What goes up, eventually comes down.
That is just reality.
The bull market that began in 2009, has now entered the final stage of “capitulation” as investors throw caution to the wind and charge headlong into the markets with reckless regard for the consequences.
Of course, it isn’t surprising given the massive amounts of liquidity continually injected into the financial markets and global Central Banks have now figured out that continually rising financial markets solve much of the world’s ills. Simply, with enough liquidity, you can cover up bad (credit risks) by guaranteeing holders they will never default.
It’s genius. It’s a “no lose” investment scheme.
Unfortunately, we have seen this repeatedly in the past.
In the 1980’s it was “Portfolio Insurance” – a “no lose” investment program that eventually erupted into the crash of 1987. But not before the market went into a parabolic advance first.
In the 1990’s – it was the dot.com phenomenon which was “obviously” a “no lose” proposition. Even after Alan Greenspan spoke of “irrational exuberance,” two years later the market went parabolic once again.
Then in 2006-2007, banks invented the CDO-squared, a collateralized derivative obligation based on other collateralized derivative obligations. It was a genius way to invest with “no risk” because the real estate market had never crashed in history.
Today, it is once again an absolute “certainty” that markets will rise from here as global Central Banks have it all under control.
What possibly could go wrong?
Here is your weekend reading list.
Economy & Fed
- The Fed Should Listen To The Market’s Message by Caroline Baum via MarketWatch
- The Fed Needs To Read This Economics Book by Simon Constable via US News
- DAVOS: Something Wicked This Way Comes by Tyler Durden via ZeroHedge
- Could We Be About To Break Out Of Low Growth “New Normal” by Mohamed El-Erian via FT
- Does Trump Deserve Credit For Good Economy? by Larry Summers via Washington Post
- Kashkari: Robust Immigration Vital For Economy by Pedro Da Costa via BI
- Economy’s Success Is About The Math by Jonathon Trugman via NY Post
- 5-Scenarios That Could Crash The Market by Tyler Durden via ZeroHedge
- The Real Source Of The Meltup by Brian Maher via The Daily Reckoning
- Investing Environment Has Been Perfect, But Could End Soon by James Mackintosh via WSJ
- BofA Warns Of Frothy Market by Mark DeCambre via MarketWatch
- Is This The Most Sustainable Bubble Ever? by Simon Maierhofer via MarketWatch
- Is Anyone Paying Attention by Sven Henrich via Northman Trader
- Davos: Should You Unload Your Stocks by Shawn Langlois via MarketWatch
- Are You Ready For The Next Market Melt-DOWN by Michael Kahn via Barron’s
- Dalio: First Comes The Boom, Then The Bust by Edward Harrison via Credit Writedowns
- Gauging Contemporary Bubbles by Chris Hamilton via Economica Blog
- Are Stocks Headed For A Nasty Surprise by Anora Gaudiano via MarketWatch
- Yusko’s 10-Surprises For 2018 by Robert Heubscher via Advisor Perspectives
- A Market Valuation That Defies Comparison by Michael Lebowitz via RIA
- It’s More Than A Matter Of Trust by Doug Kass via RIA
- Beyond The Bitcoin Bubble by Steven Johnson via NYT
- Coinbase Is Teaming Up To Unleash Crypto On WallStreet by Frank Chaparro via BI
- IRS Fears Bitcoin Could Starve Government by Holden & Malani via NYT
- How To Value Cryptocurrencies by John Biggs via Tech Crunch
Research / Interesting Reads
- Why The Next Downturn Won’t Be Like 2008 by Wolf Richter via Wolf Street
- The Bubble That Could Break The World by James Rickards via The Daily Reckoning
- The Possibilities Are Frightening by Kevin Muir via The Macro Tourist
- The Financial Road Map For 2018 by Nomi Prins via The Daily Reckoning
- Barron’s Roundtable: Bright Outlook For Economy & Stocks by Lauren Rublin via Barron’s
- Marks: Future Returns Are Low For Every Asset Class by Tyler Durden via ZeroHedge
- Rising Markets Not Bullish For Everyone by Steven Rattner via NYT
- Why CAPE Naysayers Are Wrong by Rob Arnott via Research Affiliates
- The Trendiest Rally In U.S. History by Dana Lyons via The Lyons Share
- This Market Is Literally Off The Chart by Jesse Felder via The Felder Report
“Strategy without tactics is the longest path to victory; tactics without strategy is the noise before defeat.” – Sun Tzu, The Art of War
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