This story on Taiwan degen traders highlights some major red flags

Taiwan’s stock market has doubled in the past year and it’s led to an incredible retail frenzy.

Bloomberg today writes about the market, which could be a stand-in for Korea or parts of the US market.

Andy Cheng is 26, unemployed and, with the help of a little borrowed
money, the proud owner of $60,000 worth of Taiwanese tech stocks. And in
many ways, he speaks for the entire island of 23 million people when he
doles out the following advice: “Buy any stock and you will make
money.”

There are some wild details:

• Many local brokerages have hit internal limits on margin loans and have had to ask for more collateral
• People who hit limits often turn to banks instead
• The Financial Supervisory Commission said leverage in the industry remains in check so far

Cheng in the report talks about how this rally is different than the dot-com boom/bust.

“This time it has substance,” he said.

*gulp*

Korea’s stock market was down 10% today as some of the air came out. Notably, it’s that tail that appears to be wagging the US dog today, preceding (if not precipitating) declines including double-digital losses in Micron and SanDisk.

Perhaps the most-scary details are about leverage with borrowing to buy stock markets hitting 160%, the most since the dot-com boom.

Here is another telling sign of the mood:

The vast majority of analysts at banks and brokerages predict more stock
gains in the coming months, including Goldman Sachs, which recently slapped a buy recommendation on the market.

You can never really predict when a party like this ends, but it always ends the same way and we’re getting a taste of it today. I will be very carefully watching Micron earnings on Wednesday because if there are any signs of a peak or even a looming peak in earnings, then it’s going to be a race to the exits.

Ultimately, I don’t think the big signal will come from the vendors but I suspect when one of the big spenders drops out of the AI race, it will mark the top.