Blow Offs And Bull Market Tops
Jan 3, 1973. "It is very rare that you can be unqualifiedly bullish as you can be now."
---Alan Greenspan
I've put this chart up before but thought now would be a timely opportunity to repost it. The chart is of the S&P 500 in the early 1970s. Marked on the chart with the blue arrow is the week in which Alan Greenspan made the comment above. Are friendly central bankers good investment advisors?
In addition to reminding people that economists aren't typically investment gurus, here's the real reason I am posting this. The general commentary from many is that we must have a blow off top before any bull market ends. Therefore this bull market has further to go. Another recent statement is that sentiment is too bearish for a bull market top. I even read one commentary where the author said sentiment is so bearish that after a quick correction he wouldn't be surprised to see a rally that doubled the current market averages. Really? So the valuation on the small cap averages would then be the highest in history? Double it's current valuation? Double its current valuation which is the same valuation as the S&P 500 in 2000? The S&P 500 would trade at asset values similar to 2000 again?
There have been many bull markets ending with a whimper. A market which is similar in many regards to this cycle is the 1973 market. (Note: I said many not all.) A market where the world saw tremendous global growth. A market where industrial commodities went ballistic. A market with high oil prices. Where's the blow off top in the chart of the S&P500? Where's the overly exuberant investment behavior exhibited in the pricing action? The S&P didn't really do anything for a year and a half then ended with a whimper by pushing upward for a few months. There doesn't need to be a blow off for a bull market to end. Many seemingly think every bull market ends like the technology bubble in 2000. To the contrary, except for bubbles, we don't typically see a blow off. By the way, in reference to bubbles, we are in the midst of a bubble and we had our blow off. It was May 2006 in which metals and commodity related stocks went parabolic in a period of a few months. I highlighted this repeatedly in posts last year.
Beware the bear. He is cunning and a deceiver. Beware the journalist or blogger who is not armed with facts as he is working for the great deceiver. (For those who are politically correct and scoff at my use of "he" as my pronoun of choice, you may insert "she" or "it". I am politically correct but find the use of "he" more appropriate here. Mostly because I've met many more men who are bears, ie, hairy and bad breath, and the market bear is really human in form. Capeesh? Capisci? Kabish? Coppish?)
---Alan Greenspan
I've put this chart up before but thought now would be a timely opportunity to repost it. The chart is of the S&P 500 in the early 1970s. Marked on the chart with the blue arrow is the week in which Alan Greenspan made the comment above. Are friendly central bankers good investment advisors?
In addition to reminding people that economists aren't typically investment gurus, here's the real reason I am posting this. The general commentary from many is that we must have a blow off top before any bull market ends. Therefore this bull market has further to go. Another recent statement is that sentiment is too bearish for a bull market top. I even read one commentary where the author said sentiment is so bearish that after a quick correction he wouldn't be surprised to see a rally that doubled the current market averages. Really? So the valuation on the small cap averages would then be the highest in history? Double it's current valuation? Double its current valuation which is the same valuation as the S&P 500 in 2000? The S&P 500 would trade at asset values similar to 2000 again?
There have been many bull markets ending with a whimper. A market which is similar in many regards to this cycle is the 1973 market. (Note: I said many not all.) A market where the world saw tremendous global growth. A market where industrial commodities went ballistic. A market with high oil prices. Where's the blow off top in the chart of the S&P500? Where's the overly exuberant investment behavior exhibited in the pricing action? The S&P didn't really do anything for a year and a half then ended with a whimper by pushing upward for a few months. There doesn't need to be a blow off for a bull market to end. Many seemingly think every bull market ends like the technology bubble in 2000. To the contrary, except for bubbles, we don't typically see a blow off. By the way, in reference to bubbles, we are in the midst of a bubble and we had our blow off. It was May 2006 in which metals and commodity related stocks went parabolic in a period of a few months. I highlighted this repeatedly in posts last year.
Beware the bear. He is cunning and a deceiver. Beware the journalist or blogger who is not armed with facts as he is working for the great deceiver. (For those who are politically correct and scoff at my use of "he" as my pronoun of choice, you may insert "she" or "it". I am politically correct but find the use of "he" more appropriate here. Mostly because I've met many more men who are bears, ie, hairy and bad breath, and the market bear is really human in form. Capeesh? Capisci? Kabish? Coppish?)
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