While listening to a financial program recently I heard one of the participants mention and praise Fred Hickey, an analyst whom I was unfamiliar with. Upon researching this fella to get a feeling of his views, an interview he did years ago popped up. It appears that back in early 2018, Fred Hickey, a frequently cited expert on Bloomberg News and Barron's Round-table was more worried about the state of the financial markets than he had ever been.
Hickey, known for publishing his
extremely well-respected investment
newsletter, The High-Tech Strategist, took the stand that asset prices were dangerously overvalued. Today, the same markets are much higher, in truth, they never really retrenched.
While his primary focus had been on analyzing Tech stocks, over the years he had expanded his research into macro trend analysis. This includes how central banks started increasingly intervening in world markets and distorting the price of money. Rather than taking this post as a criticism of Hickey, consider it solid proof that we have again witnessed the adage often attributed to the famous economist John Maynard Keynes:
The market can remain irrational longer than you can remain solvent.
This saying is often cast out as a reminder that a person can be right
but timing often determines our destiny. It also underscores why,
capital preservation should be job one. The market will fail only when
something breaks. It is only then that delusion and despair will
overtake the optimist irresponsible central banks and the policies
politicians continue to crank out. History indicates that efforts to postpone the day of
reckoning only delay it.
As pointed out, Hickey, a
lifelong expert in "all things technology" was railing against market trends as far back as 2018. Even then he concluded that gold (the
"barbaric relic") had become the sanest asset to put one's capital. This was due to its safety factor and its current level of
undervaluation. This is why Hickey was out warning about how we were in an everything bubble.
His warning included how companies such as Tesla were doomed to fail. This argument held some truth but over the years, forces have pushed the boulder up the hill. Today markets are at insane levels and much higher than many of us thought possible. This is a time when it might be wise to remember trees, no matter how tall, do not grow to the sky.
In a very recent video on Thoughtful Money, Sven Henrich of NorthmanTrader.com reached out with the message that he closed out all his longs this week and moved to cash. While he has been a bit spooked by recent market action, he makes it clear be is not all that bearish. Based on his charts, he is cautious. This is due to the fact we are experiencing the most distorted markets in history. Whether this is a result of too much liquidity or passive investments driven by computer trading is an issue of debate.
The important thing is where the
market goes from here. Having been bearish far longer than I ever wanted to be, every time I turn towards capitulating, I try to remember that two wrongs don't make a right. This is particularly true in economics. When the numbers don't work it is only a matter of time before reality hits hard and long. The idea that this time is different has throughout history proven untrue. Whether the market pullback that started a few days ago is a preamble to something greater has yet to be determined.
(Republishing this article is permitted with reference to Bruce Wilds/AdvancingTime Blog)
No comments:
Post a Comment