Juggling Dynamite

Is the U.S. in the heat of a recession right now? A recent jump in bankruptcies resembles that of the Great Financial Crisis, Danielle DiMartino Booth, CEO and Chief Strategist for QI Research, tells Jeremy Szafron, Kitco News anchor, on the sidelines of the New Orleans Investment Conference. Booth discusses a range of topics, including the state of the U.S. economy, revisions in job market data, government versus private sector employment, and the impact of political shifts on economic policies. She also shares her latest take on recession timelines, the role of Elon Musk in government efficiency, and the challenges facing the Federal Reserve. Here is a direct video link.

The S&P 500 (26% concentrated in the five most expensive tech companies) is trading at 38x smoothed 10-year earnings, just marginally below the all-time high of 43x briefly seen at the 2000 tech bubble top and much higher than the previous bubble top in 1929 (Shiller PE ratio below since 1870).
But then, most are oblivious, and those who know or should care have become convinced that the price multiple paid doesn’t matter.  If that is true, it would be a first.

Feeding on the frenzy, the financial sector has rolled out endless products of mass destruction for retail buyers.  Things like leveraged single-stock ETFs (weekly flows below since 2020) are wildly popular.  Following an epic rebound since last fall, those expecting ever higher stock prices in the next year have reached the most since the survey began in 1987 (Conference Board Survey respondents below, courtesy of Bespoke)! It is not just the retail crowd; institutional investors are all in and then some (buy-side positioning below since 2010, courtesy of Global Markets Investor).

Record leverage betting on ever-expanding prices and an endless flow of math-blind buying, what could possibly go wrong?

About that Trump trade…

The last time today’s expert was on the program back in July, she was concerned about rising unemployment. Is she still as worried about it as we prepare to enter a new year with a new Administration taking over? To find out, we have the good fortune to talk today with Dr Anna Wong, Chief U.S. Economist for Bloomberg Economics. Prior to her current role, Anna also worked at the Federal Reserve Board, the White House Council of Economics Advisers, and the U.S. Treasury. Here is a direct video link.