The S&P has fallen 7 consecutive days, bringing it into correction territory, having fallen 11% since the last week of December. Tesla, who I wrote about in October and identified as the canary in the coal mine of the “Ponzi” stocks, is down 28%, and that’s before earnings come out January 26th. I don’t give valuation advice because I’m wrong on timing more often than not, but it’s still 95% overvalued in my opinion and it’s about to give a lot of that back.
Peloton, down 80% from the highs, shows that a $1750 bike with $50 a month in subscription fees might be the best piece of exercise equipment ever BUT still becomes a coat hanger for most people, even when they are working from home.
Netflix? Down 35% in 2 trading days.
And my favorite, Moderna? Well, the US just achieved a 7 day average 2,000 deaths a day of/with COVID, only 35% lower than the peak a year ago when virtually none of the population was vaccinated. With 76% of the population having a least one dose (let’s be clear, the trickery of calling someone unvaccinated for the 6 weeks after their first shot when they have documented immunosuppression for 4 of those 6 weeks was the biggest load of accounting fraud perpetrated on the public the whole pandemic), the math doesn’t even make sense and people are asking much harder questions about these vaccines and why “boosters forever” is a reasonable strategy given that the “95% effective” vaccine has shown that it is, in fact … not.
And so the carnage is on, and there is absolutely no reason it will let up since the Fed HAS to raise rates, stimulus should have ended in January of 2021 and there is nowhere to hide. I am reminded of March of 2020 when I had a full scale panic attack. We were shutting down economies, locking people in their houses, paying people not to work, banning asset owners from evicting those who weren’t paying rent and blew up the economy. I said we would not get back below a 10% unemployment rate for years and that the stock market should have been trading at 1800. Clearly, I was wrong. I simply would not or could not believe that the US would inject $6+ trillion into the economy when the solution was just to go back to work and protect the vulnerable, most of whom weren’t in the work force anyway.
For a time, they suspended reality. The stock market is 80% higher than it was at the lows, and 33% higher than the January 2020 levels, but this chicken was always coming home to roost. Inflation is over 6%. Houses are up 40%, and a ton of people have decided they don’t want to re-enter the workforce (according to JP Morgan, as many as 2.9 million people decided not to go back). Perhaps they became day traders, minted like those that were day traders in 1999 when the market only went up. Until it didn’t.
My primary concern has always been the number of businesses that have been “given money” at valuations that are entirely illogical, and worse, many don’t make any money (or in Tesla’s case, very much of it). At some point, businesses need to actually make money and I fear this correction will absolutely crush the technology companies that don’t. At the time of writing this, the market is down almost 4%. We have been living in a fake economy, with the money printer covering up all the sins of policy in the last 2 years. It’s going to get a lot worse.
But I have good news for the world. At some point “I have billions of cash that investors gave me because they don’t care if I make money, so I’m going to buy carbon credits to get to net zero and invest trillions in an unreliable and intermittent electric grid” is going to turn into “Oh God, I was a paper millionaire and now my company is bankrupt and I don’t have a job! Why on earth would I ever spend real money on fake credits or rebuild existing power plants?”
The energy transition is over and like in 2000 and 2008, economics will finally matter. My only hope is the S&P doesn’t go to my 2020 target of 1800 because we spent all the dry powder on a pandemic and lost sight of the thing that matters most to the standard of living in this country: the economy. And we ain’t got no bullets left.
And Nancy Pelosi sold her Moderna shares at that $484 number, no doubt.
WOW..u must be fatigued after all that! Did u witness any of the WA DC event yesterday?