Readers of this article will encounter a new word to add to their lexicon — OmniBubble. Why OmniBubble? The word “omni” means “all” or “everywhere” and frequently connects in words like omnipotence. The inescapable conclusion is that we're encircled by a series of omnipotent financial bubbles that will ultimately suffocate the world economy and financial markets. 

In 2018, I penned an article that talked about the end of the omnibubble given what was occurring in the credit markets, real estate, debt, and government spending. That year I also wrote about how it impacted the art world and taxis. Late in 2019, I suggested stocks were as risky as ever. Then the virus arrived and I penned an essay in April of 2020 discussing why virus public policy would be the worst in U.S. history. Right on cue, the Wizards reflated the COVID economy making the omnibubble even larger. My book, Escaping Oz: Navigating the crisis discusses bubbles and what comes in their aftermath, and how society should prepare for the inevitable shocks. 

What does the omnibubble look like today? Below are twelve indicators of just how much larger the bubble is now.

• S&P 500 price to sales ratio well exceeds the bubble highs of 2000 and 2007. ⁽¹⁾
• The Wilshire 5000 index is twice the size of the U.S. economy. ⁽²⁾
• NYSE margin debt has surpassed all previous stock market peaks. ⁽³⁾
• Everyone's all in as evidenced by record low money market participation and low cash to asset ratios. ⁽⁴⁾
• Rydex Funds participation demonstrate overwhelming bullishness far surpassing the levels in 2000, 2007, and 2020. ⁽⁵⁾
• Put-call ratios are at all-time levels of bullishness and the amounts paid for call options far exceed levels of 2000, 2007, and 2020. ⁽⁶⁾
• Traders are confident when IPOs are blossoming. Last year saw record volume. ⁽⁷⁾
• You might conclude with record IPOs we'd also have record number of companies making money. We have the opposite. ⁽⁸⁾
• A special type of IPO is a Special Acquisition Company (SPAC), which is a company raising capital with no stated purpose. You might say they're being flexible. The last two years exhibit explosive growth in the issuance of SPACs. This type of undefined capital raising was evident in a prior bubble. ⁽⁹⁾
• More fund managers are admittedly taking more risk. ⁽¹⁰⁾
• Households are all in with the all-time highest percentage of their financial assets being allocated to equities. That's saying something. considering the explosion of residential real estate prices. ⁽¹¹⁾
• What can we conclude about insiders (company managers/executives) who are selling at eight times the ratio at which they're buying? In case you're wondering that level is higher, by far, than any in history. ⁽¹²⁾

When I penned an article in late 2019 discussing how stocks were at the riskiest levels in history, I suspected a correction was around the corner. That came early in 2020. The ensuing fall into the March 2020 low did little to dampen the animal spirits of investors. While the omnibubble's existence doesn't tell you when it will pop, we should not be surprised when it does. There's much air to let out of this bubble. The consequence of this deflating bubble will devastate many.  How will investors and advisors respond?  

References

(1)  Elliott Wave International

(2) Elliott Wave International

(3)  FINRA data

(4) Sentimentrader

(5) Rydex funds and Elliott Wave International

(6) Elliott Wave International & Sentimentrader

(7) Bloomberg

(8) Sentimentrader

(9) SPACInsider.com

(10) BofA Global Fund Manager Survey

(11) JP Morgan

(12) Bloomberg