Juggling Dynamite

As of yesterday’s close, the economically sensitive small-cap Russell 2000 index had bounced 15% from June 12 and remained -22% from its October 21, 2021 high. The tech-heavy Nasdaq had rallied 19% since June 16 and remained -21% since November. Canada’s resource and bank-heavy TSX was +7% since July 14’s low and -11% from its March 30 peak.

With Nasdaq 100 net speculative long positions (CME futures and options) back to the year’s highs (Rosenberg Research), a lot of speculative short trades have covered, and the latest bounce is running out of buyers once more (as highlighted below from my partner Cory Venable).

The widely-benchmarked S&P 500 was +10% from June and -13% from its January 3rd peak. The bounce since June 16 achieved the 4155 level that Cory had defined as a potential failure area for this latest bear market rally (shown below).

Meanwhile, central banks are tightening, and the macro backdrop is deteriorating at an accelerating pace with negative momentum in home sales, housing starts, prices paid, corporate revenue, earnings, GDP, commodity demand, hours worked, job cuts and financial liquidity worldwide. Capital defence remains the dominant objective. As shown below in gold, courtesy of MacroAlf, the global record low in consumer confidence since 1985 suggests that stocks should dramatically underperform bonds over the next 12 months (green line).

And then, there’s the Metaverse shitshow mess…hard to overstate the madness that was.

Ultra-easy credit conditions in 2020-21 conditioned many to think that prices–from vehicles to homes, consumer goods, crypto, stocks, junk debt, et al.–only go up. Painful lessons are the natural aftermath of such misguided thinking.

In the July University of Michigan consumer sentiment survey, 15% of respondents said that interest rates were now impeding their ability to buy a vehicle; this was the same level as October 2008 amid the great financial crisis and up from 4% at the end of 2021. Meanwhile, auto loan defaults are accelerating, and repo activities are helping to balloon the used vehicle supply as dealers (like many homeowners in denial) hold on to inventory, hoping that peak prices will return soon. Classic bust cycle.

Used Car prices Update. Car Bubble is slowly letting out air. Here is a direct video link.

“There has never been a time in history when used cars have appreciated; this has taught so many bad habits.”

Better Markets CEO Dennis Kelleher joined Bloomberg TV’s The Close to discuss the anniversary of Robinhood’s IPO, its predatory practices, & how we can actually democratize #WallStreet. Here is a direct video link.