"...bull markets are like sex. It feels best just before it ends..."
lol
Bottom Line:
Many strategists are calling for a year-end melt-up: I believe it already happened
There have been 76 melt-ups since 1900: the current one is already the second longest on record
Stocks have achieved a Sharpe ratio of 4.5 this past year – better than 99.7% of the times since 1900
There is little sidelines cash and leverage levels are high • A re-allocation from bonds into equities could push the market higher
I’d rather bet on higher rates than on a continuation of this over-extended bull run
Warren Buffett famously joked that “bull markets are like sex. It feels best just before it ends”. Based on my sometimes-unlucky experience of sex and bull markets, I would add another commonality: the climax is sometimes reached before every participant realized that the party had even started.
Market pundits have pumped the notion of a year-end melt-up with quasi sexual frenzy lately. This report will make the sobering case that the melt-up already happened. Defining a melt-up as the combination of new all time-highs and 20% + year-over-year gains, I documented 76 such explosions since 1900. The median melt-up lasted 45 days. The longest and greatest of these jubilations lasted a glorious 320 days. The current climax has lasted 311 days, and counting. This remarkably resilient market Nirvana also featured a 1-year Sharpe ratio of 4.5, enough to break the heart, mind, and soul of the most seasoned hedge fund manager.
Racy jokes aside, I do not want to join the bears which have broken their claws on the back of this soaring bull. Melt-ups alone do not portend future losses: the S&P 500 index has gained an average 6.8% in the year following the 76 prior meltups. Also, bond investors have poured about $10 trillion into bond funds since 2009, and almost nothing into equity funds. Even a small re-allocation could propel the stock market into an unprecedented jubilee.
But I’d much rather play the melt-up game by betting on rising rates, rather than a continuation of this overextended and overvalued equity bull market.
http://www.zerohedge.com/news/2017-10-29/technical-history-market-melt-ups
3 comments.........................
IH8OBAMA's picture
IH8OBAMA junction Oct 29, 2017 5:38 PM
What happens if you apply a similar analysis to the Bitcon?
stacking12321's picture
stacking12321 IH8OBAMA Oct 29, 2017 5:53 PM
Proper analogy for bitcoin and cryptos is the dot com bust.
Many collapsed, but the ones that made it ended up being worth orders of magnitude more.
The world is in the process of being transformed, and cryptocurrency is part of that transformation.
Blue Steel 309's picture
Blue Steel 309 junction Oct 29, 2017 5:39 PM
1929 can't happen. This time it really is different. This time it is 100% fraud from every direction.
The only certainty is that fiat currency always collapses. Always. Usually collapses the governments with it.
Realist - Everybody in America is soft, and hates conflict. The cure for this, both in politics and social life, is the same -- hardihood. Give them raw truth.
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