Friday, February 23, 2024

SPX and COMPQ: Irrational Exuberance

Since last update, COMPQ captured its target, but SPX fell short.  Markets are rarely rational, and I learned to accept that decades ago as a trader -- but I have to say, this particular market is a frustratingly irrational market.  The fundamental macroeconomic picture is vastly different than the late 1990s, but as far as the market's behavior if judged as if in a vacuum, in a weird way, I might be tempted to say that's the closest analog I can find in my own personal experience.  The tail end of the bubble, when "irrational exuberance" ruled the day.

One huge difference in the macroeconomic picture is, of course, the massive debt facing both the U.S. and the world... and being overburdened by debt rarely ends well.  WSJ has had some interesting coverage of this lately, reporting that interest payments alone over the next 10 years are projected to exceed $12 trillion dollars.  This year, servicing the debt (interest alone) is already going to be third largest expenditure, behind only Social Security and Medicare:

Interest payments have exceeded the national defense budget for the first time in history:

The current trajectory is simply unsustainable:

But hey, that probably won't be an issue for a few more minutes, so BUY, MORTIMER, BUY!  

Anyway, here's COMPQ, which behaved well:

And SPX, which behaved like a crack addict:

In conclusion, the market clearly wanted a simple correction either way, so not much to add beyond all that.  Trade safe.

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