The current “bull market” doesn’t even qualify as cyclical in that it was engineered by the Federal Reserve. It is propped up by printing presses and the Presidents Working Committee, and that is all. If anything causes the markets faith in Bernanke to wane, the game is over. Worse yet, things are bad in so many different places that it will take a separate act of God (not Bernanke) to hold this house of cards up much longer.
We Are Approaching A Critical Point In The Current Bear Market
It’s easy to forget, especially in the excitement of the recent new market highs, that not only a cyclical bear market, but also asecular bear market began when the market topped out in 2000.
None other than Warren Buffett warned in November 1999 that“Over the next 17 years equities will not perform anything like – anything like – they’ve performed over the last 17 years.”
When Buffett made his perceptive forecast in 1999 the market had been in a typical 18-year secular bull market since 1982, and had become extremely overbought in the process.
Over the last 110 years the market has cycled fairly regularly between secular bull markets that lasted up to 18 years, and sideways secular bear markets that typically lasted about 17 years.
In a secular bull market there are periodic bear markets, but they are usually brief, and then the next cyclical bull market takes over and carries the market onward and upward to ever higher new highs.
In a secular bear market, periodic cyclical bull markets take place that carry the market back up to the vicinity of its previous peaks. But then the next bear market takes over, the market tops out again, and the long-term sideways secular bear market continues.
The last secular bear market ran from 1965, when the Dow reached 1000 for the first time ever, until 1982, when it reached 1000 for the sixth time in 17 years, and finally kept going into the 18-year 1982-2000 secular bull market.
In the current cyclical bull market that began in 2009, within the secular bear market that began 13 years ago in 2000, the market recently again reached its previous peaks of 2000 and 2007, and this time exceeded those peaks.
EVERY Market Is Rigged
MAULDIN: Economists Are Totally Clueless About The Economy
Economists Are (Still) Clueless
The Revenge of the Minsky Moment
Monaco, Cyprus, Croatia, Switzerland, and Las Vegas
Economists set themselves too easy, too useless a task if in tempestuous seasons they can only tell us that when the storm is past the ocean is flat again.
- John Maynard Keynes, A Tract on Monetary Reform
There can be few fields of human endeavor in which history counts for so little as in the world of finance. Past experience, to the extent that it is part of memory at all, is dismissed as the primitive refuge of those who do not have insight to appreciate the incredible wonders of the present.
- John Kenneth Galbraith
Hitler must have been rather loosely educated, not having learned the lesson of Napoleon’s autumn advance on Moscow.
- Sir Winston Churchill
US GDP has been slowly ramping up, only to fall back and then try once more to bring us back to the ’90s. Stocks markets are volatile but seemingly moving higher in most of the developed world, except for Japan, where the current 20% drop comes hard on the heels of one of their frequent “end of the bear market forever” rallies of almost 90% – how many of those have we seen over the last 24 years? Europe is mostly in recession or Muddling Through with very slow growth. I continue to read from those who know China intimately that there is a real crisis brewing there. And over the last four weeks I have highlighted how desperate the situation is in Japan.
HERE IT IS: SocGen’s Famous Chart With The Black Swans
The risks remain biased to the downside.
JIM O’NEILL: We Could See A Bond Crash
5% yields on the 10-year “not a stretch.”
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