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2018-10-25 07:00 by Karl Denninger
in Market Musings , 161 references
[Comments enabled]  

Markets do not crash from highs.

Indeed they nearly always crash from severe oversold conditions -- that is, on "local" lows.

The reasons for this are somewhat complex but come down to psychology.  Every night some number of people wake up in a cold sweat thinking they're going to lose all their money.  Some other number of people wake up with a huge, raging hard-on thinking they're going to make a fortune.  They meet during the day, or even overnight now with the futures, and hit "buy" or "sell."

The day none (or effectively none) of the people have hard-ons is the day the market crashes.

The reason this almost-never happens from "highs" is that there are plenty of people with hard-ons when the market is rallying.  It's only after dippy gets his head cut off a few times trying to buy bounces that they fail to show up.

Are we there yet?

Probably not.  But we're a hell of a lot closer than we were a few months ago.

You need both that sort of situation and the precursor -- a whole bunch of companies with 100+ P/Es, or even worse, firms making no money at all but flying high and successfully selling ever-more debt in the "high yield" marketplace, to set the stage.

That we have.

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2018-10-17 09:54 by Karl Denninger
in Market Musings , 119 references
[Comments enabled]  

The opposition of the alcohol industry to weed legalization is obvious.....

“I realized that I get zero enjoyment out of drinking and it costs me more money than weed does,” said Jena, who asked to omit her last name because marijuana is not legal where she lives.

Oh.....

Well now.... that, by the way, puts a whole lot of color on the weed industry too though.

You see, booze, while a significant (and profitable) business isn't that large.  The total booze (all types) in the US was about $25 billion last year, half of which (roughly) is wine.

Now consider that if there's a substitution effect and the cost goes down to the consumer for the cannabis products then the gross sales are going to be materially smaller than they are for the booze industry.

There are still people preening around saying that the total addressable market is in the couple-hundred billion area -- Tilray's CEO being one of them.  IMO he's using too much of his own product.

I know, I know, the stuff's legal in Canada basically now.  Fine.  The US will follow, and soon -- it's utterly silly to cater to Jeff "I'm a dickhead" Sessions at this point, but it's part and parcel of his bull**** and that Trump doesn't really care about the issue - especially not the very real and known medicinal characteristics for kids suffering from epilepsy.

Nonetheless the worm will turn -- just don't get caught under the weed stocks when the floor falls out of their valuations -- because it will.

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