Stock Market Mania Has Set in Among the Public. Is this the Top? By an anonymous financial trader, and 104 of his buddies.
Remember the huge rise and then crash of the Dot Com stocks in 2000, and how stocks like Amazon and Apple nearly went belly up in the next three years?
Those companies and others were part of the American Tech Stocks index called the NASDAQ. Perhaps none of you reading this would remember a similar index in Germany falling 99% before it was abandoned completely and delisted.
Tech stocks were off the radar for years while the world’s focus turned to Australia and it’s resources stocks — mining in particular — from 2003 to 2008. Things went nuts again in the long forgotten, despised and unprofitable uranium sector. At one point, despite the Federal Government’s limit of no more than three uranium mines in Australia and the sensitivities around Chernobyl etc explosions (and the world’s near extreme tightening of transport regulations relating to the carriage of radioactive material), there were over 600 stocks on the Australian Stock Exchange (ASX) which claimed to be involved in the uranium industry. This represented one-third of all stocks on the Australian exchange.
Dot Com companies were brought back from the dead (literally in many cases — delisted ones) and turned into uranium stocks. At the peak, Paladin set a record for the biggest and fastest overall rise of any stock in ASX history. It rose from seven tenths of a cent to over $10 in about 3.5 years, mainly on the back of acquiring a then worthless uranium deposit in a little known, West African country called Namibia. The deposit had been abandoned by Rio Tinto, the uranium price was far below where it needed to be for profitability, the deposit was in a National Park, directors were working for free, Paladin had only a little cash and no backers, there were water and logistics issues and fierce opposition from locals to the deposit being developed. In short, no investor in their right mind would invest in the stock. The later boom was staggering and overblown and in recent years, Paladin was seen moving in and out of bankruptcy again and not trading with a share price a very tiny fraction of its heyday record.
With the next recovery beginning in 2009, after countries like Greece had to be repeatedly bailed out and had youth unemployment around 60%, tech stocks in America once again started to find some favor.
In the next decade, America would triple its money supply, Europe would do something similar, interest rates would drop to 5,000 year lows and go below zero in 17 countries. Economic textbooks had to be rewritten, because such conditions had never been seen before. There was no inflation, other than in assets like leading stocks and property.
Warren Buffett, arguably the world’s most successful investor in modern times, was helping to bail out big American banks on very favorable terms and apologizing in the New York Times for calling the recovery three months too early, while markets were still crashing.
President Obama later looked like a guru, suggesting the day before the recovery began that anyone who invested then would probably do OK. But it was the Federal Reserve (FED) — supposedly a completely separate and independent entity — pumping the markets back up by creating money out of thin air and lending it to leading financial institutions.
A general rule of thumb is that tech stock companies don’t get second chances once they turn sour. But Apple was leading the charge from near oblivion, ultimately reinventing itself four times from the late 90’s. New tech stocks like Netflix came from almost nowhere to be one of the market leaders. Amazon wasn’t alone in attaining valuations which could only be justified in normal times if they had sewn up most of not just planet Earth’s markets, but Mars as well. Not bad for a company which started selling a few books in a crowded and failing market sector.
When President Trump was elected, the media and investors outside the U.S. panicked and the market plunged. It proved in the end to be something that looks like a glitch.
Today, the NASDAQ has nearly doubled since he was elected three years ago. Market sentiment is about as high as it can possibly be — despite the China trade deal not being finalized, impeachment, lack of investment by ordinary Mums and Dads which got the Dot Com boom going and the media being against most of what President Trump is about, even when it’s unequivocally beneficial.
Most trading on the NASDAQ is performed with no human involvement. About a dozen companies do most of the trading. Most are illegally front running orders, and about 90% of all their orders are fake, and illegal, They are tricks by market players regarding market interest, and such orders are pulled microseconds before they can be executed.
Those trading companies have also been able much of the time to buy market moving announcement information up to half an hour before official and supposedly very tightly controlled, official release. They use supercomputers and ultra-fast connections which outrun the ones in use by nearly everyone else, including Government surveillance outfits. One company, Virtu, declared before it’s highly controversial and unpopular listing on the American Exchange, that it only had one losing day in its recent four year history.
See the chart above of the all conquering NASDAQ. President Trump is basking in its glory, optimism is near record highs and the future looks very bright … and that is what late 1999 to early 2000 was like. (President Clinton had also been impeached at the time.)
Mark Twain roughly said that history doesn’t repeat, but it sure does rhyme. Based on statements in recent times, The FED and European Central Bank (ECB), may no longer be willing to allow a crash like 2000 and 2008 and things do look really good coming into a traditionally money pumping election year and season. But somewhere in the darkness, a lonely few voices are softly calling “Remember Japan”.
Don’t say you weren’t warned.
There are increasing signs of insiders bailing out and the less informed buying in. But money supply figures are rising nicely, so there won’t be a crash in the very near future.