As we sit here in early July, many institutions are at an impasse. The NFL and NBA are locked out. Europe can't seem to figure out how to resolve the debt situations in Greece, Ireland, and Portugal. The US government has hit its debt limit, and can't seem to figure out how to reach an accord. The Minnesota state government is shut down. And the Los Angeles Dodgers -- a team that was purchased in 2004 for $0 down with a bunch of real estate assets as collateral -- has moved past the zombie stage and is now working through bankruptcy proceedings.
This is all bullish. As we look at economic conditions, we don't see exurban California town houses selling for $500,000 with people camping out for the right to purchase one, as we saw in 2006. We don't have the S&P 500 trading at a P/E of 28, as it did in 2000. Unemployment is already elevated. Governments are already cutting back. Social mood is already pessimistic -- we are already convinced that we are doomed to debt deflation, hyperinflation, another lost decade, the end of American hegemony and the dollar standard, a shortage of natural resources, climate change wreaking havoc on humanity, the implosion of the interlinked global economy, or something else that the in-the-pockets-of-the-elite media won't tell us about.
Maybe the US government will fail to lift the debt ceiling for a couple weeks longer than expected, or European banks will have liquidity crises again, causing asset markets to crash. And in fact, I think there's a pretty good chance of one or both happening over the next few months. But let's not confuse a short-term disruption to financial markets like we saw in 1987 or 1998 as being another Lehman Brothers instead of the situation we find ourselves in today, which is the slow, methodical transition of the economy to the next secular bull market.
---Connor Sen [my italics]