2008 rang and wants its stock market euphoria back

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Over the years I’ve had some time for David Rosenberg but have also learned that he is sometimes too bearish. Not today:

No one really knows how far up the top is, but what happens after the top does not fit into very many people’s risk tolerance. In the meantime, another year of double-digit returns on the highest quality, long duration bonds is our expectation and the interest rate risk associated with them is entirely manageable from my perspective as a market economist.

While I cannot pick the date, I can tell you that this turbocharged debt cycle will end miserably, not unlike 2008 and 2001. Don’t try to time the inevitable mean-reversion trade. Just heed this first Bob Farrell rule of investing on ‘mean reversion’ and know that it’s out there. In nearly 11 years the S&P 500 has soared nearly fivefold to multiples (on earnings, sales and book value — take your pick) we have only seen twice in recent history.

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About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.