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Anecdotal evidence: “Evidence in the form of stories that people tell about what has happened to them. Example: ‘His conclusions are not supported by data; they are based only on anecdotal evidence.’”
It’s important you avoid extrapolating anecdotal evidence because there’s almost always data that’s more relevant. On the other hand, when you add up enough anecdotal evidence, it can start to look like data. And there’s something to be said for simply looking at reality, the anecdotes around you, and accepting what you see.
I find no bullish anecdotal evidence. There are only bearish anecdotes in the world today.
Teen crypto owners
Fully vaccinated but still cautious for my daughter who’s on oxygen, I was on the periphery of a graduation party in a wealthy enclave outside Dallas over the weekend. I heard my nephew and his friends mention their crypto holdings.
So I decided I needed to do a poll of the 18- 20ish-year-old kids at his party. I kept the results in my head, and here’s how they came out: Seven kids owned Dogecoin
DOGEUSD,
One owned Cardano. One owned bitcoin
BTCUSD,
Each of them had made the purchases earlier this year. One kid said he bought $1,000 of bitcoin a few weeks ago and sold it when he made $50. Two kids said the only reason they don’t own any crypto is because they can’t, for some reason. One awkward kid who was sitting by himself or his parents for most of the party was the only one who said he had no interest in crypto “because I don’t understand what it is.” He was the only kid I thought might actually know what he’s talking about.
The last group of three kids I polled asked me if I was in crypto. I told them “yes,” I’d been in bitcoin for years but that I was worried that we might see a crash in most cryptos this year.
I said: “Maybe I should be selling more of my own crypto to you guys here. After all,” and I pointed to the 80-year-old farmer sitting under the pergola, “I don’t think he’s going to be buying my cryptos from me at higher prices. And he’s the only one around here with real assets.”
Deli as a goldmine
Here’s a deli in New Jersey worth $100 million that’s now doing a reverse merger with an electric-vehicle startup. It’s one of the wackiest deals I’ve seen put together.
I read an article about this on CNBC, and even after 25 years of analyzing deals, I couldn’t get my head wrapped around all the moving parts. So I had one of my analysts put together a chart to show us what the hell is going on here — you might need to zoom in:
Deals like this don’t get done when stocks are close to a bottom. I’m not sure why a deal like this would ever exist. But I do know that deals like this only get done when stocks are in a bubble.
Devalued dollar
Here’s another bearish anecdote: The most hated asset in the world right now is cash. The kids are in cryptos, the institutions are in stocks and starting to get into crypto, the bears (few as there are) are shorting stocks, but is anybody out there preaching cash is king? No.
Word on the Street is that “cash is trash” and that bitcoins are better than bonds” (to paraphrase). I thought they’d said that bitcoin was in a bubble back when it was 95% lower than its current price: “’It’s not an effective store of wealth because it has volatility to it, unlike gold,’ the hedge fund founder added. ‘Bitcoin is a highly speculative market. Bitcoin is a bubble.’”
Hmm.
Rise of AMC and meme stocks
How about the fact that retail traders who are playing with AMC’s
AMC,
stock are threatening Wall Street sell-side analysts who are now too scared to comment to CNBC on the record: “CNBC reached out to a number of analysts who cover AMC and many refused to comment out of fear of repercussions from these retail investors. Some indicated that they had already received phone calls, emails and other messages in response to previous downgrades of the stock.”
Those anecdotes are not bullish.
Earlier this year, when small-cap tech stocks, cryptos and everything else went parabolic, I started writing that we were in the Blow-Off Top Phase of the Bubble Blowing Bull Market (see Feb. 10’s Trade Alert: Strategies for This Blow-Off Top Market, for example) that we’d been riding since 2009. I do think The Bubble-Blowing Bull Market probably popped in February or March when most small-cap tech stocks, every SPAC, most cryptos and even Cathie Wood’s ARK Innovation ETF
ARKK,
all put tops that are far away from their current levels. That doesn’t mean stocks will go straight down or that we’re going to see a crash in the major indices.
But I have to admit that the anecdotes above, along with just about every other anecdote I come across in regard to trying to trade in the markets, is pretty darn bearish. How many anecdotes does it take to make up a mesh of data? How many bearish anecdotes do we have to see in front of our faces before we take them serious?
My feet-to-fire guess is that the markets are in a rip-the-shorts’-face-off rally, a second echo blow-off top with meme stocks and the hundreds of crappy alt-crypto coins ready to crash next. I think the broader indices will struggle to get much higher than these levels and that the path of least resistance for most stocks and the broader indices is probably lower for the near term for most of the this year.
Opportunities ahead
We were loading up on Apple
AAPL,
Alphabet
GOOG,
Facebook
FB,
Nvidia
NVDA,
Tesla
TSLA,
bitcoin, ether
ETHUSD,
et al., over the years when they were hated or ignored. I am happy to find some new names at cheap valuations in new future trends that can turn into our next 10 to 200 baggers for us.
But I do think we are going to get some better, maybe much better, buying opportunities — in coming weeks, months and next year or two — as we grind ourselves out of this current phase of the market. Having some cash on the sidelines, not being greedy, not trying to capture the next 30% meme-bubble move, using fundamentals and valuations and common sense while sticking with the rest of our many long-hold winners are probably what’s going to be the best way to make sure we’re positioned for the most likely outcomes here.
Cody Willard is a columnist for MarketWatch and editor of the Revolution Investing newsletter. Willard or his investment firm may own, or plan to own, securities mentioned in this column.
