"The Most Important Thing To Note"

This market is the definition of resilient! Under normal conditions -- when stocks are reasonably valued, when general conditions are good, when company balance sheets are healthy, when credit spreads make sense, when corporate bond issuance is measured and covenants and rates make sense, when the Fed isn’t aggressively adding liquidity ($70 billion in repo last night!), when investors are acting rationally, etc. -- you’d expect events such as those occurring today to bring the market notably and sustainably (for a bit) lower, while it consolidates gains, while investors reassess risk, and so on.

Given currently stretched valuations, stressed general conditions, highly-speculative credit issuance and consumption, and, nevertheless, the willingness of investors to aggressively buy every dip in equities, this feels eerily like bull market tops of the past. 

Time will tell...  tops are always messy, and they can take awhile...

Finishing up Howard Marx’s Mastering Market Cycles; he does a very nice job articulating much of what we’ve been preaching herein of late.

Here's a quote that speaks loudly to our latest messaging:

"The most important thing to note is that maximum psychology, maximum availability of credit, maximum price, minimum potential return and maximum risk all are reached at the same time, and usually these extremes coincide with the last paroxysm of buying."

Here’s another:   emphasis mine...

""….we may never know where we’re going, but we’d better have a good idea where we are."

To do that requires an understanding of the basic nature of cycles in general: what gives rise to their movements, what causes them to progress toward peaks and troughs, and what causes them to retreat from those extremes?"