Is this capitulation emblematic of a market top, as Hendry jests above? Is he doing his followers any favors by turning bullish now, after a 40% growth rate in the market’s sentiment toward stocks (expanded PE multiple) backed by very little in the way of earnings, sales or economic growth? Is there anything to gain by such a late-in-the-game admission?
And what if he’s actually been right all along about how at risk everything is? What if future events play out just as he’d been predicting over the last five years after he gives in? Can he turn back? Can he resurrect the old playbook in time should the crash begin shortly?
This game is really hard, even for the smartest guys who play it, guys like Hugh Hendry who can get almost all of the facts right and yet still reach a precisely incorrect conclusion. And if that can happen to him, think about how difficult the prediction game can be for the rest of us.
Boy, do I empathise with Hendry. It’s been a rotten time for anyone attempting to be “rational” about equities. Still, all of us who’ve been around for a while ought to have taken on board one simple lesson. Keynes put it best: “Markets can remain irrational a lot longer than you and I can remain solvent.” And even that’s assuming our (the would-be bears) take on things is in fact rational. I still think it is, but . . . .
In any case, it does feel good not to be beating my head in on this particular brick wall any more (or not much!). With a bit of luck, Hendry will have at least some time to savour the same peculiar pleasure.