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We’ve hit 1,600 on the S&P 500. Now what? Risk Reversal’s Enis Taner says the rally is no different than what we’ve told ourselves in advance of other bubbles popping. “When I first read Random Walk on Wall Street 15 years ago, I developed an immediate bias in favour of fundamental analysis vs. technical analysis. …But all the analysts’ research seemed to become irrelevant when animal spirits either became too hot or too cold. Technology valuations soared, and I got caught up in the new paradigm, when everyone was shouting from the treetops that old valuation methods didn’t matter. Then they crashed, and everyone was shouting from the treetops that the internet was only a fad, and the durable and the physical, houses and cars, were what mattered. Then they crashed, and everyone was shouting from the treetops that the U.S. consumer was too stretched, and the emerging markets, the BRICs, with their voracious appetites for commodities and trade, were the new leaders of a new world. Then they crashed, and everyone was shouting from the treetops that central banks were the saviors, and their money printing, and only their money printing, mattered in a new, changed world…”
Interest Rates And Copper Tell Us There Is No Economic Activity (Jeff Gundlach)
At the 10th annual Strategic Investment Conference today, Jeff Gundlach says the Fed has put the U.S. squarely in a liquidity trap where rates cannot rise lest they kill growth — but there’s actually very little growth occurring anyway. He also says falling copper prices add further evidence. “Understand that there is NO WORLD in which rates will rise with copper prices falling. Interest rates are currently telling the same story as copper – there is very little economic activity occurring.”
We Will Never Not Have Crises (Morgan Stanley)
Two interesting charts from Morgan Stanley’s Joachim Fels about the nature of business cycles. He says economies inevitably follow a pattern of complacency, crisis, response and improvement, which looks something like this:
And here’s how this “CRIC” cycle has applied in the Eurocrisis:
Still looking to shore up capital that got destroyed after Fall 2008, large banks have begun issuing preferred shares, WSJ’s Katy Burne reports. Here’s why: “They bolster balance sheets hit in the 2008 crisis by adding permanent capital without harming existing shareholders, and they are cheaper than some other fundraising methods because ultralow interest rates are pushing investors toward higher-yielding securities.”
S&P 1,600 And John 3:16 (Reformed Broker)
According to a Marketwatch report, it took 13 years for the S&P 500 to get from 1,500 to 1,600. That is the fourth-longest lag between 100-point moves in S&P history. Here is Josh Brown’s take on this: “When I look back and I only see one set of footprints on the chart, I ask the S&P ‘How come your footprints aren’t there? I thought you would be walking beside me when things got rough?’ To which the market replied ‘Where you see only one set of footprints, that’s where I was carrying you.’ “
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