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Discussion Starter #1
Here's an interesting story at Bloomberg

I've complained for some time on this board that the central banks (particularly the Federal Reserve) have been fuelling the entire rally since 2009 using QE / balance sheet expansion. This activity seems to have gone on steroids recently, with the Fed repeatedly throwing more money at the markets whenever it starts falling.

This article claims that the latest Fed market manipulation was totally unnecessary, and now is only fuelling speculative stock buying. They claim there is a new surge of interest among retail traders.

I agree, though I don't think it's new thing. I think the Fed has been juicing the stock market since 2009.

The author doesn't think it will be a repeat of the 90s mania, but rather, retail investors are having an impact in certain areas:

But SG’s research still makes clear that retail money is having a real impact at the margin. The day traders have piled into the cheapest stocks with the worst balance sheets in the Russell 2000 in recent weeks — and an epic “dash for trash” has resulted.
Examples might be things like JETS and Boeing, though I personally also think that this new crop of overconfident retail traders are pretty heavily involved in NASDAQ and TQQQ.
 

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This week 2 out of 3 of the largest negative ticks over the last 30 years were seen June 11 -2058 & June 15 -2006. The small trader is putting their money on a sharp move higher (traders buy calls when they expect a sharp move higher) which was witnessed with a record 12.1 million call contracts purchased by the small trader going into the recent peak. (Source sentiment trader.com) The prior record was set @ 7.5 million contracts when the high was being set prior to the so called Covid crash. Though Covid had nothing to do with the crash it was just the time.

There is going to come a backlash against technology as it is being used to track us.

Recall earlier this year the DJI, S&P & Nasdaq made new highs without any other index. Recently only the Nasdaq made a new high with no other index. If this is the top we will have one of the largest none confirmations of all time. Could get very interesting if the rally of the March low is a wave 2 if not a flat that was completed @ the March low as the top alternate count
 

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It's worse than you thought. Greenspan made it Fed policy to counter financial failures with Fed money starting with the LTCM debacle in 1998. Ever since then it has been official policy to juice up the stock market whenever there was a crisis, and now, even a mild drop is sufficient excuse. I am amazed that the flood of money has not resulted in hyperinflation, all I can think is that almost none of it has gotten to Main Street, it has all gone to Wall Street and run up the price of investments including stocks, bonds and real estate, plus the price of yachts 100 feet and longer, private islands and Picassos.
 

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Discussion Starter #4
It's worse than you thought. Greenspan made it Fed policy to counter financial failures with Fed money starting with the LTCM debacle in 1998. Ever since then it has been official policy to juice up the stock market whenever there was a crisis, and now, even a mild drop is sufficient excuse. I am amazed that the flood of money has not resulted in hyperinflation, all I can think is that almost none of it has gotten to Main Street, it has all gone to Wall Street and run up the price of investments including stocks, bonds and real estate, plus the price of yachts 100 feet and longer, private islands and Picassos.
I agree that this style of thinking began with Greenspan. Ever since the mid 90s, we've been living with a stock market which depends on support and rescues from the Federal Reserve. That's about 25 years with this style of stock market.

And yet the stock market has been around for much longer. When considering retirement plans and our future projections, most of us are quoting 100+ year data.

This could be a big problem in the long term. Everyone has gotten used to this 25 year situation (Fed support) but this is very unlike stock markets of previous generations. This makes me question how relevant that 100+ years of past performance and behaviour is, since we are operating in a new kind of regime today. Stock markets did not operate like this in past history.

To me, this means that stock performance going forward is a total unknown, because this kind of regime is a new thing. I don't think 1900-2000 performance is very relevant.
 

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The Fed is no match for mass psychology. Fed lender of last resort could not stop the last something like 18 recessions. Velocity of money has fallen of a cliff & has stayed there. The fed can not cause inflation when the time is not right. A debate could be made that high interest rates cause inflation from the compounding.
 

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I agree that this style of thinking began with Greenspan. Ever since the mid 90s, we've been living with a stock market which depends on support and rescues from the Federal Reserve. That's about 25 years with this style of stock market.

And yet the stock market has been around for much longer. When considering retirement plans and our future projections, most of us are quoting 100+ year data.

This could be a big problem in the long term. Everyone has gotten used to this 25 year situation (Fed support) but this is very unlike stock markets of previous generations. This makes me question how relevant that 100+ years of past performance and behaviour is, since we are operating in a new kind of regime today. Stock markets did not operate like this in past history.

To me, this means that stock performance going forward is a total unknown, because this kind of regime is a new thing. I don't think 1900-2000 performance is very relevant.
You said it. And how. This is why I do not trust stock markets and prefer a short term, technical approach. How long can the markets be propped up this way and what happens when we find out the emperor has no clothes?
 

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Discussion Starter #10
You said it. And how. This is why I do not trust stock markets and prefer a short term, technical approach. How long can the markets be propped up this way and what happens when we find out the emperor has no clothes?
I don't trust stock markets either, and that's why I only have 30% in stocks. And that amount is diversified between a few global markets, not just a bet on the S&P 500.

Wouldn't you agree that keeping a relatively small weight in stocks is a good compromise on this problem?

It's been working for me. Since I started my approach (30% stocks, 50% bonds, 20% gold) my performance has been 7.2% CAGR.
 

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Stock mania and Robinhood :
Pretty much what happens when you put a low barrier to entry for stock trading. You get people not knowing what they're doing and lose their shirts... or life. Rookie trader commits suicide after seeing a negative balance of more than $700,000 in his Robinhood account

Apparently the UI for the Robinhood app is pretty bad which leads to these misunderstandings. Of course, a sane person would find out what the issue is as opposed to committing suicide.
 

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On June 12 in the morning record tick +2149 the opening gap ticks have been declining since meaning the panic buying is declining.
 

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You said it. And how. This is why I do not trust stock markets and prefer a short term, technical approach. How long can the markets be propped up this way and what happens when we find out the emperor has no clothes?
When the people figure out the Covid scandemic has no clothes there could be hanging in the streets on this one.
 
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