Russell 2000 Drops Below Year Ago Level. Collapse of IPOs, SPACs, Housing “Tech” Stocks, ARKK, etc. Progresses

The most-hyped stocks are collapsing, some by 90%, such as EV SPACs, as the sordid underbelly of the stock market comes systematically unglued.

By Wolf Richter for WOLF STREET.

The Russell 2000 Index, which tracks 2,000 small-cap stocks, dropped 3.1% on Tuesday, to 2,096, down 6.6% year-to-date, down 1.3% from where it had been a year ago, and back where it had been on January 7, 2021. The index has whittled down its gain from its pre-pandemic peak of August 31, 2018, to 20.5%.

But that’s on the mild side of the spectrum (stock data via YCharts):

This is another aspect of how the stock market has been falling apart beneath the surface, in line with the wholesale collapse of IPO stocks, SPACs, and trackers of the most-hyped stocks, such as the ARK Innovation ETF.

The Renaissance IPO index [IPO], which tracks stocks that went public over the past couple of years, after a blistering spike that started in March 2020 and ended in February 12, 2021, has now plunged by 37.7% from that high, to the lowest level since September 11, 2020, with lots of air remaining below it (stock data via YCharts):

The top components Renaissance IPO index and their collapse in percent from their highs:

  1. Moderna [MRNA]: -62%
  2. Snowflake [SNOW]: -29%
  3. Uber [UBER]: -40%
  4. Cloudflare [NET]: -57%
  5. Zoom Video [ZM]: -73%
  6. CrowdStrike [CRWD]: -42%
  7. Datadog [DDOG]: -34%
  8. Coinbase [COIN]: -48%
  9. Palantir [PLTR]: -66%
  10. BioNTech [BNTX]: -63%

Among the notable IPO stocks beyond the top 10 of the Renaissance IPO Index, with the collapse in percent from their highs:

  • Airbnb [ABNB]: -28%
  • Peloton [PTON]: -82%
  • Carvana [CVNA]: -57%
  • Chewy [CHWY]: -64%
  • Squarespace [SQSP]: -56%
  • DoorDash [DASH]: -50%
  • DraftKings [DKNG]: -70%
  • Unity Software [U]: -43%

And some notable housing-related companies, and the collapse in percent from their highs:

  • Zillow [ZG]: -75%
  • Redfin [RDFN]: -68%
  • Compass [COMP]: -63%
  • Rocket Cos. [RKT]: -70%
  • Lemonade [LMND]: -81%

And our space SPAC:

  • Virgin Galactic [SPCE]: -85%

Our glorious EV SPACs have gotten wiped out wholesale. Here are some of the most prominent ones:

  • Lordstown Motors [RIDE]: -90%
  • Nikola [NKLA]: -90%
  • Lucid [LCID]: -40%
  • Rivian [RIVN]: -59%
  • Faraday Future Intelligent Electric [FFIE]: -75%
  • Workhorse [WKHS]: -91%

Even the online dating SPAC when online dating is hot:

  • Bumble [BMBL]: -63%

Fake-meat producer Beyond Meat, which IPOed in April 2019, today landed below its first-day close:

  • Beyond Meat [BYND]: -67%

Some of these winners are tracked by the ARK Innovation ETF [ARKK], which attempts to track “disruptive innovation,” which it defines as a “technologically enabled new product or service that potentially changes the way the world works” or at least it changed the way people’s money got disappeared:

  • Ark Innovation ETF [ARKK]: -52%

 

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  203 comments for “Russell 2000 Drops Below Year Ago Level. Collapse of IPOs, SPACs, Housing “Tech” Stocks, ARKK, etc. Progresses

  1. Phoenix_Ikki says:

    Ark Innovation ETF [ARKK]: -52%

    Yet you still see lame stream media interviewing Cathie Woods left and right like she is the next oracle of the market. I guess once you become famous of hyping up Tesla, you stay relevant for a long time.

    Another stock that’s biting the dust hard you forgot to mention is SNAP..only close to 60% from all time high in Aug.

    Good to see Beyond Meat on here, that bubble sure is deflating fast, so glad I never took a job after my interview, dodged a bullet there for sure. Judging by their glassdoor reviews, looks like another hyped up company with problematic work culture, if they fail, I say good riddance.

    • Wisdom Seeker says:

      This is a long-term positive. The labor market ran out of willing bodies. Only way to get more workers solving our supply problems is by shutting down unprofitable non-successes.

      Time to put WeWork’s workers to work where we need workers!

      • historicus says:

        WSJ today 1/19
        Poor Goldman Sachs….. complaining about “wage inflation”

        Their earnings hurt because they are paying out so much money…..to their partners, etc…
        So who exactly is getting hurt? The people who somehow think owning Goldman Sachs stock is a good play.

        Six and seven figure compensations, in a discussion of $12 or $15 an hour wages is a joke….Goldman whines about paying themselves so much money.

    • Old school says:

      Momentum investors tend to be heroes before being zeroes.

      Pigs get slaughtered.

      Fed produced many investing geniuses.

      • Ted says:

        Totally agree with you Old School. kept asking myself; Am I stupid? What am I missing? Turns out I missed out on the big losses.

        • WES says:

          Another way to loose half of your capital was to buy stock in a profitable dividend paying gold mining company, operating in only stable countries, like I did.

    • Jay says:

      With food inflation running sky high, products like BM that need a 30-40% price premium to succeed aren’t doing so well.

    • RH says:

      Lots of over-leveraged, overhyped companies with gigantic PE rations are going to go under eventually. The “investments” that many have made are ludicrous, like the Tulip bubble and crash: e.g., the cryptos have no inherent value nor any reason why they should increase in value except for their use to evade restrictions on the transfer of capital (e.g., by CCP cadres in China using mining hardware to get bitcoins to transfer their stolen funds out of China), and to evade taxation and hide assets. Too many stocks and investments, like cryptos, are based on the greater fool theory: you buy them in the hope that you will later be able to sell them to an even bigger fool.

      • RH says:

        None of this would have happened, not the over-leverage, not the bubbles, not the forthcoming crash and recession without the corruption of the “Federal” bankster Reserve that chose a misleading name to deceive Americans into mistaking it for a federal agency like USPS. It has kept interest rates artificially low for too long, so they can create and lend billions or TRILLIONS to their bankster owners at 2.5% a year and those banksters can then charge you and me 23% or more per year in interest on credit cards, etc., plus fees. Remember, always ask, “Qui Bono.”

        • Randy says:

          “Whoever controls the volume of money in any country is absolute master of all industry and commerce.” ~ James A. Garfield

          “A private central bank issuing the public currency is a greater menace to the liberties of the people than a standing army. We must not let our rulers load us with perpetual debt.” ~ Thomas Jefferson

          “Real power is achieved when the ruling class controls the material essentials of life, granting and withholding them from the masses as if they were privileges.” ~ George Orwell

      • Rcohn says:

        Theses stocks still have much more to go on the downside

  2. Ghassan says:

    Appears to me that ppl who bought these ETFs prior to the pandemic still in a good place but most of buyers from after are about even so far but heading toward losing everything, maybe now is a good time to get out before is to late.

    • Djreef says:

      The rotation into high dividend value, REITs, and MLPs is palpable at this point.

      • Harrold says:

        Yep. Back in spring of 2020 when the roads and airports were empty I bought oil majors and other dividend paying blue chips that everybody thought were dead forever. Looks like I might have been right. Making a decent income and stocks are up around 30%.

        If they dump quality stocks again I’ll be there picking up bargains. Only bargains that make solid profit and pay dividends. Somebody else can gamble on the latest phone app or crypto project. If Elon Must is involved in any way, it’s a hell no for me.

        • Old school says:

          I think that is the best game in town. Buy the best in a recession and never sell til you get retirement age and then you can sell 2% – 5% of shares per year depending on need. Wish I had done that, but I can hold an over valued stock.

      • Anthony A. says:

        Even those are a little dangerous in the face of rising interest rates. It’s best to hold off buying interest bearing securities until after the rate increases have occurred, if we can ever figure when that is.

        • Wisdom Seeker says:

          IF the 1970s are a guide, it could take 10-12 years before interest rates stop rising.

          Or longer.

        • Anthony A. says:

          WS, you might just be right there and the stock market probably won’t be the place to be if it’s like the 1970’s.

      • Augustus Frost says:

        The entire stock market is absurdly overpriced. The US stock market has been in the biggest mania of all time for years, dwarfing 1929 and all others except 1989 Japan. Same mania as the dot.com bubble, as it never ended. Supported by a bond mania and a fake economy since 2008.

      • cb says:

        Please name some high dividend value stocks.

        • Dan Romig says:

          Cenex Harvest States, or CHS Inc.. They are a Minnesota based company in the agriculture, grains, foods and energy business.

          Current forward dividend is 6.5%. Amazingly stable stock price.

        • Ted says:

          DOW, PFE, BAC,

        • Anthony A. says:

          As Dan mentioned above, CHS is a big Ag CO-OP and also are into fuels. I have two of their preferred issues and they have been paying me over 6% for years now. They are Americas largest co-op refiner with two refineries.

        • Flea says:

          You want safety stash under tou mattress,

  3. Tom S. says:

    The wealthy are so fabulously wealthy they can buy non profitable garbage without fear, simply unload it to millions of retail morons engaging in a price battle over table scraps. ‘Merican way. Carvana had to actively try to lose money in this pricing power environment, that company is a scam and a half. Same for a lot of the EV junk as well. Build 2 trucks get a 70 billion dollar valuation, insane.

    • Depth Charge says:

      “Bu-bu-bu-but Amazon…..”

    • Augustus Frost says:

      Purportedly 724 billionaires now versus 13 in 1982. What does that tell us? Certainly not that the country is that much richer and it’s also only partly due to unprecedented income inequality either.

      Point is, most of them are ultimately destined to become poorer or a lot poorer, just like the rest of us.

      Many (though a low proportion IMO) will remain “fabulously rich”, but I expect the majority to get taken to the cleaners or virtually wiped out.

      Look at what they actually own, not what it is “worth”. Most of the time, it’s a bag of hot air with little or no substance.

      Compare what these people own now to what their predecessors did in past. Transition to an information economy doesn’t actually mean most of these assets or companies have much if any substance.

    • Yort says:

      Amazed that Nikola basically “Fred Flintstoned” their hydrogen trucks in promo videos to suck in investors and the CEO walks away with billions. Hyundai has been working on hydrogen engines for decades, and is still not economically feasible yet folks believed Nikola narcissist CEO.

      Run when you figure out the CEO of any company is a narcissist, as complete carnage is almost guaranteed as narcissists not only have the ability to suppress basic human emotions such as empathy, they actually believe the fantasy they are selling…

  4. Ryan says:

    US stocks are extremely overvalued, especially meme stocks. I’m looking forward to commodities, energy (oil/nat gas/uranium), and emerging markets in 2022.

    • Wisdom Seeker says:

      Uranium always seems dumb to me. Nuclear plants need very little uranium. Fossil plants need tons and tons of fuel, but nuclear plants need very, very little because there’s so incredibly much energy stored in the nucleus.

      I suspect the right way to invest in next-generation nuclear power is in the power station construction, that’s where all the expense is. And then in the utilities selling the hopefully-cheap energy into a market where price is set by more-expensive alternatives.

      • fajensen says:

        Current nuclear plant designs sadly waste most of the fuel and then dump the rest somewhere*.

        A reactor takes a charge of typically 100 tonnes of almost perfectly purified uranium, extracted from 14 million tonnes of rock, assuming the ore is typical, containing about 0.70% uranium.

        Once about 2-5% of that fuel has been converted, the impurities become too much for the reactor and old fuel must be replaced.

        The old fuel will be lethally toxic for many generations and nobody will want it, so it is typically left to fester on the site. Eventually, that becomes a problem and the tax payers are gifted the tab for the cleanup.

        If one still believes in “nuclear”, one should probably buy into the highest and least complicated mass-flow. That will be in the mining and machinery for the mining.

        The nuclear plants themselves and the waste handling has proven time and time again to be where the sucker money goes to die. An exception is that there is also lot of money to be grifted by running “Superfund Site Facility Management”.

        *) The hole-in-the-ground is the preferred boomer disposal method for old engine oil and other chemicals, so of course nuclear waste is treated just the same by the boomer nuclear designers :).

    • dishonest says:

      “US stocks are extremely overvalued”

      I’ve been hearing this since the last decade. While quite true, it doesn’t mean that they’re going to become even more overvalued.

      • Richard Greene says:

        Useful valuations that have a strong correlation with stock market returns over the next ten years are at the highest levels in the history of the stock market.

        The two I follow are the S&P500 Price Sales Ratio
        and Wilshire 5000 Capitalization as a Percentage of GDP. The probability of average, or above average, total stock returns over the next ten years is near zero.

    • Old school says:

      Second biggest gold miner just reported they mined 10% more than previous quarter, mined at a lower cost and sold for a higher price. All gold miners up today on news about 7%. They were dirt cheap. At $1800 net margins are 16+% and Fed seems interested in helping you out with negative real yields.

      Kathie Woods could have bought miners with a 15 PE this year, but she doubled down on momo and got in trouble.

      • WES says:

        Yes, and investing in 100% profitable gold miners has been a great way to loose half your capital too! Sadly real companies with real products are considered garbage these days.

      • WES says:

        I might also point out that the gold bullion banks have developed a new way to fleece the rubes playing paper gold on the COMEX. Temporarily raise gold prices before smashing gold prices. New game the same as the old game!

      • Flea says:

        And you believe this = greater fool

      • Klaus says:

        ‘All gold miners up today on news about 7%.’

        Gold went up and carried the miners with it. Nothing to do with what one company extracted.
        Gold moves on real yields and the value of the dollar. Some odd behavior in gold and silver this week, probably related to some major options activity this Friday. Large trades and hedges unwind and produce counter intuitive moves in assets such as gold and silver.

        The stock and gold markets will keep flapping its wings until interest rates rise and QE is ended. They haven’t taken away the market’s rocket fuel yet and they will party to the very last minute.

        $1500-1600 a good buy point for gold this year . Miners will suffer due to covid and higher oil prices.

  5. Adam says:

    “back where it had been on January 7, 2020”

    I think this should be 2021 per the chart up top.

      • Flea says:

        Wolf why is xi warning Powell not to raise interest rates to fast would make a great article Michael Engel where are you your opinion would be appreciated

        • Wolf Richter says:

          I don’t care what Xi says. I don’t think the Fed does either. China has its own problems.

          It’s well known that rising interest rates in the US can rattle emerging markets. A lot of companies in China borrowed in dollars, and they’re going to have to refinance this debt at higher rates, which can be tough. Some of those companies already defaulted on this debt for other reasons. So this is going to get messier. But that’s not the Fed’s problem. That’s Xi’s problem.

        • fajensen says:

          Probably trolling.

          It could work in the sense that far too many people would just say: “Hahaha, I’m gonna do exactly what them Chinese does not want me to do”, but, those people are not at Powells level at all.

          It costs nothing to try, though.

        • LifeSupportSystem4aVote says:

          “Wolf why is xi warning Powell not to raise interest rates to fast”

          That is analogous to warning a landscape rock in your front yard to not run too fast or it may get hit by a car in the street.

  6. Boomer says:

    Every bull market has its celebrity guru’s. Shining stars who are right until some of them end up horribly wrong.

  7. DawnsEarlyLight says:

    Waiting for S&P500 to fall to 2500

    • Anthony says:

      With Brent Crude hitting $87.96 as I write, who knows…

      • Anthony A. says:

        Don’t forget WTI at $86+ this morning.

        • Danno says:

          I wonder what the sweet spot price is for WTI?

          Not too hot to harm the eCONomy, not too cool to start riots in oil producing countries?

    • Old school says:

      Return to long term median price to sales is roughly 1500. If we overshoot a little bottom could be in the 1000 neighborhood.

      If we have Great Depression type wipeout then it’s 500. Don’t make Great Depression mistake of going all in when markets got cut in half. There was about 78% down from there.

    • Augustus Frost says:

      Temporary (yes, temporary) strong support is the March, 2020 low which is slightly below 2500.

      • Old school says:

        Fed has provided a put for 40 years, but that game might be over if inflation is 5% plus. They will have to make a tough decision, unlike the past when the market wants the heroin

        • Augustus Frost says:

          The difference since COVID is that “printing” and QE previously didn’t correlate to inflation and therefore appeared “free”. Now:

          Door One: keep “printing” and borrowing where Inflation outruns income gains

          Door two: Cut government spending and QE which reduces fake “growth” and fake earnings

          Good luck on door #3 (an eternal mania).

          Add it all up and it equals declining living standards with a reversal of the last 40 years, lower asset prices and higher inflation.

  8. Depth Charge says:

    She should just change her name to Cathie Woodshed, because that’s where you can find her these days. She is getting abused. I think a Rhesus monkey could do better.

    • Yort says:

      @Depth Charge – “Cathie Woodshed”…LOL!

      Maybe change company name from “Ark Invest” to “Titanic Invest”….

  9. dishonest says:

    Somebody’s got to do something. Jerome, we’re coutin’ on ya lad.

    • KPL says:

      haha. Jerome is dressing up in the best of his rescue dress. Give him time. Nothing has happened yet.

  10. KPL says:

    Hopefully it is just the beginning but then that depends on the Fed.

  11. Martok says:

    Wolf,

    Good post and this era reminds me so much of the collapse of 2000, with ARKK like funds and all the SPAC’s that came about over incredible hype because they bought just 1 “computer server”, along with all the “irrational exuberance” buying as stated by the Fed Chairman.

    It isn’t exactly the same, however it’s like watching a slow-motion crash of a high-speed train, – with a lot of the same, but with new players such as Crypto’s with it’s leverage, along with WallStreetBet Apes, along with reckless global money supply, etc, etc.

    I reiterate a premium Bloomberg article that said on Jan 5th, 2022, and these folks don’t mess around with the facts, contact them if you got better info!

    This is just the beginning folks, those hedge funds don’t mess around either.

    —————————————————————–

    Bloomberg – Jan 5th, 2022,

    The hammering in technology stocks that began to spread into the broader market Wednesday is being fueled by one of the most intense bouts of selling by professional speculators since the financial crisis. (2008)

    Hedge funds, which spent December unloading high-growth, high-valuation stocks, began the new year by jettisoning software and chipmakers at a furious pace. During the four sessions through Tuesday, these sales reached the highest level in dollar terms in more than 10 years, data compiled by Goldman Sachs Group Inc.’s prime broker show.

    The tech carnage worsened after minutes of the Federal Reserve’s last policy meeting pointed to earlier and faster rate hikes, uncovering “a more hawkish Fed than some may have expected,” said Mike Loewengart, managing director of investment strategy at E*Trade Financial.

    The Nasdaq 100 Index dropped more than 3%, rounding out its worst two-day drop since March. Stocks boasting nose-bleed valuations bore the brunt of selling, with a Goldman basket of expensive software sinking 6.3% to the lowest level since last May.

    The MSCI Asia Pacific Communication Services Index dropped as much as 1.5% on Thursday, with South Korea’s Kakao Games Corp. the biggest loser with a 14% slump. Hong Kong’s Hang Seng Tech Index, which mainly tracks Chinese giants, closed 1.4% higher, erasing earlier losses. The gauge plunged 4.6% on Wednesday and was near oversold levels.

    “The Fed is going to be raising rates this year, perhaps more aggressively than many thought,” said Mark Freeman, chief investment officer at Socorro Asset Management LP. “In many of these tech names, there is little support from the long-only community so it doesn’t take much selling pressure to push the names sharply lower, which in turn forces more selling by the hedge funds.”

    The specter of higher borrowing costs prompted traders to rethink their long-held affection for tech firms. The rush for the exits created trouble for hedge funds whose concentrated bets on speculative software were still elevated even after unwinding some of those positions late last year. On Tuesday, Goldman’s long-short fund clients suffered their worst alpha drawdown, or below-market returns, in a year.

    Even before the Fed minutes were released, the tech drubbing began as a rotation, with big investors selling one-time highfliers to buy companies poised to benefit from an improving economy. Before Wednesday, Goldman’s hedge-fund clients snapped up airlines, energy and industrial shares during the previous four sessions. As a result, their technology exposure relative to the S&P 500 dropped to the lowest ever recorded by the bank.

    With the Fed turning more hawkish and Treasury yields rising, overly stretched stocks may have a hard time to justify their valuations. According to data compiled by Bernstein, about one-third of all tech stocks were recently traded at more than 10 times their revenues. The S&P 500 was valued at 3.2 times sales, Bloomberg data show.

    “When there’s no valuation support for a full third of the sector, these unwinds are ultimately a function of positioning and pain,” said Benjamin Dunn, president at Alpha Theory Advisors LLC.

  12. Mark says:

    Bad day for those doing “God’s Work” ………

    aka Cathie Wood ARKK

    and Goldman Sachs down over 7%

    • Yort says:

      I trusted the “Omnipotents” at Goldman as they seem to be god’s in terms of running the govt via rotating execs and lobby efforts, yet I got hit hard with that 7% loss. My Russell short hedge and large XoM holding helped offset the hit that day, both contrarian risky purchases to past herd perceptions, but they both fit the base reality we currently exist within…

  13. Chinedu Mmaduebo says:

    Thanks Wolf I must confess that you have made my days reading your incredible articles that dissect current economic issues and also to the entire house contributing. You guys rock! I feel this is an MBA class each time . I may not have much contribution but I read everything to know what l lack. I’m grateful.

  14. phleep says:

    The bait worked to migrate wealth up to a few sharpies (thinking of pools of the 1920s, Joe Kennedy and that crowd). Greed is wonderful bait and finally pulls in the last punter. Casino capitalism shows its familiar profile. Retail investors just got their generational lesson. Hopefully not a 1930s lesson though, which engulfs all of us.

    I kept looking the at P/E ratios and gasping, thinking fundamentals must assert themselves sometime. I rolled out of most stocks I had in November, awaiting a reentry point. Again, those too hasty to buy back in after 1929 did nothing but catch a falling knife with bare hands.

    Paraphrasing Keynes, the market can stay irrational longer than a skeptical investor can stay solvent. But the “this time is different crowd” (as countless times before) just kept ponying up dollars.

    If this overshoots as it did upside, this could be very deflationary. Downside sentiments usually persist longer than exuberance. Look at the slow path back from 2008.

  15. ivanislav says:

    Wolf, you could add ASTRA as a SPAC in the space category, down ~75% from the the high of ~21.

  16. John H. says:

    The late Martin Zweig (younger folks may need to look him up) created an informative page in one of his slide decks back in the 1990’s. (From memory, so #’s are approximate):
    ———————
    Market Declines …. and Average Frequency:

    10% ….. every 1.5 years;

    20% ….. every 3 years;

    30% …… every 5 years;

    40%+ …… every 10 years.
    ——————-

    I believe he used the Dow Industrials going back to 1900.

    I always found those numbers very realistic, and even somewhat comforting: the market crazies eventually get educated in the ways of the market, and market skeptics eventually get a chance to re-enter the equity market.

    Ever thus.

    • Yort says:

      In the past 120 years of markets, they have risen 83 years so they tend to go up about 69% of the time. That said, it is usually an escalator up and an elevator down, although the last Fed market bailout condensed the bear market to 23 days, with the Nasdaq recovering in about 50 day versus the 1018 day previous recovery average.

      The Fed removes all historic comparisons as it really is different this time, because the Fed has completely changed the rules to the “Game of Markets”….and perhaps they play Game of Thrones music while sitting behind computer screens bailing out the markets???…HA

      • Wisdom Seeker says:

        The COVID-Crash of 2020 wasn’t a bear market, just a deep correction. 2020 was like the Crash of 1987 in this respect.

        A bear market changes mindsets. In 2020, speculative mindsets were not changed; in fact they were amplified.

        A true bear market needs time as well as price to change investor psychology. A genuine bear-market bottom cannot occur until most investors have given up on trying to buy the dip and instead become deeply frightened about buying stocks.

    • Levi C. says:

      Marty Zweig was a near prophet in our house after my father saw him be singular voice of reason and absolutely predict the black monday market crash of the 80s.

      • John H. says:

        And, he was both humble, and humorous.

        But a Cleveland fan. Nobody’s perfect!

  17. SpencerG says:

    I am surprised that Wolf didn’t highlight Peloton (down 82%) considering his article from a couple weeks ago. CNBC’s current article about them (dated 18 JAN):

    “Peloton hires McKinsey to review cost structure; cycle maker may cut jobs, close stores”

    • Augustus Frost says:

      A company “worth” $50B at the peak that should probably be worth nothing. Yes, $4B sales but lost about $400MM last year and to my knowledge, never made a cent. I guess they will make it up on volume, eventually.

      Even changing their business model to actually try to make money, “reasonable value” might be another 80% to 90% loss from current market cap of about $10B.

    • Wolf Richter says:

      Type: ctrl F then fill into the search box PTON and you will see :-]

      • SpencerG says:

        How do we do a search for previous articles? I cannot find the search block any more.

        • Wisdom Seeker says:

          @Spencer – (Whoosh) He was talking about the current article. PTON is in this article right in front of you. If you’re on a PC just use your browser’s text-search function (ctrl-F). If not on a PC, it’ll work differently.

          @Wolf – A lot of readers aren’t on PCs and mobile browsers don’t always have easy search functions…

        • Wolf Richter says:

          Two options to find prior articles. Try both, they produce different results.

          Go to the “Wolf Richter” tab, and the search box is in the right sidebar (on mobile, this is below everything). Type in peloton.

          Use Google. In Google, put wolfstreet in front of the search term. That works really well. For example, type into the Google search box:

          wolfstreet peloton

          some of my articles will pop up. Maybe.

        • VintageVNvet says:

          just tried it with ”wolfstreet : peloton, and got a ton,,, not sure about results without the colon
          AFAIK, the colon makes the search engine aware that you want data from the preceding source, as has worked well for many years while looking for hard data on sailboats advertised with the usual BS

    • Khowdung Flunghi says:

      Most recent episode of Family Guy featured a “pedel-a-ton” …

  18. Realist says:

    I believe that those talking heads that claim “it is different this time around”, are correct, because when the day reality shows its ugly face arrives, it will be quite a roller coster ride unseen in living memory.

    Until then, one has to play with the cards you are dealt and if you do the dealing, deal from the bottom ….

  19. Elvis' Bass Guitar says:

    Dow 14,950. The former high pre GFC.

  20. Asul says:

    This is probably going to be the greatest misallocation of funds in the modern history. 10 years of 0 % rates, companies burning cash to innovate and make products that they sell at a loss … never making any profit for nearly half a decade …

    Staggering stuff.

    • cb says:

      The misallocation is made the moment the FED creates dollars from nothing ……………….

    • economicminor says:

      These were all funded by loans and bonds.

      Who do you think will be the biggest losers?

      Somebody has to take the losses..

      I see Puerto Rico finally settled its bond losses with I think I read an 80% haircut to its bond holders.

  21. SocalJim says:

    In every market, there are always some stocks collapsing. However, at the same time, many otheres have risen. How do we know this?

    Look at the RSP, QQQE, and EWSC. They are equal weighted versions of the SPY, QQQ, and IWM. The QQQE is down a little more than 10% while the RSP and EWSC don’t look bad at all.

    What this means is that, in general, while some stocks are collapsing, others are quite strong, and in the end, the balance is still there. No crisis … just a normal stock market tradeoff that is long overdue.

    • Wisdom Seeker says:

      Careful there. The QQQ is only the NASDAQ-100, not the full NASDAQ, which has a lot of falling knives and dead cats in it. So QQQ and/or QQQE can look fine while the Nasdaq Composite … not so much.

      Also, the EWSC is the S&P600 which is only 600 stocks (#901-1500 in market cap), vs. IWM which is the full Russell 2000 (#1001-3000 in market cap) and has more smaller-cap stocks in it.

      Meanwhile, RSP is only slightly healthier than SPY right now… I don’t think there’s an investment thesis there.

      A different way to get at a similar point is to look at the market not by market cap but by industry / sector. Some sectors are being sold off hard but others are being heavily bought.

      Another way to look is by charting the percentage of stocks trading above their 50 or 200 day averages. There are still some healthy stocks out there but it’s not like before when stockbuyers (hard to call us investors given current valuations!) were indiscriminately bidding up everything.

  22. Swamp Creature says:

    Chuck Shumer, House majority leader, who is suppose be overseeing anti-trust legislation to regulate Big Tech including Amazon and Facebook was exposed today. His daughter is a big lobbiest for both companies. He’s competing with Peliso, who made 50 million trading Apple stock, as biggest slimeball in the Swamp.

    • Wisdom Seeker says:

      What’s most depressing is that this isn’t even a surprise nowadays.

      They’ve normalized behavior that used to be scandalous, criminal or both…

      The conflict of interest rules need to be enlarged to include all family members including cousins…

      There also needs to be a lifetime ban on “charities”, “book deals”, gifts, speech fees (in excess of documented travel costs) and any other after-service reimbursements to people in positions of public trust and authority. Retired politicians should genuinely unplug.

    • Flea says:

      Should be in jail along with 3 fed reserve scum bags but sec is bought off ,and citizens are ignorant

  23. David Hall says:

    The German 10 yr bund interest rate was in positive territory this AM before going below zero again.

    I remember in 1999 people were buying high revenue growth stocks with no earnings. In March of 2000 the market started down. Some of these were bankrupted as people did not want to fund them anymore. Toys.com ran out of funding. Global Crossing installed fiber optics cable for the expanding Internet, then went bankrupt. There was accounting fraud. Microsoft survived.

    • Augustus Frost says:

      At least Pets.com had the sock puppet as it’s mascot. It’s more than many on the article’s list have going for them.

      • Old school says:

        It’s kind of funny but one of my favorite stocks at right price has ticker PETS. No debt. Do your own due diligence.

    • Cas127 says:

      Wolf,

      “I remember in 1999 people were buying high revenue growth stocks with no earnings…”

      You may want to Google around for a follow up post…

      It has been awhile, but my general recollection is that perhaps 30% to 40% of the Russell *2000* have *zero* or negative earnings (infinite PE ratio…).

      Those numbers will bounce around from year to year, but my guess is that for the last 6 or 7 *years* the percentage of infinite PE stocks in the R2K has been absurd.

      It takes a bit of Googling, but there have been articles noting the absurdity.

  24. Old school says:

    I predict Berkshire Hathaway will be number 1 company by market cap one day. They already own the most real capital and tend to climb up the ladder a few spaces everytime there is a recession.

    Main reason is they focus on the very long term, pay no dividend and run a very conservative balance sheet. They are number 7 in SP500 and will probably move up two or three spots after next recession.

  25. The Bob who cried Wolf says:

    Moderna’s collapsing? That’s strange.

    • SocalJim says:

      MRNA is now only up 10x in two years. We now call that a collapse?

      • Harvey Mushman says:

        Right?
        In the article it shows Moderna down -62%. No time frame is mentioned but in the chart above it, the time frame is 2017 to 2022.

        Moderna 2017 – $17
        Moderna 2022 – $179

      • Flea says:

        Should be in jail along with 3 fed reserve scum bags but sec is bought off ,and citizens are ignorant the rich are bleeding the market= taking profits u fools

    • Wisdom Seeker says:

      MRNA down from a bubble-peak of 497/share in August to 174 today.

      So it’s now down -65% from the peak.

      Still up year-over-year … but that seems likely to change soon.

      What’s the catalyst for future growth in MRNA?

      • fajensen says:

        The next corona variant or the new MRNA-based cancer treatments made more necessary by repeated infections with the Corona virus burning out T-cells, one of the systems that nips cancer in the bud.

        Right Now, the story is that Omicron is “mild” and “this the end, herd-immunity is coming”. I think this will turn out to be bullshit.

  26. Michael Engel says:

    1) Paris 1921 extracted Prussia energy resources in southern
    Poland.
    2) When the French invaded Germany western energy zone, the Wimmer
    gov gave the miners PPP loans and ordered them to strike.
    3) The Wimmer inflation was caused by the loss of both energy resources in Germany. Printing money was the symptom.
    4) The collapse of US rig count by 2/3 is the cause of the current inflation. The PPP loans, stimmies, or Fed liquidity are the symptoms.
    5) Higher rig count and higher interest rates will help. Recession will do the best job.
    6) NDX SPX monthly elevetad MACD indicate that we will get one soon.

  27. Michael Engel says:

    7) Keynse was against it !

  28. silverdog says:

    I believe we are nearing one of the first tipping points in this economy. I am sure a lot would agree with the observation that is has got to be the biggest financial bubble ever inflated in the history of humankind. I would posit it is even bigger than the Tulip & South Sea bubbles.

    This can’t last forever and there are signs that the end of this near. We will come out the better for it, but it’s going to be a hell of a ride.

    • Augustus Frost says:

      There is no comparison between the current mania and those two. Both were localized and of rather short duration.

      This one is global covering the three major asset classes (bonds, stocks, real estate) and in the US started close to a quarter of a century ago. That’s one reason most don’t believe it’s a mania but the “new normal”, despite abnormal monetary policy and a fake economy.

      • Old school says:

        It’s more like the Mississippi bubble. Slick central bank games to cover up the country’s indebtedness. Sucked in common people to give up hard money for paper promises. Stock boom and bust back to the starting price. It was all an illusion of wealth.

      • silverdog says:

        Yep, it’s global.

        I was off on Monday and received over 5+ calls asking if I wanted to sell my house, these were people based most likely in India working for U.S outfits and giving their names as John, Robert, etc.

        It’s funny in a way but it also shows the mania we are currently in, people can feel it in the air. We are living in a fantasy as a culture completely detached from the actual character values such as honesty, hard work, fairness, etc. Some may scoff at those values, but that’s what ultimately holds us together as a culture and keeps us moving forward.

        The housing frenzy is still in full blast around here, no cohesion , no shared interests. We are in for a hard winter ahead, we will come out better for it, but it’s going to have some very hard lessons we have forgotten.

        • Augustus Frost says:

          I can’t say it’s the only factor but extended social decay is definitely a major one. It’s one (of two) explanation for the explosion in the national debt and the FRB’s balance sheet since 2000, to keep society from falling apart. The long-term fundamentals are actually awful right now but thanks to the mania look a lot better.

          The latest (and possibly ultimate) fantasy is the “metaverse”, like the account I read on CNBC of someone purportedly paying millions for fictional “real estate”. It goes right along with NFT’s and crypto, as all three are nothing.

        • Martok says:

          @Silverdog – This part is on right on target:

          “the mania we are currently in, people can feel it in the air. We are living in a fantasy as a culture completely detached from the actual character values such as honesty, hard work, fairness, etc. Some may scoff at those values, but that’s what ultimately holds us together as a culture and keeps us moving forward.”

          Those are the solid values and work ethic I grew up with, and are a rarity today, just us ole dinosaurs believe this – the kids today face a dismal future who’s values won’t get them thru the rough seas ahead. – I used to work around the clock till I dropped in computers – as a kid shoveled snow off driveways, and mowed lawns for .75 cents, at 9 years old in the 60’s – today they want $40 dollars to mow my grass, – ha, ha!

        • VintageVNvet says:

          This for Martok:
          Delivered 125 papers every day riding my bike, one trip for the daily due by 0530, up to 7 trips on Sunday, due by 0630; mowed lawns with my mower towed behind the bike with custom axle under the mower, and clippers, etc., in the baskets; typed specifications evenings at $1/page but no errors or corrections,,, 1950s, age 11-14, before they would hire me at grocery stores, etc.
          Taught two sons to work hard by paying them very well doing piece work at same ages, and they continue now in their early 40s.
          Cash motivates kids very well, especially if it is fair pay for the work…
          My hourly pay for mowing lawns in 1955 works out to over $100 per hour last month according to the ”official” BLS inflation calculator.
          Any wonder kids today are not particularly motivated by minimum wage???

        • Martok says:

          VintageVNvet – We have that same work ethic, and there was so much competition that I had to undercut the others with my prices, and worked sunup till I couldn’t see at night.

          Your statement below is correct, and I have felt sorry for folks working 2-3 min wage jobs just to get by today, – it’s shameful as a country.

          “Any wonder kids today are not particularly motivated by minimum wage????”

          In the early 70’s I worked a job painting interstate bridges for $25 for a 10hr day, good money then and motivated me, — the kicker was “danger” — you were 60-80ft up in the air painting with a paint brush/can with ZERO safety equipment on, and this really gave me motivation and cash to finish college.

          The kid today charging $40 a lawn is doing real good and he probably makes a $160 a day, but very few kids are out there like him, they are home playing video games, watching mindless cable, texting on social media, and they are so far outta shape, that this ole workhorse/ex-lineman could take 5-6 of them on at anything, – if they would get off their asses/phones and/or electric powered skate boards – LOL

        • fajensen says:

          We are living in a fantasy as a culture completely detached from the actual character values such as honesty, hard work, fairness, etc.

          is that not because Culture is just a shared fantasy? A bunch of stories about ourselves, that we keep telling ourselves, so we feel like we belong to the tribe and know each other.

          I see that, Sometimes, things becomes “values” because of scarcity, we value the virtues that we lack. Who will, on their own volition, want to do “hard work”?

          Being older, I consider my values as my programming. Things that I was given to make it easier to exploit me, a.k.a. become a productive member of “our liberal democracy”, as it is now called.

          F.ex. I am pretty honest, which also makes me a sucker, in the sense that I am not right in there now selling NFT’s instead of working. I lose out while The Story and The Values driving the New Story, the Emerging Culture, is being created and the kids are all over that stuff.

          They in turn will be programmed by their upbringing. They will have different values, more useful ones, only to become a new vein of suckers to be mined by the same people that did me over, those who put “Liberal” in front of “Democracy”.

          I don’t worry about it. It’s how life goes. No sense in clinging to a past that never really existed.

  29. roddy6667 says:

    Amazing numbers! All with minus signs in front. Time to resurrect the Dot.com website F**kedcompany.com?

  30. Michael Engel says:

    1) We got a blizzard, but it was short lived. It’s sunny & cold today.
    2) Satya bought a blizzard for $69B, buying at the deep.
    3) The gaming craze will be over like the Peloton craze.
    4) QQQ backbone might send prices to a new all time high, because wall street metaverse analysts think that paying $69B for a fad is an act of genius.

    • Yort says:

      MSFT buying ATVI (Activision/Blizzard) may not get past regulators (especially Europe) as they are attempting (will take 12-16 months) to purchase the company to gain control of their massively popular gaming titles, and then plan to add them to XboxLive Game Pass Ultimate subscription, which would be devastating to Sony and the consumers of the only other console alternative, Playstation.

      If it passes, it will do a lot of damage to gamers as costs are sure to go up as it hurts competition (think HD without LOW). MSFT has a knack for taking top game franchises and coding it into oblivion as with most mega companies, creativity and individualism is not allowed, instead collective conformity is enforced to the point where the the top talent quickly exists and what is left is the less talented coders to clean up a massively delayed “tech bankrupt” title…

      • Nathan Dumbrowski says:

        Something stinks. Perhaps this will be another disaster like the Microsoft mobile failure.

        Microsoft bought LinkedIn for $26 billion at a 50% premium over its existing share price

        Nokia $7.5 billion acquisition: wrote-off around $6.3 billion in goodwill

        …acquisition of Skype for around $8.5 billion

        • Kenny Logouts says:

          They’re buying it for the Omniverse/Metaverse/wankydoodle hype train nonsense.

          Miscrosoft obviously need more visual creators.

          Nvidia, Facebook and Microsoft are all trying to corner the Web4.0 (3.0 but in VR) market, centralised, decentralised, centralised web, that you’ll pay them to use the internet through… a bit like AOL or the other walled garden Web 1.0 from the late 90s, that all failed spectacularly and essentially Google won, from nowhere… doing something vastly different to a walled garden.

          MS don’t have a clue.
          They just chase hype trains years late, only propped up by their Office and OS user base which will slowly fade year by year.

          They’re a bit like IBM in the late 80s and early 90s.

  31. Kay Martin says:

    I hope you’ll keep putting out the losers Wolf, this is not covered on most channels, save a very few. Really interesting and great talking points to get my sister away from the “wood” hysteria.

  32. DR DOOM says:

    Looks like gold and oil may be thinking that Jerome grabbed the tweezers out of that tool box instead of the Saws All with the high speed made in China inflation blade attached.

  33. roddy6667 says:

    “Wood is a devout Christian and says she bases a lot of her investing strategy on her faith and what God thinks she should do with her ventures in the market.” Finty
    Nothing like a fund manager with a Messiah complex to blow things up.

    • Old school says:

      The great investors can only be identified after 20 years or so. Most of the rest are just taking excess risk and hope to make a good living.

      Take Hussman. Obviously a smart guy, that navigated two busts well and then he has been a disaster since Fed changed the game.

      Buffet has done pretty good for fifty years. Obviously is an exceptional investor.

      • Stevik says:

        Buffet is an insider of insiders club that is why he’s done well; it is not that he is exceptional.

    • Flea says:

      Woods don’t care about anything ,but here cut of investments wake up

  34. Franz Beckenbauer says:

    By the way:

    Do you like gold at these prices ?

    • DR DOOM says:

      Do I like gold at these prices? I do not think about it that way. I buy gold coins every year. Same with silver. Been doing it since the Hunt Brothers took a shot at the silver market in the 80’s. Gold is not an investment. It is insurance. I hope I never need it. I do trade silver following the tired old gold / silver ratio. Today at $1830 / oz a gold eagle will buy 21 barrel’s of oil. In 1980 a barrel of oil was about $35 and a gold eagle cost about $600. A gold eagle in 1980 bought 17 barrels of oil. We are still in the age of oil not wind-mills N’est-ce pas?

      • Old school says:

        I don’t think gold is cheap, maybe even a little expensive. The thing I like about gold and short term treasuries is they are safe havens not very correlated to stock market.

        • Stevik says:

          Gold is cheap. It is that the markets lost price discovery that the gold seems expensive.

      • Flea says:

        Fiat currency is toilet paper ?

  35. nick kelly says:

    New RE crisis in China.

    Evergrande is not the largest RE developer in China, it is Country Garden with 3000 projects and 200,000 employees. Thought to be above the 6 other majors, its bonds now are taking a kicking.

    One weird thing: the bonds of one major are ‘cross rated’ meaning one outfit rates them just above investment grade and another rates them just below.
    My takeaway: in this environment take ALL bond ratings with a smidge of salt, including the (approx) 50 % of corporate US bonds that are rated one notch above junk: treat them as junk.

    The read is on ZH Tuesday. It figures Chinese RE is the world’s largest asset and the entire sector is distressed.

    • Franz Beckenbauer says:

      The real kicker in china is “commercial paper”.

      These are the completely opaque IOU’s, often daisy-chained, re-packaged and rehypothecated that the whole chinese economy is running on. And they are really a bunch of nothing

      Or actually, “running” might not be quite the correct word for it.

    • Augustus Frost says:

      Bond ratings are a lagging indicator and have been my entire life. When an issuer really turns south, rating agencies are always late to downgrade, waiting until after prices decline or crash and then responding simultaneously with the deteriorating fundamentals.

    • David Hall says:

      The price of steel dropped due to weak Chinese demand.

    • Old school says:

      Supposedly real estate bubbles are the worst as they are highly leveraged and employ a lot of people.

    • Flea says:

      I’m a simple guy ,but bonds are loans there going to default worldwide,end of everything bubble ,including retirement funds good luck lemmings

  36. Gen Z says:

    Is it like the lamestream media Dog coin hype where thousands of Americans took payday loans to buy dog coin at 70 cents, while it was at the top?

  37. David W Young says:

    We will be seeing company bankruptcies and debt defaults in the weeks and months ahead like re-born zombies rising up from the ground in the classic 1968 thriller, “Night of the Living Dead”! While most investors and commentators are fixated on the carnage playing out in the equity markets, it will be the much larger Credit Markets that steal the show going forward and put the spike in the funding monster. A lot of company debt that was sold as BAA or higher in years past is going to prove to be junk, junk, junk; many High-Yield investors are going to be lucky to exit this self-igniting paper at 25 cents on the Dollar.

    Size does matter when it comes to financial collapses, and the Chinese property development market is giving American bond investors a preview of coming attractions to a dead-man-walking reality of grossly overleveraged High-Yield companies with declining cash flows. We are not at the beginning of an economic cycle, but well on our way into economic decline with myriad raw material to retail shelf disruptions, price explosions along the entire chain, and a dire lack of leadership at all levels of American governance, including the confidence-losing Fed.

    So put a close ear to the rumblings in the Bond and Credit Markets as well as Tech Stock Implosions, because you will definitely want to get off the tracks before the speeding locomotive of retracement to mean comes barreling your way. Since this train is carrying Toxic Valuations, you will want to be many thousands of feet away when it spectacularly derails.

    • SocalJim says:

      Inflation is usually kind to corporate capital structures because it:

      1) Increases nominal revenues;

      2) Increases nominal operating and non-operating asset values;

      Which flows into increased free cash flow making debt easier to service.

      For now, I don’t see a credit event.

      • Wisdom Seeker says:

        Define “usually”? Also, I’m wondering which specific examples of benign inflation you’re referring to?

        Last significant burst of inflation was 2008. That didn’t end well for corporate capital structures.

        Previous burst of inflation was 1968-1982. That didn’t end well either.

        What are you seeing differently?

      • David W Young says:

        You are leaving out the Cost of Operations, Cost of Goods Sold, SG& A costs (selling, general, and administrative), Cost of Capital (only going up as inflation pushes interest rates up), and the tendency for most businesses to be hesitant, esp. in a softening economy, to match Revenue – Product Price increases with all associated cost increases to put product out the door. It is call Margin Shrink, and it is a key reason that the Stock Market is not feeling so well right now.

        Look no further than way across the Pond to China. A major credit event is already underway there related to the importance of their property development sector, and an interconnected world is unable to avoid contagion of some form and magnitude from a major economy such as China. Stay tuned. You will see the light, and it is a train headed right for you and me.

        • SocalJim says:

          Yes … inflation can squeeze operating margins which would cause stocks to flatline or drift lower or even correct … but not crash because the FED will never allow another Paul Volker in the house.

      • Old school says:

        A scatter plot will show stock PEs are highest when inflation is very close to 2%. Stock PEs don’t like 7% which will become evident unless this time is different.

  38. historicus says:

    So having your money in the Russell was like having your money in a savings account……down 7%. No commissions in a savings account.

  39. Anthony A. says:

    New tidbit from CNBC this afternoon:

    “Peloton executives and insiders sold nearly $500 million worth of their stock before its big decline, according to filings with the Securities and Exchange Commission.

    Peloton stock is down more than 80% from its highs last year, and it hit a 52-week low of $29.11 on Tuesday. Yet the company’s CEO and other executives sold millions of shares at prices over $100 a share in the months leading up to the big declines.

    Company executives and insiders sold $496 million worth of their shares in 2021, according to SmartInsider, citing SEC filings. Virtually all of the sales were part of 10b5-1 plans, or prescheduled selling programs. It’s unclear how many of the sales were also linked to options exercises or options-related tax sales.”

    More evidence that the rats are fleeing with the cheese.

    • Page88 says:

      Excellent post……you beat by 45 minutes…..I was going to copy and paste a couple of paragraphs you posted……..thank you for your efforts.

      The big message….again….insiders selling mass quantity of stocks before the huge roller coast ride down.

    • Nathan Dumbrowski says:

      One in the hand is worth 10 in the bush. It probably will never be know if they knew something or acted inappropriately. What they did was take share and sell them and take the proceeds. They have the right to exercise their shares as written into the individual organization. Insider trading is public information and can be viewed freely

      Loved my profit sharing and stock options back in the day. Hated tax time

  40. Kenny says:

    Wolf,

    I don’t mean to nitpick, but you listed BMBL as an online dating SPAC, and RIVN as an EV SPAC, but both BMBL and RIVN went through a traditional IPO.

    I’m not saying their IPO’s were less bubbly or anything but I just didn’t think it’s nice to call them SPAC when they aren’t.

  41. Red says:

    I just talked to a real estate agent. She said her client bid $707,000 for a house that’s listed for $600,000 and their offer was not accepted.

    • SocalJim says:

      Right now, in the areas I watch, people are bidding wildly … much stronger than I have ever seen. This can not go on for too long.

      A friend of mine who works at a large brokerage firms says they are seeing large checks being cut from all types of brokerage accounts, including people paying penalities on 401Ks … being wired to escrow accounts.

      • Old school says:

        If you are really going to stay somewhere the rest of your life you might could justify paying today’s prices in a lot of areas if you can finance for a low enough rate, but I wouldn’t do it.

        If you were lucky enough to have made 10X your money in the stock market, it might not be bad to buy an over priced house. I would probably do that.

    • Wolf Richter says:

      Why the HECK did they even bid at these crazy prices? This is what drives up prices. People need to stop bidding when it gets this crazy. And then it’ll settled down.

      • Pea Sea says:

        Well, Wolf, it’s because they are very, very stupid. Unfortunately they are not at all atypical. All over the country people are lining up to lock in those historically high prices!

        • Giordano says:

          50% of the population has below-median intelligence. The other half refuses to accept reality.

      • Flea says:

        Remember the 90/10 rule you’ll be good to go

  42. Should the Fed simply do what it promised to do and not what the market analysts think they might do it would be wildly bullish for the markets. Bitcoin is shadowing the market lower as well. There is a political underclass which would like to tear the country down and the stock market and hand it over to VP. I doubt that will happen but should you ride the triple leveraged bear ETF all the way you could be one of the new oligarchs.

    • Old school says:

      Investing is basically treating the stock as if you are buying or selling the whole business, not trading price movements daily. Nearly everything else is gambling.

  43. Citizen AllenM says:

    Raindrops keep falling on my head….

    Stimulus package failure is now driving contraction. Of leverage in everything.

    LoL, been here before, and last time it was not pretty. 3 years to the bottom, if we follow 2005-09 scenario.

    Now, everything is all about inflation, but the reverse of leverage is toxic debt.

    Wages still are nowhere close to supporting house prices in most of America. Yet, interest rates have just twitched up a tiny fraction of where they will need to go to stabilize inflation.

    Ready for 1967-1981? Nobody believes that it’s possible…. until it happens again….

    • tom20 says:

      I’m as ready as possible.

      Personal & business debt free.
      When the slow down hits out here in flyover
      The freezer will be packed, the shelves full with canned
      venny & wild turkey.

      Have to wait for global warming to kick back in.
      Then the garden will be expanded.

      Wood boiler, burning barrel & chain saw always hungry.

      So far no slow down out here. Calls keep coming for new builds.
      Finally pulled the plug and parked the equipment. Time for some servicing & maintenance, and R&R time.

    • Nathan Dumbrowski says:

      It is different this time. Really. Last time in early 2000s it was QE light. The government bailed out the banks. There was no broad $T stimulus. There was no pandemic. All of the variables have been altered and the FED. The result will be judged in 30-50 years. This was one for the textbooks of empires going forward. Can you avoid the razors edge? I bet that conversation has been had more than once

  44. MonkeyBusiness says:

    Gold and silver up …..

    Are they starting to decouple from the markets?

  45. RedRaider says:

    Remember reading an article in Barrons in, I think, 1999. The authors were talking about the 103 year history of the DOW. They said the Dow’s average annual gain was 7 1/4%. They then asked the reader to guess how many of those 103 years were between 5% – 10%.

    The answer: 3!

    The reason for this is the large standard deviation involved. In short, the Dow has large annual gains and large annual losses. Not very much in between. It’s a double hump pattern with the average at the low between.

    It’s best to keep in mind that you go from large gains to large losses.

    Good luck to everyone.

  46. dishonest says:

    Comeon Jerome. We(the market & housing) need ya.
    -Negative interest rates.

    -Purchase stocks directly ala Japan.

    -Create some really moronic financial instruments to prop up housing. Let’s call them Freedom Bonds (with a suitably large eagle at the top of the first page) where the gvmt backs your houses at a ridiculously high price en perpetuity.

    • Nathan Dumbrowski says:

      Prop 13 from California for the nation would do the trick. Would be at the expense of future generations so why not go ahead and stick it to them GenZ and younger. Waiting for it

      Proposition 13 provides three very important functions in property tax assessments in California. Under Prop 13, all real property has established base year values, a restricted rate of increase on assessments of no greater than 2% each year, and a limit on property taxes to 1% of the assessed value (plus additional voter-approved taxes).

      • Flea says:

        Do u own property tax and insurance ,will put me in poverty in 10 years moron

        • JayLah says:

          Prop 13 definitely had its flaws and if it was eradicated there would have to be a whole slew of new laws to protect those affected negatively. For example, elderly people and the like that can’t afford to move and pay higher property taxes with a fixed income. (then again proceeds should be enough for most to downsize) State income tax would also potentially shift downwards along with regressive taxes such as sales tax, gas tax, etc. These taxes disproportionally affect lower income citizens. It would make those with multiple houses and real estate investments pay a more reasonable rate. Overall, I find it disadvantageous to the average Californian to subsidize taxes on second, third, homes and commercial investments of the wealthy. With a change in the law California housing would dramatically change.

          Warren Buffet-

          “My sympathies are clearly with the “non-billionaire” family purchasing a $300,000 house in Chico today that faces real estate taxes materially higher than those borne by this non-resident billionaire on his $4 million house in Laguna. This family, because of Proposition 13, has been selected to subsidize me.”

        • JayLah says:

          edit: has*

  47. Same Guy says:

    What? Down? What? Other than some tech, just about everything else is still massively up since start of Covid. All the talk, posts, left, right, up, down, you’re all a bunch of drama queens. The only certainty is the wealthy will be protected and will concentrate more wealth.

    So, just go enjoy the short time you have here on earth. Go for a walk, hike, ride, drive. Camp with some friends, play a board game, poker game. Pick a hobby, build something, fix something, dream a little. In other words, no one in power is listening.

    No matter how whacked you think is the US has become, it still is a great place to live so enjoy it now before it gets worse. Time waits for no one.

    • dishonest says:

      “enjoy the short time you have” before prices go up even more.

    • Kenny Logouts says:

      That’s great if you don’t have kids or grand kids whose future you don’t want to be some dystopian hell.

      The wealth disparity is at all time highs.

      If it’s stays bad or gets worse, that’s not nice.
      If the West flips into more overt communism, that’s not nice either.

      I agree with your sentiment, but people fought wars and gave up their lives for our generation to enjoy a free world… to stick your head in the sand for future generations seems a bit sad.

  48. sunny129 says:

    My long expected secular BEAR has started. Too many head winds for the mkts to recapture previous peaks. My puts with a few call options for (as a hedge) possible whiplash, are bearing fruits. I also use leveraged ETFs both & short (caution NOT for the novice) The sentiment has dramatically changed!
    Fed cannot support both the mkts and the mkt bubble. It is being forced to choose ONE! At last reversion to the MEAN has starte. Of course there will be bounces (bear traps) along the way, just like any secular BEAR mkt!

    “One thing and one thing alone enables global dominance: being able to create “money” out of thin air and use that “money” to buy real stuff in the real world. The nations that can create “money” out of thin air and trade it for magnesium, oil, semiconductors, etc. have an unbeatable advantage over nations that must actually mine gold or make something of equal value to trade for essentials….
    But now it’s time to suck in global capital by raising rates, and let nature cull the herd. The number of pundits announcing that the Fed will never raise rates, that the Fed can’t raise rates because the precious Billionaire’s Bubble would burst and the Fed would never, ever, ever let its precious Billionaire’s Bubble burst, is legion. But they’re wrong, alas, for the Fed’s job isn’t to enrich billionaires, it’s to maintain the confidence of the herd in the USD”
    h/t Charles H Smith

    • Tony says:

      I’m not convinced the bear market has begun. If history repeats, we might have a mini “roaring 20’s” first, the same thing which happened after the 1918 pandemic.
      It’s also possible this is just a normal correction within a continuing bull market.
      Perhaps an “Elliott Wave 4 down”. The top—Wave 5–is perhaps not in yet.

      • sunny129 says:

        Tony
        Been in the Mkt since ’92. Gone through more than one bear mkts in my life time. Secular Bear mkts are obvious only in retrospect! Since the hopium is STILL very high ( None of the newbies- investors 45y or below have NEVER undergone a bear mkt in the their life time!) I buy a few call options as a hedge against the ‘palovian’ trained (bt Fed) DIP buyers.

        Longtime trend is heading in the abscence of support from Fed. AS I repeatedly said ‘ Without FED, there is no market’ It is as simple!

        All the macro indicators are red ( PE, PS, Debt to GDP, Mkt cap to GDP ++) Never in my life I have seen such a SURREAL Bull mkt purely created and supported by Fed/CBers. This 3rd largest, everything bubble cannot survive without ‘easy-peasy’ money from Fed!
        All the bear mkts do start with corrections!
        (Atleast 6 signs show the mkt is starting to break down – MW)
        B/w no one rings a bell when the bear mkt starts.

    • Cookdoggie says:

      “But now it’s time to suck in global capital by raising rates, and let nature cull the herd.“

      Yeah, we’re not really into letting nature do that anymore, in finance or health. Helicopter society.

  49. Finster says:

    This is what happens when you buy a stock on a story, and skip number crunching financial statements and valuations.

    • sunny129 says:

      Finster

      Mkts are NOTHING without Fed’s put, since March ’09

      Will be proven in coming months. Those trying to catch falling knives, are always the feature of bear and at the same time, convincing themselves, this is just a correction. Seen it Been there. DIP buyers make my buying puts cheap!

      • Cookdoggie says:

        I agree completely. You saw how the Fed simply stopped the crash of 2020 with keystrokes. So maybe the plan now is let it fall until the next fed heroic action and then buy the farm?

  50. Prophet says:

    The longer the top, the deeper the drop!

  51. CCCB says:

    IMHO the stock market is a suckers game that only the initial shareholders, the wall street vc promotors and their huge legal machines ever win big.

    If you were to talk to any of these guys you would be shocked at how much the game is set 1,000% in their favor.

    Imaginary example:

    I start a new company in a hot industry. Let’s call it “Killer Gaming” I’m a gamer, but I’m a killer too and I’m gonna to make hundreds of millions off all you suckers. I get my wall street college buddies to let me pitch their VC fund. They like the idea (and they like me and know I’ll make them $$$) so they throw $20 mil or so my way for 20% and I grow the company like crazy (the company, not profits – we’ll NEVER have those)

    Now revenues AND expenses are way up (Still losing money) VC’s have to justify their investment so now they pay 3x their original investment for another 20%. They just booked 300% profit on their first buy in.

    Company and revenues are exploding and on all the newsfeeds (so are losses). Time for another cash injection to keep the music playing. Now its 3x the second price. VC’s book 900% profit on first buy in and 300% on second buy in.

    Now comes the fun part. IPO to all the suckers at 3x the third buy in – 10x revenues (not profits – remember we don’t have or talk about those) VC’s now book 2,700%, 900% and 300% returns respectively on the three buy ins … 13x return on total investment and sell their shares to …. “INVESTORS!” – not bad, huh.

    Meanwhile, CNBC, MSNBC, etc and investment gurus are all talking about huge 40% – 50% upside on the stock in the next 2 years. Now that the suckers are all loaded up on the IPO, the stock drops 80%.

    The odds are better in Vegas.

    * Stay tuned for what wall street does next with the carcasses of the company and all the little guy portfolios they just decimated

    • Martok says:

      CCCB,

      Yep that’s what has been going on for so many years and reminds me so much of the dot com 2000 era, where even bad news for a stock to go up as is today too – fools!

      Folks are going to learn a tough lesson about valuing a stock, if they ever get another chance.

      Throw in goofball Crypto-Trash money based on a “handful of nothing” and all this train wreck crash in markets will be of epic proportions.

      I’ll take Vegas odds, and those boring Series I-Bonds paying 7.12% interest anyday!

    • Doc says:

      That was a most informative example. Thanks!

  52. Prophet says:

    Did anyone manage to “buy-the-dip” in any of the securities listed in the article when they were, say, 10-15% off of their all-time highs?

    • Wolf Richter says:

      Prophet,

      If you look at the ARKK chart and the IPO chart, you can tell that dip buying was alive and well all the way down! And this will continue. If no one buys the dip, the stock goes to heck in a straight line, which doesn’t happen often — “nothing” ever does that, according to the Wolf Street dictum.

      Actually, in a down-trend, for any sale to take place, there has to be someone that buys those shares, hoping they will go up. So there is always a dip buyer, anytime there’s a sale.

  53. Yort says:

    Congrats to the Federal Reserve, as check out the Price/Book ratio chart from Bloomberg. The Mega-Caps for both Russell and SP500 are off the charts high right now:

    https://pbs.twimg.com/media/FJjuOfwVQAEvDtx?format=jpg&name=900×900

  54. Swamp Creature says:

    On CNBC this morning Jim Cramer was not the only host that was s$itting in his pants over the recent plunge in the stock market especially the NASDAQ. The other brain dead hosts were doing the same. I hope we don’t have to listen to these whining dogs for the next 6 months trying to explain why everything they have been saying over the past 8 years has been total bogus propaganda and self serving bull s$it . I’m going to have to turn off this station and find another one to get my financial news.

  55. Mike says:

    IPOs, SPACs are doing great, most lucrative ever! Ask Goldman. They were the financial advisors on most and they just reported 12B in revenue in just 4 short months, 50% margin.

  56. 2BFrank says:

    The real problem started way back in 2008, the problem was never fixed just kicked down the road and kept us in a semi permanent recession. If the fed had allowed things to sort themselves out then we would be streets ahead of where we are now. Had the growth rate returned to its 2006 normal rate after a short sharp recession the whole market and economy would be $5 Trillion ahead of where it is now. We have been in a slow grinding recession for 12 years zombie company after zombie company propped up with cheap money and dragging everyone down with them.

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