We Have Reached The Silly Phase Of The Bull Market

Have we entered a new bull market? Was the 35% pullback in the S&P 500 (SPX) in March the fastest bear market in history? Or is this just a continuation of the bull market that started in 2009, interrupted by a rather large correction? Bull markets and bear markets are about behavior, about the human emotions of fear and greed. While we got a brief bout of fear in March, greed has since overwhelmed all sense, common and otherwise. What we’re seeing in the casino…er, market….today is not beginning of a bull market behavior.

What has been going on in markets over the last two months is the most glorious episode of human greed I’ve seen since 1999. I know there will be plenty who pooh-pooh that comparison but the speculative trading and the ignorance of those doing it is exactly the same. There are silly things going on, new “traders” doing stupid things and getting away with it because that’s what happens in the end stages of a bull market that has been going on for a decade.

Hertz, the rental car giant, filed for bankruptcy on May 22 and its stock hit a low of $0.40 a few days later. Earlier this week it traded as high as $6.25. That’s a gain of over 15 times your money if you bought at the low. In 12 days. Did Hertz cancel its bankruptcy? Did Hertz get a last-minute rescue from the Trump administration? No and no. Hertz is still bankrupt. And my quick math says they have $19 billion in debt and maybe $15 billion in assets. The stock is almost certainly worth zero. And yet hundreds of millions of shares are changing hands every day. This is not investing.

And Hertz isn’t the only stock fools are buying in hopes of finding a bigger fool to take it off their hands at a higher price. Chesapeake Energy (CHK) was a penny stock and on the verge of delisting from the NYSE earlier this year before executing a 1 for 200 reverse split. Its unsecured bonds trade for less than 10 cents on the dollar. The stock tripled one day this week and at its peak had a market cap of $750 million. The stock is, like Hertz (HTZ), likely worthless. This isn’t investing either.

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William K. 4 months ago Member's comment

This seems to explain the motivation that I had attributed to madness, where instead it is gambling, albeit with "free money", which at some point will need to be paid back into the system by somebody. NOTHING is really free, the closest we can get to free is bad advice from slick hucksters.