The pick you up and they bring you down… bubbles

Stocks had a mixed close in a low-volume session on little or no news other than Fedspeak. Traders sidelined themselves in the afternoon to see the solar spectacle… with special eclipse spectacles becoming a hot commodity in and of themselves in NYC.

Supply and demand. I will admit, I did see the eclipse. I, like most New Yorkers, tried to pretend that it was no big deal that the moon temporary blocked the sun. I sat in my office keeping myself quite busy, focusing on the huge collection of screens that line my desk. Then it happened. I glanced out my window at the adjacent Battery Park City Esplanade, and I saw that it was packed with people wearing those silly looking, NASA-approved sunglasses. I even spied rows of folks on the roofs of World Financial Center buildings. They were all gazing out over the Hudson River in the direction of the Statue of Liberty. I know that it was not Lady Liberty that attracted their collective gaze. No, of course, it was the silly eclipse… which of course… was no big deal 😉. Then I looked across the trading floor to all the offices that overlooked the river, and they were lined with seasoned, unemotional Wall Streeters, who also just minutes ago declared the eclipse as “no big woop.” They were passing around those silly sunglasses, noses pressed against the windows, looking at the eclipse. I could not remain unflapped for too much longer. I casually strolled across the trading floor to my friend’s office, careful not to walk too quickly; I didn’t want any of our younger folks to get the impression that I was bursting with excitement to see the eclipse. I did my best. I grabbed those silly cardboard sunglasses and looked right into the face of the sun, and what I saw… … … was utterly fantastic 😎🌕☀️.

I hope that my ophthalmologist (whom I am seeing tomorrow night) is not reading this, but I admit that I briefly lifted the goofy glasses to see if I could make out the eclipse with my bare eyes. Why would I do such a silly thing? You see, in New York, the eclipse dominated all the headlines and local TV news, so I wanted to know if I really needed those glasses. Whether by plan or happenstance, what we got from all that news coverage was a massive public health initiative warning us not to look into the sun without special eclipse glasses. The initiative was such a success that one could not easily get their hands on the cardboard glasses… unless of course… one was in the highest income bracket… because, as you know, everything is for sale for the right price. Street corner bodegas all around the city managed to stock up on the glasses and were selling them for quite a hefty price. I thought for a minute that it would be nice to get in on that trade. I mean, how much could it cost to manufacture those things… think of the margins 🤔💰💰💰💰.

I know that I was not the only one thinking about that yesterday. There were some really, really entrepreneurial folks who managed to get dozens of the glasses and were even selling them on the street for cash. The closer the clock ticked to 2:30, the higher the price went.

I walked into another office 3 or 4 more times to get a quick glimpse of the celestial display. The eclipse reached totality (which in our case was 90%) at 3:25. By 3:26, I kid you not, the entire esplanade emptied out as droves of Wall Streeters headed back to their cubicles.

A few hours later I stopped into a colleague’s office to say goodnight and I saw a pile of those eclipse sunglasses sitting on a desk. I was asked if I wanted one. I furrowed my brow and smiled. As I turned my back, I saw him brush the pile into his garbage can.

As I walked across the square towards the beautiful wintergarden enroute to the subway, I watched maintenance folks sweeping up piles and piles of discarded sunglasses. I was reminded of the Dutch Tulip Bubble from 1630, and then my mind went to The South Sea Bubble (1720), The Dotcom Bubble, and the Housing Bubble that burst in 2006. “Wow,” I thought, “those crazy sunglasses went boom and bust pretty quickly.” I am sure as I said that delivery trucks around the city were piling boxes of them into the cellars of the bodegas that acted too slowly.

I hear lots of talk about bubbles on Wall Street these days. Is AI or Crypto in a bubble, just waiting to burst the minute you load up your portfolio? I searched Google Scholar for academic papers using the search term “forecasting bubbles and crashes.” Would you believe that there were 24,100 results? Would you believe that it is almost impossible to determine if one is in a bubble? If you don’t believe me, look back to when Apple first introduced the iPhone. The stock rose by some +450% from its June 2007 release through 2012. People were calling it a bubble, but what they were really witnessing was the birth of not just a product, but an entire ecosystem that became today’s thriving smartphone market. Even with Apple’s recent challenges, the stock has risen by +3,792% since the iPhone was released. I would urge you to think twice before labeling something as a bubble. But I would also urge you to do your homework before you make any investments on anything. You may not be able to determine if that stock is merely a fad which will be brushed into some rubbish bin after the hype settles down, but you can improve your chances of making a silly judgement error.

YESTERDAY’S MARKETS

NEXT UP

• NFIB Small Business Optimism (March) ebbed to 88.5 from February’s 89.4 reading.
• All eyes are on tomorrow’s inflation numbers, so emotions will be running high today.