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Ghost of Igloi
RE: Q scale

I am open to the outcome that you are correct and I am wrong. Most of the advisors in my office have similar views to your outlook, but also fear that I may correct in my view. One called me an "Uber Bear." During the middle of the last decline one client called me "overly optimistic." I assume perception is colored by the spirit of the time.

Skepticism comes with age, and of course so does cynicism. I try to exercise the former and not the later. Experience does have its advantages, and so does youthful optimism. The difference I suspect is one's ability to live beyond their mistakes.

In regards to my earlier post, I cannot prove a link that the end of QE caused oil to collapse. However, one should consider the affects of hot money seeking a return. In the last crisis the hot sector was housing. In this cycle one could point to fracking and MLPs. "Housing will only get more expensive and energy can only go higher." Both investments proved to be less safe than originally thought. It is a theory and certainly has some validity to it. Lastly, over the last five years we cheered the growth of the energy sector, MLPs, and regions that benefited from the new industries. Now we say the sectors decline will not be significant to earnings going forward. Sorry, it can not be good at one point in time, but not bad in another.

Companies have been lowering the earnings hurdle, while continuing to buy back stock, making any beats meaningless. The collective S&P earning have declined and that is a fact. Market history has proven that investors become over confident at tops and disinterested at the best at bottoms. Data shows the economy is growing a little above stall speed. I believe low interest rates and QE have stolen demand from the future. If these programs end, where does the growth come from?

The question remains to be answered whether or not the slowdown is isolated? My view is two fold, 1) stocks are overvalued, and 2) we are at a cyclical top. If those two things are true, it does not matter what the Federal Reserve does, the eventual outcome has been determined.

If for some reason, which I find highly unlikely, earning take valuations to a reasonable level, that will be the new reality. On the other hand, if markets get more overvalued it will only reinforce my view that there will be tougher times ahead.



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