Authored by Lance Roberts via RealInvestmentAdvice.com,
Peak Exuberance
There have been numerous articles out as of late emphatically stating this cannot be a bubble as valuations are not as elevated as they were in 1999 nor are investors as “giddy” about investments as they were then.
Back in 2013, markets tumbled (if briefly) on the news that Detroit would file for bankruptcy, at the time the biggest municipal bankruptcy in US history with over $18 billion in liabilities. Yesterday, algos barely even bothered to look up when Puerto Rico's governor announced that the US Commonwealth would submit Title III (aka bankruptcy) protection, despite a debt load of more than $70 billion, or nearly four times greater than Detroit's.
Via Francesco Filia of Fasanara Capital
“Learn how to see. Realize that everything connects to everything else.” – Leonardo da Vinci
Hard data ceased to be a driver for markets, valuation metrics for bonds and equities which held valid for over a century are now deemed secondary. Narratives and money flows trump hard data, overwhelmingly.
The Hong Kong Dollar has plunged to its weakest level against the dollar (to which it is pegged) since February 2016, even as the Hang Seng surges higher. As HKD nears 7.80, triggering likely HKMA intervention, we wonder whether we will see a replay of last year's liquidity-driven stock market slump.
Less than a month after the latest forecast from JPM's Marko Kolanovic left something to be desired, when the famous quant said "it is no longer prudent to buy the dip" only for the dip to be furiously bought, whether by algos or ETFs, "Gandalf" is back with another discussion of his favorite topic, and an emphasis on a issue that is near to all traders' hearts, namely what could lead to a "volatility explosion."