对于牛市的牛群狂奔，在投资界有个描述它的专业术语—Melt-up，说的是在牛市末期牛群头也不回地一路向前越跑越快地直到坠入悬崖，直译为“熔冲”，也可叫“末路狂奔”。 关于Melt-up有一篇文章《The 2020 Melt-up And Aftermath》介绍给大家参考，已经附在本文后了。
2.其次是做多Melt-up。我的建议是：首先做多股指期货，然后做多个股。做多（或做空）股指可以根据个人的风险承受能力选择eMini SP500 futures 或者Micro eMini SP500 futures，也可以选择众多的S&P500 ETF 或是加杠杆的ETF（比如Direxionn S&P500 Bull/Bear 3X），包括做多股票也可以用CFD加杠杆。不过要注意的是，某些个股可能已经涨幅巨大了（比如Tesla），而某些个股由于自身原因可能会被投资机构提前抛售。此时做多我一般会选前期涨幅不大的个股。
3.最后是在Melt-up的最高点清仓并反手做空市场。这一步也是最难的一步，因为没人知道Melt-up的最高点在哪里，每个市场参与者都在博弈，都既想在别人抛售前抢先获利又想最大化利润。参与博弈的可大概分为三方：一方为机构投资者的“多方”，一方为机构投资者的“空方”，一方为小投资者散户。当然Melt-up的前期三方基本都在做多，由于小投资者的力量是分散的形不成合力也左右不了市场，到了Melt-up的中后期就基本是机构投资者的多空双方主导市场了，而等到了Aftermath of the Melt-up即“大翻转”后三方则进入做空的熊市博弈。
The market melt-up is in full swing. A melt-up with a subsequent crash similar to 2000 is now all but certain.
History shows us that markets tend to melt up 100% or more before bursting in major bubbles.
Timing melt-ups and their aftermath is extraordinarily difficult, but not impossible.
We currently see behavioral finance in action. In the U.S., it was way back in 1999 when we last saw this irrational behavior in the markets. It is tricky to spot, being right in the middle of it, but the parameters are starting to line up beautifully for a March 2000 replay.
Last year, I highlighted the risks of the emergent dot-com market sentiment. Although the risk factors were already brewing, at that time the environment wasn't quite ripe for a significant crash. Valuations last year were elevated, and the dot-com era parallels were starting to crystallize. However, some key signs were still missing that are starting to manifest:
- Significant market euphoria à la late 1999.
- Dismissal of bad news that, just months ago, would have caused large swings to the downside.
- High amount of investor leverage, either via margin borrowing or investing through leveraged products.
- Irrational sell-side analyst calls and talking head predictions.
These factors are steadily increasing. I will analyze these and others in more detail below.
The origin of a market bubble
As more market participants realize the quick rise of the markets, everyone seeks opportunity to benefit from the gain. Even those that are aware of the market melting up are attempting to profit. Leveraged buying further fuels the bubble. Plenty of investors know that this will end sooner or later and they have to exit rapidly. Most investors believe they can get the timing just right. Unfortunately, the math is stacked against them. Those that are oblivious to the situation are certainly left holding the bags.
So, what do we know about the general behavior of bubbles? Are there any patterns? It takes a certain amount of pressure for a bubble to burst. When looking at bubbles across the last decades in assets such as stocks, bitcoin and commodities, you will be hard-pressed to find a bubble that burst before melting up at least 40%. Some bubbles melted up 100% or more. The start of this melt-up is usually not immediately apparent at the time. Once it becomes evident, investors leverage up and expose themselves to tremendous downside risk.
Bitcoin price 2016-2018 (Data source: Coinbase)
One of the most extreme examples in recent times was Bitcoin. In 2017, Bitcoin more than doubled within one month. It subsequently lost almost all of the gain once the bubble burst just as quickly as it had gained it.
Nasdaq Composite (Source: Wikipedia)
When the Nasdaq Composite peaked on March 10, 2000 at 5,048.62, it had almost doubled within six months. When the reckoning came, the drop was sharp. The Nasdaq lost over 30% within a month. It took around a year to descend down to where the melt-up started and then further down from there.
The bubble in the Shanghai Composite (SSEC) in 2015 unfolded slightly differently. Although in retrospect it appears to follow a similar path, it would have been much harder to tell at the time how inflated this bubble actually was. The market was rising sharply, but the true melt-up really didn't start until March 2015. Within two months, the index doubled - although it already rose sharply before that.
The 2020 melt-up
So how high can we go? For those that think we are currently about to crash, let me illustrate that markets can rise tremendously. Below is a hypothetical scenario of the Nasdaq Composite, should it follow a typical bubble trajectory, in which the market doubles. In this scenario, the Nasdaq 100 could rise to over 14,000. I would argue this scenario is not that unlikely. We would know the answer in three months in the scenario below.
The examples above show that the drop after the bubble bursts is typically even quicker than the melt-up. The typical drop is at least 20% or more. Frequently, a dead cat bounce follows, until the bubble continues its decline down to a level well below the original melt-up.
Timing the drop
If we could improve our timing of when this market peaks, we would have a tremendous opportunity to reduce our risk and potentially even profit. As I mentioned above, every investor thinks they are an above-average driver, but that math just doesn't work out. However, I have also shown that there are plenty of clear similarities in most bubbles throughout history. Apart from just price movement, many other factors can assist in improving the timing of when the bubble will burst.
A significant amount of exuberance, to the level of euphoria, needs to be present for a bubble to inflate. And once we get that irrational level of exuberance, we're close to a popping bubble. This is a very subjective assessment. There are some clear indicators of market sentiment, such as reactions to bad news. Economic indicators that tended to get significant negative market reaction just a couple of months ago are now completely brushed aside. The recent Iran conflict barely made a dent in the market. These are all signs of a level of exuberance that overshadow all potential negativity.
Starting in November 1999, margin debt skyrocketed. Investors leveraging up is a distinctive sign of risk-taking and attempts to benefit from rapid rises in prices. With the availability of leveraged products such as the ProShares UltraPro QQQ ETF (TQQQ), individual investors are able to be highly leveraged without the need for large margin debt. This may be the reason why we have not yet seen that large of an increase in margin debt. However, FINRA, which reports on margin debt, so far hasn't reported any data more recent than November 2019. I expect there to be a large jump in the margin debt in the December 2019 data to be released shortly. I suggest to keep a close eye on this.
The Shiller P/E (CAPE) ratio is over 30, one of the highest values in history. However, it hasn't moved much for over a year. For comparison, the ratio was at an all-time high of 44 in December 1999. As the large S&P 500 components, Apple (AAPL) in particular, are further bid up, the Shiller P/E may rise to new heights well. This would truly be the writing on the wall.
Volume and Volatility
Trading volume and volatility are other indicators that show similarities across market bubbles but are not as clear-cut. Increases in trading volume are often associated with general euphoria. Similar to increases in leverage, more market participants want to be part of the action and trade higher volume. Volatility may be helpful to determine if the market turned or is just giving up some gains. Attempting to time the actual turn bears a tremendous amount of risk. Typically, a market turn creates a very significant spike in volatility within a couple of days with a drop in the market of several percent - a sort of collective reckoning that the bubble may have burst. Unless properly prepared, this can already destroy one's portfolio. An example where the market retreated without a major spike in volatility was the Iran crisis. The options market clearly wasn't concerned about a bursting bubble or we would have seen a much larger spike in the VIX.
If there are no major geopolitical events, trade wars, earnings misses, and the like, I don't see any indication why this bubble wouldn't inflate similar to what we have seen in the past. That would mean a sharp rise into March at the same rate we are climbing right now. However, the higher the market rises, the more certain we can be that we will have a market decline not seen since the dot-com bubble. Highly leveraged investors lost vast sums of money within days. The market will most certainly return to a level we are currently at, so the most prudent move is to get out now.