What’s the link between the Chinese stock market and U.S. subprime mortgage market? Nothing, really. Well, almost nothing, except that both had previously been soaring and have recently hit some speed bumps.
That leads us to an astonishing conclusion: markets that have enjoyed long and robust bull markets eventually hit a wall. Bear markets, in short, haven’t been banished, even if it appears otherwise.
Full disclosure: we don’t have a clue about what’s coming. But we do have a firm grasp of history, which is conveniently available for all to see in full clarity.
The fact that China and subprime mortgage markets have slipped may be dismissed as marginal events of no real relevance to the capital markets. But we think such stumbles are early warning signs of things to come. Granted, this is a highly speculative notion and so readers should proceed accordingly. Nonetheless, we think our view has merit if only because bull markets have flourished across the spectrum of asset classes for some time and, well, nothing lasts forever.