Is the next recession in America going to be more like 2001 or 2008?

No bear market has ever started because one day market participants woke up and collectively thought valuations were expensive and decided to sell, not once. Valuations are essentially meaningless in a world of free money. As long as drinks are on the house, keep drinking.

The last two bear markets were balance sheet recessions. Looking at earnings the P&L and conclude that everything is therefore meaningless, particularly when the current bull has been sponsored with free money.

Moral hazard has shifted from investment to central bankers

The moral hazard has shifted from investment to central bankers. They are committed to do whatever it takes to prop up the economy, at whatever cost. This brings us to the next recession.

An entire generation of economist was born and raised in bull markets. They believe that bull is the only regime and bear is anti-patriotic, literally. Cycles have to be at a “permanently high plateau”, to paraphrase the economic buffoon Irving Fisher. Bottom line, central bankers will pull out an even bigger monetary bazooka at the first sign of economic slowdown. And it will work great, until it won’t…

So, the next bear is probably going to be shallow, followed by economic euphoria. I am not worried about the next bear. I am worried about the one after that.

When the monetary bazooka stops working, when they press the print button and it does not have the expected effect, then what? We will have wounded the spring, delayed the inevitable.

Cyclical bears or structural BEAR

My belief is: it is better to have cyclical mild bear markets you can control than a big structural BEAR you cannot control.

And wrong, banks are not in a better shape than pre-crisis. The antidote to “too big to fail” was make them bigger and hire single brain cell parasites called compliance officers. There has been no structural change. Worse even, those who caused the crashes were put back in charge. Banks used to be utilities. Now, they are casinos

The economy is far too important to ever be entrusted to economists. None of the economists alive ever saw the last two bear markets coming. There is something worse than the blind leading the blind. It is the pedantic overconfident blind leading the blind

I am not in the business of forecasting , but as long as drinks are on the house: BUY BUY BUY.