The Twilight Zone
David Nelson, CFA CMT
Picture if you will U.S. equity markets tracking a +70% return by Christmas. GDP coming in at 3.2% instead of the usual 2% for the first quarter, non-farm payrolls knocking it out of the park and the ultimate value investor Warren Buffet telling us Amazon (AMZN) is a good fit for Berkshire. Add the fact that the Federal Reserve thinks inflation no longer follows the same rules and a $4 Trillion balance sheet is the new normal, traditional economics and security analysis seem like a waste of time.
Ladies and gentlemen; “you’re traveling through another dimension, a dimension not only of sight and sound but of mind. A journey into a wondrous land whose boundaries are that of imagination. That’s the signpost up ahead – your next stop, the Twilight Zone!” – Rod Serling
Apparently, some of the large bulge bracket firms believe risk is an albatross from the past that holds no purpose in modern day central bank-controlled markets. Morgan Stanley and Bank of America were out last week encouraging investors to throw caution to the wind and load up on call options to catch the melt up on the heels of a 25% move off the Christmas Eve low. – “What could possibly go wrong?”
By the way, Trump just tweeted he’s increasing tariffs on $200 Billion of Chinese Goods to 25% on Friday. I’m sure we’ll be just fine.