasury yield curve with the 10-year T-Note yield rising from 0.93% (93basis points) from its close on January 4th to …Read More

Priced For More Than Perfection, Markets Have Dismissed Economic Reality

The holidays are upon us, and we wish our clients and friends health, peace and happiness. Recent income, output, and employment data have turned sour. We’ll see what that does to holiday shopping. The financial markets, especially equities, have looked past the valley (abyss), and the vaccine news has enhanced the view that “normal,” or at least a “new normal” is just maybe a quarter or so away. The DOW set an …Read More

The Wile E. Coyote Market/Economy

The Wile E. Coyote stock market has now looked down. Nothing but air! The “good news” data from the U.S. economy is all stimulus related. Without stimulus, Q3 GDP would have fallen double digits. The economy has yet to face the oncoming eviction crisis in the rental markets and foreclosure tsunami in the commercial real estate market. No matter how the economic numbers are presented, 22+ million unemployed tells you all you …Read More

The Real Recession Is Just Starting

At month’s end, we are going to see the BLS announce a 30%+ bounce in real GDP (the Atlanta Fed’s forecast is now above 35%). Much of this is already priced into the equity market, so a positive or negative reaction will only occur if the reported number is significantly above or below the consensus view. In addition, this is old news, as Q3 will have been in the rear-view mirror for …Read More