Drudge Retort: The Other Side of the News
Friday, April 09, 2021

There are a growing number of signs the bull market in equities is overheating, with indicators of investor complacency and risk-seeking reaching the highest levels since 2007 and 1999.



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Why it matters: Those periods of extreme euphoria were followed by market crashes.

What's happening: As of late February, investors already had levered up with a record $814 billion borrowed against their portfolios, according to Financial Industry Regulatory Authority data.

  • That's a 49% year-over-year increase, the largest since 2007.
  • The prior high was during the dot-com bubble in 1999, WSJ reports.

Is this time different?

Who knows....

#1 | Posted by LampLighter at 2021-04-08 10:00 PM | Reply

oops, my #1 was a quote from the astute article, I did not intend the erroneous formatting to indicate otherwise.

#2 | Posted by LampLighter at 2021-04-08 10:02 PM | Reply

If Joe Biden is elected, your 401k's will be worthless.

- Orange Sack of Triglycerides.

#3 | Posted by Nixon at 2021-04-09 12:03 PM | Reply | Funny: 1

Keep an eye on margin debt (i.e., borrowing against one's stock holdings and owed to a brokerage house). In nominal terms it is indicating trouble, while in real terms, less so. In 2006-2008 many got caught short when the US equities market turned around, and the selling fed upon itself, as can happen when investors are forced to unwind their positions quickly. It was a sickening ride for those who watched, and even worse for those who were on the ride at the time.

Pro tip: back down your levered equity positions NOW. Your broker will thank you. And if you have Robinhood on your phone, close your account, get out and delete the app. The investment world is no place for folks who no not what they are doing...

#4 | Posted by catdog at 2021-04-09 05:03 PM | Reply

It no longer matters. Today's stonk market is in no substantial way connected to the economy any more, it's really just a casino now.

To fix it, major structural changes would need to happen. Things like sales taxes on stock transactions, bans on short selling, bans on algorithm-initiated trades, bans on leveraged-anything, prohibitions on different 'classes' of stock, and many more would be necessary.

I think the easiest and most quickly effective would be the sales tax. It would immediately reduce liquidity, which is really the biggest problem the market has right now, and it would be potentially a decent source of revenue for the federal government going forward.

And yes, market liquidity is BAD. It should be harder, slower, and more expensive to move into and out of owning stock. The entire reason stocks exist is to allow a company to gain funding from people who think it's going to be a long term success, not as a casino for 'making' money by moving money.

Or we can continue to have a stonk market that's casino only vaguely tied to anything related to the economy, but that still effectively serves to increase wealth inequality.

#5 | Posted by DarkVader at 2021-04-10 10:31 AM | Reply | Newsworthy 1

@#5 ... he entire reason stocks exist is to allow a company to gain funding from people who think it's going to be a long term success ...

Yes and no.

I'd say "no" because the quarterly reports encourage a short-term approach to "investing."

#6 | Posted by LampLighter at 2021-04-10 11:05 AM | Reply | Newsworthy 1

Buy and hold longer term investor here, have been through crashes starting with Black Monday in Oct 87. Incidentally, was buying the next day as a major pullback in the market is a buying opportunity. Also took advantage of '08 and last march bought 300 shares of ABBV in the mid 70s : ) Not all is scary with the market if you have studied Economics and other business courses, applied due diligence to your research and have correct investing philosophy.

#7 | Posted by MSgt at 2021-04-10 11:57 AM | Reply | Newsworthy 1

I foresaw the end when I was in business school acquiring an MBA in 1975. Companies severed their relationship with the community in lieu of "Shareholder's Interest." Profits going to shareholders at the expense of the physical assets and employees was what mattered. Long-term planning and investment? Nah. And here we are. Being an unreconstructed hippie has worked as a long-term plan for me. I have watched the market crash and burn four times since 1973, and I have been largely unaffected. "Turn on, tune in, drop out" has been a successful strategy for me.

I suggest people seek out jobs where there must to be a physical plant and human interface. Those jobs are almost gone. There may be an Universal Basic Income in your future. Work ethic? Pshaw. Investment? Buy used and wear it out.

#8 | Posted by john47 at 2021-04-10 12:27 PM | Reply

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