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Day traders know a bubble when they see one

And they want in.
Image: Michael Nagle/Bloomberg

It’s a bubble, according to a survey of retail stock investors. And they don’t want to miss it.

An E*Trade Financial survey found that roughly three-quarters of retail investors believe the market is “fully or somewhat” in a bubble, a 3 percentage-point increase from the previous quarterly poll. At the same time, bullish sentiment has increased, rising to pre-pandemic levels at 61%.

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“Optimism grew as the market hit new all-time highs, vaccines increased, stimulus measures continued, and earnings estimates are high,” said Mike Loewengart, managing director of investment strategy at the firm.

Stocks have been on a tear for more than a year, and bubble warnings have rung out during most of that time. But the latest leg up has stretched valuations to levels last seen in the dot-com era, and with yields surging, the chorus has grown so loud retail investors have taken note. But most ignore it — just as they’ve done as the S&P 500 surged 83% from the pandemic lows — betting that there’s money to be made as long as the government’s spending and the Federal Reserve is keeping policy loose.

They’ve consistently bought when the pros shied away and made early bets on stocks that will benefit most from a return to normal economic activity. For the last 12 months, they’ve plowed an average of $1.2 billion into stocks daily, according to data from VandaTrack.

In some circles, the relentless buying by individual investors is stoking concern that the group is poised to pull back, creating a risk to the broader market. The equity allocation of US households probably rose to 40% in April, surpassing the dot-com peak and reaching the highest level since the early 1950s, according to an estimate from JPMorgan Chase & Co.

At various times over the past year, the retail frenzy has spurred concerns from professional investors who warned that their involvement, similarly to the early 2000s, signified too much euphoria. But they’ve not shied away yet. At Bank of America Corp, individuals were net buyers of stocks for a sixth straight week, according to the firm’s latest data on client funds. That contrasts with professional investors who took advantage of recent gains to offload holdings.

E*Trade polled nearly 1 000 retail investors who manage at least $10 000 in their online brokerage accounts. The survey also showed nearly half believe the economy is in better shape, a 15 percentage-point increase versus the prior quarter’s results. And though concerns around virus-related risks dropped amid the recent vaccine rollout, market volatility concerns increased and now rank as the top risk to investor portfolios, according to the survey.

Whether or not retail investors continue to play a big role in markets will depend on what happens when there’s a meaningful pullback, according to Max Gokhman, head of asset allocation at Pacific Life Fund Advisors.

“What happens when there’s no new fuel for this rocket ship to the moon? A lot of the diamond-hands crowd may realise they’ve been overpaying for shoddy cubic zirconia,” he said, referring to a popular phrase describing bullish gumption. “Whether they stay in the markets after that will determine the long-term effect of retail.”

© 2021 Bloomberg


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Scary situation for people needing to enter the market.

What to do, stay in SA cash or invest at these levels?

VERY difficult. The runt is 14 vs 19 when advisors were screaming externalise, but US markets are expensive.

Cash is almost never the option

“Day traders know a bubble when they see one”

FACTS baba! Facts.

As long as governments supply cheap money the bubble will grow. The big question is when will someone in these first world governments have the guts to promote a market related interest rate.

A rarely provocative article within a continuation of a farcical and fake storyline of incredulous and jollying but nonetheless pure fantasy.
The old school have evidently handed the reigns of fiscal discipline over to the highest emotional bidders, their undeserving beneficiaries. These inheriting mega dons of market and financial manipulation have in turn bequeathed their omnipotence to their totally untrustworthy offspring. Therein is the recipe for the fake tree of future wonderness commonly known as a total disaster.
Fools and their omnipotent control over money which the power of any even semi-intelligent Democracy never had even a semi-fair chance to compete with.

…w…t…f… Are you on about

The Zimbabwean stock market was the best-performing market in the world, in terms of the Zim dollar, during the period of hyperinflation. It is clear that share indices will keep on rising for as long as currencies are being devalued. Currencies will be devalued until the Debt/GDP ratio in leading nations are below 20%. They will manufacture GDP growth by creating inflation. This implies that the share indices will keep on making new highs for the next decade at least.

Commentators should acknowledge this simple fact – It is mathematically impossible for a share index to crash in terms of money as the unit of account when the purchasing power of that unit of account is crashing at a faster rate. The price of shares is based on the price of money which is based on the price of credit. Credit expansion is a bubble, the money supply is a bubble, the share price is a bubble.

Share indices are bubbles within bubbles within bubbles. This is the froth created by proponents of Modern Monetary Theory. The international financial system, including the banking system, is fully dependent on bubble-inflating Reserve Banks.

We should ask ourselves – “How do we keep our noses above the bubbles? How do we protect the purchasing power of our assets?”

When the stock market corrects in such a scenario, the best is to sit on your hands because the US government cannot endure a longer than 4 month bottom before defaulting on debt. 15% cash to get you through the bottom and buy on the dip, 25% gold, silver & bitcoin to hodl, 25% niche real estate & 40% commodities, industrial, big tech and foreign entities. Ray Dalio’s all weather portfolio comes to mind.

Very well put, Insightful and simple as usual.

“Opportunity Lurks Where Responsibility has been Abdicated”
Jordan B Peterson.

The reason for BITCOINs success as hedge against Inflation, because of irresponsibility on the behalf of the central banks world wide, they have are a bunch of sell outs to the highest bidder just like Guptas to Zuma.

The opportunity to buy the state of affairs from an elected governing party exists only because the politicians have abdicated their responsibility towards their citizens.

Citizens must therefore take ownership of their Responsibility and discriminate against the corrupt by providing opportunity for the value to be sustained.

Nobody is held accountable, because it is perceived as too big to fail. It will all eventually fail, with new winners and old loser who simply will not give up throwing ever last ounce of declining power at the new system.

The Zim stock market was closed last year

Did they perhaps try to say the Stock market is “bubbling” up or doubling up?

Looks like someone wants a cheap deal.

Last leg of the melt up probably still to come. Buckle up and keep the trailing stops tight. Be ready with the puts on the way down. Precious metals getting ready to surge.

One has to keep in mind that Zim did not fold due to an Economic bubble.

The point is that currency devaluation drives asset prices. Currency devaluation in the USA goes straight into the financial markets.

Coinbase and Crypto fanatics?

Have the rules changed? (these are all US)

There are a host of indicators that SCREAM bubble:
– market cap to GDP
– funds invested in equities as % of disposable income
– Schiller ratio
– Market cap ratio : operating cashflow
– equities volume versus options
– value and volume of shares traded
– sovereign debt to gdp
Can carry on.

Cause is free money. Companies have issued 0% coupon debt!!!

I want to go back into equity but literally need S&P at around 2500 to be a sane decision. I have only one offshore equity and the rest in near-cash positions. Yes I’m feeling like a fool for last 16 months 🙁

The USD has been in a currency war with the majors since 2009. This scenario has absolutely no end in sight. But the new yellow player looms like the replicate of a large ape on top of an ancient tall building.
Will the circling biplanes of US interests shoot the beast down (yet again) or will the will of the audience bring the caring beast to be the new proponent of something that is believably honest?

Johan, you are no fool. The rally of the past 16 months have been on lower than average volume. Many participants are on the sidelines.

Hedge funds and investment banks are sitting in cash. One large hedge fund has collapsed over this period and the margin calls hurt the banks as clearing members.

If you survived the past 16 months in the market you should pat yourself on the shoulder. A cash position is also a position.


A couple of people above have already said it, but it truly is important to also consider money supply when evaluating whether equities are in a bubble or not. I remember in late 2012 / early 2013 when a lot of people said the US market was again in a bubble after recovering all the losses of the 2008 crisis and that it would be better to wait for the correction before entering the market. This was when the S&P500 index was at 1500 points, these people will be waiting for the correction forever. Cost averaging your positions if a correction occur are far better than having no exposure to the market.

In the words of Peter Lynch… More people have lost money waiting for these corrects than in any downturn that happened afterwards.

Timing the market is a gamble or a fools errand.

Read up on Ed Seykota, George Soros, Richard Dennis, – but then, there is also Nick Leeson who bankrupted the Queen’s bank, Barings Bank, the second-oldest bank in the world at the time.

A year ago the world was coming to an end, so we thought. The dow lost about 30% in a matter of days before the fed kicked in and restored liquidity etc.

Now a year later the economy is coming back growth is returning, China produced some good numbers, resources prices are strong on so on.

The problem globally is only employment.

So what bubble are they talking about.

Any way there’s new breed of day traders out there and they young, fearless and they play with own money. (robin-hooders, coinbase wsb)

to the moon …

End of comments.





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