The disconnect between weak economic fundamentals, ebullient investor sentiment and elevated stock prices form an unhealthy and potentially toxic cocktail.
For those who are of the view that the U.S. stock market feels like it will never decline (and that global easing is the panacea for growth and ever rising share prices), we suggest you look at the price of gold in mid-September 2011 and/or the price of Apple's (AAPL)
shares in late-September 2012. At those points in time, investor sentiment was at an extreme. Now look at the subsequent price drops following those heights and where those prices stand today.
It is important to remember that over market history, progress often cuts with a manic edge. There is little or no permanent truth in financial markets as financial ideas have their seasons. So it is, as in the later stages of bull markets there is often a blurring between progress and fantasy.
In Minding Mr. Market
, Jim Grant (Grant's Interest Rate Observer
) once wrote, "The country's most admired companies are frequently on their way to becoming the least admired investments." Jim's comments might also apply today to the market indices.
I am as bearish on stocks as I have been in some time.
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