I told you to watch the FAANG stocks for signs of trouble

In this CNBC article today, they're talking how the big hit Facebook's stock took yesterday could very well be a sign that the "Trump Rally" is close to cracking.  For those not up on the acronym, FAANG is the vicious sounding word for the big tech blockbuster stocks, Facebook, Apple, Amazon, Netflix and Google.  Google's holding company in now named Alphabet, but FAAAN doesn't have a good ring to it, so FAANG is still the name people use to refer to these stocks. 

Here's the problem, stock indexes have been rising steadily since early 2009.  People like to forget that, but the charts tell the tale.  They rose through the most of the Obama presidency, and then accelerated after the 2016 election.  Donald Trump took credit for steepening rise in the stock markets, which was stupid.  The reason it's stupid is because if a president takes credit for stocks rising, he's going to get the blame when they fall, which they inevitably do. 

The real reason the stock markets rose quicker after Trump got elected is because with Republican control of the presidency, House, and Senate, they knew they would be able to pass the massive "tax reform" bill.  That bill was a huge giveaway to major corporations and ultra-wealthy people with lots of investments.  Quite literally, it was welfare for the super-rich and for major Industrial Age corporations who are having a lot of trouble adapting and competing in the 21st century information age. For the highly profitable tech companies, it was a huge bonus, unneeded, but helpful.

It's kind of like people getting a winning lottery ticket and then going on a shopping spree, because they know that huge check is coming soon. 

But since the stock market had been rising for 7 years straight before Trump got elected, and then rising a bit faster for 2 years since, prices are high, and things are running out of steam.  Once the "tax reform" bill passed in January, there wasn't a big reason for stocks to keep rising.  The major companies got their "lottery check," so to speak, and the anticipation period was over. Where did they spend most of the money?  On buying back their own stocks, so they own a bigger share of themselves.  Most of that huge amount of money saved, and brought back to the U.S. from overseas, has NOT gone into the real economy of everyday Americans.  It wasn't invested in new infrastructure, creating new jobs, funding small businesses, getting broadband to rural America, or any of the other things useful and helpful to the majority of people.

The FAANG stocks, which have been the rising more than any other group of stocks, have attracted more money, because they just kept going up more than everything else.  So now, as the long up trend in stocks is running out of steam, EVERYBODY owns the FAANG stocks.  And there's not just many more reasons for them to keep going up.  So when these few stocks do peak and head down, it's going to leave very few really good places for large amounts of money to go.  When the FAANG stocks start to head south, the whole stock market will most likely follow, and that, combined with huge amounts of debt, ultra low interest rates, other factors, will almost certainly send us into the next recession.  And that recession is looking like it will be a gnarly one, much like 2008, and maybe even worse. 

Facebook took a big hit on its stock price, and other things look pretty good... for now.  But the big hit FB took is a sign that the gravity of reality is being felt in the overinflated financial world, and a correction is coming.