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What I think I learned last week #19

Back in November, I mentioned how it was looking like we were hitting a « melt-up » phase of the market. The first week of 2018 certainly looked like a melt-up to me.

US stock indices started the new year like it ended the old year: hitting new highs, with the Nasdaq Composite breaching the 7000 level for the first time and the Dow busting through 25,000.

Both the S&P 500 and Nasdaq Composite Index have had four consecutive record highs to start 2018. The S&P 500 hasn’t begun any year with as many all-time highs since 1964, when it started with six. The Nasdaq hasn’t started any year this hot since 1999.

Japanese stocks started the year on a high note as the benchmark Topix index hit levels last seen in late 1991.

In 2017 the S&P 500 did not have a single monthly decline in dollar terms and has now risen for 14 months in a row. This has never happened before. Market participants are asking how long can this trend continue?

Oil has been ripping upwards as well. But beware the crowded trade. It is reported that hedge funds have accumulated a record bullish position equivalent to more than a billion barrels of oil in Brent and WTI. In my experience, hedge funds don’t actually take possession of oil and use it, so those positions will be sold eventually.

The Financial Times pointed out: “Avoiding banks is generally a good way to sleep well. Worldwide, investing only in non-financial stocks would have produced better results than including them over one, two and three decades.”

Eurozone inflation fell to 1.4% while economic confidence numbers hit highs last seen in 2000.

US jobs report was a bit disappointing in the headline number with only 148,000 jobs created in December. The unemployment rate remained steady at 4.1%.

Canada, which was expected to report a net gain of 2,000 jobs in December, came in with a blockbuster number of 79,000.

Tesla has long been known as a technology leader in both electric and autonomous driving vehicles. Tesla has now moved into a completely new category: the invisible car, which is called the Model 3. Finimize, a terrific investment news site, noted that Tesla has now produced almost the exact same number of cars during each of the last six quarters and that the 5000 per week Model 3s that they were supposed to be building now, will not happen for another six months. In fact, instead of 5000 per week, Tesla only managed to produce 2425 for the entire quarter.