Investors Think They’re Bulletproof

(And They’re Dead Wrong) [Morning Reckoning] August 01, 2023 [WEBSITE]( | [UNSUBSCRIBE]( Investors Think They’re Bulletproof - Bulls were nowhere to be found… until now. - Just how cocky are investors these days? - How to trade the disconnect… [[LEAKED MEMO] AI Opportunity]( A leaked memo from Google on AI could prove that it's [the biggest opportunity of the decade](. [Click here to learn more]( Silicon Valley insider, James Altucher, shows that a tiny AI company could be in the crosshairs of major NASDAQ players — and [a buyout deal]( could be announced at any moment. And if you don’t get in this stock before a potential deal is announced... You’ll miss out for good. Take a look at this research, and [this urgent buy alert]( before it’s too late. [LEARN MORE]( Baltimore, Maryland August 01, 2023 [Greg Guenthner] GREG GUENTHNER Good morning Reader, The bulls are running wild. Remember when we discussed the possibility that the red-hot tech leaders were finally running out of gas? Well, we just witnessed a dramatic mid-air refueling on the heels of last week’s tame Fed meeting, positive earnings reactions, and strong economic data. Just when it looked as if the highest-flying names would finally take a break, frantic buyers stepped in to blast these stocks back into the stratosphere. Mega-cap tech continued to push higher. Semiconductors roared back to life as the VanEck Vectors Semiconductor ETF (SMH) posted fresh all-time highs. Even the tech-growth trade found its footing to finish the week with respectable gains as the ARK Innovation ETF (ARKK) pushed back toward recent highs — despite flashing an ugly reversal candle on Thursday. The bulls were nowhere to be found in December. Now, they’re buying up just about everything and memory-holing the big fears from 2022, including steady rate hikes and sticky inflation data. But here’s the thing… No one is contemplating a pullback — or what might happen if stocks actually go down for a week or two. Confident? Or Just Plain Cocky? Just how cocky are investors right now? For starters, virtually no one is hedging their bets. Snagging puts has never been cheaper than it is now, according to Bloomberg, with the cost of buying protection against a 5% dip over the next year falling to historically low levels. When hedging is dirt cheap, you’ll have trouble finding anyone who isn’t setting up their portfolio with higher prices in mind. Even a routine 5% pullback isn’t top of mind right now. I say “routine” here because a 5% dip is downright guaranteed to come knocking sooner rather than later. The major averages will typically post a 5% drop an average of about four times per year. To think a perfectly normal pullback isn’t lurking around the corner is nothing short of delusional. Yet we’re cruising into August without a care in the world — and stocks aren’t the only assets driving the bulls wild. Real estate projections are also getting crazy, higher prices and higher rates be damned! Zillow (Z) is, of course, fanning the flames. These real estate perma-bulls just announced that U.S. home prices will likely rise more than 6% by June 2024, with almost 50 of the 200 biggest markets seeing a jump of more than 7%. Is this just the way it is? Are we destined to live in a world of never-ending stock market gains and bidding wars for shoddy real estate flips? I doubt it! In fact, I’d wager we are much closer to at least a minor market correction (or even an abrupt reset/gut-check move) than most investors believe. As the great technician Walter Deemer says, “We have nothing to fear but the lack of fear itself.” [Are you worried about “Biden Bucks”?]( Don’t be. All you need to protect yourself and your money is this secret gold investment you see in my hands here. [Click here to learn more]( This new alternative gold currency is the perfect way for you to sidestep “Biden Bucks” while preserving your wealth at the same time. To show you how it works, I just recorded a [quick 2-minute video]( walking you through all of the details… [Just click here now for all of the details.]( [LEARN MORE]( Hibernating Bears Investors think they’re bulletproof. They’ve erased 2022 from their minds and now believe stocks have nowhere to go but up. If you’re tuned into the animal spirits, you understand these are the times we should be thinking about fear — when everyone else has the rosiest possible outlook on the market. For the record, these little tidbits don’t mean I’m itching to short the market into oblivion. I’m not attempting to call a top or bet on a serious market crash at the moment. Quite the opposite! Over at The Trading Desk, we’ve enjoyed a red-hot July where we were able to go 5-for-5 in our options trading, with the worst gain being an 82% winner on Palantir Inc. (PLTR) calls. When the calendar flipped to July, I wasn’t expecting this wild rally. I had a suspicion that the market would flatline for the dog days of summer — or even correct through a broad consolidation following the big push higher in June. The Nasdaq — specifically mega-cap tech — was hitting overbought territory. A pause or move lower felt like a sensible prediction. Obviously, this isn’t what happened. Not even close! But I did not allow my expectations for a move lower to affect the outcome of my trading. Trading the Disconnect As the rally continued to broaden and breakouts extended into July, I had no trouble following the trading signals and hopping on board some strong momentum plays. I call it trading the disconnect. Instead of driving myself crazy by trading what I think should be happening in the markets, I open my eyes and trade what I’m seeing on my screen. This is one of the most important skills any ambitious trader needs to learn. It’s also one of the most difficult concepts for most novices to grasp. I can’t tell you how many times I’ve heard a newer trader tell me they’re going to ignore an obvious buy or sell signal because of some preconceived notion about which direction the market is supposed to be moving. The stock market is not the economy. I’m sure you’ve heard this old saw a million times. An extended take on this adage is that the market will go through extended periods where it appears to be disconnected from reality. Sometimes that’s true. Other times, it’s simply a case of the financial media remaining stuck on an old narrative. That’s usually the case in and around market turning points. The investing public’s core feelings about the stock market take time to reverse and move in the opposite direction. If we apply this idea to the market’s performance so far this year, we can assume the herd was extremely bearish in January, and the narrative was slow to flip bullish until the end of the second quarter. Now, we find ourselves in a situation where investors are chasing stocks following a historic first-half run. I’m more than willing to ride this rally until it starts to sputter. But I’m also aggressively taking gains where I can — and carefully watching for signs of weakness. Just like it surprised everyone by exploding off its lows in January, the market will blindside the unlucky baby bulls during its next 5% drop. Best, [Greg Guenthner] Greg Guenthner Contributing Editor, Morning Reckoning feedback@dailyreckoning.com [Man Who Predicted Bitcoin Warns: “Don’t Buy Bitcoin!”]( [Click here to learn more]( James Altucher first predicted Bitcoin all the way back in 2013… And ever since, he’s been one of the biggest advocates for it. But now, he’s warning Americans that buying Bitcoin could be a big mistake… [Click here now to see why](. [LEARN MORE]( In Case You Missed It… Education Has Become a Battlefield Sean Ring, Editor [Sean Ring] SEAN RING Dear Reader, Last week, I taught a graduate course in New York City for one of the big banks. I thoroughly enjoyed myself and the students did, as well. The experience reminded me of this piece I wrote about 18 months ago, before I was writing for the Morning Reckoning. You see, I’m not licensed to teach. I’ve just got a lot of experience that banks demand. They want me to pass on that experience to their new hires to give them a running start. Honestly, if I had to pass an exam to be able to teach, I’d probably not bother. So let’s get into the ideas of education and freedom… How It Started Over 25 years ago, I bought the Easton Press’s One Hundred Greatest Books series to bolster my meager literary knowledge. My girlfriend was a literature major and I thought my reading would greatly increase our conversational repertoire. Alas, we wound up breaking up anyway. And I was left with these beautiful books that came once a month. Ahab and The Whale The first book Easton Press sends is Moby Dick, a thick classic steeped in the minutia of whaling ships. I felt I could tie knots and sail after I had read it. All great literature makes us feel as if we are there, amid the narrative, sharing the trials and tribulations of both the protagonists and antagonists. Like all things, we like those that make us feel smart. And Melville’s writing does that. He doesn’t condescend for a sentence, making Moby Dick such lavish and challenging reading. I was determined to get through it, though I’d never read a 600-page book before. Some of it was tough going, to be sure; I felt like a rusty weightlifter trying to lift his usual after a few months off. But I got through, and I’m all the richer for it. All that most maddens and torments; all that stirs up the lees of things; all truth with malice in it; all that cracks the sinews and cakes the brain; all the subtle demonisms of life and thought; all evil, to crazy Ahab, were visibly personified, and made practically assailable in Moby Dick. He piled upon the whale's white hump the sum of all the general rage and hate felt by his whole race from Adam down; and then, as if his chest had been a mortar, he burst his hot heart's shell upon it. There may not be [a finer passage]( in all literature. I remember reading those famous words for the first time and thinking, “Yes. That’s it. That’s why we read these books. That’s why they’re called Classics.” So you can imagine my dismay when I saw Star Trek: First Contact, the finest of all the Next Generation films. Self Education To hear Sir Patrick Stewart, a classically-trained actor, and a veteran of the Royal Shakespeare Company, butcher this passage was an affront to me. I felt like a 22-year-old Waldorf and Statler-like critic! Oh, I know why he did it. Who knows what a “mortar” is today? Or in 1996, for that matter, before Her Majesty The Queen knighted him? “His hot heart’s shell?” What? What is he talking about? You can find the misquote here, right on [IMDB](. The bolds are mine: Captain Jean-Luc Picard: [Quoting "Moby Dick"] And he piled upon the whale's white hump, the sum of all the rage and hate felt by his whole race. If his chest had been a cannon, he would have shot his heart upon it. Lily Sloane: What? Captain Jean-Luc Picard: "Moby-Dick.” Lily Sloane: Actually, I never read it. Captain Jean-Luc Picard: Ahab spent years hunting the white whale that crippled him, a quest for vengeance, but in the end, it destroyed him and his ship. Lily Sloane: I guess he didn't know when to quit. At least he didn’t butcher the message, I suppose. Why do I bring this up? Because no teacher ever taught me that. No one ever made me read Moby Dick. That isn’t a rebuke to the Hasbrouck Heights Junior-Senior High School English Department, which was easily the best assembly of teachers in my high school. But life influences, circumstances and desires fuel our need to further our education at one time or another. And the sooner, the better. Rude reader Dan K. reminded me of all this with an excellent commentary on the state of education. Or, in The State’s parlance, the education of the state. And that, my friend, is the problem in a nutshell. 1619 or 1776? That is the Existential Question... Dan wrote to me about the 1776 Report, issued by the Trump Administration, in response to the New York Times’s 1619 Project. Of course, The Cathedral awarded the Pulitzer Prize to Nicole Hannah-Jones for her work on The 1619 Project. It’s plain to see why Trump felt a duty to strike back, so to speak. Here’s a list of essays that make up The 1619 Project: - "America Wasn't a Democracy Until Black Americans Made It One,” essay by Nikole Hannah-Jones - "American Capitalism Is Brutal. You Can Trace That to the Plantation", essay by Matthew Desmond - "How False Beliefs in Physical Racial Difference Still Live in Medicine Today,” essay by Linda Villarosa - "What the Reactionary Politics of 2019 Owe to the Politics of Slavery", essay by Jamelle Bouie - "Why Is Everyone Always Stealing Black Music?", essay by Wesley Morris - "How Segregation Caused Your Traffic Jam,” essay by Kevin Kruse - "Why Doesn't America Have Universal Healthcare? One Word: Race", essay by Jeneen Interlandi - "Why American Prisons Owe Their Cruelty to Slavery,” essay by Bryan Stevenson - "The Barbaric History of Sugar in America,” essay by Khalil Gibran Muhammad - "How America's Vast Racial Wealth Gap Grew: By Plunder,” essay by Trymaine Lee - "Their Ancestors Were Enslaved by Law. Now They're Lawyers", photo essay by Djeneba Aduayom, with text from Nikole Hannah-Jones and Wadzanai Mhute We all have our frames. And if you’re African American, you will have a different frame to the one I grew up with. But alleging America is America because of slavery is ludicrous. And that’s where education becomes a battlefield. An Education For All Must Be An Education For One, First Murray Rothbard wrote a monograph called Education: Free and Compulsory. Of course, Rothbard, as a libertarian, believed education should be tailored to each child’s needs. Not only is this right and the best way to give the child the ability to absorb new concepts, but the alternative is the gateway to totalitarianism. Rothbard writes: It is evident that the common enthusiasm for equality is, in the fundamental sense, anti-human. It tends to repress the flowering of individual personality and diversity, and civilization itself; it is a drive toward savage uniformity. Since abilities and interests are naturally diverse, a drive toward making people equal in all or most respects is necessarily a leveling downward. It is a drive against development of talent, genius, variety, and reasoning power. Since it negates the very principles of human life and human growth, the creed of equality and uniformity is a creed of death and destruction. He goes on: Since each person is a unique individual, it is clear that the best type of formal instruction is that type which is suited to his own particular individuality. Each child has different intelligence, aptitudes, and interests. Therefore, the best choice of pace, timing, variety, and manner, and of the courses of instruction will differ widely from one child to another. And further writes: It is obvious, therefore, that the best type of instruction is individual instruction. A course where one teacher instructs one pupil is clearly by far the best type of course. It is only under such conditions that human potentialities can develop to their greatest degree. It is clear that the formal school, characterized by classes in which one teacher instructs many children, is an immensely inferior system. Since each child differs from the other in interest and ability, and the teacher can only teach one thing at a time, it is evident that every school class must cast all the instruction into one uniform mold. Regardless how the teacher instructs, at what pace, timing, or variety, he is doing violence to each and everyone of the children. Any schooling involves misfitting each child into a Procrustean bed of unsuitable uniformity. I couldn’t agree more. Luckily, many Black families feel the same way: [chart] Credit: [census.gov]( This is thrilling, excellent news. These kids aren’t victims. In fact, with the help of their parents, they will have shrugged off that awful millstone. They’ll thrive in this environment. Even the liberal [New Yorker]( seems to cheer this trend on. In the fight between state-sponsored malarkey and parents looking out for their children’s best interests, support the parents. I just hope they read Moby Dick at a younger age than I did. Light that fire early! I’ve received a lot of good feedback so far on my “educational” pieces. Let me know if there are any topics you’d like to learn more about by emailing me [here](mailto:feedback@dailyreckoning.com). All the best, [Sean Ring] Sean Ring Contributing Editor, The Morning Reckoning feedback@dailyreckoning.com Twitter: [@seaniechaos]( Thank you for reading The Morning Reckoning! We greatly value your questions and comments. Please send all feedback to [feedback@dailyreckoning.com.](mailto:dr@dailyreckoning.com) [Greg Guenthner] [Greg Guenthner, CMT,]( is chief strategist at Forge Research Group. He has spent the better part of the past two decades developing long-term and short-term strategies with a single goal in mind: to help everyday investors generate outstanding returns and control their financial futures. Greg’s charts, analysis, and insights have appeared in Marketwatch, Forbes, Yahoo Finance, and many other financial publications. [Paradigm]( ☰ ⊗ [ARCHIVE]( [ABOUT]( [Contact Us]( © 2023 Paradigm Press, LLC. 808 Saint Paul Street, Baltimore MD 21202. By submitting your email address, you consent to Paradigm Press, LLC. delivering daily email issues and advertisements. To end your The Daily Reckoning e-mail subscription and associated external offers sent from The Daily Reckoning, feel free to [click here.]( Please note: the mailbox associated with this email address is not monitored, so do not reply to this message. We welcome comments or suggestions at feedback@dailyreckoning.com. This address is for feedback only. 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