Episode summary
Dylan Jovine | The Market Is Sending a Warning Most Investors Are Ignoring
Summary
Dylan Jovine argues that the market is sending a warning that many investors are missing, and he frames it with Jesse Livermore’s response to the 1906 San Francisco earthquake and fire. Livermore saw that East Coast investors were underestimating the damage, shorted the market early, and benefited from the selloff that followed into the panic of 1907. Jovine says today’s market has a different delay: not slow news flow, but a “split screen of realities” that leaves investors divided on war, the economy, and risk.
He says that divide is showing up in falling liquidity and rising fragility. Jovine cites S&P 500 futures liquidity at $5.1 million, about 61% below the historical average of $13 million, and says levels below $7 million usually signal stress. In that environment, he expects bigger price moves from smaller orders and more volatility if institutions need to trade in size.
Jovine is not calling for a crash, but he is getting defensive. He says to sell weaker and more speculative positions, reduce exposure, and hold higher-conviction names. He also agrees with the broad thrust of JPMorgan’s recent note to stay long energy and cautious on the market, while noting that AI strength, including Nvidia, is one reason the market has not already sold off sharply.
Key takeaways
- Jovine says the market is in a risk-off phase and investors should sell their weakest, most speculative positions.
- He cites S&P 500 futures liquidity at $5.1 million, about 61% below the $13 million historical average, as a sign of stress.
- Jovine argues the market’s main problem is a split perception of reality, which delays consensus and increases volatility.
- He says he is not shorting the market, but he is reducing exposure and tightening up positions.
- Jovine points to strength in energy and defense, and says Nvidia and AI strength help explain why the market has not fallen harder.
Notable quotes
“Jesse Livermore when he found out there was a big earthquake and fire in San Francisco basically leveled the city. He went short the market”
“market liquidity is starting to collapse amid this. So liquidity in the S&P 500 futures is down to just $5.1 million”
“It takes just a few million dollars now in orders to move the S&P up or down a tick”
How the episode opens
Good morning. This is Dylan Joven with Behind the Markets. Happy Wednesday.
Today is Wednesday, March 18th. What can an earthquake and fires that happened in 1906 teach us about the stock market today? I'm going to answer that question.
In 1906, there was a San Francisco earthquake which created a bunch of fires. Basically destroyed San Francisco, leveled it. And I learned about this when I was probably 20, 22, 23 years old.
Young on Wall Street and I was reading a book called Reminiscence of a Stock Operator. It's a book written, it's a classic written in 1923 written by a man named Edwin Lefra and it's written about the life of a great stock speculator named Jesse Livermore. It's basically a biography but written on first person on Jesse Livermore.
and Jesse Livermore is Raquette uh telling the story to Edwin Le Fevery basically that in 1906 that earthquake and fire remember back then San Francisco had a lot of gold money gold rush money really big prominent and it was a big chunk of the entire US economy but also back then news traveled really slow traveled really slow from the west to the east in other words Jesse Livermore when he found out there was a big earthquake and fire in San Francisco basically leveled the city. He went short the market because what he perceived early that few other people perceive was that you know what this is probably worse than people on the east coast understand and I better go short the market now. And of course a year later those are one of the key events that lead to the panic of 1907 where the market just broke out and just sold off.
What does that have to do with today? Right now we are also in a situation where people might not be perceiving this very very clearly yet.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- market liquidity
- rising volatility
- ai momentum
- macro risks
- investor psychology
Companies and tickers mentioned
- NVDA
- Nvidia
Watch the episode
Watch “Dylan Jovine | The Market Is Sending a Warning Most Investors Are Ignoring” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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