The Buffett indicator has fallen 7% to 199%. If the downward momentum that started in August but has gained traction in the last week continues, we might see the DOW going to 32k in this round. I consider a 30k for the DOW to be fair value but that will very much depend on what the FED decides to do... it very much seems that the FED has a new mandate to keep markets calm, it would be nice if they admitted this.
The downward momentum that's been kept at bay by the dip buyers is starting to win the tug-o-war, US Indices have now broken the -5% mark, something we hadn't seen for a year. People in the know say that many of the retail dip buyers that have been dominating the relentless upticks, even forcing fund managers to buy high against their better judgement, are starting to utilize margin accounts, if true and if we see a proper 10% correction, it is likely that, at that point, unfilled margin calls could cause a fast decline close to -20%. The selling trigger was that market players stopped believing the central banker's claims that the inflation rise is transitory, I think that if T-bond yields break the 1.7% mark, selling on equities will accelerate.
Christine Lagarde. Steve Schwarzman. ... Carl Icahn. ... Ray Dalio. ... Yngve Slyngstad. ... Lloyd Blankfein. ... Ding Xuedong. ... George Soros. ...
Today's payrolls report shocked most, everyone of the 71 fund managers that estimated the figure was saying that the number would be big, the only question was how big. This estimate was based on a fact that millions of Americans were seeing their emergency benefits expiring, but, everybody was wrong, including the FED. Putting the September number of 194k in context by taking the 2021 average, the monthly job growth has averaged 561,000, roughly half of what Fed officials promised at the start of the year. So, what did the markets do? Nothing, markets barely bleeped on release of the figure, immediately recovered and continued as before the number despite the number being the first back-to-back monthly drop in payrolls this year and indeed the lowest number for 2021. Markets saw the number as likely impairing the Fed's tapering schedule as it was a major shock from the Fed's perspective, this was the only thing markets took into consideration i.e. Stuff the economy, as long as the FEB pours liquidity into the system, markets will tend to ignore the fundamentals. Of cause, we haven't heard from the FED yet, once we do, sentiment may change and the downward momentum might again dominate. Next week should be interesting. The unemployment rate now sits at 4.8%, in my opinion, a figure that will be viewed by the FED as acceptable enough to continue with tapering plans mainly because the drop in September was seasonally adjusted which may have pulled the number down by as much as 150K, however, this is not what markets were seeing on Friday. https://pbs.twimg.com/card_img/1446454145993650178/PHsU-EYh?format=jpg&name=small
If we were to focus on the inflation story and the downgrade of GDP expectations, one has to say that the US market relentless buying should be coming to an end for now. However, fundamentals have been disregarded by the dip buyers who continue to buy without rime nor reason and have pushed the Buffett Indicator to over 210%, 70% above the historical average. The reality: There are several areas of higher input costs, these are likely to squeeze profit margins of corporations due to higher operating costs in Q4. Coincidently, lower purchasing power from consumers is probable as growth in wages does not appear to be increasing in line with inflation, mainly due to the Fed insisting that inflation is transitory, the opposite assumption to Dec 2018 error when Powell was convinced that inflation, and therefore rates, needed to go on autopilot (the sooner this buffoon vacates office the better). Erosion of purchasing power will lead to lesser demand for goods and services, all in all, a big risk of adjustment to the current future rosy earnings forecasts by analysts is likely, and if it happens, equities could get repriced or downgraded swiftly. Logical reasoning for lower stock prices is there, whether this happens depends on the sentiment of the Robbin Hood and the Redditt crowd... something I have no idea how to gauge.
Tesla again jumped in value when Hertz ordered 100,000 units, I don't see why since Tesla is not short of orders, it has supply issues, expanding the order book makes no difference to supply. Tesla valuation is completely detached from the company’s worth and it ignores the uphill battles Tesla needs to face from now on. One has to be crazy and blind to be oblivious to the fact that Tesla valuation is based on the unrealistic expectations of what Elon Musk is capable of. Sure, the guy has rockets going into space and plans to colonize Mars so his cult followers seem to believe he can run Tesla on magic and are willing to pay cartoon prices for the shares, but….. Established automakers have been rather savvy… They let Tesla create the market and go through all the teething problems at their cost, Tesla almost went bankrupt doing all that while the others just sat back and watched. Now that Tesla has created the market and has shown others what type of EV the consumer wants, the established automakers will put themselves into gear and overtake Tesla many times over, these guys just weren’t interested in Evs until there was at least 1m cars a year market to enter. These automakers know how to build good looking cars cheaply and at a higher quality than Tesla, they also know how to market cars much better than Tesla, not to mention that they have existing dealer & service networks and spare part outlets that Tesla does not have. Musk made two big mistakes, the first was not to employ professional & experienced automakers as plant managers to run his plants, this might not seem to be a problem while there was no competition, but when serious competition ramps up, it will be a problem that will take years for Tesla to fix, perhaps too long for Tesla to remain in the mass market. The second was something that I’ve told Musk himself, going downmarket from the Model S was a policy error, if Tesla wants to remain in business at all, it needs to create a niche market for itself and give up the notion of trying to corner the mass market with cars that look like 1990 models i.e. go upstream from the model S with cars that look the part. What could help Tesla remain relevant in BEVs is if autonomous cars became legal but this is highly unlikely in Musk’s time, so Tesla is more likely to struggle than to keep growing. Musk’s future is in Space X, not in Tesla. Further, BEVs in general won’t be the permanent replacement for ICE cars. BEVs are not the green machines people think they are… scaling uptake of BEVs to a billion or more will not resolve the pollution problem, it will just substitute one problem for several other more serious problems in mining, energy shortages and toxicity (battery manufacturing, battery charging that wastes 40% of the input energy and then disposing of a billion huge EV batteries is no joke). When the billion mark of BEVs is reached, the focus will have to shift away from BEVs to either fuel cells or back to the ICE running on pollution-free fuels such as hydrogen, Tesla is totally unprepared for this, the others are.
Manufacturing Down, GDP Down, Inflation Up, Tapering almost here Yet markets reach new Highs, DOW Hits 36k, Tesla Jumps another 8% to $1,200... Bubble or TINA? Maybe not a bubble on everything yet but I won't go long either with the Buffett Indicator at 72% above average and the gap between the VIX & the VIX futures at 3 full units. Interesting that on a day were record highs are made, Big Teck was down, the higher-priced stocks that are out of reach from the Redditt crowd, such as Google and Amazon at over $3k per share, fell over 3% showing that not all traders are in hype-mode, we might see some dips soon also because many economists & money managers are starting to lose confidence in the Fed's ability to manage the economy, they fear that when Powel reaches the Oops moment, a forced sharper and sooner rate hight than that being advertised by Powel will happen.