The Daily Stock Market Crash
Death By A Thousand Cuts
Here is an S+P 500 chart since November of 2021.
We are in a bear market. In early December, we tested it. Omicron happened in mid to late December. We have fundamentally turned a corner.
Instead of a big crash, we are losing .5% to slightly over 2% per day. That is death by a thousand cuts.
Meanwhile, look at Crude Oil. Let’s go Brandon!
Crude oil will leave a mark. This is inflationary as the price of crude affects a lot of production and supply chain transportation.
Questions that I would love to know answers to which are impossible to answer.
How much of any market is held on margin? When margin calls happen, people sell. This exacerbates any breakdown.
How many people are so used to “buying the dip” that they are either picking bottoms or hopefully waiting for a rally? Picking bottoms in a market like this are suicide by the way.
How many people are looking at their portfolio and hopefully waiting for a bounce to SELL? They just want out. If it is a large percentage of them, there will be no bounce.
In the short run, any bounce in this sort of market is a dead cat bounce.
Why is it different than before?
The Fed has telegraphed interest rate rises. The market has priced them in. But, so far even with the downside move, the Fed is on track so there will be no relief from the Fed as there always has been in the past. The Greenspan Put isn’t as strong as it was.
The market was frothy and everyone knew it. We just didn’t know where. However, when you look at the carnage in crypto, in stocks, in bonds, and commodities there is nowhere to hide from it. By the way, neither gold nor bitcoin is an inflation hedge. Otherwise, they’d be rallying.
How frothy? We haven’t found a bottom yet. Capitulation hasn’t happened yet.
The other thing that is different is we have President Biden, not President Trump or President Obama. There is a crisis of confidence in our political leadership. Senator Charles Schumer and House Leader Nancy Pelosi don’t inspire confidence either. Heck, Pelosi’s husband probably shorted the market. Nothing major will happen until 2024. Even if the Republicans sweep the midterms in 2022, there is only so much that can happen. It’s more about inspiring some confidence in leadership if they can do that and putting as many brakes on the bad stuff that is being proposed.
Don’t look to corporations for leadership. They have gone soft and a large percentage of them embraced being “woke”. Woke people can’t lead. All they do is complain and shout and stamp their feet. Companies that are focused on equity and ESG aren’t going to make shareholders money since shareholders are taking a backseat. In some companies they don’t get the backseat, they get put in the trailer. I loved this Andy Kessler piece in the Wall Street Journal today when he chatted with VC Marc Andreessen.
“90% of everything is crap.” Mr. Andreessen says “90% of music is crap.” The same is true of “paintings, writing, TV shows and movies.” I would add ideas, stocks, opinions, politicians—the list goes on,
That is “the nature of creative work. There are only a few people in each field that know what to do,” Mr. Andreessen says. “The reason I’m so fascinated by this is the ethic of our times is egalitarianism. Everybody’s the same, everyone is equal. The conceit of the times, the ethos that if only you put the work in, you’ll get great results”—Malcolm Gladwell’s 10,000-hours nonsense. “It’s not just effort. It’s not just accidental. There’s something else going on. In these domains, we have a very small number of people who know what to do. And we have a much larger number of people typically laboring under some set of delusions—generating crap. It is what it is. I wish there were more quality painters . . . or entrepreneurs.”
The good news is if you are a long way from retirement, you are getting a discount. My friend Mike Evans who is a wealth manger says the long term return of the S+P 500 is 12% after compounding and reinvesting dividends.
The bad news is for people like me at retirement age. We just lost a chunk of our wealth and it will be a while before we get it back. But, someday we will wake up. Like a rented mule, you have to just take it.
One thing that was nice to see is the price of Google is down over 3% today. If you want to search for stuff and don’t want to use Google, give Freespoke a try. Using it means you don’t support the crap going on and coming out of Google.
The Rational Expectations Theory in action. We get a little more used to sucking everyday. We then decide that everything is a little less valuable. The loss of S&P 500 value probably tracks a loss of morale. The beatings will continue until that morale improves.
I recall feeling bad for those retirees whose nest eggs were slashed back in 2008, only to become one in 2022.