Warren Buffett just strongly endorsed the two dumb money ideas I've said will implode this entire ponzi scheme with extreme dislocation - passive indexing and over-allocation to stocks. Only one of us can be right, untold zombies will be wrong. Of all of the bubbles in this era, none is more crowded and popular than the dumb money bubble. Needless to say, this is a very expensive vacation from reality. Unaffordable to be exact. As usual, over and over again, the Idiocracy is looking the wrong way down the tracks for inflation while deflation is coming from the other direction. Recession will be there to greet them when they finally figure out they're wrong again:
But it's their vacation from reality - they paid for it - so they may as well enjoy it. Until the trend-line breaks, and they realize they're going to need more underwear.
Speaking of dumb money. This past weekend, bailout king Warren Buffet, explicitly endorsed the two idiotic ideas that I've been saying will implode this entire delusion. The first is this one:
"Buffett is a stock picker, but he’s adamant most investors are better off sticking with passive, low-cost, index-tracking products"
Over time, "passive indexing" pushes more and more money into fewer and fewer large cap stocks, until such time as the casino implodes. Market cap weighted indexing is to assume that a stock deserves more inflows just because it's larger than other stocks; hence it only grows more over-valued over time:
During the course of this rally, the over-crowded tech trade just became more over-crowded:
"Favoring large-cap technology stocks proved a winning strategy during the recent bout of volatility that sent the stock market into correction. But the risk of a crowded trade, one that could be ripe for reversal, in tech remains"
The S&P 500 is up 3.4% since the start of the year...The much-beloved tech sector — up nearly 9% year to date — accounted for more than 60% of those S&P gains"
Let's try this again, but this time with the other 60% of downside volume:
The second thing Buffett endorsed that will implode this entire delusion is over-allocation to stocks:
“It is a terrible mistake for investors with long-term horizons—among them, pension funds, college endowments and savings-minded individuals—to measure their investment ‘risk’ by their portfolio’s ratio of bonds to stocks,” he said. “Often, high-grade bonds in an investment portfolio increase its risk.”
When one person increases their allocation to risk, that's not a problem. When everyone increases their allocation to risk at the end of the cycle. That's 1929 all over again.