My talks out west this week were a review of current market conditions, asset valuations and probable outcomes. I like the discipline of preparing public presentations, because it requires me to rigorously review and summarize incoming evidence and explain how it informs and evolves our investment thesis. This week I could not help but have a strong sense of Deja Vu with the conclusions I was presenting in my 2007- 2008 talks when I was a rare bear at investment conferences, and nearly all speakers were extremely bullish on the idea that Chinese growth was insatiable and that commodities and commodity producers, their economies and currencies could only go straight up. Fast forward to today and I am once more expecting the next cyclical bear market to begin, while most others are convinced that “endless” central bank liquidity has abolished bear markets for years to come.
Today I can see no evidence that the secular bear market that began in stocks in 2000 is over, and I see every reason to expect that the next cyclical bear market is very likely to whack over-exuberant prices back down (ala 2002 and 2009) for the third time. I was therefore interested to read an excellent article this morning from Vitaliy Katsenelson. Apparently he too is feeling a sense of Deja Vu today with 2008:
“In early May I had the pleasure of attending and speaking at the Value Investing Congress in Las Vegas. The last time I spoke there it was May 2008 and the market was just coming off its top. The S&P was at 18x trailing earnings. Profit margins were at a modern-day high. They subsequently collapsed but came back to set an even higher high…
The market was not cheap in 2008. It is not cheap now, either…
In all honesty, I could do the same presentation today that I did 5 years ago…”
Read the whole excellent piece here: Beware of Sideways Markets
