I haven’t posted in a while. It’s been a frustrating year. I was getting excited when the S&P started the year down 5%. I thought “This is it!” And of course, I was wrong. I keep reading more and more people say that we are in the beginning parts of a new secular bull market. I actually get upset when I read that. It’s so unbelievably dangerous. Secular markets start and end based on valuation. We are at all-time historical highs in valuation. Higher values than even 1999 and 1929, in many regards. Secular bull markets have started, in the past, when the stock market to GDP ratio has been sub 50%, and right now we are at 130%!
Patience is a virtue and I lack it in every aspect of my life…except investing. I’ve been blessed with that ability to be patient. Has it been trying? Of course. But these cycles do take time. As John Hussman said in his post tonight, and as a former partner of mine always says “Market tops aren’t just points…They are processes. We are in the process, hopefully, of this. I say “hopefully” because I have been wrong for quite some time. But I do feel good knowing that the longer I am wrong, the more likely the devastating result that will follow. Thinking that another 50% drop (3rd in 15 years) is not likely is a fool’s wish. History has shown that during times of immense overvaluation, prices fall, fundamentals don’t rise.
For those reading this who think I’m kooky, keep on thinking it. It’s been hard thinking otherwise. But again, please don’t say “it was so obvious” in a few years when the market has fallen 40%. It’s just insulting.