The answer is not yields, tariffs, war, famine, or Trump; although any of those could contribute to the selloff.
Here is a Tweet discussion leading up to the correct answer which will likely surprise many.
Goldilocks vs the Bears @LizAnnSonders @hussmanjp @biancoresearch @TheBubbleBubble @JeffSnider_AIP @Hedgeye
Is Goldilocks in the room or out of the room? That’s not even the right question.https://t.co/Ppw7kdere2 pic.twitter.com/kbKEvrL8FC— Mike Mish Shedlock (@MishGEA) March 12, 2018
Yes, valuation is high; but historically (since 1958) it’s had no consistent correlation to subsequent one-year returns (either for CAPE or trailing P/E) pic.twitter.com/TCHENi3uSG
— Liz Ann Sonders (@LizAnnSonders) March 13, 2018
Did anyone say CAPE correlates to 1-year or even 3-year returns? @Hedgeye @LizAnnSonders @hussmanjp No one knows when it matters, but we do know the higher it gets the worse the final results. There does not have to be a definable catalyst. Sentiment can change for no reason.
— Mike Mish Shedlock (@MishGEA) March 13, 2018
Also, I believe that writing off these valuation indicators (because they’re not short-term timing tools) is a way of trivializing the very real risk that asset bubbles pose to our economy and society. This is disingenuous. The coming mean reversion will prove this to be true.
— Jesse Colombo (@TheBubbleBubble) March 13, 2018
About Catalysts.
Think back to 2006. People lined up on the streets overnight for the right to enter a lottery to buy a Florida condo. A week later: no lines. Vanished. There was no trigger or event. What happened? Sentiment changed. The catalyst is “sentiment” not an event.— Mike Mish Shedlock (@MishGEA) March 13, 2018
Well said. The same will happen this time around too, because “This time ISN’T different.”
— Jesse Colombo (@TheBubbleBubble) March 13, 2018
Gaga Over Real Estate
Thinking back to 2005, I recall this magazine cover.
