Further to the re-coupling-after QE theme, the large cap S&P 500 (top green line) would also need to fall 50% if it were to retrace and rejoin in its long-standing historical correlation with the CRB commodities index (bottom orange line) as shown below. Just like the Venture Exchange in the previous post, the CRB Index is today back where it was in late 2009. Over to you Janet.
In the time before the double-down pump and dump scheme released as “Q’Ever” in 2012, small cap resource companies that trade on the Canadian Venture Exchange Index used to move in strong correlation with the US based small cap Russell 2000 Index.
As shown above, this historically positive correlation went negative over the past 2 years, as the Russell (top line) disconnected from the Venture (bottom line) and the real economy, and levitated along with large cap indices. But then the plot thickens: over the past 3 months, the Russell decoupled from the large caps once more, and is now negative year to date. If the Russell were to recouple with its Canadian cousin from here, the downside for US small caps is about -50%. At that point, they are much more likely to present some value worth owning.
Wide-eyed teleprompter readers, most of whom have little savings to lose in the first place, nor any expertise or clue about how to protect and grow money, are having a heyday at the moment hammering anyone with actual investment discipline who is expressing concern about downside risk.
The fact is that those who have their own established rule set, don’t need to insult or belittle the approach of others or convince them to abandon their discipline and follow the crowd. Only those who are lost with no plan themselves, do that. This clip is actually comical in a pathetic sort of a way. Here is a direct video link. Bill maintains civility pretty well in the circumstances.
It is always the same. When the downturn hits, the same crowd will blab on about how no one saw it coming. Many of them will lose their jobs as shows get cancelled, hosts shuffle stations and strategists try to obliviate their capital-devastating track record by rotating to other firms. In the land of the blind, the one-eyed man is king.
Marc Faber has also been getting slammed the past few months for continuing to express facts about the outrageous risk in current asset prices. He managed to get in some good points in this clip.
Cory’s Chart Corner
