Wednesday, July 22, 2015

Going Nowhere Til We Get Somewhere


Dear Bob had quite a few nuggets of wisdom to share, but I like #4 best, which is:

"Exponential rapidly rising or falling markets usually go further than you think, but they do not correct by going sideways"

Based on capital returns of the SPY as a proxy for the S&P500, capital returns has been a whooping 14.7% annually compounded over the 5 years.

Exponential rapidly rising market? Check.

Add this to the fact that the S&P500 has been pissing around 2040 and 2140 for the past 6 months, which is an extremely tight range of about 5%.

Going sideways for a pretty long while? Check.

So either the US markets surprise us by breaking out of this tight 6 month range and head towards dotcom bubble valuations (since based on valuations the only other time in history where the stock market has been more richly valued is during the dotcom bubble... but that all turned out fine, right?), or everyone suddenly realizes how ridiculous things are and we head substantially lower.

Gone are the days when people talk about market cycles and look at the history of the markets. Stocks can go only up these days. If they are going down, the market breaks, halts or selling is banned.

Who knows what could happen? Maybe the market corrects then Yellen pussies out and hold off the rate hike. Why not? The Fed has been saying they will be raising rates since forever.


I see plenty of things that can go wrong and bring the market down with it, and very few things that will make everything better and send the market up.

The more days go by, the more I feel confident that this ship is going down. I believe in market cycles and this run has just gone on for way too long.

Nobody rings a bell at the top so everyone can exit their positions at all-time highs in an orderly manner. It's gonna be ugly.

And there's where I hope we are going to.

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