It works until it doesn’t. Now all eyes are on housing.
By Wolf Richter. This is the transcript of my podcast of last Sunday, May 23, THE WOLF STREET REPORT.
The market philosophy and the overpowering strategy on how to approach the markets since last summer – and I mean the stock market, the housing market, the crypto market, the junk-bond market, and a bunch of others – was summarized eloquently for all eternity: “Just shut up and buy,” the guy said.
For a long time, I mean for months, this strategy worked, everything was going completely crazy, and people kept changing metrics to explain that this was the new normal, that this is how it would be from now on. It became a “raging mania” – again one of those highly accurate technical terms – and it practically didn’t matter what you bought, and at what ludicrous insane price you bought, because as long as you bought, you made money.
But then, the logic of “just shut up and buy” broke somewhere near February 12. Many of the most hyped segments of the whole rigamarole started cratering. We’re talking IPO stocks such as Airbnb, which is down 39% from the peak, Zoom, which is down 46% from the peak, Palantir which is down 53%, Snowflake which is down 45%, and many others…
EV stocks started cratering too, including Tesla which is down 35% from the peak, and SPACs – the special purchase acquisition companies – and especially the EV SPACs that are down 50% and 60% and some over 70%, such as Quantumscape, and a few are down over 80%, such as super-hype-nova Nikola, which is down 87%…
Or media-darling Cathy Wood’s ARK Innovation Fund which is down, well, only 34%…
And real estate outfits such as Compass, which had its IPO seven weeks ago, is down 37% from the peak on the first trading day, and Redfin which is down 47%. And Zillow, which is now flipping houses, is down 45%.
And there’s another market philosophy and overpowering strategy on how to approach the markets: “Just buy the effing dip.”
In these segments, people did just that, and they bought the effing dip, or rather every plunge that the standouts such as Nikola performed, and every time they bought the effing dip, shortly thereafter they got run over by another and even bigger effing dip. At some point, this is starting to hurt.
In other words, there is a bloodbath going on in these segments. And this bloodbath has been deepening and widening, and their market capitalization is in the billions of dollars, or hundreds of billions, such as Tesla, and the damage has started to bubble to the surface ever so gently even in the overall stock market indices though they track many trillions of dollars in stocks.
The Nasdaq is down only about 5% from its high, and the S&P 500 has stalled since mid-April and on Friday was down just 2% from the high. So people who are invested in the overall stock market…
Read More: “Just Shut Up and Buy”: But Hype-Stocks & Cryptos Crashed