{"id":36398,"date":"2018-08-04T11:25:07","date_gmt":"2018-08-04T16:25:07","guid":{"rendered":"http:\/\/olduvai.ca\/?p=36398"},"modified":"2018-08-04T11:25:25","modified_gmt":"2018-08-04T16:25:25","slug":"stock-market-manias-of-the-past-vs-the-echo-bubble","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=36398","title":{"rendered":"Stock Market Manias of the Past vs the Echo Bubble"},"content":{"rendered":"

Stock Market Manias of the Past vs the Echo Bubble<\/a><\/h3>\n
\n

The Big Picture<\/strong><\/p>\n

The diverging performance of major US stock market indexes which has been in place since the late January peak in DJIA and SPX has become even more extreme in recent months. In terms of duration and extent it is one of the most pronounced such divergences in history. It also happens to be accompanied by weakening market internals, some of the most extreme sentiment and positioning readings ever seen and an ever more hostile monetary backdrop.<\/p>\n

\"\"<\/a>Who\u2019s who in the zoo in 2018<\/p>\n

The above combination is consistent with a market close to a major peak \u2013 although one must always keep in mind that divergences can become even more pronounced \u2013 as was for instance demonstrated on occasion of the technology sector blow-off in late 1999 \u2013 2000.<\/p>\n

Along similar lines, extremes in valuations can persist for a very long time as well and reach previously unimaginable levels. The Nikkei of the late 1980s is a pertinent example for this. Incidentally, the current stock buyback craze is highly reminiscent of the 1980s Japanese financial engineering method known as keiretsu<\/em> or zaibatsu, <\/em>as it invites the very same rationalizations.<\/p>\n

We recall vividly that it was argued in the 1980s that despite their obscene overvaluation, Japanese stocks could \u201cnever decline\u201d because Japanese companies would prop up each other\u2019s stocks. Today we often read or hear that overvalued US stocks cannot possibly decline because companies will keep propping up their own stocks with buybacks.<\/p>\n

Of course this propping up of stock prices occurs amid a rather concerning deterioration in median corporate balance sheet strength, as corporate debt has exploded into the blue yonder (just as it did in Japan in the late 1980s).<\/p>\n

\u2026click on the above link to read the rest of the article\u2026<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

Stock Market Manias of the Past vs the Echo Bubble The Big Picture The diverging performance of major US stock market indexes which has been in place since the late January peak in DJIA and SPX has become even more extreme in recent months. In terms of duration and extent it is one of the […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[5728,4306,6170,3054,1138],"class_list":["post-36398","post","type-post","status-publish","format-standard","hentry","category-economics","tag-acting-man","tag-market-mania","tag-pater-tenebrarum","tag-stock-buybacks","tag-stock-market"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/36398","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=36398"}],"version-history":[{"count":2,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/36398\/revisions"}],"predecessor-version":[{"id":36400,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/36398\/revisions\/36400"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=36398"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=36398"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=36398"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}