Fred Hickey on the risk of tariffs to investors

Tariff hikes are a major risk [for investors].  The average effective U.S. tariff rate is currently around 15%.  The last time U.S. tariffs were this high was in the mid-1930s, during the Great Depression.  Many believe that the Smoot-Hawley tariffs (signed into law on June 17, 1930) were a major contributing factor for that extended depression.

~ Fred Hickey 

 

Fred Hickey on the stock market: "This is about as toxic a brew as I could ever imagine"

The combination of investor complacency in an environment with trade wars, out-of-control U.S. government spending, enormous deficits and debts, funding risks in a period of financial tightening, rising inflation, supply shortages, a likely economic recession, loss of faith in "U.S. exceptionalism," a declining U.S. dollar, risk of monetary debasement and a "massively overvalued stock market" (per investor extraordinaire Paul Singer) is about as toxic a brew as I could ever imagine.

Not only are investors extraordinarily complacent, the bear market rally since April 7 has encouraged them to return to taking enormous risks.  They're piling into the MAG 7 stocks, which have accounted for over half of the S&P 500's total market cap gains since the early April bottom.  Worse yet, they're pouring into all sorts of garbage stocks, grossly overpriced high-fliers and cryptos, including MicroStrategy (MSTR), CoreWeave (CRWV), Tesla (196 times falling earnings and with slumping auto deliveries), Palantir (PLTR - 600 P/E) and many more.  Investors have added a record $437 billion into U.S. ETFs this year, with the largest inflows occurring following market declines.  Believing that they cannot lose in the long run, they buy every dip (thanks Fed!).

~ Fred Hickey, "Toxic Combination," The High-Tech Strategist, p. 2, June 2, 2025

Fred Hickey on the factors driving the gold bull market

There are several factors driving today's gold bull market including: a loss of faith in central bankers worldwide following their coordinated money printing (currency debasement) programs in recent years to fund massive government deficit spending; U.S. actions to "weaponize" the dollar (the global reserve currency) against their enemies; the collapse of investing alternatives (real estate, stocks) in China and the revival of inflation.

~ Fred Hickey, The High-Tech Strategist, May 4, 2024

Fred Hickey begins buying gold stocks

I bought a slug of Newmont Mining shares at $23.60 that I still happily hold today.  The antithesis of a tech stock, this giant gold mining company is a bet on the end of the 20-year bear market in gold.  It is a bet on an anticipated plunge in the dollar.  It is a bet against Greenspan and the Fed, who I fear will flood the system with money as the stock market and economy continues to contract.  It is a bet against undisciplined fiscal spending and budget deficits.

~ Fred Hickey, The High-Tech Strategist, August 3, 2002

Fred Hickey on the lack of demand for generative AI

Understand that I believe in AI.  But AI has been with us for decades - becoming a bigger part of our lives year after year.  But Generative AI (Gen AI) - which just came on the scene last year when Microsoft touted it as means to threaten Google's stranglehold on the search market (so far Microsoft has failed with that attempt - getting just 1% additional market share) is another matter.  To me (and many other observers) Gen AI is like the Metaverse or Blockchain - "all hat and no cattle" - as the saying goes.  For example, Wired magazine (not exactly a Luddite's favorite read) titled a recent story: "Get Ready for the Great AI Disappointment."  Wired: "More and more evidence will emerge that Generative AI an large language models provide false information and are prone to hallucination - where an AI simply makes stuff up, and gets it wrong."  Anticipation that there will be exponential improvements in productivity across the economy, or the much vaunted first steps towards 'artificial general intelligence,' or AGI will fare no better."  "Some people will start recognizing that it was always a pipe dream to reach anything resembling complex human cognition on the basis of predicting words."  There are many similar stories out there questioning the usefulness of Gen AI.

Microsoft has placed its AI-powered assistant called Copilot that uses ChatGPT (a Gen AI version from OpenAI) in the upper right-hand corner of my computer screen.  When it first came out, I tested it when I was researching topics.  I found its answers underwhelming.  I rarely use it anymore - just as I almost never utilized Microsoft's previous assistant "Clippy."  My experience with ChatGPT is not unusual.  Data traffic analytics firm Similarweb recently reported that ChatGPT web traffic has declined in five of the last eight months and is currently (January 2024 data0 11% lower than its peak in May 2023.  The thrill is gone - just don't tell Wall Street.

~ Fred Hickey, The High-Tech Strategist, February 27, 2024

Fred Hickey on troubles in commercial real estate

As we all know by now, March brought a new banking crisis, as many banks have huge losses lurking on their balance sheets...  Silicon Valley Bank, Signature Bank and Credit Suisse all collapsed, and depositors were rescued using various means in order to forestall panic...  These regional banks also have huge exposure to the reeling commercial real estate (CRE) market, where vacancies are already nearing 2009 recession levels thanks to overbuilding and the remote work trend - even before a recession hits.  An estimated $1.5 trillion in CRE debt comes due over the next three years.  It's not just banks that are in trouble.  Insurance companies and pension funds have experienced large portfolio losses and some will have trouble meeting obligations.

~ Fred Hickey, The High-Tech Strategist, April 3, 2023

Fred Hickey on the everything bubble

The notion that we could be in a new bull market without correcting the unprecedented valuations, the enormous debt levels, all the malinvestments throughout the economy created from years of "free money" and the egregiously excessive investor enthusiasm is ridiculous, but that's how misguided the dancers can become when FOMO takes over.  Investor desire to believe that the good times will continue is nothing new.  There were ten double-digit rallies during the 1929 to 1932 bear market and 16 double-digit rallies during the 2000-2002 bear.  In both periods the stock market rallies averaged 23%.

~ Fred Hickey, The High-Tech Strategist, "Up It Goes, Before It Blows III," June 28, 2023

Fred Hickey on why Apple's stock is vulnerable

Apple's stock has rallied all year long (almost back to a record high) and certainly does not reflect the deterioration in the economy, the squeeze on consumers from tightened lending, declining consumer sentiment (remember - Apple sells to consumers - not corporations), the slide in the smartphone market - leading to an inventory overbuild and digestion period, falling revenues and earnings and a rising P/E ratio (twice as high as it normally runs at).  It also doesn't account for its heavy exposure to China (relations between the U.S. and that country continue to worsen), a difficult (and likely costly) transition from producing nearly all its products in China to places such as India, the likelihood that the Chinese government will kick Apple in the pants on the way out (I don't think China will forget how the U.S. government destroyed Huawei's smartphone business), the poor position of its product cycle and lack of innovation.

Of all today's Big Seven, Apple (and likely Tesla) appear to me to be in the most trouble (short-term and long-term) and once Apple's stock momentum inevitably turns downward again, investors may experience a Wile E. Coyote moment - over the cliff and with a long way to fall in the bear market.

~ Fred Hickey, "2000 Déjà vu," The High-Tech Strategist, June 1, 2023

Fred Hickey: "It might be that the growth possibilities for these FAANG stocks are over"

It might be that the growth possibilities for these FAANG stocks are over.  They're too high, the regulators have them in their sights, they might get broken up.  Google's growth doesn't come from search, it comes from YouTube.  Facebook's growth doesn't come from Facebook, it comes from WhatsApp and those kind of things.  And if they can't acquire, and you just have a platform that they have to acquire and grow, then the growth rate goes away, and people over time become less enamored with them.

~ Fred Hickey, "The End Game Ep. 12 - Fred Hickey," The Grant Williams Podcast, December 1, 2020

Fred Hickey on Apple's recent earnings release

Apple handily bested estimates with better than expected iPhone sales but weaker services growth ($400 million less than expected).  On the conference call CEO Tim Cook was asked which services segments caused the shortfall.  He avoided answering the analyst's question.  It's important because Apple's services businesses are supposed to pick up the slack from the no growth (and highly competitive) smartphone market.

~ Fred Hickey, The High-Tech Strategist, February 4, 2020

Fred Hickey on Tesla's parabolic rise and $165 billion market cap

Tesla's insane stock price explosion is all about three things: money, momentum and mania.  It has absolutely nothing to do with fundamentals.  Even before this week's multi-hundred point upward explosion, Tesla's stock last week was "valued" by "investors" (speculators) at more than the stock values of the entire U.S. domestic auto industry (GM, Ford and Fiat-Chrysler) combined...

TSLA's stock is currently valued at $165 billion.  For comparison purposes, Ford Motor is valued at $36 billion, General Motors at $49 billion, and Fiat-Chrysler at $26 billion.  Germany's Volkswagen (which delivered almost 11 million cars in 2019 versus Tesla's 370,000) is at $92 billion - a valuation 44% less than the great money-losing Tesla.

~ Fred Hickey, The High-Tech Strategist, February 4, 2020

Fred Hickey: "Fear has left the building"

We all know the markets are driven by two sentiments: fear and greed.  Currently, investors show no fear but plenty of greed as they pile into stocks as if it were 1999 all over again.  The much-watched Investors Intelligence survey of investment newsletter writers last week reported that the percentage of bears was down to 14.4% - a level not seen in 26 years - 1987, before the crash.

The Consensus Bullish Sentiment Index is currently at 77% - putting it firmly in the "market is overbought" territory.  After four consecutive years of withdrawals (2009-2012) investors are now pouring money into stock mutual funds at the fastest pace in thirteen years (since the 2000 top).  Barron's estimates that equity mutual funds and ETFs are on pace to receive more than $450 billion in inflows this year, more than the previous four years combined.  Investors are chasing "story" stocks again.  Anything related to the "cloud," "Big-Data," social media and 3-D printing is fair game to drive into the stratosphere of infinite P/Es.  The Shiller cyclically adjusted price-to-earnings (P/E) ratio is now over 25, a level only exceeded three times before - prior to the 1929, 2000, and 2007 crashes.  According to Credit Suisse, U.S. nonfinancial stocks are 45% more expensive on a price-to-book basis than their global peers, an excess not seen since the 2000 crash period.

The Dow Jones Industrials and S&P 500 indices have risen for eight consecutive weeks, the S&P 500 has leapt 26.6% year to date and the Nasdaq Composite index has soared 34.5%.  There hasn't been a 10% correction since the fall of 2011.  Initial public offerings (IPOs) this year-to-date are more than at any time since 2000, with more than 60% of the IPOs funding money-losing companies.  Secondary stock offerings (over $160 billion) are at the heaviest pace ever (since Dealogic began keeping records in 1995).  Fear has left the building.

~ Fred Hickey, editor, The High-Tech Strategist, "Fear Will Make a Comeback," December 1, 2013

Fred Hickey on QE3

Maybe I've spent too much time in the basement, but it can't be any clearer to me that we're seeing an almost exact replica of what occurred last year.  Last year Ben Bernanke and a "galaxy of Fed officials" fanned out to pave the way for the next round of QE.  This year they're doing the same thing.  Stocks soared for months before and for months after the implementation of QE2.  Now we're in the months leading up to the implementation of QE3 and the stock market has begun to soar again.  Yet there are a lot of stock market bears trying to short this market.  Look, I'd like to be bearish too, based upon the dismal economic fundamentals.  Unfortunately in this case, you can't fight the Fed.

~ Fred Hickey, The High-Tech Strategist, November 6, 2011

Fred Hickey on short selling in the current market

I learned that you can't make money shorting in this market currently. As stocks careen higher, the gap between fundamentals and valuations will widen, providing opportunities to short in the future. In the meantime, I'll try my best not to get sucked in.

[...]

What is worth mentioning is that this market is currently near-impossible to short.

~ Fred Hickey, "The Smartest Dumb People in the World," The High-Tech Strategist, November 5, 2010

Fred Hickey on the media's attitude towards gold

The media remains outright hostile towards [gold]. Last month Fortune magazine titled a story, "The Coming Gold Bust." Time Magazine had its own version: "Is Gold About to Bust?" CNBC host Simon Hobbs foams at the mouth when he speaks about gold. Last month Hobbs asked a gold bull the following loaded question: "So Jerry, would you still be advising widows and orphans to join the great pyramid selling scheme to buy gold in the hopes that others will follow you and push the price still higher?" For good measure, Hobbs declared at the end of the segment that "Gold isn't a store of value, it's a nonsense!"

~ Fred Hickey, editor, The High-Tech Strategist, June 4, 2010

Fred Hickey on unsustainable living standards

Dr. Bernanke has unwittingly helped create a monster, an 'Abby Normal' world economy where excessive government interventions keep market forces from clearing the imbalances. Most of the developed world countries consume too much, produce too little, retire too early and borrow too much in an attempt to sustain ultimately unsustainable standards of living. That's true in Greece, Spain and England, as well as in the United States.

~ Fred Hickey, editor, The High-Tech Strategist, June 4, 2010

Fred Hickey: "I don't regard the selloff as a great short selling opportunity"

Virtually all bear markets in this country's modern history have been preceded by Fed interest rate tightenings. [...]

Today, there's not even a hint of Federal Reserve rate hikes nor of significant liquidity draining. [...]

This kind of support from the Fed makes it unlikely that the current correction will turn into any kind of sustained bear market for stocks. The Fed would likely reinstate its QE [Quantitative Easing] program if stocks declined too sharply. Bernanke told Congress last month that there was nothing that says the Fed couldn't buy more mortgage-backed securities if conditions warranted. Therefore, even though I'm expecting this downturn to continue for a while, I don't regard the selloff as a great short selling opportunity, unlike what I had foreseen in the late 1990s-2000 and again in 2007 when interest rates were hiked.

~ Fred Hickey, The High-Tech Strategist, May 5, 2010

Fred Hickey on gold bubbles

I’m not sweating $1100 gold as the top like so many others in this country. They see bubbles everywhere in gold. They never saw the bubble in real estate, never saw the bubble in stocks, never saw anything. However, all these people in the U.S. see a bubble in gold. I don’t see it. I sleep like a baby with my gold position.

~ Fred Hickey, Wall St. Cheat Sheet Interview, April 20th, 2010

Fred Hickey on Bernanke's claims that he is not monetizing the debt

I watch every week as tens of billions of dollars are created out of thin air by the Fed in order to purchase U.S. Treasuries and mortgage backed securities. While Bernanke claims that he's not monetizing our debt, it's like a kid sitting in front of an empty plate with chocolate frosting all over his face claiming that he didn't eat the cupcake.

~ Fred Hickey, The High-Tech Strategist, August 3, 2009

Fred Hickey: "Vast overbuild of Internet infrastructure capacity"

Internet equipment suppliers like Cisco, Nortel and Ciena will not miss numbers in Q3, though I am beginning to see cracks in their armor. Investors pile into these stocks at ever more absurd prices because they are sure that there is no earnings risk in coming quarters. However, investors are ignoring the longer-term implications of the vast overbuild of Internet infrastructure capacity (bandwidth, hosting centers, etc.) that has been occurring over the past few years.

Mania-driven thinking has persuaded investors to believe that the demand for Internet infrastructure is limitless.

~ Fred Hickey, editor, The High-Tech Strategist, September 2000