If you have found yourself wondering what stage of this more than decade long Fed-induced bull market we are in, please allow us to present our case for us being in the “dump to the masses” stage.
What we mean by this is we are at the time where the hype surrounding the stock market, as evidenced by such totally normal moves as cash furnace Tesla tripling over the last few months), has hit a fever pitch. And this is usually the time when the “smart money” dumps their equities to the unsuspecting and excitable, yet horribly uninformed, retail crowd.
The evidence for this has been trickling in every day.
For instance, recently released data from the Federal Reserve Board shows us a couple of trends that are worth keeping an eye on. The two following charts indicate that as recessions begin, the top 1% begins to sell their holdings, while the bottom 90% continues to try and “buy the dip”.
This chart shows the top 1% dumping as the market falls entering recession. Of late, we can see that selling has happened in spurts by the top 1%:
Whereas this chart shows just the opposite: the bottom 90% begin to try and buy into a recession while the market pulls back. In laymens terms, the rich are dumping their stock to the poor.
In the below chart, we can see the share of equities owned by the 90%, starting to pop higher for the first time in years.
And when it comes to other signs of both recession and “dumping to the bottom 90%” happening of late, there’s plenty.
Despite the stock market rallying to new heights, sectors like automotive have been mired in recession for the better part of the last 18 months globally. Recent housing data also suggests that we could be on our way to recession in 2020, as we have pointed out.
We also pointed out recently that 9 states were heading to recession over the course of just six months – numbers that we haven’t seen since the 2008 financial crisis.
There also remains an existential threat of the coronavirus, the damage of which we won’t know the true extent of for weeks. It has, however, put a damper on the newly signed U.S./China trade deal, paralyzing the country of China just days after that volatility was putting downward pressure on the market (if you can even call it that).
Meanwhile, other signs continue to pop up. Going back to Tesla again, it was posted on Robintrack , a site that monitors the buying and selling habits of Robinhood users, that 21,000 new users on Robinhood have bought Tesla stock since the beginning of February during the stock’s wild ascent.
Robinhood users tend to be about as “retail” as you can get.
And finally, one video from TikTok, posted on Twitter, shows a young girl claiming she “paid off her student loans” by trading stocks while in class. The video then shows her, in class, on Thinkorswim, trading. She also shows a photo of her P/L, where its clear that she owns both Microsoft and (of course) Tesla.
“This is how to make money in school as a college student,” she cheerfully says, before directing people to open a TD account and download Thinkorswim. We hope she checks back in and makes another video, crying into her Starbucks frappuccino, the first day that the market has a circuit breaker halt lower. We’ll keep an eye out for it.
Meanwhile, one Twitter user asked – so we had to answer: we are officially in the “dump to the masses” stage of the cycle.
— LVD (@LVDTrades) February 4, 2020