Great chart series. I was short equities early in the year based on tariff concerns and Trump over-exuberance priced into markets. Also long commodities. I covered shorts as liberation day turned into TACO relief. Just shorted equities again now that the index recovery is back and the economic charts show eroding conditions. Long volatility trades with option spreads also make sense whenever the VIX dips. It may be early, but this set of imbalances is likely to resolve with a pain trade that is lower. Triggers may come from multiple directions. The risk/reward opportunity for long equities is poor, especially in stocks and sectors that rely on the bottom 80% of consumers for revenue.
Also, banks don't seem to want to touch commercial real estate. The private credit markets are getting more exposed. If we see a market downturn based on recession/stagflation, the impacts on private credit and private equity are likely to be profound. Private equity funds own a lot of businesses that are overvalued on pre-COVID/low-rate metrics. If the cash flow and growth don't materialize, the purge in private equity could be severe.
Note the poor bounce-back performance of the top private equity stocks: Apollo Global (APO), Blackstone (BX), and KKR (KKR). They are still 30% off their highs. YTD, still down about 18%. All are below where they traded on election day 2024. If private equity has a protracted decline due to rates-higher-for-longer, immigration weakness across sectors, and changing policy for energy/infrastructure/healthcare, etc., look out.
And from the NYTimes (6/10/25):
"Yale University’s famed endowment has been trying to offload one of the largest portfolios of private equity investments ever in a single sale, a move that reflects the pressures on both Wall Street and higher education under the Trump administration. The Ivy League school has sought buyers for up to $6 billion in stakes in private equity and venture funds, according to three people briefed on the sales process, amid uncertainty about its federal funding and the reality that many of these investments have not delivered the outsize returns that Yale expected."
Putting my new money into Ivanhoe Mines. Large copper and platinum mines. It’s down due to a mining accident. Will buy more oil producers on a pull back.
>>The global “Buffett Indicator” (equities market cap to GDP) is at imminent-crash highs, implying a wild level of investor overconfidence.
I suspect that a good amount of it is also the "autopilot" effect in which 401k contributions are funneled into "life stage" funds (and other mutual funds) that then auto-allocate around 60/40 stocks / bonds.
Rare indeed might be one that has any allocation at all that includes natural resources, much less precious metals.
So the working-stiff folks out trying to make an honest living, and save for retirement, are being herded toward ... "The Great Taking?"
"Should we really be piling in? ... No we should not",
especially if you're invested in the general stock market or don't have tight stop loss orders in place.
I'm fully invested in just a few big PM ETFs (like GDX) that I monitor closely, with stops at -1.5%. Considering the circumstances, I think if they fall much at all at this point they will fall a lot because a general equity sell off, and I don't want to lose the roughly 60% gains made this year.
I had actually been in mostly cash for the last few years and finally had enough of missing out while waiting for all hell to break loose, so went all-in during the first week of January and am glad I did. That's what's so crazy. I figured all the good vibes about Trump's re-election was enough energy to overcome just about anything, and so it seems to have.
But that may be changing. The multi-decade trends and fundamentals have only become even more extreme so they can't be forestalled forever. Biden-level government spending on credit will continue if the "big, beautiful bill" is passed and, at best, there may be one, last blow-off melt-up boom in stocks, but since half the country (and half the world) doesn't want that I have my doubts. But it might still happen, which is why I want to stay in until I'm stopped out. Timing seems to be impossible. "Everyone" have become so jaded and dumbed-down that ordinary reasoning and analysis left the station years ago. Who would have thunk the markets would be so apathetic to Israel's bombing of Iran, for example. (One analyst stated confidently just a week or so ago that the stock market would crash 30% by mid-morning if Israel attacked.)
In the meantime, it's important to pay attention to what stocks and areas are doing well now based on such a "bullish" expectations, because after a major pull back occurs you'll know which ones to jump into after the dust settles, without having to think too much about it.
Great chart series. I was short equities early in the year based on tariff concerns and Trump over-exuberance priced into markets. Also long commodities. I covered shorts as liberation day turned into TACO relief. Just shorted equities again now that the index recovery is back and the economic charts show eroding conditions. Long volatility trades with option spreads also make sense whenever the VIX dips. It may be early, but this set of imbalances is likely to resolve with a pain trade that is lower. Triggers may come from multiple directions. The risk/reward opportunity for long equities is poor, especially in stocks and sectors that rely on the bottom 80% of consumers for revenue.
Also, banks don't seem to want to touch commercial real estate. The private credit markets are getting more exposed. If we see a market downturn based on recession/stagflation, the impacts on private credit and private equity are likely to be profound. Private equity funds own a lot of businesses that are overvalued on pre-COVID/low-rate metrics. If the cash flow and growth don't materialize, the purge in private equity could be severe.
Note the poor bounce-back performance of the top private equity stocks: Apollo Global (APO), Blackstone (BX), and KKR (KKR). They are still 30% off their highs. YTD, still down about 18%. All are below where they traded on election day 2024. If private equity has a protracted decline due to rates-higher-for-longer, immigration weakness across sectors, and changing policy for energy/infrastructure/healthcare, etc., look out.
And from the NYTimes (6/10/25):
"Yale University’s famed endowment has been trying to offload one of the largest portfolios of private equity investments ever in a single sale, a move that reflects the pressures on both Wall Street and higher education under the Trump administration. The Ivy League school has sought buyers for up to $6 billion in stakes in private equity and venture funds, according to three people briefed on the sales process, amid uncertainty about its federal funding and the reality that many of these investments have not delivered the outsize returns that Yale expected."
Great post--we have been warned.
Putting my new money into Ivanhoe Mines. Large copper and platinum mines. It’s down due to a mining accident. Will buy more oil producers on a pull back.
Maybe irrational exuberance ??
Student loan defaults are skyrocketing since Trump made them start to pay the loans off.
VERY GOOD POST!
>>The global “Buffett Indicator” (equities market cap to GDP) is at imminent-crash highs, implying a wild level of investor overconfidence.
I suspect that a good amount of it is also the "autopilot" effect in which 401k contributions are funneled into "life stage" funds (and other mutual funds) that then auto-allocate around 60/40 stocks / bonds.
Rare indeed might be one that has any allocation at all that includes natural resources, much less precious metals.
So the working-stiff folks out trying to make an honest living, and save for retirement, are being herded toward ... "The Great Taking?"
https://thegreattaking.com/read-online-or-download
"Should we really be piling in? ... No we should not",
especially if you're invested in the general stock market or don't have tight stop loss orders in place.
I'm fully invested in just a few big PM ETFs (like GDX) that I monitor closely, with stops at -1.5%. Considering the circumstances, I think if they fall much at all at this point they will fall a lot because a general equity sell off, and I don't want to lose the roughly 60% gains made this year.
I had actually been in mostly cash for the last few years and finally had enough of missing out while waiting for all hell to break loose, so went all-in during the first week of January and am glad I did. That's what's so crazy. I figured all the good vibes about Trump's re-election was enough energy to overcome just about anything, and so it seems to have.
But that may be changing. The multi-decade trends and fundamentals have only become even more extreme so they can't be forestalled forever. Biden-level government spending on credit will continue if the "big, beautiful bill" is passed and, at best, there may be one, last blow-off melt-up boom in stocks, but since half the country (and half the world) doesn't want that I have my doubts. But it might still happen, which is why I want to stay in until I'm stopped out. Timing seems to be impossible. "Everyone" have become so jaded and dumbed-down that ordinary reasoning and analysis left the station years ago. Who would have thunk the markets would be so apathetic to Israel's bombing of Iran, for example. (One analyst stated confidently just a week or so ago that the stock market would crash 30% by mid-morning if Israel attacked.)
In the meantime, it's important to pay attention to what stocks and areas are doing well now based on such a "bullish" expectations, because after a major pull back occurs you'll know which ones to jump into after the dust settles, without having to think too much about it.
Extended (by massive infusions of gov-issued fiat debt/US $$) Blowoff Stage of most massive (by far) Speculative Bubble in history.
The banks seem like another area to add puts right?
Great info, thanks. What are your thoughts on piling into puts? CVNA seems to be at nosebleed levels, especially given the car loan default info.
Waiting.
John any thoughts on platinum/ palladium at this price? I got some physical platinum ahead of this move and wondering if it will spread into palladium