Risks are rising and investors are ignoring… The Chinese Lehman moment is imminent

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Investors are ignoring the parallels between stocks today and ‘heady’years of 1929, 1999 and 2007

  1. The S&P 500 is trading at a lofty 22.5 times forward earnings and its price-to-sales ratio of 3.1 times is far costlier than in 2000. The Nasdaq-100 tracking QQQ exchange-traded fund QQQ, 0.14% is trading at a 70% premium to its 200-week moving average, the biggest since 1999/2000.

  2. “Blank-check” or special-purpose acquisition companies where investors have no idea what the investment will be. “The last time SPACs were as big as they are today? That’s right 1928/1929,” said the strategist.

  3. Leverage highs. Similar to 1920 and 2000, margin debt has shot to new highs, which is fine until it starts heading the other way. It has recently started to unwind and if that keeps going, markets have a problem

  4. 4. Cryptocurrencies. Maley said he’s bullish longer-term on cryptos, but is concerned about “froth,” given a 1,000% gain for bitcoin since the Federal Reserve’s massive quantitative easing program began in 2020, with Ethereum up 3,400%.

  5. 5. Individual investors make up 20% of average daily volume for stocks, twice the level of two years ago. Many big market tops of the past — 1929, 1999/2000 — were marked by big jumps in investor activity.

  6. 6. From 1998 to 2000, lots of companies with zero earnings saw shares shoot higher and investors pile in, and Maley sees parallels with `so-called “meme” stocks of today.

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