Weekly Market Pulse: Have We Reached Peak Speculation?

These TikTok stars built a VC firm backed by Anthony Scaramucci and the Winklevoss twins

The article is about Josh Richards, a TikTok influencer who has, with the assistance of the above mentioned adults (a term used loosely in this case), started a venture capital fund and raised $15 million. He is 19 years old and from the pictures I saw I’d guess he needs to shave about once a month. He’s very cute and I’m sure he has no problem getting a date which seems to be the primary driver of his TikTok popularity. He’s got killer abs too. The problem is…he’s 19 years old. Let me say that again. He’s 19 frigging years old, too young to have finished college. Too young to have experienced a bear market. Hell, too young to have experienced a correction. If an investor decides to give this lad money to invest, they deserve to lose every nickel. And if a professional investor gives any client’s money to this whiz kid, they deserve to lose a career. This is where we are on the speculative spectrum. They haven’t handed out free lunches like this since Jesus fed 4000 people with a few loaves of bread and some fish.

Stocks have been expensive for a very long time and it has been hard to stay invested or to get that way if you’ve been out. But until recently, stock valuations were high, not crazy and there wasn’t this public fascination with investing and trading. It is the emergence of the speculative factor that has me concerned. Yes, stocks seem expensive but we don’t know what future earnings will be. Maybe we really will have a boom that lasts for years, maybe we will get another roaring 20s as I’ve seen some predict. The bond market doesn’t agree with that scenario but maybe it’ll come around to it. Anything is possible and I never try to predict the future. But the speculative frenzy gives me pause. And I think it should you too.

That doesn’t mean that I’m about to sell our entire portfolio and get long gold, bonds and canned goods. We don’t do all or nothing investing here. But I do think it makes sense to start looking for the markers that generally signal the end of a bull run. For us that means keeping a careful eye on credit spreads and other indicators that tend to act as early warning signs. It is when things look the best – and spreads right now are the tightest they’ve been since 2007 – that one should be the most vigilant. There is no sign yet that they are about to widen and they have been tighter in the past so it isn’t time to do anything yet.

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Disclosure: This material has been distributed for informational purposes only. It is the opinion of the author and should not be considered as investment advice or a recommendation of any ...

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William K. 1 month ago Member's comment

Housing sales have been booming because of the low interest rates on those huge mortgages, and how long will that last? Only until it ends. And then??? And many CEOs are very good motivational speakers, which helps keep investors happy no matter what. So just like that old song, "That's the Way it goes, Where it ends Nobody Knows, (but if it does), That's the way it goes." (A very old song, from the early 1960's.)

So there could be a "correction", because nobody will call it a recession or a crash. Oh Well.