Clearing Rallies and Crashes (Buckle Up)

  • March 1, 2020
Presently, we continue to observe extreme valuations, coupled with ragged and divergent market internals. Yet we also observe very compressed short-term market action that has historically been permissive of “fast, furious” clearing rallies to relieve that compression. We are not “bullish” from a full-cycle perspective, and we continue to view safety nets as essential, but this compression does encourage us to have a more “two-sided” view about very near-term volatility.
Read More

Make Good Choices!

  • February 24, 2020
The menu of investment choices for passive, long-term investors is now the worst in history. When speculation drives prices to hypervalued extremes and likely risk-premiums to zero - or worse - investors face an additional problem. A market crash is simply a low risk-premium spiking higher. That's not hyperbole, and it's not a market call. It's just a fact.
Read More

Whatever They’re Doing, It’s Not “Investment”

  • January 30, 2020
The more glorious this bubble becomes in hindsight, the more dismal future investment returns become in foresight. Investment is not independent of price. As Graham & Dodd observed, "Had the same attitude been taken by the purchaser of common stocks in 1928-1929, the term ‘investment’ would not have been the tragic misnomer that it was."
Read More

One Tier and Rubble Down Below

  • December 28, 2019
One of the striking things about bull markets is that they often end in confident exuberance, while simultaneously deteriorating from the inside. Internal divergences, the lowest prospective market returns in U.S. history, and why not-QE really is not QE.
Read More

The Meaning of Valuation

  • December 3, 2019
Last week, our estimate of prospective 12-year nominal annual total returns on a conventional portfolio mix (invested 60% in the S&P 500, 30% in Treasury bonds, and 10% in Treasury bills) fell to the lowest level in U.S. history, plunging below the level previously set at the peak of the 1929 market bubble. Yes, interest rates are low, but with them, so are the discount rates and long-term returns embedded into prices.
Read More

Marks of a Phase Transition

  • November 20, 2019
We identify phase transitions by looking for a gestalt – several features that form a coherent, recognizable whole - in this case reflecting dispersion in leadership (new highs vs new lows), participation (the % of individual stocks joining a given market advance), and breadth (advancing vs declining issues) emerging immediately near a record market high.
Read More

A Striking Collection of Duck-Like Features

  • November 11, 2019
If a high-risk market peak were a duck, observable market conditions presently include a striking collection of duck-like features. The key idea here isn't terribly complex. High-risk market conditions feature the simultaneous appearance of market extremes and market divergences; essentially an overextended market losing its engines.
Read More

Propositions for a Recessionary Bear Market

  • October 9, 2019
As the financial markets enter what I expect to be a rather disruptive completion to the recent speculative half-cycle, it will be helpful for investors to consider certain propositions that are readily available from history, rather than insisting on re-learning them the hard way.
Read More

Going Nowhere in an Interesting Way

  • September 5, 2019
At extreme valuations, it’s important to remember that the completion of a hypervalued market cycle can wipe out every bit of the stock market's total return over-and-above T-bills, going back not just a few years, but for over a decade. In my view, investors are on the cusp of yet another very long period in which the stock market is likely to go “nowhere in an interesting way.”
Read More

How to Needlessly Produce Inflation

  • August 4, 2019
Quantitative easing is simply an asset swap. QE doesn’t produce inflation, and whatever inflation we get will not be the result of QE. What inflation requires is public revulsion to government liabilities, and what produces public revulsion is the creation of government liabilities at a rate that destabilizes the expectation that those liabilities remain sound.
Read More
Back To Top