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Strategies & Market Trends : Bear!

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To: Harshu Vyas who wrote (191)	11/19/2023 12:39:43 PM
From: Sean Collett	Read Replies (3) of 266

<<To me, 2022 was more like 1998 - only the time and depth are different.>> What followed 1998? Given we have some of the highest levels of overvaluation we're very much looking at a repeat of the overvaluation of the dot com IMO. Valuations will matter again despite what current market sentiment is. << I agree that consumers are stretched but they've been this way for a while>> They have been stretched due to inflation and they have weathered the storm well, but unlike Rocky Baloba, there are only so many hits to the head they can take before they hit the mat. Wage growth has already begun slowing and claims are starting to pick up: What you will see now with inflation declining is companies forced to protect margins - they can't protect themselves with inflation like they did in 2020-2022. Many are sitting on large inventory increases due to the JIC ordering from supply disruptions and will now be forced to mark prices down to get consumers to continue spending to clear that inventory. And as you can see we're already in decline. Part of this protection is also going to be in the form of reducing OPEX and thus laying off people. This will of course be a self feeding loop as more layoffs will weaken the consumer and thus lead to further margin protection leading to more layoffs. Historical unemployment going back to 1948 has averaged around 5.71% and today we are still below 4%. I challenge that you're looking at things from the view of 3.9% unemployment, but at 4.5-5% I suspect this will very much paint a different picture of consumer strength and thus feed into the market. In Q2 401K hardship withdrawals was up 36% from Q2 2022; this is not a sign the consumer is still doing okay. Just look at the accounts for credit cards. Consumers weathered but this isn't sustainable as eventually discretionary spending will be cut: << The market just doesn't care.>> I would also challenge we had events that provided liquidity like the fed stepping in for banks in March and even Janet needing to refill the TGA. Today though the ONRRP is draining quick as Janet continues to issue bonds that provide a more favorable offering than what they can get from sitting with the fed. As ONRRP drains this will eventually create a fork in the road and here is where I see QT starting to end. Right now we have the fed balance sheet declining, ONRRP declining, and TGA is also declining. All three of these happening at once is going to start sucking liquidity from the market. << the market will soar higher and higher as more flows make their way into "growth". I don't think the top has come in>> Bubble gets thrown around pretty easily since 2001/2008 and while I don't expect a 2008 level blowup, these are clear markers that things are not good under the hood. This isn't 2021 and the consumer is showing all the signs of getting weaker. Companies too - Walmart is down 6.57% in the week because they just warned the consumer was getting weaker. -Sean

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