Bitcoin Is Not A Currency

“We went short Polaroid when it was selling at sixty times earnings, which we thought was absurd; it then went to seventy times earnings. The market seemed to lose track of reality, and we found ourselves asking, ‘What is the difference between forty times earnings and eighty times earnings?’ By putting a different number on the secular growth rate estimate, you could justify almost any multiple. That is how people were thinking in those days ” ~ Michael Steinhardt

Good morning!

In this week’s Dirty Dozen [CHART PACK]  we look at buybacks, the trend towards more frequent market dislocations, what a real equity bubble looks like, crypto’s voracious energy appetite, deglobalization, and more…

Let’s dive in.

***click charts to enlarge***

  1. There’s a persistent bid under this market in the form of buybacks which are running at a record pace since the start of this year. According to EPFR, announced buybacks are averaging $6.9bn a day this earnings season, which is the highest level since 06’.

  1. This chart from KKR shows every 10% or greater correction in the SPX over the last 35+ years. I have two takeaways: (1) man, investors in the 90s were spoiled and (2) markets are becoming more prone to large dislocations, as we’ve seen over the last decade. This is bullish in a sense for the duration of the market cycle because these frequent corrections (we call them trend thorns at MO) keep investors from leveraging to the point that it causes real instability.

  1. The bubble callers are back after being in hibernation for the last few years. The chart below is a good illustration of what the returns of a real equity bubble look like. The yellow line shows the 3-year rate of change for the SPX. In the late 90s, it spent multiple years above 100%. It’s at 40% now (chart via Ari Wald).

  1. The latest BofA Fund Manager Survey is out. Below are the highlights.
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Disclaimer: All statements are solely opinions and are for educational purposes only.

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