Again, Eichler, tho I hate to be the prophet of muddle, and tho I remain quite willing to believe that the struggle presently unfolding on the charts may still resolve more or less dramatically to the downside, I think it's worth noting that Russell is often spoken of as one of those permabears who's simply bound to be right sooner or later. Could be this time... then again, maybe not.
Furthermore, the commonplace notion that he expressed in that interview - that, to paraphrase, the greatest bull ought to be followed by the greatest bear - may be amount more to an aesthetically appealing intuition rather than to a well-founded observation. To take the argument to its logical extreme, if such symmetries always obtained, then every bull market would be as powerful as every bear market, and vice versa, and therefore every bull market would also be the same as every other bull market, and every bear market the same as every other bear market.
Russell himself merely voices the notion as a possibility rather than a necessity, but why, really, should there be any dependency (or counter-dependency) of that sort? What if, for instance, the crucial underlying relationship between one period and the next lies not in some kind of perfectly symmetrical yin and yang process, but rather in actual alterations and maturation within the underlying socio-economic context that each market reflects. If that is so, then it might very well stand to reason that the greatest bull market would be followed by the WEAKEST bear - or perhaps by a relatively "normal" bear that simply "feels" extremely weak to participants (relative to the experience through which they most recently passed) - or perhaps by a bear market that unfolds relatively autonomously...?
The reactionary pessimist looks at the US stock market in the '90s and sees absurd excesses and relentless irrationality. The progressive optimist might see an altogether rational response to a combination of technological and other advances, to pro-business domestic politics, and to virtual worldwide US political and economic hegemony. Thus, for instance, from the latter perspective, PEs on the S&P 500 have have risen far above the "historical average," but there are numerous good reasons why they should have done so, and why a "pullback" should not need to return all the way to the historical averages or lower.
The truth may turn out to be somewhere in between, or it may be something that we all still have to create.
Happy 4th! |
