This is a quick note, which tends to be just off the cuff thoughts/ideas that look at current market situations, and to try to encourage some discussions.
Recently, there has been a lot of talk about bubbles, and bubbles bursting. This is despite the fact that we are about 15% below all time highs for the SPX, and 6% above recent lows. It is getting scary out there…
In 2008, Sequoia made the, then controversial move of publishing a slide deck titled “RIP Good Times”. Despite the events of late 2007, no major financial entity was publicly talking about dramatic economic hardships at the time, and the Fed then was still publicly optimistic.
As we now know, those slides turned out to be prescient, almost perfectly marking when the Great Financial Crisis really started in earnest, eventually resulting in the SPX dropping around 50% peak to trough.
Recently, Sequoia is out with another note, this time in a medium more fitting of the times, “Adapting To Endure”. While the title is less punchy and doomy than the deck in 2008, the contents aren’t exactly encouraging.
A relatively recent entrant to the financial news scene, Wealthion has grown fairly rapidly, with insightful interviews of various prominent financial scholars.
Wealthion recently published a 2-part interview with Peter Atwater, who is a fairly noted and celebrated financial observer, titled “Everything That Can Go Wrong, Will – As This Confidence Cycle Ends” and “As Bursting Asset Bubbles Vaporize Wealth, Social Blowback Will Be Inevitable”,
Clearly, the titles are less than optimistic, and the content matches the mood set.
I would strongly encourage everyone to read Sequoia’s latest note. If nothing else, it gives some ideas for how one would prepare for potential future financial hardships.
The videos from Wealthion are also worth the time. They give a brief history of how we got to where we are, and highlights something I’ve been talking about on and off — price discovery doesn’t seem to be working well, especially since the Great Financial Crisis; With the dramatic rise in stock valuations in the past ~20 years, and despite the recent drop in stock prices and the dramatic earnings improvements of the past ~10 years, the P/E ratio of the S&P 500 is still about 30% higher than the average pre-dotcom.
Nobody really knows what the future will bring, so take the above with a pinch of a salt. They aren’t meant to be predictive, nor prescriptive. Instead, they suggest that at least in some parts of the economy, some people are starting to take note and they seem worried.