 Folks, recently David Einhorn of Greenlight Capital Partners did not bid for Bloomberg. And he stated, David Einhorn says, tech stocks are in an enormous bubble. He went further to say, the question at hand is where are we in the psychology of this bubble? He went further to say, our working hypothesis, which might be disproven, love the way he left the back door for himself there, is that September the 2nd, 2020 was the top and the bubble has already popped. If so, investor sentiment is in the process of shifting from greed to complacency. Now, what we're gonna talk about in this video today is, first off, A, who is David Einhorn? A bit about him. B, I'm gonna tell you what I said about this market on the week ahead commentary to members on August the 29th, Saturday, August the 29th, in advance of the September 2nd top, quoted by Einhorn, where we were shorting the triple Q names. Then we're gonna segue over into how this market is valued at current. And we're going to use a few different interesting metrics. So stick around for those. And then we're gonna segue over into the technical analysis of the markets relative to the Pimp Mac Daddy of the Mall, the internet bubble, which burst in 2000. And then I'll leave you off with catalysts that could help precipitate a bursting of the market that we find ourselves in right here, right now. So let's get to it. So a bit first about David Einhorn. He founded Greenlight Capital back in 1996. He is a long short fund manager. So he can go in both directions, which is why I pay attention to him. He's most notable for calling for the short sale of Lehman Brothers prior to its collapse. He got popped for insider trading for which he was fined $11 million in January of 2012 over in the UK. And unlike other funds, Greenlight does not use borrowed money or leverage. And frankly, his returns are mixed for what he's being compensated for. As of February of 2015, Greenlight Capital is ranked 53rd out of 58 hedge funds with a D grade. He underperformed the bull market of 2017 and started off January of 2018 down dramatically relative to the S&P 500. He was down 6% while the S&P 500 was up five spot 6%. And earlier in the year, he was not positioned for the sell-off ahead of the pandemic. And he might be saying, you know, well, nobody expected that to come. Go back to February. You can watch my Trendspider interview. You can watch my commentaries right before. The markets broke that I was bearish on the market. We were shorting, we were shorting Amazon stock in particular. So this is not an excuse that he didn't know was coming. He should have known it was coming. That being said, does Einhorn, does he have a point? And the answer is yes. And I'll point to this paragraph right here. And this is something I have warned about quite a bit is that we have a bull market but only in a handful of individual stocks. So in this paragraph here, tech stocks have driven the markets rally this year. The NASDAQ 100 index, or the trip cues, is up 33% since January 1. That's the time of this writing on the 27th, led by Gaines in Zoom video communications and Tesla. By contrast, the S&P 500 has risen 5.3%. That in and of itself, the S&P 500 being up at current is shocking alone given the contraction in the overall economy. Now where else I find common ground with David Einhorn is with his largest trades, which just happened to be recent trades, as of these are recent buys as of Q2 2020, the GDX. We were along with the GDXJ. We booked profits a few weeks ago. We started buying them back just recently on this big sell-off last week. He's been buying transports and resource plays. We have been bullish on the transports, bullish on resources. So now let's segue into where we've been positioned with regard to how the market has been frothy and how we've been capitalizing on it for quite some time now. It's good that David Einhorn is now bearish on the market, but I don't think he's using charts. I think he should have been using the charts and identifying good risk reward entry points to the short side since August, but it's good to see that he's joined the club. So before we walk down the reasons of as to why on a fundamental basis and on a technical basis, why I think that this market is indeed in a bubble, here's what I have to say to members on the week ahead commentary August the 29th. The VIX, I guess the best thing that could be said about the VIX viewing the market through the lens of a net long was that we closed off the highs of the week. Now, where I net short, I'd be saying, Jesus, while we closed off the highs of the week, we closed up on the week along with the S&P 500. Not only that, the prior week, we closed up. This is the S&P 500. We closed up on the VIX last week with the S&P 500 up. The prior week, we closed up with the S&P 500 up. Back to the VIX. This could be an ominous sign here, folks, but as I've been saying recently, I don't expect a huge market crash before the election. We have two months to go. The S&P 500, new all-time highs. Volume rose versus the prior week. Let's go to the daily chart. RSI near 80 on the S&P 500, folks. Yet it appears as though we're going to go up higher, but expect a brief correction fairly soon to take this froth off. The TripQ leadership names of which we are short. So as you can see back on August the 29th, I was bearish on the market. Not net bearish, but since that point in time, we've grown increasingly wary of this market. And all you need to do is take a look at GAP earnings. And you can see, overlaid here is the S&P 500 in blue. Relative to GAP earnings, and they have gone inversely of one another. When earnings have dropped like a stone since the beginning of Q1 of 2020, the S&P 500 is up over 5% on the year. And the NASDAQ 100 was up as of the 27th of October, 33%. So this is a major divergence between reality, meaning earnings and delusion, meaning stock price. And at some point in time, this current inverse correlation will become correlated real quick, real fast. And hopefully people will be positioned wisely moving on to S&P 500, price to earnings multiples. Now take a look at this table here in red, primarily. PE equals 20 or higher means overvalued in blue. PE equals 15, which is fair value. PE in green equals 10, which is undervalued. Look at where we are at current. The last time we were here at these levels was back here. Late 1999 into 2000, just before the bubble popped. Fast forward. When you take a look at the stock market, the S&P 500 on a price to sales ratio, meaning the willingness of an investor to pay X amount of dollars for $1 worth of sales. Investors are at current paying $2.38 for every dollar's worth of sales on the S&P 500. However, when you break this down to the leadership level on the S&P 500, on the NASDAQ, on or in the triple Qs, it gets real serious. Remember that the S&P 500 at a price to sales ratio of about two and a third. When you take a look at this chart, Tesla price to sales, 15 spot 25, Microsoft 10 spot 97, Facebook 9.55, Apple 7.41, Amazon 4.6. This is after their most recent sell off and they remain extremely overvalued on a price to sales basis. And as we look at the fundamentals and we look at the valuation of the market, we'll leave off with the Buffett indicator, which is the ratio of the total stock market valuation to US GDP. This is as of the 22nd of 2020. And you could see according to this chart here, we have not been this extended since the internet bubble back in 2020. And if you're wondering why you haven't heard of Warren Buffett all that much this year, with the exception of his purchase of Barrett Gold in recent months, is because when you were hearing about him back in 2008, the market was undervalued and he was picking up bargains. Notice that we have come nowhere near to even being fairly valued since the early 2020 sell off. And if you're wondering, how many times has this happened in the past that we have been this overvalued? It's only been one time, one time before. That was the internet bubble. When you go back to 1950, before you had all the Fed intervention in the markets, yes, of course you had markets that were overvalued and they would correct. And what we're looking at here is a one standard deviation Bollinger Band in yellow and that was usually the extreme. Now what we're seeing are bubbles get inflated to two standard deviations beyond the norm due to Federal Reserve intervention. So to David Einhorn's concern about whether or not we are in a bubble, yes we are. There's no doubt about it. But let's keep one thing in mind folks. Here's a chart of the triple cues going all the way back to the financial crisis. And my point here is that rarely do bubbles just simply burst. Usually there's a slow leak if you will just as you had back here. In March of 2000, I remember this, it's clear as day, the top. I was in Times Square peering through the NASDAQ market site window looking at quotes. And while we corrected thereafter, it wasn't until here, November of 2000 that we finally broke support on the triple cues and we spent the next two years in a horrible, horrible bear market. So while yes, it appears as though the air is coming out of this balloon, keep in mind that you still have an activist Federal Reserve. Also keep in mind that they will pass some sort of a stimulus after the election that will probably give this market another boost up higher. Can it move to new all-time highs? Maybe, I tend to doubt it. And I think that's why Einhorn left himself a way out. He knows that there's gonna be a stimulus package. I don't think it's gonna take these markets to new all-time highs. I do think that we can get a lift, but then we will probably roll over after putting in a lower high. Now as Einhorn points out, where are we at psychologically with this market? I think that, yeah, we could be segueing into a phase of complacency where traders are optimistic that there will be more fiscal stimulus and that will propel the stock market higher. I am not of that camp. I do believe that there will be fiscal stimulus, but ultimately it's going to fade for one of several potential reasons, possibly a couple of those reasons. And I'll go to those in a moment. Now, when we take a look at the NASDAQ composite on a weekly timeframe, relative to the top back in 2000, the charts are eerily similar. This is our most recent chart as of the close October the 30th. And you can see that we peaked out the week of August the 31st. We pulled back to 10,519 on the NASDAQ composite. Then we rallied to a lower high during the week of October the 12th. Now we are rolling over, Stokes lower highs, RSI lower highs and now lower lows on RSI anyway, not quite yet on Stokes. Volume rising sequentially. Now let's take a look at how we looked back in 2000. Are there any resemblances? The answer is yes. You could see that the NASDAQ composite peaked out the week of March the 6th, 2000. Traded a few weeks sideways, then ultimately broke to a new lower low. The week of April of 2000. We put in a low, intermediate term low in May of 2000, rallied back, stalled, put in a lower high and we just vacillated in this range. And this is where complacency sets in. Everybody was expecting, and it really needed to be a part of the culture at that point in time, the trading culture, which everybody was a part of. Investing had gone mainstream as it did back in the 1920s, but then ultimately here in November of 2000, this was truly the break that the market was or was not expecting. Certainly the amateur money was not expecting it. It broke and it broke really hard. So right now to Einhorn's point, I think that we are in fact in a period of yes, still some enthusiasm with regard to the potential of more stimulus, more Fed accommodation, but we need to remember that the more stimulus that we pump out, the more Federal Reserve intervention that they do, the less bang for the buck that we get. The analogy I draw, it's like pushing on a string. And at some point in time, it just doesn't matter anymore, just like the law of diminishing returns. Now, let's talk about catalysts that can really begin to burst this bubble. That slow leak, which we're beginning to see now, that slow leak becomes a tidal wave of air leaving that bubble. What could help precipitate that? One of the concerns that I've had for quite some time now is the 10-year yield. The 10-year yield, despite the fact that we've seen massive Federal Reserve intervention is breaking out. In fact, last week it recaptured a resistance level. It hasn't closed above since the week of June the 1st. So despite the fact that we have the Eurozone locking down and you would traditionally see money rotate into the US dollar, into gold, into US treasuries, that didn't happen. Bonds sold off, that's a tell. They weren't viewed as a flight to safety. Money left, US stocks last week, where did it not go? Bonds, bond yields rose. What does this imply? Investors are saying, hey, we need to get paid more for your debt, especially if you have a socialist government coming in that plans on opening up the spigot on spending, which leads us into, threat number two is a Biden win. This is not a conversation with regard to politics. This is with regard to policy, which they freely admit to. If you are triggered by virtue of the fact that I'm speaking about it, investing is not for you. All we need to do is be honest with ourselves and ask ourselves this question. Would socials be good for the stock market? And the answer is, no, it would not be. Take a look at any economy which went from a vibrant economy, Cuba, Venezuela, to not so vibrant economies such as the Soviet Union. Why did those economies not do well? They did not have free market economies. The government sucked up all the resources. They stifled freedom of speech. What does freedom of speech provide a capitalistic society? Innovation. When you stifle freedom of speech, people do not innovate. They are afraid to because success is punished with the gains stolen by the government. Take a look at the platform of Biden-Harris. Take a look at the media in this country. Take a look at Silicon Valley with their censorship of conversation. This will only grow worse in a Biden administration. Now, what if President Trump wins reelection? Does that mean the stock market lifts off from here? No, it doesn't. I've long held an opinion about President Trump that he wanted to win a second term because of his competitive streak that he had a lot to accomplish and it couldn't be done in four years. When he ran for president initially, he called this economy, he called the stock market a big fat ugly bubble. And he was right then, but it's even worse now. To continue this type of behavior would only make the inevitable crash all the more worse. So, since he's not able to get reelected due to term limits, what will his legacy be? One that continued to inflate a stock market bubble or would he prefer to be viewed as a president who was able to at least attempt to soft land this economy and bring it back to some semblance of normalcy? And a normal yield on the chain year yield, historically, is it about, let's call it 5%. The thing we need to keep in mind is that this stock market, and this all has to do with the bubble folks, I'm gonna overlay the S&P 500 above. And this is a weekly timeframe. And you can see that when Jay Powell was beginning to normalize rates, and he did come in with the best of intentions. And I believe that's why he was appointed Fed share in an effort to normalize yields, but without bursting the bubble, which was the stock market, each time back in 2018, we hit a high on yields of 3% the S&P 500 here in blue rolled over. We rallied to a high here of 2.6% S&P 500 rolled over. We rallied to a high here of one spot 93 S&P 500 rolled over. So the trend at which the stock market can absorb rising yields declines dramatically folks. At what point after we have just broken out above this resistance level, will the stock market feel the pain of rising yields? Will it be one spot 5%? That's crazy. The historical norm is 5%. We have so much debt and it's only getting bigger that the stock market cannot absorb anything near, anything near a sense of normalcy. And remember that as yields move up higher, so do our interest payments as a nation. If they were to normalize our interest payments alone, forget about principle, our interest payments alone would equal our defense budget. That's how much debt we have. We are bankrupt and I'll leave you off with, ultimately will be a day of reckoning with the Chinese. We're not there yet. And I'm of the opinion that we have been at war with China for quite a while now, yet we just didn't realize it. The ratcheting up of tensions between China and Taiwan are tremendous. We are selling more arms to Taiwan in these past couple of months than we have in years. And traditionally, arms sales to Taiwan have been defensive in nature. They are now turning to offensive sales with missile capabilities. So in closing folks, are we in a bubble? I think we've answered the question, yes. Whether it be on a valuation basis, whether it be on a technical basis, the answer is yes. Will we go straight down from here? No, I highly doubt it. We will vacillate in this area for a while. We will see rises and fall in volatility. And then one day we're going to wake up and then we're gonna see the bottom drop out of this market. It may be this month, it could be three months from now, but this market is going to break. The question is, will you be positioned wisely and appropriately to take advantage of what will be a great money-making opportunity? Or will you join the vast number of people in the majority that will expect new higher highs to come? Because they are not looking at the signals by the market which we've seen in bubbles pass in closing. Please smash that like button and join us tonight for Sunday Night Futures Live. We go live every Thursday night and Sunday night. Hope to see you there. Be well.