Was this the week of capitulation?
That's the $8 trillion question for the markets these days. First, for those who failed high-school Latin : Capitulation refers to the bowing of one's head in surrender at the end of a battle. If you're lucky, your head doesn't get chopped off.
In markets, it's when things turn so ugly that many of the bulls finally bow their heads in surrender and hit the "sell everything" button, which in turn makes things turn even uglier. The bears, sufficiently satisfied that things are ugly enough, turn into bulls and start two-fisted buying that sends prices back up and makes the capitulators look like dunces.
The V-shaped 3.7 percent intraday plunge and recovery in the S&P 500 on Wednesday certainly had the aroma of capitulation, though we'll have to wait and see if it was actual head bowing or just a head fake. Those who follow the punditry in financial news solely for its value as a contrarian indicator -- and that's a big demographic -- were surely giddy to see the article with the headline "How Much Lower Will Markets Go? Top Investors See No Bottom Yet" land on their screens right as that V shape was taking shape.
Even some of the most reliable bulls out there sounded as if they were getting a little queasy this week. Tom Lee of Fundstrat Global Advisors -- who's sitting on a year-end S&P 500 forecast that's some 28 percent above the market's low point of 1,812 this week -- didn't exactly bow his head, but did nod it a little bit. "Damage to bullish thesis, but not end" was the title of his note on Friday even as he conceded that sustained low oil prices could trigger a credit-market meltdown and recession that really would spell the end of the thesis.
Laszlo Birinyi, the former Salomon Brothers hand who's reliably and correctly endorsed this almost seven-year-old rally from the beginning, said he's more worried about stocks than he's been since 2009 because the geopolitical wild cards of China and the oil market are just too impossible to assess.
George Soros said he was shorting the market. Russ Koesterich of BlackRock said stocks and oil had further to fall. If it's optimists you want, Templeton's Heather Arnold, who has about $42 billion in funds to worry about, doesn't see too much to worry about. Citigroup's Ivan Szpakowski's seems to agree with El Chapo that the bottom of oil is near once the market works off a post-sanctions surge of supply from Iran. He calls crude "the trade of the year," which sounds a little gimmicky to us, but whatever.
What's to be learned from all this pontification amid a whiplash week in markets? Well, for one it was a great week to be in the financial press, when demand was raging for predictions of the unpredictable and boldfaced names were willing to make baldfaced market calls knowing full well that the wrong ones will be thrown back in their faces. So thanks for that, y'all!
Second, the scent of capitulation was heavy in the air of the financial news even away from the market charts. JPMorgan Chase's board managed a neat trick of capitulating to both CEO Jamie Dimon and shareholder proxy services by increasing his pay to $27 million but tying it to future performance. The heavyweights gathered in Davos capitulated to global warming by working on a plan to divvy up the spoils of a melted Arctic Ocean rather than trying to prevent the inevitable. Hedge-fund manager David Tepper is smartly capitulating on New Jersey right before the big blizzard by reportedly booking space in a flashy Miami high rise.
So in the spirit of capitulation, the Gadfly Trade of the Week goes to Jerry Seinfeld, who has decided to unload several vintage Porsches each worth more than $1 million, as Bloomberg's noted car-and-hat enthusiast Hannah Elliott reported:
“I've never bought a car as an investment,” Jerry Seinfeld said in a written statement. “I don't really even think of myself as a collector. I just love cars. And I still love these cars. But it's time to send some of them back into the world for someone else to enjoy.”
(Note to readers outside the U.S.: Jerry Seinfeld starred in an eponymous television series that paralleled the dot-com bubble very closely in that both involved 1990s-era American nerds in their 30s who got filthy rich by putting on a fantastic show about absolutely nothing.)
Other than that statement, we don't know much about Seinfeld's motivations -- or whether any of these cars were once owned by Jon Voight (or even John Voight) -- but it's clearly troubling that one of history's richest comedians is suddenly a used-car salesman. Seinfeld cashing out on risky assets like Porsches is like John Bogle cashing out of an index fund, or Bill Ackman selling Valeant shares: It's just not supposed to happen.
One thing is sure: There's a future Trade of the Week award up for grabs for whoever buys these cars when they go up for sale in March, so plan your bids accordingly.
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Michael P. Regan in New York at firstname.lastname@example.org
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