Englund

  Hubris in the financial markets is most apparent when growth is robust and investors ignore the past If we omit the two-month downturn that accompanied the initial COVID-19 lockdown, it has been more than 16 years since the U.S. economy was last in a recession as designated by the National Bureau of Economic Research — the longest such stretch in U.S. history. The real question is whether analysts are right that recessions, if not completely a thing of the past, have become so rare that investors no longer need to defend a portfolio against economic growth turning negative for two consecutive quarters. ...  all too reminiscent of economist Irving Fisher, who in the fall of 1929 famously declared that “stock prices have reached what looks like a permanently high plateau.”  The October 1929 stock market crash, then the worst in U.S. history, would occur within weeks of his proclamation. On the other hand, Wall Street’s graveyard is filled with economists who have confide...

 Back in the 1990s, Pimco’s Paul McCulley first dubbed the point where the stability morphs into financial carnage for a Minsky moment, and the term took off after 2007-08, for obvious reasons. Suddenness is kinda central to the whole idea, so Montier’s concept of “slow burning Minsky moments” is a bit jarring. The argument is that the size and extent of the global private sector debt build-up has bred economic fragility that leads to a series of predictable mini-Minskys — or “grey rhinos” as some call them: large, obvious scenarios that are easily ignored until they suddenly charge you.  Surprisingly, he also seems to brush off cash, despite noting that it is the “oldest, easiest and perhaps most underrated form of tail risk hedge”. And at a time when cash actually has a chunky positive real return (at least in the US). Robin Wigglesworth FT 14 July 2023 https://www.ft.com/content/dbc2ece4-6289-4c99-8a52-0d4791629597 You can read the full thing yourself here. https://d1e00ek4...