Get in Crash Positions

The Top Is In Were you forwarded this email? [Sign-up to The Daily Reckoning here.]( [Unsubscribe]( [Daily Reckoning] Get in Crash Positions - The six requirements of a bubble top… - How low can stocks go?… - "Hell is the truth seen too late"… Recommended Link [URGENT: Your New Crypto Book Is Awaiting Shipment]( [Read more here...]( If you’ve kicked yourself for not investing in cryptocurrency… Watching Bitcoin go from $61… To $1,000… To over $60,000… Then pay close attention. Famous crypto millionaire James Altucher just released a brand-new book on crypto… [And he’s releasing a limited number of books to folks who click here now.]( We have a copy reserved in your name, and we just need to hear back from you. [Click Here To Claim Your Copy]( San Francisco, California December 18, 2021 Editor’s note: You probably suspect stocks are in a bubble. But bubbles can continue much longer than you think. What are the telltale signs of a market top? Today, Charles Hugh Smith shows you the answers and how today’s market checks every box. [Charles Hugh Smith]Dear Reader, Everyone with some gray in their ponytails knows the stock market has ticked every box for a bubble top, so everybody get in crash positions. Let's run through the requirements for a bubble top: 1. Retail investors (i.e., dumb money) are all in and buying the dip with absolute confidence. As the gray-ponytail traders know, there are many moving parts to the retail dumb money going all in: — The pain of the last bubble bursting has finally faded and been replaced by greed as retail punters watch everyone else mint fortunes by buying the dip and gambling with abandon at the casino's trendy tables: crypto, NFTs, Mega-Tech, EVs, uranium, etc. — Prudence and caution (i.e., holding cash in low-risk accounts) are thrown to the wind as the more money you put into the bet, the bigger the rewards — Punters realize the key to the really big gains is maxing out margin and leverage, preferably by foregoing owning the underlying equity in favor of options and futures contracts — Confidence in the Federal Reserve's godlike powers and determination to never let stocks decline more than a few percentage points over a few hours or days is off the charts — Confidence that this is a new era and so old rules no longer apply is in the stratosphere. Retail punters believe that cryptos, NFTs and blockchain are can't-lose bets as these are A) unstoppable and B) revolutionizing finance and the economy. As for stocks, retail traders have discovered the power of the herd: If the herd all buy call options by the thousands, this forces market makers to buy the underlying stocks, pushing the prices higher in a self-reinforcing feedback loop that is guaranteed to succeed —Retail investors view all these bets as extremely low risk and so there's no financial sense in hedging bets or limiting margin debt, leverage or risk, because risk has been abolished by the Fed Put. Recommended Link [**Urgent Note From Jim Rickards – Response Is Requested By 12/21**]( [Read more here...]( I’ve just made a massive change to Strategic Intelligence. This is one of the biggest changes to a newsletter in the history of our business… As far as I know, nothing like it has been done before. What’s going on? In short, I’m adding 3 exciting new additions to this all-new “Pro level” of Strategic Intelligence. And as a current subscriber, I don’t want to see you miss out. Seriously. Once the timer hits 0, however, it’ll be too late… you’ll miss out. I’d hate to see you left behind. [Click Here Now To Get In]( The Smart Money 2. Insiders (i.e., the smart money with asymmetric knowledge of what's actually going on beneath the surface PR) are selling with unprecedented enthusiasm. The gray-ponytail traders know the only way to anticipate the next trend change and benefit from this knowledge is to follow what the smart money (insiders) are doing, not saying, because they know the smart money will always talk their book, i.e., promote a confident happy story about future prospects even as they're dumping their own shares as fast as they can without crashing an increasingly precarious market. 3. Market leadership shrinks from 50 to five companies even as the majority of stocks are faltering. The absolutely classic sign of a bubble top is the indexes continue rising even as the majority of stocks stagnate or enter bear market territory with stairstep declines. How can indexes continue marching higher if 80% of stocks are falling? Easy: big gains in a handful of mega-cap stocks. The current concentration of market-moving heft in a few mega-tech stocks is unprecedented. Last week all three market indexes — the Dow 30, S&P 500 and Nasdaq — were all led higher by one company, Apple, which added hundreds of billions of dollars in capitalization in a few days. When the market depends on a NIFTY 50 for the vast majority of its gains, it's already getting toppy, but when it's entirely dependent on a Fabulous Five for gains, then the top is in. Suckers 4. Short sellers give up and short interest falls to multiyear lows. The gray-ponytail traders can savor the irony: As short sellers give up and the percentage of shares sold short dwindles, the retail bulls declare victory (Ha ha, we've wiped out the shorts and bears! We won!). What the jubilant bulls don't understand is the hated short sellers were the last line of defense against a market decline gathering momentum into a crash, as shorts covering their bets by buying stocks are a reliable source of buying when greed turns to fear. Wipe out the shorts and there's nobody left to buy as stocks tumble and margin calls proliferate. 5. Buy-the-dip euphoria continues sucking in money even as market internals weaken and extremes of risk are ignored. When gamblers are putting all their capital on the table and boosting the bets with margin and leverage, the dumb money is all-in; not only do they not have any cash left, but their sky-high margin debt guarantees even a modest dip will result in margin calls and forced selling: The self-reinforcing momentum everyone assumed could only be bullish reverses into selling that begets more selling. 6. Punters are confident that the Federal Reserve will manage to tamp down inflation while keeping the stock market at a permanently high plateau. Never mind rising real rates, never mind the need to reduce monetary stimulus as the only means to take the air out of inflation — the Fed will never let stocks decline. The Fed Put is unbreakable. Recommended Link [Will this tech kill 5G forever?]( [Read more here...]( One of America’s leading tech investors believes so. It’s all thanks to a recent (and little-understood) Federal government decision that could radically reshape the tech industry. If you own 5G stocks… or get your cellphone or broadband from AT&T, Verizon, Sprint or T Mobile… you need to see this. [Click Here For The Full Story]( How Low Can Stocks Go? And so here we are: Every box of a bubble top about to burst with unimaginable force is ticked. Traders sporting gray streaks in their ponytails know from experience that every bubble pops, and all the endless analysis after the fact boils down to: Things changed. Nobody can fathom how low stocks can go at the eventual bottom. In a recent example, consider the price action in a marijuana-sector stock, Tilray (TLRY). Believers in the future prospects of the sector pushed the share price of TLRY to over $300. At the eventual capitulation low, shares traded hands in the $3 range — a roughly 99% decline. History is full of examples of 80% declines, 90%, 95% and, yes, 99% declines. No one predicted the eventual capitulation low because such declines were inconceivable. Any decline could not possibly be more than three or four steps; a nightmarish fall into a chasm could not even be imagined. And so here we are, witnessing the switch from risk-on to risk-off in real-time. Retail investors are buying every dip with gusto, margin debt is at record highs and insiders are selling quietly but furiously as they race to dump all their overvalued shares on buy-the-dip believers in the permanence of risk-on euphoria and valuations. "Hell Is the Truth Seen Too Late" From $900 to $90 is unimaginable. Yes, it is unimaginable now, but it will become conceivable as the risk-on bubble deflates, but too late for all those who clung on to the faith that risk-on euphoria is permanent. The final redoubt of risk-on markets is the confidence that I will get out at the top. The problem with this notion is there is no top in greed and hubris, and greed and hubris are the engines of risk-on markets. So please fall carefully into the chasm. How do I know all this? Experience. Like most participants, I learned about risk-off markets and bubble pops the hard way, falling not so carefully into the chasm. Timing is everything in a crash: As Thomas Hobbes is reputed to have observed, "Hell is the truth seen too late." Well said, T.H. When the market goes bidless, it's too late to preserve capital, never mind all those life-changing gains. Regards, Charles Hugh Smith for The Daily Reckoning Editor’s note: In these risky times, Jim Rickards advises you to pursue wealth-generating opportunities outside of the stock market. That’s because they aren’t subject to the same dynamics that can bring the stock market crashing down. For example, Jim recently released the details about a massive [$6.6 trillion daily flow of capital that few investors know anything about.]( In his new blockbuster video, [Jim shows you how you can tap this $6.6 trillion daily flow of capital for potentially explosive gains.]( It’s already generated a lot of chatter on the internet. You’ll see why when you [click here]( to see it. [In this video Jim revealed his proprietary secret]( for profiting from this $6.6 trillion bonanza. At the heart of it is a new computerized [Tactical Operations Center]( Jim and his team have built to track this massive cross-border capital flow. It’s something you really need to see if you want to look to build wealth outside of the stock market. We think you’ll truly be amazed when you see it. [Click here now for details.]( --------------------------------------------------------------- Thank you for reading The Daily Reckoning! We greatly value your questions and comments. Please send all feedback to [feedback@dailyreckoning.com.](mailto:dr@dailyreckoning.com) [Charles Hugh Smith][Charles Hugh Smith]( is an American writer and blogger, and serves as the chief writer for the blog "Of Two Minds". Started in 2005, this site has been listed No. 7 in CNBC's top alternative financial sites, and his commentary is featured on a number of sites including Zerohedge.com, The American Conservative, and Peak Prosperity. Add feedback@dailyreckoning.com to your address book: [Whitelist us]( Additional Articles & Commentary: [Daily Reckoning Website]( Join the conversation! Follow us on social media: [Facebook]( [LinkedIn]( [Twitter]( [RSS Feed]( [YouTube]( The Daily Reckoning is committed to protecting and respecting your privacy. We do not rent or share your email address. By submitting your email address, you consent to Paradigm Press delivering daily email issues and advertisements. 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