Whiplash for the brontosaurus

March 14, 2021 by No Comments

Bloomberg/John Authers/3-9-2021

“But as yet the equity market seems totally unaffected with volatile and risky stocks still making the running. Although the brontosaurus has been bitten on the tail, the message has not yet reached its tiny brain, but is proceeding up the long backbone, one vertebra at a time.” – Jeremy Grantham, 2007 (just before the financial crisis)

USAGOLD note: Authers explains that what is going on in the stock market at the moment is a rotation – not a sell off. Investors are selling high tech stocks and buying old school companies. In keeping with the brontosaurus analogy, though, there may be another message that has yet to migrate beyond the tail. When the margin calls come to the highly leveraged crowd investing in tech stocks, it could precipitate a wider selloff as investors scramble to raise capital. If so, it would not be the first time excessive margin positions have provoked panic selling – 1929 and 2008 come to mind.

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Original source: https://www.usagold.com/cpmforum/2021/03/whiplash-for-the-brontosaurus/