Is the Market Ready to Return to Some Sense of Rationality?

In this article:

• A closer look at AI 'mania'... Is a fierce sell-off coming?
• A breakdown of my recent trend-following system positions
• My view on the currency markets

Thoughts on the Market - February 19, 2024

As the AI mania in the markets continues, I believe it is apt to quote Charles Mackay, a Scottish poet, novelist, songwriter, and one of my favorite authors. Mackay is best remembered for his book, “Extraordinary Popular Delusions and the Madness of Crowds.” He was born in 1814, but his analysis of people one hundred and eighty-three years ago is no less apt today when he noted that “men…go mad in herds, while they only recover their senses slowly, one by one.”

Mackay’s book is fantastic, and if you haven’t read it, I strongly recommend it. The book provides a great analysis of crowd psychology and panic, and as I have noted in recent writings, we are now well on the way to full-blown insanity in the markets. In whatever way we label these periods of madness, whether we use the term “bubbles” or “mania” or anything else, the result is the same. They all end in tears.