I used to think 1973 might be a reasonable model, but the more I study things, the more respect I have for the way the 1950s-1960s bull market handled itself. Things never got out of hand back then. The Fed was restrained, and prevented the formation of any significant blowoff. Without a climactic endgame, the secular bear just gradually bled things from moderate overvaluation to moderate undervaluation.
This is very different. The bubble in the S&P is equal in size to the 1929 Dow bubble. The bubble in the Naz exceeded both 1990 Nikkei and 1929 Dow. Both dwarf the 1960s top. Given how fast things have fallen apart, despite unbelievable liquidity injections, and given all the positive feedback present in the system, I think we're on track to have the worst bear market in the history of the United States.
The action of our Naz is weaker than the 1929 Dow, so I've resolved to play off a 1929 scorecard. While the economy is probably nowhere near as weak as 1929, and liquidity is flowing much more freely, the ridiculous height of valuations evidently has more than made up for this. It's kind of like automobile safety - every time someone comes up with a way to make cars safer, people learn to drive faster, so the risk level remains constant with time.
Every time is different, but right now the burden is on the market to prove that this isn't a repeat of 1929. If I'm right, this approach is the only way to make any money for a long time to come. If I'm wrong, the market will let me know. I'm prepared to pay for that education.
BC |
