LA ECONOMÍA ES LA CONTINUACIÓN DE LA GUERRA POR OTROS MEDIOS

 

(Simone Weil: No empecemos de nuevo la guerra de Troya (fragmentos)) 

Gillian Tett: "The key point to understand is that a shift in economic philosophy is emerging that is potentially as profound as the rethinking unleashed by John Maynard Keynes after the second world war or that pushed by neoliberals in the 1980s."https://t.co/GrkWYNFzkn

— Michael Pettis (@michaelxpettis) March 14, 2025

INVESTORS ARE NOW SLOWLY STARTING TO MAKE PREPARATIONS FOR THE INEVITABLE MARKET CRASH - JustDario https://t.co/ieK4lw7qK4

The trailing P/E ratio for US stocks stands at ~28x compared to a long-term average of ~16x
The CAPE P/E ratio stands at ~33 compared to a ~17 long-term av

— Guillermo Ruiz Zapatero (@ruiz_zapatero) March 14, 2025

Is there any reliable indicator to keep an eye on to understand when things are going to turn seriously ugly? The answer is credit spreads, and as you can see in the chart below, we are currently far from a full-fledged financial crisis pic.twitter.com/gdOA5N240h

— Guillermo Ruiz Zapatero (@ruiz_zapatero) March 14, 2025

 

Mean reversion is never a linear process, and markets always tend to overshoot the mean on the way down. To give you an idea, consider that the CAPE ratio stood at ~32 in 1929 right before the beginning of the Great Depression, and fell all the way down to ~7 in 1932. Applying the same calculations to today’s markets, US stocks are set to correct at least ~50% from current levels, but they won’t stop there. When investors panic sell in despair during the downfall, they will realistically drive this ratio all the way down to ~10-12 before it ultimately reverts to the ~17 long-term average.

 Price action already suggests there is a broad de-risking effort in the market to ensure portfolios can withstand the impact of an assured mean reversion process in the future. Personally, I don’t think Trump is willing to risk such a market catastrophe during his presidency, which is why he won’t push the envelope too much. However, many things are not under his control, and uncertainty is definitely rising in markets because people aren’t as stupid as their investment decisions in recent years would have suggested. They were just following the momentum not to be left behind, as I described in “WE HAVE NO ALTERNATIVE BUT TO RIDE STOCKS UNTIL THEY RUN”.

 Is there any reliable indicator to keep an eye on to understand when things are going to turn seriously ugly? The answer is credit spreads, and as you can see in the chart below, we are currently far from a full-fledged financial crisis. But don’t get too comfortable, since these can spike suddenly and start running very fast when something in the delicate equilibrium of the global financial system breaks beyond repair.

 Dario, March 14, 2025

Los pánicos no destruyen el capital. Meramente revelan la medida en que el capital ha sido ya previamente destruido por su traición al dedicarse a inversiones improductivas sin ninguna esperanza

John Stuart Mill

Panics do not destroy capital; they merely reveal the extent to which it has been previously destroyed by its betrayal into hopelessly unproductive work 

 Stuart Mill

 

 

 

Before Trump's election

— Guillermo Ruiz Zapatero (@ruiz_zapatero) March 14, 2025

Their (the crickets) prosperity and happiness and, I trust, mine do not depend on whether the New York banks suspend or no. We do not rely on such a slender security as the thin paper of the Suffolk Bank. To put your trust in such a bank is to be swallowed up and undergo suffocation. Invest, I say, in these country banks. Let your capital be simplicity and contentment. 

 

HDT