I grew up during the Cold War. Around 1983, there was a slew of movies and television shows about nuclear war, such as War Games (1982, I think) and a major two-night television event called The Day After in 1983. There was a particular wrenching scene which is captured below (sorry for the not-great video quality, but you’ll get the idea):
What was clear from this scene was that the mother was in a serious state of denial. Nuclear missiles were already on their way, but she didn’t want to abandon her normal life. She wanted to make the bed, just like she probably had done thousands of times before. And yet her husband had to forcibly drag her downstairs to the basement, where they would have a chance to survive.
This desperate desire for normalcy is, I believe, what is infecting people’s brains right now. They have had to shelter in place for a month or so, and they’re losing their minds. On top of that, they spent eleven years watching the stock market go up every goddamned week, and they want their perma-rising market back. They miss it. And they’ll sell their souls to have it return.
Think about what Herbert Hoover said shortly after the crash of 1929. “Now everybody can get back to work.” The idea being that, now that the speculative zaniness was over, everyone could just carry on as if nothing had happened, unburdened by all the crazy trading of 1929. However, the crash was a harbinger of an entire decade which, on the whole, was economically wretched.
Today, the media is saturated with articles about what a great time it is to buy stocks, and how they are “on sale”, and how the bull market is back. Even semi-esteemed publications like the Wall Street Journal have loudly proclaimed a new bull market is with us, after the “shortest bear market in history” has, ostensibly, been put in a state of permanent hibernation.
My viewpoint, and it is a freakish one, is utterly different. It consists of these thoughts:
- The bull market is complete., and we are in a bear market now that will last a meaningful amount of time;
- Strength is to be sold;
- The widely-embraced BTFD mentality, beaten into the heads of the public for eleven years, will be the best ally of the bears.
It seems to me everyone has become an amateur epidemiologist. They’re all trotting out their graphs and hospital bed data and ventilator information, and declaring that Things Aren’t Going To Be All That Bad and, adjunct to that, Things Will Return To Normal Real Soon Now.
My response is: none of that even matters. They could announce a lifelong cure for Covid-19 tomorrow (they won’t………..), and we’re still in a bear market. One does not undo eleven years of complete fakery by selling off for two or three weeks. I’ve said it repeatedly, I’m looking for 1250 on the S&P 500. We’re just getting started.
I make a distinction between the bubble – – that is, the ghastly overinflated valuations assigned to equities, right up to this day – – and the prick that popped the bubble – – that is, this pandemic. Everyone from David Stockman on down is decrying how foolhardy it was to basically shut down the world for this thing, but the fact is that it did get shut down, and it was precisely the kind of shock that was needed to start – – I emphasize start – – this major new bear market.
So the bubble was always there, and it was ripe for pricking. It hardly mattered which one would come along. My worldview is a simple one: any old prick will do. This isn’t 2019 anymore. In spite of what you’ve seen the past few weeks, there has been a core change that isn’t just going to be wished away.