There’s almost too much to catch up on today, so I will summarize as best I can.
The super-short version is that equity markets sold off hard, the story stocks got absolutely clubbed, and three oil tankers near the Strait of Hormuz were seriously damaged in a sabotage attack. Wild markets and wild times, indeed.
While it’s hard to describe the sell off in the US equity “markets” today as anything other than “a start” at least it seems like something has shifted.
After rising roughly 600 points off of the December (18) lows, the S&P 500 has barely given up a fraction of the rise over the past week and one day (of this trading week):
I’ve marked a ‘big round number’ which is 2,800. For whatever reason, the “markets” like to dance around these big round numbers as if they meant something other than target/price fixation by various government officials and trading algorithms.
There’s nothing magical about bit round numbers from a fundamental standpoint. It’s purely psychological, which is why I believe we see such spirited defenses of them when they are about to be breached to the downside.
Today was no exception:
Everybody and their distant relatives expects such goal-line defenses as well as an almost certain burst of a closing rally in the final minutes of the day. So nothing too abnormal at the headline index level given the fact that the trade deal with China is dead.
However, it’s under the covers that we see something interesting developing.
One of my pet theories has been that the so-called ‘story stocks’ have to give way before The Everything Bubble can really burst in earnest. The story stocks are just that; stocks of companies that exist on the basis of a story that excites investors rather than on such things as earnings or positive cash flows.
The most recent entrant which joined us via IPO on Friday of last week is Uber, which was priced at an obscene valuation of $82.5 billion at the IPO price of $45/shr. The story of Uber is a good one, with lots of compelling angles, and I happen to use the service all the time myself.
It has cut down on drunk driving, it’s convenient, it’s cheap, it allows people the freedom to not own a car if they don’t want to.
by richcabot 
