Friday, July 19, 2013


Click to enlarge**

Does the current 1.9% yield look like this is what you see at beginning of Bull markets?
Exactly, with the new FED engineered stock market, we are witnessing the largest bubble blown in the history of the stock market.

It is my suspicion, when it BLOWS, what follows will also be historic.



Anonymous said...

CAMC: Busy on the proof, years of it. Bears busted broke.

“The economy continues to do okay, the stock market is hitting all-time highs every day, real estate is back on the up and up, interest rates remain very low by historical terms, the net worth of Americans is back at all-time highs, we’ve just dragged ourselves out of the worst recession in 80 years, but people are still upset about a lot of things . . . I have a feeling that there’s more to this general unhappiness than meets the eye. And I think a lot of people are mad because the fear case has totally lost out at this point.”

He is precisely correct: A large source of angst is from those who missed the 146% rally to all time highs. Sell offs can be painful, but the mathematics of mean reversion are inescapable. Asset classes eventually recover, but if you fail to participate in a generational rally, it will haunt your compounded returns forever. Cullen implies that (beyond high unemployment) this might be the source of this angst.

But there is a deeper, more fundamental reason for the unfocused rage and misdirected anger: The failure of the narratives that have been driving much of economics, investing and politics. As John Kenneth Galbraith famously said, “Faced with the choice between changing one’s mind and proving that there is no need to do so, almost everyone gets busy on the proof.” Rather than accepting certain unpleasant realities, many participants have contorted themselves into a painful waiting game. They are “busy on the proof.”

The Galbraith quote reflects a favorite topic of ours – Cognitive Dissonance — and we have spilled more than a few pixels in these pages on the subject. As many of the narratives have failed, rather than admit the error and face the music, the rationales have morphed into a waiting game. Dow 5000 will happen eventually, Collapse of the Dollar — and all fiat currencies — is coming; Hyper-inflation (any day now), Gold will hit $10,000 (sold to you), Great Recession 2, Oil $200, etc. The reference is not to any one of these errors specifically, but rather, tot he entire narrative driven belief systems in general. They are by design money losing stories, either torturing the data or ignoring it entirely.

Cullen gets more specific than I do in The Narrative Failing — he calls it The Fear Trade Has Been Demolished:

“If you’ve been paying attention over the last few years, you probably remember how many people predicted hyperinflation, surging bond yields, soaring gold prices, a cratering US Dollar and a collapsing stock market. This was the fear trade. You overweight gold, short US government bonds, short the USD, short equities and laugh all the way to the bank. Parts of that trade have worked out OKAY (like the gold portion over the years), but on the whole that trade has been a big disaster. In other words, fear lost out – again.”

Anonymous said...

Great post. Just what I have thought and been saying all along.

Everything is just fine and the market is headed higher.

You really think they ran this market all the way back to this level only to let it fall again??

No way.

Anonymous said...

Buy and hold wins again

By Mark Hulbert, MarketWatch

If you think you will know it when this bull market finally comes to an end, you are kidding yourself.

The vast majority of professional advisers who try to get in and out of the stock market at the right time end up doing worse than those who simply buy and hold through bull and bear markets alike. Even those few who beat a buy-and-hold strategy during one period rarely beat it in the next one.

What makes you so confident you can do better?