Well finally! In this column and on my Market Perspective blog, I have been writing about expansive social mood driving the prices of cars, real estate, and stocks ever higher.
Well finally! In this column and on my Market Perspective blog, I have been writing about expansive social mood driving the prices of cars, real estate, and stocks ever higher. The mood has gone parabolic the last few months registering an all time high just over Dow 22,000. Various market indexes have been topping and reversing the last three weeks. The Russell 2000 peaked July 25.
Never believing Trump would be elected, the media now blames all ills on Trump. Headlines screech that Trump sends global stocks lower with North Korea comments. If one believes that external events drive social action, how do the headline writers conclude it was not North Korea’s threat to attack the United States Territory of Guam? Here at the Market Perspective we have a grasp on what moves markets. Markets move based on internally generated social mood, which is unremembered, and can literally turn on a dime. Let’s take a socionomic look at what is happening.
Social Mood bottomed on March 9, 2009 when the Dow finished around 6,000. Mood towards the markets reversed that day, adding thousands of points in the next few months. Evidence of the expansive mood has been detailed here ever since. The prices of collectible cars like Steve McQueen’s 275 GTB4 Ferrari sold for $10 Million in 2014. A pinnacle of social mood towards cars is surely the Bugatti series produced by of all firms, Volkswagen. The latest version produces over 1,000 horsepower , a top speed of over 200mph, and yes a price tag just over $2 million. Oh and then there is Tesla whose market capitalization is higher than Ford.
In the spirit of the time, the Wall Street Journal renamed its Friday Distinctive Properties section on real estate as simply, Mansion. Readers are treated to multi-million dollar properties that would cause even Jay Gatsby to blush. Given that the financial crash of 2009 was caused by the collapse of speculation in sub prime mortgages, it is only fitting that this market top be celebrated with headlines like today’s “Properties that Shout, Timber” or “Construction Worker Shortage Worsens in June.”
A talking head on Fox Business proclaims that "anything can be done at Facebook" echoing the August 1929 comment that "stocks have reached a permanent plateau." Even the tech types at stockcharts.com have given in proclaiming that all the economic ETFs point higher save energy. Again this is simply the polar opposite of mood in March 2009.
There is always a mix of mood. Certainly there have been warnings with the throw the bums out wold-wide electoral reversals with complete changes in the USA, England, Brexit, France, and Brazil. Cuban soldiers give Venezuela’s Maduro clout amid what will surely eventually become a civil war.
While the media wants to blame Trump the truth is that the markets simply ran out of buyers. The number of new lows in stock prices has been growing for months and the number of new highs shrinking.
The convergence of so many long-term cycles at just this point in time has the potential to be more severe than most realize.
A sixty-year top occurred in 1957.
A thirty-year top occurred in 1987
A seventeen-year top occurred in March 2000. We are now exactly seventeen years out from that high.
An Fibonacci eight year high occurred in 2008. We are now eight years out from the 2009 low.
The seventh year of each decennial period often turns lower as in 1987, 1997, 2007, and now 2017.
One financial adviser told me that all sectors were over-valued. That is not the case with energy. We are looking for a low among energy-related stocks and the actual oil price this Fall. Crude oil hit resistance yet again at $50, trading at $48.32 pre-market open this Friday. The Energy service ETF of XES has already returned to its February 2016 low at $13.83. Pioneer Natural Resources reported more gas and less oil in its production sending that stock from $160 to $130.
Commodity prices are also having an eight year low from 2008 (remember $145 oil?) to February 2016 ($26) and now another perhaps a higher low.