- A fool bolts pleasure and then complains of indigestion.
- Minna Antrim
Title Refers...
...to the big downturn last Friday. Insiders know that the market is at all-time highs and yet, 40% of its stocks are below the 200-day moving average. They also know the PE ratio is off the charts as well as the Shiller CAPE Index. Their thinking counters this aspect with strong earnings, big tech investing into chips, AI and data centers. They no longer consider what ordinary people talk about. The lack of quality jobs, affordable housing and the continual loss of retail establishments. The break between the market and the economy is just noise in their thinking.
We worry. Data centers and AI are feeling robust enthusiasm while everything else starves. The geopolitical environment does not help in the Iranian and Ukraine conflicts. And do you know what else is kept quiet, but is the most dangerous economic factor? Our national debt has exploded over $40 trillion...and counting. With that knowledge, how does the dollar rebound to 100 as it did last Friday? This should remind you that the market is irrational.
They also hear about Jane Street. We told you about the firm. It leads all investment houses in profits. They are hitting on all cylinders. They made $39 billion last year and made $16.1 billion in the last 90-days or first quarter. Wow! They want to grow. They are entering the fray to build their own data center. They need the power of new tech. This is a big plus in their ledger. These big cats see last Friday as a blip on the chart.They sleep well at night knowing analyst like at Morgan Stanley who see the S&P hitting 8300 this year.
We See...
...people seeking to avoid inflation at the grocery store. We see and hear more and more firms closing for good. We read where high tech is laying off 108,000 cumulatively and the lies of a strong jobs report. The latest was 170,000 new jobs. We told you with our large population, the neutral point is 150,000. We informed you about the dangers in the private credit market. Now, we hear that the giant, Blackstone is also limiting withdrawals. They saw requests hit 10%. They immediately imposed restrictions to redemptions. If you are not free to withdraw your money, you are not in an open, free market.
We see this same contagion spilling over into bitcoin. The value ($BTCUSD) was $127,000 last October and closed last Friday at $60,496. Ouch! This connects to Strategy (MSTR). It was over $460 last July and closed last Friday at $120. Someone is crying in their beer? It gets worse. Jim Chanos, the famous short seller who sees financial fraud began shorting MSTR. The CEO countered with a parlay stock, STRC to MSTR. It supports Strategy by offering a high dividend. Now, STRC is losing its price. Can it afford to continue the dividend? I trust Chanos, but nevertheless, this is another nail in the recent rally by the market.
In addition...
...we see a bearish engulfing candlestick in the Dow on the daily chart and the same in the S&P 500 in a weekly chart. We also see disharmony in the indexes. We told you when the transports hit a new all-time high and on the same day, gave it up. This is a red flag. The S&P fell 200 points last Friday while the Dow fell 695 points. Our calculations formulate that one S&P point equals 10 points on the Dow. The market should drop another 1300 points in the Dow as this is a weight on the down elevator. Space X IPO comes out this Friday and the new Fed chair has his first meeting next Wednesday. Any second thoughts? Peace.
