FOMA Again?

June 20th, 2023

Hoping that everyone had a fun filled and sunny “Fathers’ Day and Juneteenth celebration three day weekend.

FOMA, is an acronym for “Fear of Missing Out.” That is the stock market history that people like to chase a positive moving train. As stocks become more expensive, more people believe that the trend will continue for a long period of time, and try to jump on board. Only to find many times that they are the last ones to arrive at the party.

This shorterened trading week should provide some indication about the strength of this recent 5 week stock market rally. I certainly could be wrong, but continue to believe that this is more of a “wishful thinking” rally, than the start of a new bull market run.

Why am I still cautious. Well from the reports I read I still see significant economic problems around the world, including in China as the property sector bubble continues to expose the weakness of the Chinese “miracle.”

Major investment banks, such as Goldman Sacks, and Morgan Stanley, continue to move down their business forecasts for China from the 6% level to the 5 1/2% range. Although not bad when compared to many other economic forecasts, I have a hunch the true sate of the Chinese economy will turn out to be much worse than these forecasts. As the Chinese central government continues to inject more stimulus into their economy, it seems to have less and less of a positive outcome.

Another factor that gives me concern is that the level of bullish option buying over the buying of bearish options, has reached a level usually found near market tops.

One last factor that I look at is that consumer credit card debt has reached the Trillion Dollar level, a new record. As consumers have trouble making credit card payments, they will be forced to curtail their spending on Homes, and Cars and Travel and Restaurants.

Anyway, let’s see what unfolds in the coming days. Of course, I continue to like the 4 percent plus returns available with 3 month and 6 month Treasury Bills.