Every cycle, a parade of fresh-faced
financial analysts salespeople are commissioned to keep the gullible masses buying ‘investment’ products against all odds.
Last week, Kate Moore–who began her sell-side career with Bank of America Merrill Lynch in November 2009, before moving up the ranks at JP Morgan in 2013, and to Chief Equity ‘Strategist’ for BlackRock in 2016–explained why she thinks everyone should just stop worrying and buy equities. As usual, the subtitle should be: Stop worrying about your life savings damn it, we have perpetually escalating sales targets to hit here people! I have a bonus to make!
It’s worth noting that starting in 1988 as a risk management and fixed income institutional asset manager, BlackRock founders sold the company to the stock market in 1999 just as central banks began the past 17 years of pumping ‘free’ money into markets. Good timing for them.
Today BlackRock is the largest ‘long always’ fund co in the world with $5.4 trillion in assets under management and 70 offices in 30 countries. So long as no one blinks and assets keep going up forever, all is golden. There’s just one problem with that…
As shown in the chart above, stock valuations are now second only to the all time largest bubble–before collapse–in 2000, and worse than the peak of 1929.
And as shown below in this chart of the S&P 500 in blue, those holding stocks today have borrowed the most margin debt (in red) to buy those securities than at any time in history–far worse than the previous speculative peaks of 2000 and 2007.
As the blue line mean reverts, margin calls will demand liquidation and market gains since at least the late ’90’s are likely to be vaporized. At that point, Kate and all the other long-always cohorts will be looking for new jobs, new careers, new callings, just as they were in the last 2 bear markets. Those who bought the industry sales pitch will be left suffering the losses.