Fed Rate Cut Risking Next Insane Melt Up Mania?
The ingredients for an explosive melt up mania seem to be rapidly coalescing ahead of this week's pivotal Fed decision on rates.
What Is a Melt Up?
An extremely rare frenzy where assets become completely unhinged from fundamentals, driven by psychology forces like FOMO and greed. Vertical price spikes and triple-digit percentage gains become the norm even among struggling firms.
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The Classic Accelerant
In prior melt ups like the late 1990s tech bubble, the accelerant was excess Fed stimulus. Aggressive rate cutting fuels a "Buy Everything" mentality, divorcing valuations from reality as corporations gorge on cheap debt for buybacks.
More Concerning Signs
Frenzied speculation in meme stocks, crypto, AI/tech
Stocks exhibiting trading patterns signaling melt ups
Record low equity allocations signal cash awaiting deployment
Overly euphoric/bullish commentary saturating social media
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Will Fed Cut Provide the Spark?
With fed funds futures pricing in a 75% chance of at least a 50 bps cut this week, any hint of an open-ended easing cycle could prove the accelerant for the next speculative mania across risk assets.
Disciplined risk management and strict profit-taking rules are vital for preserving capital if a full-blown melt up takes hold. The rumblings are growing louder by the day.
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