American Consequences - March 2021

The last two times in history that we saw a market up over 100% in the same short period of time as today, the Melt Down was knocking at our door. It’s as simple as that. SOWHY NOT JUST SELL NOW? You might be thinking, “Steve... If all this is true, why even participate? With the Nasdaq up more since its bottom than at any other time, why not just sell now?” Market commentator Josh Brown explained it best recently in his blog The Reformed Broker. Talking about cryptocurrencies and crazy investing ideas, he said, “That sounds stupid... I’m buying some just in case.” He continued... With 6% economic growth, plus zero percent interest rates, plus millions of people sitting around on their phones all day speculating in stupid sh!t on the internet, your regrets will multiply daily, as said stupid sh!t continues to grow... The Greater Fool Theory is in effect right now. There aren’t many more people left to buy, in my opinion. All we are down to is those new investors putting more and more money to work. That’s not enough to keep the bull market going forever. But it does mean prices can rise from here. You never know just how high a boom can go on. As the saying goes, “Markets can remain irrational longer than you can remain solvent.” That goes for booms, too.

that are “all in.” Individual investors – many of whom are buying for the first time – are getting on board... An astounding 28% of all Americans bought GameStop or other viral stocks in January, according to a Yahoo Finance-Harris poll. The median investment, according to the poll, was just $150. The largest group of buyers was men aged 18 to 44. And 43% of these folks said they had just signed up to get a brokerage account in the last month. So in both professional investors and in new individual investors, we have seen a dramatic shift in investor attitudes and behaviors. In short, basically since GameStop, we moved from a stock market boom to an investing bubble. We may not know the exact date... But the Melt Down is coming. The main index of tech stocks – the Nasdaq – hit another record to end last week. From its bottom 47 weeks ago, it’s up 105%. To give you some frame of reference, that is the best 47-week performance in the 50-year history of the index. The Nasdaq has only been up over 100% after 47 weeks twice in history... The last two 100% moves ended in March 2000 and in July 1983. The stock market performed terribly, immediately after those huge moves higher... Take a look:

3/6/2000 7/4/1983

47-week return 3 months later 6 months later 12 months later

103% 101% -23% -7% -21% -10% -59% -26%

American Consequences


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