A couple months ago Financology summed up its broad market call in It’s A Bear Market, concluding that
“In general, I still like cash, gold, cash, copper, cash, industrial commodities, cash, energy … did we mention cash …”.
The context was our sense that the “Everything Bubble” was in the early stages of collapse. This term was hardly invented here … it’s been fodder for many a financial analyst. But how can everything be in a bubble?
A Financology stock in trade when it comes to the purported value of anything is to ask “In terms of what?” Usually it’s dollars, but to just tacitly equate dollar price with value without further examination is the most popular error in finance. I hold that whenever you see across the board price changes anywhere, check your unit. If “everything” appears to be in a “bubble”, Occam’s Razor dictates that it’s because your unit is in an antibubble.
Just as “in a bubble” refers to something apt to decline, “in an antibubble” means something apt to go up. That led to the conclusion that cash was going to be an important asset to own. Fundamentals also underscore this, as interest rates have been too low for years and are now begging to make up for lost time … rising rates make shorting dollars more expensive and therefore support their value. Also being a subscriber to the principal of diversification, I sprinkled in a few other assets I believed would have the wind at their backs, each with their own story.
So far we’ve seen nothing to change our mind.