Skip to content

Skating By The Trap Door (Motherlode II)

There are certain features of valuation, investor psychology, and price behavior that tend to emerge when the fear of missing out becomes particularly extreme and the focus of speculation becomes particularly narrow. On Friday, May 24, we hit a fresh “motherlode” of these conditions.
Read more

This Is Where You Start Bear Markets From

Statistically, the current set of market conditions looks more “like” a major bull market peak than any point in the past 75 years, and I suspect, any point other than the 1929 peak. As Jeremy Grantham recently observed, "This is where you start bear markets from."
Read more

Universal Capitulation and No Margin of Safety

The stock market presently stands at valuation extremes matched only twice in U.S. financial history: the week ended December 31, 2021, and the week ended August 26, 1929. Meanwhile, despite all the bluster about technological improvements driving durable increases in corporate profitability over time, the fact is that corporate profit margins before interest and taxes have hovered around the same level for 75 years.
Read more

Speculative Euphoria and the Fear of Missing Out

Investors seem to be developing an excruciating and nearly frantic 'fear of missing out.' The intent of this note is to describe what we are doing – calmly and methodically, in our own discipline, to share the data surrounding those actions, and to remind investors how those actions will change as the data changes.
Read more

Cluster of Woe

We estimate that current market conditions now “cluster” among the worst 0.1% instances in history – more similar to major market peaks and dissimilar to major market lows than 99.9% of all post-war periods.
Read more

The Return of Buy-Low Sell-High

The S&P 500 is two years into what we expect to be a very long, interesting trip to nowhere. The strongest stock market returns in the coming decade, perhaps longer, are likely to emerge during advances in the S&P 500 that attempt to catch up with the cumulative return of risk-free Treasury bills. Recall that investors experienced the same outcome between 1929-1947, 1968-1985, and 2000-2013.
Read more

The Secret Life of Fed Pivots

The yearning affection that investors hold for Fed pivots is quietly driven by the fact that nearly all the pivots occurred when the S&P 500 already stood at historically normal or depressed levels of valuation. The associated market returns were typically a function of two factors: favorable valuations, coupled with an improvement in market internals. It’s those factors – the central elements of our investment discipline – that actually correlate with favorable market outcomes.
Read more

Soft Selling a Hard Landing

In every noise-reduction problem, uniformity matters. There is vastly more information in the common signal drawn from multiple sensors than there is in any single measure by itself. While we still don’t have enough data to anticipate a recession with high confidence, my view is that the sudden enthusiasm about a 'soft landing' runs exactly opposite to the trend of the data.
Read more

When the Bough Breaks

The recent 'everything bubble' has taken its dear sweet time to collapse. Even though the S&P 500 remains down from its early 2022 peak, and 30-year Treasury bonds have lost over half their value since early 2020, the market has maintained the appearance of 'resilience.' Yet there need not be a proportional relationship between the size of the last grain of sand, the length of the last straw, or the weight of the landing butterfly, and the extent of the catastrophe they provoke.
Read more

Central Bankers Wandering in the Woods

Fed policy variables provide very little information about subsequent economic outcomes over-and-above the information available from non-monetary variables alone. The exception is economic crisis that inevitably follows interest rate suppression, yield-seeking speculation, and misalignment of monetary and economic quantities. 'The crisis takes a much longer time coming than you think,' said the late MIT economist Rudiger Dornbusch, 'and then it happens much faster than you would have thought.'
Read more
Back To Top