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2018-09-06 — blogspot.com

Here in the U.S., the bullish consensus view holds that a faltering EM doesn't matter. The U.S. economy is strong and largely immune to global factors. Profits are booming. Prospects are unequivocally positive. The mindset is uncomfortably reminiscent of the "subprime doesn't matter" blather heading right into a devastating crisis. It's worth recalling that U.S. GDP exceeded 2% in 2007's 2nd, 3rd and 4th quarters, with Q4's 2.5% expansion the strongest in a year.

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Mr. Buffett, along with virtually everyone, was blindsided by the 2008 crisis. This should matter but doesn't. Amazingly, another crisis is viewed these days as an opportunity rather than a risk. Stocks, as they always do, will come roaring back. The last crisis was only an issue for those that lacked conviction and sold stocks in an irrational panic.

At this point, the bullish view that stocks must be bought and held for the long-term has surpassed rational. It's Unassailable. Your price entry point matters little - the global backdrop even less. Politics little, geopolitics less. Holding cash is stupid, shorting much worse. Indeed, to not bet confidently on the U.S. for the long-term is an act of self-destructive irrationality. A risk-based approach, to be sure, would lead to irrational decisions. It's been proven - repeatedly. Don't sell.

I believe we're nearing the end of an historic multi-decade Bubble. Risk is incredibly high, a view that has by now been thoroughly discredited. A key factor boosting risk is the overwhelming consensus view that risk is virtually nonexistent. In stark contrast, I believe this protracted period of serial boom and bust cycles has led to the accumulation of financial and economic distortions and deep structural impairment.

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