Published
9 months agoon
Good morning, Bull Sheeters. Positive for the year. All-time record. Every day there’s a new superlative for these markets.
Let’s see where investors are putting their cash.
Yesterday evening, two news alerts flashed across my phone. The first read: “The S&P erases its losses for 2020.” Congratulations! You get a cigar. And you get a cigar. The second, not more than 20 minutes later, read: “New daily coronavirus cases worldwide hit a record.” In the U.S., 22 states have seen fresh spikes in new cases.
Wait. Wasn’t this market rally based—at least a bit—on us winning the war against the coronavirus? Or, is it merely enough for investors that we merely reopen shops and businesses; the rest will sort itself out?
It’s become abundantly clear, the markets have moved on. Let’s face it. They’re bored with this pandemic. A vaccine breakthrough? Yeah, that would be nice. But you know what would be even sweeter? More medicine from the Fed.
This markets rally has been both euphoric and humbling. The legendary Stan Druckenmiller proclaimed last month that “the risk-reward calculation for equities” was as bad as he’d ever seen it, and that he was sitting this one out. You know what? He lost. He doesn’t get a cigar.
Sven Henrich of Capital Traders Ltd. is another one who isn’t buying all this investor exuberance. He wrote yesterday on his blog about all the warning signs he sees, even evoking the C-word:
My variant take here which may well turn out to be very wrong: The Fed is setting markets up for another crash. Why? Because they’ve set in motion a stock market mania we have not seen since the 2000 tech bubble. But this time while we’re still in a recession. And it is a mania and it’s important to recognize this. And like all manias it’ll end badly. The amount of “ever’s” keep building up.
To underscore his point, he put up this chart:
It’s not just that stocks are expensive. They’ve never been more expensive on a market-cap-to-GDP ratio.
A few hours after he wrote that, the markets closed even higher. The Nasdaq could easily top 10,000 this week, if not today.
The pros are getting nervous. Retail investors, meanwhile, are diving into airlines and cruise stocks as if it were 2019. And, you know what? They too get cigars.
***
In the autumn of 2001, I did something rash. I bought my “second house” first. By bought, I mean I took out a mortgage on a little stone cottage that sits on the edge of Monti Sibillini National Park, in Amandola, in the Marche region of Italy.
I was living in London at the time, working for Reuters, a low-paid scribe on the equities desk. I knew as much about Italian mortgages then as I did about the place where I was buying the house—that is, piú o meno, niente. It was the lira era. Houses in this part of the world were cheap. Even a scruffy journalist like me could afford to live the dream. It was the early years of Europe’s budget airlines boom. Ryanair flew into nearby Ancona. Perfetto, I thought. I can manage a weekend getaway every month or so, and leave the rat race behind.
My friends and siblings thought I was crazy. They peppered me with questions about Italian tax law, Italian grammar rules and my new Italian neighbors. I went blank. I think the only supportive person was my mother. She loves a good adventure.
Fast-forward to today. Amandola is how I met my wife. And she is why I’m in Rome, raising two half-Italian kids who speak a lot with their hands. It’s why your Bull Sheet correspondent—this American—is based in Italy. And that’s why you get all these Italianisms in your in-box most mornings.
I’ll leave you with one more. My desk this morning (before a spring rainstorm rolled in):
***
Buona giornata, tutti. Ci vediamo domani… Have a nice day, everyone. I’ll see you here tomorrow.
Bernhard Warner
@BernhardWarner
Bernhard.Warner@Fortune.com
A note from my Fortune colleagues on a timely new initiative:
Many companies are speaking out against racial injustices right now. But how do they fare in their own workplaces? Black employees in the corporate world, we want to hear from you: Please submit your anonymous thoughts and anecdotes here. https://bit.ly/WorkingWhileBlack
As always, you can write to bullsheet@fortune.com or reply to this email with suggestions and feedback.
Correction and update: Yesterday’s Bull Sheet contained an erroneous price for Brent crude. It should have read “above $42/barrel.”