"THIS TIME IS DIFFERENT"

Consider the following... we have an eleven year market advance [Bull Market], the longest in history, without a 20% pullback. We were close in 2011 when "Tea Party" Republicans shut down the US government, but the Federal Reserve rode to the rescue with lower interest rates and increased liquidity (read availability) to calm markets. This pattern started by Alan Greenspan in response to the crash of 1987 always works to slow the economic contraction but not necessarily mitigate the stock decline: Remember, when Tech stocks became radically over valued in 2000 the NASDAQ plunged 84% over the next 18 months. The greatest "Tell" in the psychology of market participants is the zeitgeist that: This Time Is Different.

U.S. stocks have been valued roughly twice the level of their international counterparts for several years; I have evidenced the Titanic Theory, as psycho-phisological manifestation, where behavioral action mimics physics: with Titanic split in two and the front-half sinking, the stern rose perpendicular to the sea before plunging into the depths. Technically, U.S. domestic stocks (DJIA Chart) attempted three times to breakout to new highs, the third time was the charm. I personally had doubted a breakout would occur as stock overvaluation was at record levels.

In October 2019 back-stopped by Fed injections of liquidity into the overnight Repo market, stocks began a new leg higher - credit usually goes to Trump administration's cessation of trade hostilities. Liquidity concerns have been the root of market consternation for several years, the sharp decline in Fall 2018 was caused by fears of further Fed tightening. Now keeping rates lower for longer has been of great concern to some economists - since it means that the Fed has less rate flexibility to fight the next recession whenever it should appear. This Corona virus crisis will dramatically curtail growth and the fear is now that the Fed will not be able to jump start economy, once crisis has past. AS WE FORECAST A "SHARP & SAVAGE DECLINE" - ONE WEEK AGO, WE FEEL THE STRONG POSSIBILITY OF 40% DECLINE IN U.S. EQUITIES THROUGH SPRING AS THE CONFIDENCE OF MARKET PARTICIPANTS HAS BEEN BROKEN.