Today's circumstances -- of massive liquidity and gross speculation -- represent familiar warning signs. Remember that history may not repeat itself but it sure as heck rhymes...
The market has grown increasingly speculative and while this might not be a broad indictment of equities -- we should begin paying attention to the unprecedented speculation/gambling as well as the signposts of ebullience that are being ignored:
* Tesla (TSLA) soars by 50% in a matter of months on little new news -- to become one of the largest market caps extant.
* Meme stocks are flourishing -- taking their turns almost on a daily basis. (Read: Avis (CAR) , Bed Bath & Beyond (BBBY) , et. al)
* And so are gewgaws (shiny objects of questionable value) -- with charts moving from the lower left to the upper right - rotating in and out of traders' appetites.
* While value stocks languish in obscurity and underperformance.
* The combined impact of meme stocks rocketing, gewgaw gambling and the dormancy of value stocks is reminiscent of the final days of the dot.com boom in late 1999/early 2000.
* The shoe shine guy, bartenders and parking lot attendants have their heads down firmly in their iPhones -- often trading fake and worthless digital currencies like the Squid Game crypto coin.
* Negatives are ignored and even scorned by "talking heads."
* Supply chain disruptions intensifying, inflation ripping, central banks pivoting, the economic and political threat of China...Fuggedaboutit! we are told by the bullish cabal.
* Shorting has never been more dangerous -- with the tall risk to shorting longer and wider than ever seen (or at least since the dot.com boom in the late 1990s).
* Equities move relentless higher without any dip whatsoever.
No doubt my observations above will be dismissed by readers and traders who are profitably playing this game of "hot potato." After all, traders are taking their cue from a famous quote made in The Financial Times within weeks of an important market peak in 2007:
"When the music stops, in terms of liquidity, things will get complicated. But as long as the music is playing, you've got to get up and dance. We're still dancing.
The depth of the pools of liquidity is so much larger than it used to be that a disruptive event now needs to be much more disruptive than it used to be.
At some point, the disruptive event will be so significant that instead of liquidity filling in, the liquidity will go the other way. I don't think we're at that point."
- Chuck Prince, Citigroup CEO, "Citigroup chief stays bullish on buy-outs," Financial Times, July 9, 2007
Sound familiar?
(This commentary originally appeared on Real Money Pro on November 3. Click here to learn about this dynamic market information service for active traders and to receive Doug Kass's Daily Diary and columns from Paul Price, Bret Jensen and others.)
