Below are some of the most interesting articles, quotes and charts I came across this week. Click here to subscribe to our free weekly newsletter and get this post delivered to your inbox each Saturday morning.
The defining feature of any asset bubble is, “extrapolation of the unsustainable.”
'No, things are not different this time. It's all very similar to past bubble cycles led by asymmetrical monetary policy, debt creation, and the extrapolation of the unsustainable.' https://t.co/vsgx5KdJbN pic.twitter.com/I7hHV7C8MA
— Jesse Felder (@jessefelder) March 28, 2024
Today, equity investors are extrapolating both unsustainably high growth rates and profit margins.
"The combination of a high growth rate and a high profit margin has never proved to be permanent. The current crop of 'glamour stocks' increasingly relies on both here." –@hussmanjp https://t.co/HMs015Q4zn pic.twitter.com/E9acqgtilh
— Jesse Felder (@jessefelder) March 25, 2024
Corporate insiders appear to validate this assessment.
'Peter Thiel, Jeff Bezos and Mark Zuckerberg are leading a parade of corporate insiders who have sold hundreds of millions of dollars of their companies' shares this quarter, in a signal that recent stock market exuberance could be peaking.' https://t.co/lFp5iOD53j pic.twitter.com/OKrQxsL6mM
— Jesse Felder (@jessefelder) March 25, 2024
And once investors come around to a similar conclusion, things could get messy again in the stock market.
'Once portfolios have adjusted to the upper end of their risk limits, markets become vulnerable to a reversal. Our concern is that the reversal will have more in common with 1987 than any of the other crises in the last 30 years.' https://t.co/6mL2aB3gGI pic.twitter.com/DMIFdHq6Ej
— Jesse Felder (@jessefelder) March 25, 2024
However, opportunities abound in asset classes where investors have extrapolated too far in the other direction.
'Since 2015, Aramco has, in fact, unexpectedly throttled back production several times. While the stated reason has been to balance the market, it may have more to do with geological depletion than is commonly believed.' https://t.co/bSGIbPlKEy by @Go_Rozen pic.twitter.com/Lu10QUzm1m
— Jesse Felder (@jessefelder) March 27, 2024
