This Time Was Different. Bears Should Live To Fight Another Day
It's one thing to refuse to concede that you were wrong when what's at issue admits of some ambiguity. Or when whatever it is that's being debated is a matter of opinion, with yours representing the out-of-consensus view.
It's another thing entirely to stare reality in the face and belligerently deny its existence. Mike Pence, for example, stood at a lectern Friday, and told the nation that "all 50 states and territories across this country are opening up, safely and responsibly". Literally as
Great article. I was cracking up laughing when you said “If it did, and someone has figured it out, rest assured they did not tell anyone about it.” It was the punchline for sure haha
I thought Jim Simmons figured that out
That last paragraph has never been more true than in the last 5 years ( and even more so now ) with the Fed and Treasury setting the default mode for Equities to Permanently UP…..
So refreshing to see market journalism that’s highly intelligent and seemingly unbiased. Thank you for your work.
“The very things that made picking the bottom all but impossible make it no easier to know when the top is in”
If he has a surefire way to know when the middle is in I would like to know.
Judging from the Federal Covid 19 response, denying reality seems to be in vogue these days. Not even the Fed knows where this may be heading (check out page 4) https://www.federalreserve.gov/publications/files/2020-sensitivity-analysis-20200625.pdf.
What is also interesting is Shiller’s survey of investors involved in the ’87 crash is how little of their sentiment was driven more by a “gut feeling” than any technical consideration like the widening trade deficit, dollar decline or the tax legislation that closed LBO loopholes.
What tends to be forgotten about the ’87 in the DJI was up over 40% from August ’86-August ’87 despite the softening recovery and that the Dow dropped substantially in the three prior sessions (October 14-16). And the selling continued into the Friday close. When Monday rolled around the selling pressure was so intense that trading in a good number of stocks had to be delayed at the open due to such a mismatch between sell and buy orders. What also tends to be forgotten is that October 1987 was a worldwide phenomenon. It may well as be one of the strongest arguments for QE and ZIRP –the Fed provided liquidity to markets (a small trickle in today’s terms) while the Bank of New Zealand steadfastly refused to bail anyone out. The different outcomes were very plain to see.
Whatever the case, all of these titans are right to be stunned but not whining at being caught flat-footed as the Q2 20 run-up really is without precedent, but no one expected to lose 19% in one day on October 19, 1987 either –or they wouldn’t have. There is a reason why “Uncertainty” has become one of the Fed’s favorite buzz-words and that word does not permit creating a trade algo via a frequency search of the Internet.
Great article. Thank you.
I am thinking this recession is much longer and deeper than most are anticipating at this point and that eventually this will be reflected in the price of equities. Anticipating a long, slow sell off.
Fiscal aid injected at the bottom of the economic ladder, take the cash back from the top of the economic ladder (taxes).
Rinse and repeat.
Every company has a different point where they start to turn a profit, which is the whole reason for buying equities.
Maybe Company X can only begin to make a profit in 2020 if they achieve 90% of the 2019 sales and maybe Company Y can only achieve profit In 2020 if they are at 95% of the 2019 sales- because below those levels, Companies X and Y are still covering fixed overhead and probably additional debt service.
No way this level of detail analysis has been done with any degree of accuracy.
We’re not even into the first full week of summer and we’re looking at Hospitals being swamped with Covid cases. The soldiers in Afghanistan may want to stay there as being safer fighting the Taliban than coming home to a full blown pandemic. If the medical services become overrun and unable to handle the number of cases, even the Republican Governors will have to order stay at home orders and pray the food factories and farmers can maintain enough food to feed the survivors. Equities hitting new highs?? Can’t see it happening under these conditions, specially if the vaccine doesn’t come in time, or worse, doesn’t work. And if there’s a second bigger wave in the fall?? Mexico may have to build the wall to keep Americans from swimming the Rio Grande into Mexico. New lows?? How low can you go?? Will all of this come to pass?? Can’t say no with Pense in charge.
Or people won’t take it