In this week’s episode of Hidden Forces, Demetri Kofinas speaks with Kevin Smith and Otavio Costa ofCrescat Capital, in a continuation of our recent markets coverage, with a particular focus on specific indicators that could validate a bear market hypothesis.
It has been difficult not to feel anxiety and trepidation while looking out across the Value-Price Continuum during the last few years. Many of us understand that our economy no longer functions as advertised. Financialization of the US economy over the past four decades has skewed the relationship between price and value in favor of price, specifically in favor of higher prices. The unprecedented support that monetary authorities provided financial intermediaries and asset holders during the last bear market has created noticeable price distortions and has raised serious questions about the usefulness of traditional indicators in assessing asset values. It is also unclear how meaningful traditional economic data like GDP and unemployment are in the face of ever-higher nominal public/private debt levels and aging populations.
We have experienced three intermediate corrections during this secular bull market. Most notably, the periods between the summers of 2011 – 2012 and 2015 – 2016, which proved to be head-fakes for investors who were expecting the market to enter bear territory. With the S&P 500 and Nasdaq Composite climbing above their all-time closing highs last week, will this last year’s declines prove similarly inconsequential, leading us ever higher in an unusually prolonged bull-market?
Kevin Smith and Otavio Costa make their case for why this market rally is different and how they are positioning Crescat Capital and its investors for the bear market to come.