'Katie-Bar-the-Door' Time For Evergrande Speculators?

Bears had a rare chance to get short with impunity last week -- arguably the first such free-money opportunity since the bull market began more than 12 years ago. With the Evergrande saga unfolding in real time, shares appeared to be doing a Wile E. Coyote ahead of Friday's opening. Their gravity-defying behavior reflected one of those deft manipulations where DaBoyz greet whatever fragile bids show up in the early going with a feather-light touch. On Friday, playing it by the book, they scaled back their offers until the very last of the idiots from Mars doing the  buying were fully satisfied. The result was that stocks hovered aloft for just long enough that traders who had gotten things exactly right -- i.e., realized that Evergrande's failure could make the 1998 collapse of Long-Term Capital Management look like a furniture-store liquidation -- must have begun to doubt themselves.

It was only after the opening bell that they came to their senses with the apparent realization that any selling done on Friday was all but certain to look fortuitous come Sunday evening.  Stocks began to fall, but not nearly as steeply as they are likely to fall in the weeks and months ahead. Indeed, I am publishing this commentary ahead of Sunday's resumption in trading to drive home my point, which is this: Evergrande's imminent implosion could turn out to be the biggest speculative collapse in history. It is going to take down many big players, perhaps causing a chain reaction that will definitively end the buying mania that has gripped shares since Covid-19's "bullish" failure to put civilization into eclipse.

Up to Their Eyeballs