What could be the trigger?
What Caused The Black Monday Crash (1987):
“Economic growth had slowed while inflation was rearing its head. The strong dollar was putting pressure on U.S. exports. The stock market and economy were diverging for the first time in the bull market, and, as a result, valuations climbed to excessive levels, with the overall market’s price-earnings (P/E) ratio climbing above 20”
www.investopedia.com/ask/answers/042115/what-caused-black-monday-stock-market-crash-1987.asp
This is the Dow in 1987 versus now: pic.twitter.com/26VcYpanvq
— Mac10 (@SuburbanDrone) May 8, 2024
All the data says the economy is "strong" while:
1. Starbucks stock, $SBUX, fell 20% after reporting a 6% drop in traffic
2. Uber stock, $UBER, fell 10% after reporting a net loss
3. Shopify stock, $SHOP, fell 20% after issuing weak guidance
4. Netflix stock, $NFLX, fell 10%…
— The Kobeissi Letter (@KobeissiLetter) May 8, 2024
Further evidence that inflation is accelerating:
US labor costs in the last quarter rose by the most since Q1 2023.
The employment cost index is a broad measure of labor costs closely watched by the Fed.
The index surged by 1.2% in Q1 2024 after a 0.9% increase in Q4 2023,… pic.twitter.com/Ic22HAee3g
— The Kobeissi Letter (@KobeissiLetter) May 8, 2024
The San Francisco Fed reports that excess savings accumulated during the Covid pandemic have been depleted, potentially signaling the end of a buffer against recession. Economic analysis suggests a brief recession occurred in mid-2022, acting as a precursor to a more significant downturn. The current administration’s extreme deficit spending and loose monetary policy are seen as attempts to delay the inevitable recession, now exacerbated by rapid economic deterioration, rising inflation, and asset bubbles in equities, real estate, and cryptocurrency. Warning against participation in overvalued markets, the author advises caution and suggests alternative investment strategies like money markets offering risk-free returns amid looming economic uncertainties.
My Econ chart of the day (so far): according to the San Francisco Fed, the excess savings during the Covid pandemic is fully depleted.
This more than anything is what’s held off the recession from finally grabbing hold.
You always have better view of the economy in hindsight,… pic.twitter.com/eIac0QidU1
— Uncle Milty’s Ghost (@his_eminence_j) May 8, 2024
$TRIP Tripadviser shares halted down 36%….when was the last time you saw this type of move for a profitable company with modest debt (no fraud etc) pic.twitter.com/4UJvpKfY3Y
— Special Situations 🌐 Research Newsletter (Jay) (@SpecialSitsNews) May 8, 2024
HMM: Warren Buffett’s $56 Billion Silent Warning to Wall Street May Portend Trouble for Stocks.
Although Warren Buffett has consistently shied away from offering negative takes on the U.S. economy and/or stock market during his nearly six-decade tenure as CEO of Berkshire Hathaway, $56 billion of net-equity security sales over an 18-month stretch speaks volumes without the Oracle of Omaha having to say a word.
The culprit for this consistent net-selling activity looks to be a historically pricey stock market and the irrational behavior of some of its participants.
In Buffett’s annual letter to shareholders that was released in February, he had this to say about the “casino-like behavior” he wants no part of:
“Though the stock market is massively larger than it was in our early years, today’s active participants are neither more emotionally stable nor better taught than I was in school. For whatever reasons, markets now exhibit far more casino-like behaviors than they did when I was young. The casino now resides in many homes and daily tempts the occupants.”
At the end of the day, Warren Buffett and his team want a fair deal on a great business, and they aren’t willing to waiver from this ideal. As the S&P 500’s Shiller price-to-earnings (P/E) ratio shows, there simply aren’t many good deals at the moment.
There’s nothing wrong with buying into a bubble, provided you know when to get out. Buffett has exited to the tune of $56 billion.
Texas latest layoffs. The Arkane Studios is part of the Xbox cuts. pic.twitter.com/mcklkctiRx
— Warn Tracker 2.0 (@j77324) May 8, 2024
Last week the Fed announced more inflation.
Despite recent numbers saying inflation’s already re-accelerating to the 4-5% range.
Thing is, the Fed’s not doing it with rate cuts that would deliver cheap mortgages and car loans.
Instead, they’re doing it by stealth, cutting… pic.twitter.com/Oww1pPRPDY
— Peter St Onge, Ph.D. (@profstonge) May 8, 2024
N.Y. Fed survey finds Americans bracing for mortgage rates as high as 10% t.co/bYZcOUcwfq
— MarketWatch (@MarketWatch) May 6, 2024