Let’s start off with a quote from the boys down in Gainesville:
Our experience with second-wave retracements is that you have to be patient to let the market trace out all of its subwaves. It’s a challenge emotionally, particularly in a bear market, because the goal of a second wave is to recreate the bullish spirits of the prior peak. By its end, investors are convinced the bull market is either back or intact. It’s the paradox of market behavior.
I’m not much of an Elliott Wave guy, but I do think they work rather impressively in bear markets. If the agonizing climb from October 13 until early July 2023 was indeed “Wave 2”, it would actually make a lot of sense. Off the top of my head, what I’m witnessing is:
- Absolute euphoria in permabull land. Numbskulls like Tom Lee and Cathie Wood are getting celebrated every day in the press again, and sentiment meters are pegging “Extreme Greed” territory.
- Complete garbage stocks like Carvana have experienced explosive triple-digit gains, whereas late last year they seemed headed for bankruptcy court.
- The tiny handful of bears that are left are being actively mocked and abused. Even I, who has historically been largely immune to such attacks, am getting a fair bit of crap online, particular in the Twitterverse.
- Valuations are laughable again. I noticed Microsoft – – the same Microsoft that’s been around since 1975 and whose claim to fame are such products as Windows and Word – – is sporting a P/E of 37. Look, 37 is perfectly fine for a biotech startup with a potential cure for cancer, but a lumbering, multi-trillion dollar bore-fest like Microsoft has no business selling at 37 times earnings.
- The entire “Stonks Only Go Up” schtick is back with a vengeance, and it isn’t meant to be laughable or ironic. It’s a real philosophy again, and it’s sickening.
It seems to be a truism that the market delights in nothing more than making as many people as wrong as possible. If that’s true, H2 2023 is going to have absolutely no resemblance to its horrific first half, and the advocate of this madness are in for a big surprise.
