Make or Break time for the Micro Traders

This is an important week coming up. Last Friday and today we see the Funny Money based micro traders making an attempt to make and hold new highs in the stock indexes. Their buying is totally short term based around earnings numbers that have been fanned by easy money and the fact that during the Covid epidemic, the big companies have taken market share from the little companies. This increasing inequality is purely due to the fact that the FED has made it easy for the big companies to pull in capital while letting Mains Street wither. This is stretching multiples. Biden’s people keep talking about fixing things but so far they do not appear to have an Economic leader. That will change, it just might require more chaos first.

So while keeping the Micro picture in mind, here are two Macro charts that tell a story.

First is a chart put out by Bloomberg recently that shows global market capitalization compared to global GDP. It is obvious that we are looking at stretched measures fanned by cheap money.

And next we are showing one of our charts showing three market cycles, 6, 12, and 18 year cycles using monthly data, 1900 to 2021. As old time readers will recall, I like the 18 year cycle. What it shows is that year 2000 was the Macro cycle high that will probably stand well beyond our lifetimes. The prior cycle peak by that measure was in 1960 and the last is right now. In a sense we have a head and shoulders top to Macro Capitalization which will no doubt be realized due to long term climates factors evolving. The current levels of the 18 year cycle, while completing the righ shoulder of the Macro chart, are at best anemic, probably due to the fact that coming out of the 2011 base, funding has been through government handouts.