Bears Capitulate

Did you ever sleep in a bear pit
With apple cores and mice along?
Did you ever lay on ice and grit
Or search for a place where the wind was gone?
--The Who

John Hussman notes widespread capitulation among money managers of all stripes. The Investor's Intelligence survey of bearish advisors has plunged to levels lower than what was seen at the 1987, 2000, and 2007 stock market peaks.

Bubbles grow on the backs of some real factor taking on exaggerated importance in the minds of investors. In the late 1990's it was the "New Economy" defined by the Internet. In the mid 2000's it was the belief that real estate prices always go up. Today it is belief in central banks and their ability to manage the economy while keeping interest rates low.

Mix these beliefs with easy credit and corresponding leverage and you have created the ideal bubble environment. Can the current bubble inflate further? Most certainly.

But when it pops it will be hard to remember today's state of collective exuberance.

position in SPX