• Clifford Bennett, Chief Economist at ACY


• 16.11.2021 12:15 pm
#stocks

Today, the top signs are everywhere.

Stocks stalling, over, or another recovery.

We have moved from, is it a bubble, to, yes, it is. The question only being how long to keep playing?

Click to view, on the image above or via this link: https://youtu.be/HQfpCLnb0YU

US New York Empire State Index bouncing strongly. The big apple is back.

These are strong numbers, so recovery is certainly the name of the game here. As well it should be, given the flow through of wealth from the epicentre Wall Street.

What the chart above most accurately reflects however, is the sporadic nature of economic data we are likely to see over at least the next 12 months. It will jump around for any singular location and will vary greatly from region to region within any one national economy.

These are new times, and while the data will be bizarrely spontaneous, there are clearly developing market trends already in place.

Bond yields will continue to track higher, sometimes rapidly.

Gold is the standout must have asset, despite significant volatility at times.

Big tech is vulnerable. Michael Burry has belatedly joined my call on Elon Musk cashing in seriously. It is most likely a more widespread phenomenon than is immediately visible.

The US dollar should not be (for it is now a mere equal in reliability to the Euro and Yuan) the reserve and safe-haven currency of choice, but it is.

From the WSJ: https://www.wsj.com/articles/biden-infrastructure-bill-signing-11636997814?mod=hp_lead_pos1

The Infrastructure Bill:

Probably an historic case of too little too late...

Now for The Bubble Story.

If very wealthy, there has never been a more appropriate time to play defence.

The requisite skill here being the discipline of avoidance of the fear of missing out.

For the simply wealthy, a stress test of a risk of 20% falls in stocks and property impact on your portfolio is immediately apparent.

For the soon to be wealthy, this applies only to the nimble and quick of mind, this could be your time to move up the relative net worth ladder. You will have to play attack 24/7, bull and bear stocks, long gold and short Australian dollar. It will not be easy, but a rapid shift is possible. 

The same is true for the wealthy and very wealthy. Playing good bubble defence will certainly afford you a sharp rise in relative net worth. You could even close the gap on Bezos and Musk, Buffet and others. Catching them is not on the cards, however there is a lot of fun to be had in gaining on them. That alone will tell the story of how you were smarter and nimbler.

True 'nimbility' however, is advisable only for those who wish to step forward to the volunteer line and seek an aggressive bubble attack strategy.

Very wealthy, defend for you are already on the podium.

Wealthy, keep playing but ratchet back the risk.

Yet/Soon to be wealthy, time to get physically fit for the intellectual high energy game that is about to begin.

So, this is my deep and meaningful contribution for today.

The market itself, is already exhibiting a stall.

US stocks rallied impressively and historically of late, but the past week saw nothing but downside and hesitation. Monday trading saw the expected, well, it's just time to buy again mentality on Wall Street. There was a rally, but not of great energy and even showing signs of a mini-stall within a bigger stall. The most likely immediate scenario is a saving of the downside, some stability for a period but if at any time Friday's low in US or Australian markets is breached, then beware the bubble.

Locally, if I am correct, Gold much higher, Australian dollar much lower due to domestic slowing, and lasting decline in trade, then the gold mining stocks could be of particular interest. Consider recent price action when looking for a quality choice.