Ricks Picks

A Ponzi Game Where Nearly Everyone Wins


I put out a commentary Sunday night bearing this tongue-in-cheek headline: “No Chance This Rally Is the Real Deal, Right?”  Of course, merely to pose the question is to suggest that it is at least possible the bull market still breathes.  Look, I’m as skeptical as you are, a died-in-the-wool permabear who thinks the Dow will ultimately trade below 10,000. And I see the same ugly, seemingly unstoppable developments that you see:  The housing and auto sectors are imploding, U.S. retailers’ holiday season is starting to look like a last hurrah (and a weak one at that); and the economies of Germany and China are entering a possible death spiral. It doesn’t help that companies that threw countless billions at share buybacks since stocks began falling in October lost their shirts. Toss in the growing political and economic uncertainties of a nation slipping into a so-far-bloodless civil war, and you might think that anyone buying stocks right now (other than short-covering bears) is crazy, stupid or both.

And yet, when we assert that new record highs are not possible, we must be prepared to eat crow if we are wrong. It wouldn’t be the first time. Nor would it require much buying power to accomplish this, even if some believe otherwise.  Here’s a skeptic in the Rick’s Picks trading room Thursday:  “Short of a new [round of quantitative easing], there simply isn’t enough money out there to lift the markets to new highs. Remember, markets fall under their own weight but need to be bought to go up. As Jim Dines used to say, ‘When stocks fall (without trading), money goes to money heaven’. The collective capital loss so far is several trillion, with FAANG stocks losing a cool trillion on their own.”

Don’t Bet Against It

In fact, it takes relatively little capital to lift stocks in a short squeeze where supply simply backs away. Until October, this was what routinely happened nearly every Sunday night for nine years. Stocks wafted higher on gossamer volume in the wee hours, triggering a short-covering panic at the opening bell. Could this victimless Ponzi game get re-energized in the weeks and months ahead?  Don’t bet too heavily against it.  And don’t mistake the tedium and wretched choppiness we are seeing on some days for weakness. The E-Mini S&Ps may have struggled fruitlessly on Thursday, for one, to achieve an ostensibly easy Hidden Pivot rally target, but don’t get short and turn your back on it. Realize that the Masters of the Universe are simply waiting for opportune moments when they can count on short-covering to do virtually all of the heavy lifting — do so with relatively small outlays of cash. That’s how the game works, and woe to any bear who thinks stocks cannot flout economic logic and the law of gravity for the four to six weeks it might take to mount a credible run at October’s highs.

Comments on this entry are closed.

none January 11, 2019, 10:05 am

The demise of APPL has more to do with ending Moore’s law than anything else. The trillion dollar ‘once’ company is at the end of a technical boom cycle not a business cycle.

Technology is moving away from the micro chip and APPL run has ended as not keeping up with the change.

APPL products will become a flashback of the pass faster than anyone can image.

This boom in the recent technology boom cycle is in place with a much larger degree in time of a major Wyckoff Wave Distribution Pattern being completed in the stock market pass blow off. You may notice of the Wyckoff pattern that the recent ‘ICE’ suggest a move lower in the major stock indexes towards a Wyckoff ‘Mark Down’, suggesting this counter trend wave not over lapping of wave 2 testing at the ICE level to create a wave lower by 23-35% in pricing from the recent high (not the all time high).

The ‘note’ of this Mark Down process will suggest a couple things, a counter trend rally in months, but a lagging type, and a ‘new target in months and years’ of a pricing decline of the major market indexes of 85-90% from the all time high, suggesting a major test of near the 1987 yearly high point.

America ‘not the world’ loves change!

Have a great weekend Rick.

watcher7 January 11, 2019, 12:59 am

For this to be the richest bull market in history the Dow has to go over 32,452; history suggests that it will; the rhyme: “The major stock market boom on Wall Street coincided with a virtual suspension of new international lending and a retreat of capital. New money from America stopped going to Germany, Latin America, or Central Europe in June 1928. All the hot money went to Wall Street instead. And much more foreign money, especially English money, was also attracted by high returns as compared to bleak prospects elsewhere” (James Dale Davidson & William Rees-Mogg, Blood in the Streets; New York: Summit Books, 1987, p.207).

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