I’m not going to say it can’t or won’t happen again.
But, I’m also not not going to say it can’t or won’t happen again.
The headlines and stories from that era were legendary, as this New York Times story from December 30, 1999 highlights:
NASDAQ ENDS DAY ABOVE 4,000 POINTS FOR THE FIRST TIME
One sentences sums up the speculative frenzy of that moment:
The milestone came less than two months after the index first topped 3,000, and was based largely on the strength of the technology stocks that have come to dominate the NASDAQ market.
Fast forward to today’s headlines and what do we see? From this evening’s Wall Street Journal:
The Good Vibes Are Back on Wall Street
Without going crazy with unrelated charts and concerns about the tech bubble attempting to repeat the .com bubble, the similarities are downright scary. Garbage penny stocks leading the trading volume, speculators using credit cards to buy stocks on upstart trading platforms, new coins and issues trading like they were the future when they will either never turn a profit or be laughed out of existence shortly for being labeled a “shitcoin”. Worse the idea that by adding “ai” to your companies 10-K or conference call means your company is hip and with it, just like every .com of the era long forgotten.
Yikes.
But what is this author concerned about with this massive rally? Let us begin by reviewing one of my favorite metrics the stocks above the 50 day moving average:
That’s not a good looking chart with the percentage of stocks rapidly descending since the May TACO day celebration, but over the longer term since late 2023.
The 200 day moving average of course looks a little bit better as it takes longer to deteriorate.
Time will tell if this is important but indications are the underlying economic deterioration, albeit no longer being measured by this administration, seems to finally be hitting a larger percentage of corporate earnings reports.
One of the metrics this author also prefers to follow is the TLT 20 Year US Bond ETF vs the US 10 year. The current readings are somewhat of a cause for concern but not for the reasons that many might think:
While so many want to crank up a nice piece of vinyl from the era of Prince’s greatest hits, a concern in credit this author has for comparison to what we see above is more akin to this:
Sometimes pushing for and getting lower rates may not provide the stability one thinks and could be indicative of an underlying market and economic condition that is ignored by the media and actually rotting out the core of the financial system in the shadows.
Is that happening now?
It’s impossible to get any precise reading but much of the economic information outside of what the government has decided to silence is indicating a severe decline in activity. Add in the trading in the shadows of private equity and the unknown liabilities of the NFBI’s and one has to start raising cash and concerns for the potential of a rapid deterioration in economic confidence and equities as a result.
Perhaps the reaction of the KRE Regional Bank ETF since the late spring or the surge in gold provide some hints. Regardless, caution should be the word of the day.
Unless one has already invested everything into partying like its 1999.