Guest Post: Thoughts On The Long-Term Equity Cycle

Tyler Durden's picture

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AnonymousMonetarist's picture

It is the flight of an arrow not the flip of a coin.

Unfortunately we do not know the Assumed Exponent of the HAND.

crzyhun's picture

Phew, excellent- will read again and ponder. Good analysis. How to protect and lower risk in this env. proposed is  the question. Short etfs on equities and buy the vix. Anyother ideas? Nix on gold as we see it is nada at this moment with Greece on the precipice.

Assetman's picture

Not necessarily... but it appears you aren't getting paid much in risk premia for making new bets on the money printing trade.

What it likely means is that if your're in the money printing camp, you might want to hedge to cover yourself for an unexpected, nasty spike in volatility. Becuase if you're wrong, you'll be pureed Alpo.

If you're in the deflation camp, you've lost your shirt over the past 9 months, anyway. You're still sitting in cash wondering "what happened"?

This is an outstanding original post.

mannfm11's picture

The door to get out of the inflation trade is about the width of an elephants asshole and there are 50 herds of them that are going to try to get out.  Needless to say, there are going to be a lot of heads up the ass. 

I need more asshats's picture

Credit where credit is due. Finally a good Guest post.

No forced religious or morality views. No guessing or misguided interpretations of facts and figures.

A knowledgeable professional sharing insight in a condensed well thought out manner. Good visuals that are easy to read.

Put him on the short list to step up to the big league.

Thanks CreditTrader.

Anonymous's picture

This is outstanding, with enough explicit/implicit material to support many PhD theses in finance. I'd be interested in any comments or insight vis-as-vis second to last paragraph and what the expectations hypothesis might suggest about current curve steepness...

Anonymous's picture

great stuff.

pivot's picture

is this the same person as this:  ?

the credit trader blog was great, though there were only a few posts before they stopped blogging.  but each post was very detailed and went to a deeper level than i have seen practically anywhere else.

Anonymous's picture

VIX Index, SPX Index, and ...? which index is the Investment Grade Spread?

Anonymous's picture

So we are at the beginning of the end rather than the end of the beginning.

Anonymous's picture

I like this type of analysis. To bad I'm color blind. :(

Anonymous's picture

If this graph was animated it would have been awesome.

Squid-puppets a-go-go's picture

those graphs make awesome abstract art.


Anonymous's picture

Thanks Credit for the piece, interesting noting the decision I'm facing being a long-time XTO shareholder (i.e. sell now or take XOM stock). Perhaps THE central theme of Z.H. pertains to the relative risk of different assets as compared to the dollar. About one-third of my net-worth is in dollars, however the notion of owning XOM in the future after my recent D.D. is becoming quite viable.

Anonymous's picture

Could some one simplify the presentation. I'd like to benefit from it but it's beyond my knowledge. Thanks.

theprofromdover's picture

Why on earth should anyone expect it to be cyclical?

Maybe people think in 2D.

If you look at it in 3D, you will see we are in a corkscrew pattern (downward spiral). On the Z-axis are all the financial gerry-mandering activites that pumped up the money.

Fruffing's picture

Credit curves are pricing in a significant double-dip recession via their steepness


Thoughtful post.   Please explain how above statement conforms with conv. wisdom of negative sloped yield curves signalling pending recession vs. today's epic positive steepness.   

I'm not sniping.    Squaring this circle would be very helpful.


Thanks CreditTrader!



ZeroPower's picture

+1. Yield curve is no longer inverted?