It’s a cold, gray day in central Maryland. Though it’s not officially winter, days like this make a man start thinking about chartering a catamaran in the British Virgin Islands. Or pulling a Gauguin and running off to French Polynesia.
Aside from the weather, there is nothing much going on in the world. The furnace went out yesterday and the dogs had a possum cornered in the woodshed. No marsupials were harmed and despite some concern from the dark-haired beauty, it turns out that possums don’t carry rabies because their body temperature is too low.
In the markets, it was more of the same. The South Korean president said he was declaring marshall law until his parliament said no, that wasn’t a good idea. There was mild chaos for a few hours as the politicians sorted things out.
There is a new bit of fighting in an old war in Syria which may or may not mean anything. It’s either nuclear war or the usual Sunni/Shia hatefest.
On the home front, more houses were listed for sale, but their prices went up. Houses in the U.S. are the least affordable they have ever been but sellers still think it is 2022. And maybe it is. Time will tell.
The equity markets are also up again. The Nasdaq has been up 11 of the past 13 weeks.
Today, a company called Pure Storage (PSTG) is up 20% after hiking future earnings projections. They make flash storage for the cloud which is in high demand.
Yahoo!Finance writes:
“Pure Storage just landed a game-changing design win with one of the top-four hyperscalers, and Wall Street is buzzing. The deal cements Pure Storage’s position as a major player in the high-stakes data storage market, leveraging its cutting-edge DirectFlash technology to dominate hyperscale environments.”
This of course sends us off to refresh our memory regarding the exact manner of a beast that would call itself a “hyperscaler”.
Wiki writes:
“In computing, hyperscale is the ability of an architecture to scale appropriately as increased demand is added to the system. This typically involves the ability to seamlessly provision and add compute, memory, networking, and storage resources to a given node or set of nodes that make up a larger computing, distributed computing, or grid computing environment.
Sounds good. In other news, Marvell Technologies (MRVL) is up 23% today. They are a chip maker who raised guidance on AI demand.
Salesforce (CRM) also jumped 9% today. The Customer Relationship Management software company beat on revenue, missed on earnings, and raised guidance for 2025. Tech earnings are supporting share prices.
Our 5x leveraged magnificent seven ETF (MAG7:UK) is closing in on all-time highs.
The MAG7 stands for the Magnificent 7 which are the seven stocks leading the market. They include Microsoft (MSFT), Amazon (AMZN), Alphabet (GOOG), Meta (META), Apple (AAPL), Nvidia (NVDA) and Tesla (TSLA).
The MAG7 ETF goes up and down five times the amount of these underlying stocks. It is as good a metaphor for what this market is all about. The chart looks like it has an easy road to $51 from here at which point we will see how it the Mag7 copes with that resistance.
There is no question that the market is overvalued and we are in the late stages of a 15-year bull market. The question is how long can it go.
Party Like it is 1996
There is a school of thought that this market is similar to 1996. As you remember, the Fed Chief at the time, Alan Greenspan said this 28 years ago tomorrow:
“Clearly, sustained low inflation implies less uncertainty about the future, and lower risk premiums imply higher prices of stocks and other earning assets. We can see that in the inverse relationship exhibited by price/earnings ratios and the rate of inflation in the past. But how do we know when irrational exuberance has unduly escalated asset values, which then become subject to unexpected and prolonged contractions as they have in Japan over the past decade?”
The Japanese index fell 3% in response.
Irrational exuberance acts as a psychological contagion driving up asset prices. Everyone else is getting rich why not you?
At the time of his speech, the S&P 500 had already gone up 60% in two years. It continued to climb as Clinton and Gingrich balanced the budget, jobs were plentiful, rates were stable and the internet changed the world.
Will Trump and AI do the same thing? Maybe. We shall find out.
All the best,
Christian DeHaemer
Outsider Club
It Only Goes Up: https://www.outsiderclub.com/leveraged-to-the-hilt/
Owned: https://www.outsiderclub.com/they-own-the-us-economy/
Trump Trumping: https://www.outsiderclub.com/top-trump-trade/
