This Time, the Shoeshine Boy Has Actual Skin in the Game
The shoeshine boy is not just giving customers stock tips these days; rather, he is jumping on hot stocks himself, scalp-trading three or four shares of Tesla, at $1500 a copy, in his Robinhood.com account. That's all the stock these penny-ante schemer-dreamers can afford, and it is why it is not the metaphorical bootblack operating out of his parents' basement who has been driving a handful of stocks moonward, as the story-hungry news media would have us believe. Even so, the shoeshine boy's gambling jones is having its effect on some big players, who for a dozen good reasons have been shorting stocks like Tesla and Moderna all the way up. Short covering, as always, has been the most powerful force driving this rally. Realize that even a sea of Fed funny money cannot float stocks past resistance peaks and mountainous layers of supply. It takes irrational exuberance and bear panics acting together to accomplish this, but also institutional shareholders who are smart enough to avoid getting in the way. That's why most of the gains in Tesla, Apple and a few other stocks leading the charge have occurred in the dead of night, when volume is practically nil. AAPL will gap up five wholly undeserved points in the wee hours, creating an additional $20 billion of wealth for size players who can afford to buy-and-hold to satisfy their own easy-money jones.The magical result is that money is created almost as efficiently as by the Fed, albeit somewhat more persuasively, since at least on the surface the bottom line for millions of bettors is a very tangible manifestation of the wealth effect regularly deposited in their trading accounts. This financial fattening occurs, as all manias do, with no actual work. The Fed's behind-the-scenes manipulations are all very mysterious, but not so the upward movement of stocks. They are the true source of helicopter money, although it is surely not what Bernanke had in mind when, years ago, he averred that the banksters could reliably thwart deflation by conjuring up whatever measures were necessary. He didn't know the half of it, since even a guy steeped in Keynesian quackery as he is could not have foreseen just how far the Fed would go to keep its promise of good times forever.
And so we have a stock market that is rampaging for the most ridiculous and least sustainable reason of all: because...well, because stocks have been rampaging. Nearly every bet these days is necessarily a momentum play, since even the crazies understand there are no decent values to be had. There are plenty of indecent ones, though, and the handful of stocks tasked by Trump and Wall Street with making America great again have been climbing so ferociously since the coronoavirus pandemic hit in March that even the blinkered, benighted hacks who invent the news have begun to routinely question Wall Street's sanity. We hear little from our political leadership about this, however, and even Biden has not tried to make the case that the stock market rally is the last reason you want to be voting for Trump, let alone take as a sign that the economy is returning to health. There are of course millionaires on both sides of the Congressional aisle, and for all we know they are closet momentum players too. Unsurprisingly, there will always be a few assholes in the customer world shilling the case that Tesla is actually worth nearly $300 billion because car sales are improving. But it doesn't take shills to push scratch-off plays like Moderna, since, as everyone knows, an amazingly effective vaccine is just months away. More immediately, earnings are due out this week for some biggies, including Tesla and Microsoft. Not that the ginned-up data, no matter how discouraging, will matter.As an aside, let me mention that Microsoft, for all the hubris touting the company's technological prowess, is ultimately just a corporate rat's ass, ahead of even Google and Facebook in this category. I've spent 70 hours this month attempting to remedy a catastrophic error committed by one of their front-line techs. All I had wanted him to do was free up some space on my hard drive, but he inadvertently moved my Windows 10 operating system to an external drive, where it functions like a bivalve immersed in cheese grits. The thing is, the next two techs who worked fruitlessly on the problem didn't even realize that the operating system had been moved. My 'ex', meanwhile, is at three weeks and a hundred phone calls, trying to re-open an Amazon account with a hold on it that none of their customer support geniuses can figure out. I have seen the digital future and it doesn't work. It is just Blade Runner and Brazil, with more than just a touch of Idiocracy. Celebrating our already fatally dysfunctional, digital future with outlandish stock valuations for the biggest players is one of the great follies of this age.