00:00Bob Elliott of Unlimited Funds writing the rotation isn't a sign of resilience but misplaced optimism
00:05as talks ramp up, folks ramp up, the FOMO caution is warranted.
00:10Bob joins us now for more. Bob, good morning. Good to see you.
00:12Good morning.
00:12What are your thoughts on this rotation so far?
00:15And do you think we've had that so-called clearing event that's going to allow us to rally on a
00:19sustainable basis?
00:20Well, it looked like even a week ago that we might be moving to the point where we got a
00:25clearing
00:26of the mania that existed in the AI and semi-sector and all of a sudden we're back to FOMO
00:32and catch-up here.
00:33And that's really been the driver of what's been going on in this market is everyone is so concerned
00:37about being behind the curve as prices go higher and higher.
00:41It's classic bubble-type activity.
00:43Now, calling the top in a bubble, a little challenging.
00:46Anyone who's been in this business for long enough knows.
00:48But when you see something like that, you've got to recognize that levering in and going full bore on the
00:55bubble
00:55is often an imprudent move.
00:58You're calling it a bubble.
00:59Just define why you're calling it a bubble right now.
01:01Well, I think a classic bubble is extremely high expectations, which, to be clear, on earnings,
01:07we have the highest expectations for earnings growth over the course of the next five years
01:11that we've had in the post-World War II era.
01:14Extraordinary outcome is priced into these markets, combined with the fact that people are using
01:19significant leverage to buy assets because they're already full up on getting exposure to these names.
01:25They have to go and add leverage, and that leverage is everywhere.
01:28I wrote a recent piece in my subset called Leverage, Leverage Everywhere, right?
01:32And it's interesting.
01:33This isn't the leverage of the GFC, concentrated in highly levered banks.
01:36This is like Wells Fargo giving significant amount of securities leverage to their wealth clients.
01:43This is levered ETFs.
01:44This is options trading.
01:46It's kind of everywhere and diffused, so it's hard to point to the exact place where all the leverage is
01:51piling up,
01:51but it's kind of everywhere, and that's a good sign that this market is overbought on borrowed money.
Comments