Daily Brief – Fed worries rile the stock market (Nov 3, 2021)

Updated: Nov 4

Ok, we’ll come clean. Some of us believe that this is it. This is the peak. This is March 2000, when the dot.com peaked, and the house of cards was about to fall.

The argument goes something like this:

A company that produces less than 240 thousand of electric cars is worth $1tn - more than all other carmakers who together produce almost 80 million vehicles per year.

For additional proof of the bubble, look at tulip-like goods like NFTs which are popping up 1000x on listing day.

Or just look at this - the greatest trade ever made:

The Fed will begin tapering, and if rates rise by just one percentage point pension money will flood away from risk assets and the castle of cards will fall.

Now to be clear, the arguments above are all valid. However, betting against this bull market has not been a good idea in the last 10 years.

Many forces are leading the bull market higher.

For one, liquidity has never been more plentiful. The Fed Taper means that the liquidity tap is still open, just less so.

Secondly, tech delivered and is now ubiquitous. We are in the market dreamed by the dot.com investors 20 years ago. They were just too early.

Third and final, momentum feeds itself. Abundant liquidity allows companies to invest in more growth.

It’s not easy to kill this kind of bull. So if you are of the short persuasion, be careful in your timing.

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