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 favor 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…"
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."
Morgan Stanley
And here's how this "CRIC" cycle has applied in the Eurocrisis:
Morgan Stanley
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