Sign that the Bull Market Is finally over?
Contrarians have been waiting for the moment when the last stock-market bear standing gets gored. That would be the very moment when the fabulous multi-year rally would turn into a multi-year bear market.
Month after month, year after year, bears have gotten gored, one after the other, and turned bullish on stocks. But it wasn’t enough. There were still too many bears left standing. So it would be a long wait.
But now, Bill Bonner, a widely-published stock-market bear and founder of newsletter empire Agora, who stuck to his investment choices – “heavy” on real estate, cash, and gold – even as stocks have soared, and who has squandered few opportunities to lambaste stocks, their irrational prices, and the manipulations by central banks and Wall Street, he who thinks that the US is headed for a devastating “credit crisis” worse than the Financial Crisis, well, he too just got “gored.”
It happened in an article he wrote with his trademark humor that vacillates between self-deprecation and self-flagellation. And it rattled a lot of his faithful readers.
My outlook is not as pessimistic as his. I’m by nature an optimist. But my optimism is running out of food.
My outlook on junk bonds didn’t turn bearish until mid-2014. I’d called it a credit bubble for years, but bubbles inflate. Prices go up. The time to turn bearish is when you see signs that the bubble will deflate.
I also called stocks a bubble for years. I pointed at market manipulations, Fed shenanigans, financial engineering, and insane valuations, and I compared some metrics to those just before prior crashes. But my outlook on stocks didn’t turn bearish until sometime after it had turned bearish on bonds.
A few months ago, my outlook on the insane housing bubble and the perhaps even more insane commercial property bubble in San Francisco turned bearish. Before then, I’d called it a bubble and a Housing Crisis, because middle-class families could no longer afford the asking rent of a median two-bedroom apartment or the price of a similar condo.
All bubbles eventually deflate. But until then, prices rise sharply. People floating up on the bubble ridicule those left behind. But over the last few months, there have been signs that the peak in San Francisco real estate was last year, and that it’s downhill from now.
So if people who wanted to buy a condo in SF were to ask me what they should do, I would tell them that they should get their head examined.
And if potential sellers of a SF condo were to ask me what they should do, I’d tell them to put it on the market now, to market it aggressively, and for crying out loud, take the first real offer even if it’s 10% or 20% below asking price because a year from now, today’s condo prices might look like nirvana.
So now is perhaps not the time for stock bears to become bullish. But Bill Bonner didn’t exactly turn bullish on stocks. Instead, he allowed “doubt” to seep in. He’d invest some of his money in stocks. This is how bullish he got in the article:
“We believe this is the worst time to invest in the stock market in the last eight years….”
“For the record, we still expect U.S. stocks to perform badly in 2016 and beyond.”
“But the guiding principle of the Diary is doubt… We doubt that this is a good time to buy stocks. We doubt that the feds’ managed currency system will survive. We doubt that our “Deep State” government serves us well.”
Not exactly very bullish. So he’d stick to his positions in real estate, cash, and gold, but he said, “bowing to doubt, we’ll hedge our bets, too, with stocks.”
His faithful readers were aghast.
Older investors are full of doubts. They’ve seen it all before, including the last three crashes. And they doubt it will be smooth sailing henceforth. Bill Bonner is one of those gnarled guys who’ve been through a bunch, who’ve learned to accept their own limits and stick to what they know. You can see that – and just how full of doubt and how bearish he is on many things – in his video where he explains how he’ll navigate into the stock market and why that might make sense even if there is “another world war.”
Only young investors are certain they know what’s going to happen next. Doubts are alien to them. Doubts just get in the way and prevent these good things from happening. But doubts can also save you from the abyss.
For some contrarians who’ve been waiting for the last bear to get gored, the fact that perma-bear Bill Bonner has been gored, if only through his thigh, may indicate that the rally in stocks is finally over – and ironically, Bonner might actually agree with them.
We live in a financially precarious world, one in which the most indebted government is at it again, and this time even more vigorously, taking the NIRP absurdity to new heights. Read… World’s Worst Sinkhole-Government Sports World’s Most Negative-Yielding Debt
Enjoy reading WOLF STREET and want to support it? You can donate. I appreciate it immensely. Click on the beer and iced-tea mug to find out how:
Would you like to be notified via email when WOLF STREET publishes a new article? Sign up here.