Stock Market Investors

The talk of inflation today looks much like housing did in 2007. Evidence is mounting everywhere that this is a real long-term problem that is only getting worse. You can read this in the media, but yet security prices don’t reflect how damaging this may be. Bond investors’ pivot from greed to fear could crush seemingly safe investments. Equity investors could be hurt by the stock market failure of an elongated equity euphoria that finally got the dumbest investors on board (millennials). This would be damaging to net worth for individuals and institutions alike. It just goes to show how powerful incentives are. What we will learn is how swiftly they can change. […]

[…] “Every time I look around” this financial euphoria episode is “making me crazy,” because of how long it has lasted, how much the math tied to its carnage makes sense and because the anecdotal evidence has been visible for some time. We are channeling our inner Alan Greenspan, who called the tech bubble “Irrational Exuberance” in late 1996, only to look foolish for nearly four more years. As Art Cashin said recently on CNBC, the Y2K technology spending explosion elongated the tech bubble for another two years. Is the COVID-19 pandemic any different in elongating this euphoria episode? […]

[…] The last thing the cynic is thinking with the McNealy problem is that we are using the past as a guide with Microsoft and Cognizant Technologies (the past) to look at DocuSign (the future). We are also speaking to financial euphoria that we haven’t seen since the late 1990’s, when Scott McNealy was the CEO of Sun Microsystems. The cynic would say that those past instances are irrelevant and you must look at how great these companies are. They will utter the four most damaging words known to investors: it’s different this time. Let us not forget this is an American specialty. “As the nineteenth-century financial writer William Fowler observed, ‘Imagination in this country, lives in the future rather than the past.’ Only in America could a man declare that history was bunk.” This is the McNealy problem.