Considering the extreme complacency in
the stock market, (I’m starting to hear multiple calls for a new secular
bull market) it would probably be fitting that the next crisis is now
sneaking up on us completely out of the blue as the Japanese currency
begins to collapse. By the way secular bear markets don’t end until PE ratios reach extreme levels of undervaluation.
Notice in the lower chart the extreme levels from which this bear
market began (PE’s above 40). I think we can safely assume that this
bear market is not going to be any different than any other one.
It
certainly didn’t end with a PE ratio of 15 when every other bear market
in history ended below 10 and every one of them began from much lower
valuation levels (usually with PE ratios about 20-25). This bear market
has much bigger excesses to clear than any other bear in history. The
rubber band got much further stretched to the upside this time. Normal
regression to the mean forces will demand that the bear market should be
deeper and more severe than probably any other bear in history.
So I don’t think we need to take anyone
calling for a new secular bull market in stocks seriously. I think we
all know this is about currency debasement, as there is no new
technology to drive a new secular bull market yet.
I warned traders that we were about to enter the euphoria phase of the cyclical bull. This is an ending phase by the way. But the end of a bull can span many months and even a year or more, which is why I keep warning the shorts to be patient.
More in the weekend report.
