I fully recognize that we have been in a backdrop of extreme optimism and speculation -- and that many traders and investors have profitably embraced the multiple opportunities, from the mundane to the not so mundane.
By contrast, my broader (ursine) market view and risk-averse nature have kept me from participating with much of the ceremonies.
In part my lack of participation is a function of my wrong-footed market view, and in part I am unwilling to partake in speculation when I view individual equity reward vs. risk as unattractive.
Being out of sync stinks but it is also a function of one's risk profile/appetite and general market views.
"And no one is getting fat, 'cept Mama Cass...
Duffy's good vibations and our imaginations
Can't go on indefinitely."
- Creeque Alley, Mamas and the Papas
I will observe from afar the speculation -- as I did with SPACs early in 2021 -- which ended badly -- and when stocks ripped back in early 2000 and in the fall of 2007. As a routine matter, I just won't play in that sand box -- just as I wasn't when Citigroup's (C) Prince declared that, in the summer of 2007, "the music was still playing" or as the Dot.Com bubble inflated in the late 1990s. During those periods, like today, I felt foolish as everyone was getting fat 'cept Papa Kass.
But, unlike others, who are quick to criticize those that are not playing in the church of what is happening now, I respect the ability of those that embrace and profit from the opportunities.
You Are Watching Cable 10 - Aurora Illinois Community Access Channel
I view the current environment as a likely culmination of a speculative era and not the start of a protracted era of speculation. But, as always, I could be mistaken.
This era has, at its foundation, central bankers who have provided the liquidity, and negative real yields, that have produced massive retail inflows, historically high valuations and limited fear.
The cherry on the top has been the changing market structure away from active management and towards passive investing, and those who generally base their strategy on price and momentum and not fundamentals.
Along the way speculation has blossomed, creating an epic cycle that, arguably, in dollar terms, is larger than the Nifty Fifty Bull Market or the Dot.Com Boom:
* Fundamentals (read: inflation and inflationary pressures, supply chain disruptions) are unchallenged by those that are long.
* Politicians, on both sides of the pew, lost all their discipline as they embarked on what I have described as Modern Fiscal Theory.
* A marketing genius, David Portnoy - who has no background in investing - was seen as a trading and investing guru embraced by investment professionals who should have known better.
* Meme stocks - most recently (DWAC) , (CAR) , etc. - emerged, many of which, like AMC Entertainment (AMC) , were, too, embraced by investment professionals who should also have known better.
* Gamma squeezes, with weekly call options, became a new term and has become a commonplace trading strategy.
* SPACs, with huge promote fees, became an asset class.
* And then there is a vast and growing stable of digital currencies -- some of which don't just double overnight, some rise by thousands of percentage points.
The most amazing feature to me is how little this era, and the associated policies, are being questioned or challenged.
In a backdrop of speculation, my investing ideas are boring -- I know that.
Remember that good vibrations and our imaginations can't go on indefinitely. Someday the leaves will turn brown and the sky will be grey on a winter's day.
When Michelle and John Phillips of The Mamas and the Papas wrote "California Dreamin'" -- they intended to express their longing for the warmth of Los Angeles while being in a cold New York City. I, too, long - -for lower stock prices.
But for now, Wall Street's dreamin' is becomin' a reality and we are watching Cable 10 Aurora Illinois Community Access Channel -- where both Wayne and Garth are living in the now and partying on to the glaring, palpable and undeniable sounds of Aerosmith.
(This commentary originally appeared on Real Money Pro on November 9. 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.)
