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The Moment Wall Street Has Been Waiting For: Retail Is All In

Charles Hugh Smith
July 30th, 2021
Of Two Minds Blog
Comments (19)

This article was originally published by Charles Hugh Smith at Of Two Minds Blog. 

The ideal bagholder is one who adds more on every downturn (buy the dip) and who refuses to sell (diamond hands), holding on for the inevitable Fed-fueled rally to new highs.

Old hands on Wall Street have been wary of being bearish for one reason, and no, it’s not the Federal Reserve: the old hands have been waiting for retail–the individual investor– to go all-in stocks. After 13 long years, this moment has finally arrived: retail is all in.

If you doubt this, just look at record highs in investor sentiment, margin debt and the Buffett Indicator (see chart below). Current valuations are so extreme that the previous extreme in the 2000 dot-com bubble now looks modest in comparison.

I have my own sure-fire indicators for when retail is all-in. One is my Mom’s financial advisor recommends shifting her modest nest-egg out of safe bonds into the go-go stocks that are topping out. Back in late 1999, it was Cisco Systems and the other dot-com leaders, today it’s the FANGMAN stocks. Sure enough, my Mom just informed me her advisor recommended moving money from bonds into a FANG-dominated stock fund. Bingo, we have a winner.

Second indicator: average people who have never traded stocks are all-in and supremely confident they can’t lose. When 20-year college students are trading based on a “genius” 22-year old friend’s advice, retail is all-in. When a worker cleaning a wooden deck pauses to put $100,000 in a company he knows nothing about (yes, true story), retail is all-in.

Much is made of meme stocks, but the real driver of retail going all-in is the complete collapse of risk / moral hazard: the Fed will never let the market go down is not a meme, it is an article of secular faith, supported by 13 long years of ceaseless Fed intervention / stimulus, all in service of elevating the stock market.

Since all evidence supports this secular religion–stocks never go down because the Fed will never let them go down–the trick is to rotate into the next blow-out winner or buy the dip in Big Tech or a meme stock. And since something is always shooting up like a rocket, the way to become a millionaire is to simply buy what’s hot and buy the dip.

In this secular religion, nothing else matters, all the old stuff is just a distraction: price-earnings ratios, valuation, cash flow, future earnings–none of that old stuff matters. Technical analysis is also a waste of time: just buy the dip and rotate into what’s hot, and the millions just pile up on their own.

Every generation that experiences a speculative mania feels it’s unique. This is the pattern that repeats. The confluence of forces driving the mania to unprecedented heights is so obviously unique and uniquely powerful that it is literally crazy not to grab a board and ride the wave to riches.

What the newly minted millionaires don’t understand is they’re the marks and bagholders. Wall Street has been patiently waiting for retail to go all-in so the pros can sell all the over-valued stocks to the euphoric, trusting retail traders, who will continue to buy the dip and rotate into the next hot meme-stock until their fortunes have dwindled to spare change.

The con requires euphoric confidence that stocks only go up forever, and every retail trader is confident in their ability to ride the wave to riches. We’re finally at that summit of euphoric confidence, where faith in the Federal Reserve is literally a religious experience.

Robbing Hoods going public is a scriptwriter’s touch. (Forgive me if I got the name wrong, I’m working from memory.) Stocks never go down is absolutely true, take it to the bank, until they do. Every share of stock ends up in somebody’s account, and the ideal bagholder is one who adds more on every downturn (buy the dip) and who refuses to sell (diamond hands), holding on for the inevitable Fed-fueled rally to new highs.

That’s how accounts are destroyed, and the wreckage isn’t just financial. The scars of being a bagholder can last a long time. But Wall Street is patient, and a new crop of bagholders eventually catches Fed Fever, and the transfer of over-valued equities to a new generation of bagholders will play out according to the same script.

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    Author: Charles Hugh Smith
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    Date: July 30th, 2021
    Website: https://charleshughsmith.blogspot.com/

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    19 Comments...

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    1. Andrea.Iravani. says:

      It seems as though the earth will be destroyed by the psychopaths in a nuclear war within the very near future. World war unfortunately appears to be in the pkans of all global leaders, and I think that this world war three nuclear war will destroy the entire pkanet. They are backed into a corner with no way out over the scamdemic. They are almost all in on it, with the exception of about five countries in the world. They have the emotional maturity of toddlers and they throw temper tantrums with bombs including nuclear weapons. The not so distant future for humanity does not look bleak, but non-existent. They have scorched earth policies on everything. If they can’t have their way they will destroy the earth so that nobody else will be able to enjoy it.

      Andrea Iravani

    2. Andrea.Iravani. says:

      It seems as though the earth will be destroyed by the psychopaths in a nuclear war within the very near future. World war unfortunately appears to be in the plans of all global leaders, and I think that this world war three nuclear war will destroy the entire planet. They are backed into a corner with no way out over the scamdemic. They are almost all in on it, with the exception of about five countries in the world. They have the emotional maturity of toddlers and they throw temper tantrums with bombs including nuclear weapons. The not so distant  future for humanity  does not look bleak, but non-existent. They have scorched earth policies on everything. If they can’t have their way they will destroy the earth so that nobody else will be able to enjoy it.  

      Andrea Iravani

      my comment was hacked by the infratard again!

    3. My wife was the stock market person, investing stocks and related stuff. Me, I heard so many horror stories from my Dad and others who lived though the crash of 29, on bad things were and what the value of things were. My Dad told the story of is father owning almost 3 to 4 thousand acres of grazing ground and farm land before the crash of 29. After Nov of 1929, my Dad said that His father went like crazy to save the home 500 acres of river bottom ground and other tillable farm ground and of course the home farm place. they lost almost 3 thousand acres of farm and pasture land for taxes. And now that farm is gone except for a few acres where the old house is still standing.

    4. Genius says:

      Then your father didn’t really own it. Nobody that pays govt. rent (taxes) own anything. Welcome to the grand illusion…

    5. Genius says:

      I don’t have any stock only REAL assets. My pension has exposure to stocks but I could live without it. Lot’s of ways to make $$. Solar equipment has been very good to me. People are amazed at how I get such awesome deals on stuff. Buy super cheap… sell cheap. I charge 40 per hour for installs too plus the markup for materials. A lot of biz this year, people are going off grid asap.

      • marty says:

        I’m doing the same thing up here in Ontario, Canada. People are crazy for 3kW and 5kW systems for their cottage and vacant land purchases, off-grid independence is the money-maker currently.

    6. Anonymous says:

      “Second indicator: average people who have never traded stocks are all-in and supremely confident they can’t lose.”

      That’s what usually happens just before a bust.

      But maybe this time will be different, we’ve never had the government pumping so much money into the economy as it is now before either.

      After all, the average PE of the market is only 32.5 as I post this. An obvious bargain.

    7. Andrea.Iravani. says:

      News Flash!

      Great Britain has officially outlawed journalism now with the imprisonment of Craig Murray!

      Journalism will now officially be considered espionage by Great Britain!

      Only government approved propagandists will have publishing rights in Great Britain!

      May as well just stop reading everything published by anyone in Great Britain! It is now officially all government approved
      propaganda!

      Andrea Iravani

    8. Andrea.Iravani. says:

      News Flash! 
      Stop The Presses in Great Britain! 
      I Mean Literally! 

      Great Britain has officially outlawed journalism now with the imprisonment of Craig Murray! 

      Journalism will now officially be considered espionage by Great Britain! 

      Only government approved propagandists will have publishing rights in Great Britain! 

      May as well just stop reading everything published by anyone in Great Britain! It is now officially all government approved 
      propaganda! Why even waste your time on it?! It only encourages the bastards, kind of like voting! 

      Andrea Iravani

    9. slim says:

      what goes up (without a parachute) will come down hard

    10. Christian Soldier says:

      A investor once told me, the stock market is just a form of legalized gambling…and we all know in gambling the house always wins…

      This is why I place my treasure in heaven for the words of Christ says where your heart is, that is where your treasure is.

      If you are a true Christian, born from above by the Spirit of God, a slave of Christ, redeemed by His blood…read the words below, for they surely are not to the children of the devil, for their home is in the depths of the lake of fire.

      Matthew 6:19-21
      19 “Do not store up for yourselves treasures on earth, where moth and rust destroy, and where thieves break in and steal. 20 But store up for yourselves treasures in heaven, where neither moth nor rust destroys, and where thieves do not break in or steal; 21 for where your treasure is, there your heart will be also.

    11. cranerigger says:

      The “normalcy bias” just doesn’t allow people to see the evidence. Congress-critters (not all) & other morons canNOT reconcile a check book. Many of these same idiots embrace MODERN MONETERY THEORY that suggests we can print monopoly-money forever. Americans allowed stupid governance for too many decades.

    12. When the crowd and experts go in one direction – I would go in the other direction.
      When the experts tell me to take these blood clotting ” vaccines ” I refuse.
      Its really very simple

      Sheeple VS Lions

      • Bill says:

        J-man, that strategy will never fail you. There is an old saying “most of the time the majority is wrong”. Society has been inculcated to be controlled by a herd instinct, to take orders, and submit to peer pressure. Almost everyone’s thinking, beliefs, attitudes, and behavior are dependent on what
        everyone else does. I believe it probably wouldn’t benefit the nation as a whole even if everyone was well educated because all that effort would not be used in a concerted way to improve things, only to fit in and follow the herd, take orders, and submit to peer pressure. Else why would the majority not oppose those entities working against common interests, or continue to vote for those corrupt officials who undermine them and lie to them continuously, and a million more obvious examples. I hate to say this, but half of Americans are really stupid and unthinking, and barely live above the animal level in terms of consciousness, this is easily observable. Therefore as you say, when the “experts” and crowd go one way, one should go the opposite way. This applies to vaccines and to almost every other conceivable scenario. This mentality has never failed me.

    13. Andrea.Iravani. says:

      Wisconsin’s organized crime ring and terrorist cult leader is now Jay Fernandez, president of Wisconsin InfraGard. Jay Fernandez is a Department of Transportation employee. He is the man in charge of the psychos in my hood of serial criminal psychopaths that have repeatedly broken into my home, stolen, vandalized, used vault7 hacking tools on everything that could be hacked including car, smart meter, sleep number bed, appliances, heating/cooling, thermostat, lighting, electronic devices, communication devices, and plumbing, gas-lit, stalked, spied on me, and terrorized, tortured, falsely imprisoned me in my own home and illegally enslaved me by round the clock surveillance and stealing my property, and have been blasting short wave radio signals at me non-stop since June of 2017 starting  immediately after my phone was hacked.

      Andrea Iravani

    14. Andrea.Iravani. says:

      I really have to laugh at this:
      IMA Webinar Broadcast: Supply Chain Compromise: How Threat Actors Leverage Trusted Relationships to Achieve Initial Access – InfraGard National Members Alliance
      http://www.infragardnational.org › event › ima…
      Mar 26, 2021 · Jay Fernandez, President – InfraGard WI Member Alliance. As the recently appointed President of the Wisconsin Chapter, Jay will only take a …

      InfraGard is the largest threat actor that leverages trusted relationships! The FBI is covered in spooge! It just keeps going from bad to worse with their threat actors, even kidnapping a governor! After 9/11, seven false flag wars, heroin from Afghanistan and cocaine from Latin America, Epstein/Maxwell, $21 trillion in Pentagon “accounting errors” , the scamdemic, and 1/6,  the spy is the limit! New info pouring in over Whitmer kidnapping organized by the FBI! What ever would we do without them?! 

      Andrea Iravani

    15. Andrea.Iravani. says:

      I cannot get excited over the man that started the scamdemic assuming power. Why does anyone support him after that?! 

      Both parties have violated the social contract, which is the constitution. There is some bogus myth perpetrated by PhDs that Hobbs social contract theory is a valid legal framework for America. Hobbs was a lunatic that believed that in order to enter society, people must sacrifice all of their rights. That would include the right to life, property rights, and right to liberty. Both parties are guilty of high crimes and treason and should be executed for it. That is the punishment for it.

      Andrea Iravani

    16. marty says:

      I’m doing the same thing up here in Ontario, Canada. People are crazy for 3kW and 5kW systems for their cottage and vacant land purchases, off-grid independence is the money-maker currently.

    17. Andrea.Iravani. says:

      To the scumbags in InfraGard blasting shortwave radio signals at me that I am not trying to tune in to with a receiver, and the scumbags in my neighborhood in InfraGard that are spying on me, breaking into my house, stealing, vandalizing, stalking, using vault7 hacking tools on on my personal property, stalking, and gas lighting me:

      You are scum. How dare you think that you have a right to live in this world. You should literally be embarrassed to death by your sick, disgusting, evil, monstrous, parasitic behavior! Do everyone in your lives a favor and kill yourselves now! What you have been doing to me is not only completely illegal, but also completely evil and sick and disgusting as hell! You do not have one ioata of power, because if you did, you would not be doing this to me anonymously, through gas-lighting, or denying that you are doing it! 

      You are abusive, sadistic, parasitic, corrupt, insane, mentally incompetent, immature, lazy, perverted, powerless, cowardly ego-maniacs with delusions of grandeur and you are not entitled to be treated with respect and your opinions are everybit as worthless as you are! You are losers! You are serial criminal psychopaths! You do not have any self-worth at all! You do not have any integrity at all! You do not have any consciences at all! Somehow, against all odds, you managed to make congress look relatively decent by comparison, which is not a compliment, FYI! Who in the hell do you think you are?! 

      Your lifestyles are sick and disgusting crimes against humanity! You are a bunch of fucked up, sick and evil freaks that should have been aborted !  You may nit be in congress, but you sure as hell act like a congress of baboons! Baboons in America belong in cages in the zoo and so do you, InfraTards! You are, useless, evil, destructive liabilities that the country cannot afford! Kill yourselves, now! 

      Andrea Iravani

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