Navigating the Speculative Id of Wall Street

  • December 1, 2017
Valuations are understood best not by trying to “justify” or dismiss current extremes, but by recognizing that across history, the speculative inclinations of investors have periodically allowed valuations to depart dramatically from appropriate norms, at least for limited segments of the complete market cycle.
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Brief Observations: Distinctions Matter

  • November 12, 2017
Last week, the uniformity of market internals shifted to an unfavorable condition. During the advancing half-cycle since 2009, zero interest rates encouraged speculation (and maintained favorable market internals) long after extreme overvalued, overbought, overbullish conditions emerged. But distinctions matter. Once the uniformity of market internals - the most reliable measure of speculation itself - is knocked away, those extremes are still likely to matter with a vengeance.
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This Time Is Different, But Not How Investors Imagine It Is Different

  • November 4, 2017
Encouraged by the novelty of zero-interest rates, not even the most extreme “overvalued, overbought, overbullish” conditions have been enough to derail the speculative inclinations of investors. Yet in every other way, this speculative episode is simply a more extreme variant of others that have come before it.
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Why Market Valuations are Not Justified By Low Interest Rates

  • October 9, 2017
Current market valuations are consistent with negative expected returns for the S&P 500 over the coming 10-12 years, with a likely market loss of more than -60% in the interim. The proposition that “lower interest rates justify higher valuations” has become a rather dangerous slogan, and is an incomplete statement.
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