Why being permanently bullish is the best place to be

Topic: there is always a good opportunity to invest somewhere

Conclusion: I’m a perma bull, and you probably should be one too


“I felt like a one-eyed person, lacking depth of vision, stumbling around, missing half the picture, often being blind-sided and having to correct my inputs and bearings. It still beats everybody else though, in this land of the blind.”

There’s always something to be happy about
The grass is always greener where I am, or how does that saying go again?

I am what you would call a perma bull; I’m always happy about something, looking forward to things to come, enjoying planning for them, or simply relishing in whatever activity I’ve chosen for the moment.

The world of investments works in the same fashion; there is always a good opportunity to invest somewhere. At any one point there is a fixed amount of wealth (people, tools, machines and assets), even if the amount of debt and currency associated with that wealth varies. Over time, wealth usually rises (more people, more tools, more buildings, more dug up gold and gems). The receipts (e.g., dollar bills) on that wealth always need to go somewhere, bidding up the price for that particular piece of wealth – and that’s where you want to be exposed.

It’s never exactly clear where the dollars are going next, but sometimes it’s slightly less difficult than other times, to guess at a likely turn of events. In any case, there is always some asset being significantly underrated compared to other assets. Usually investors will find it sooner or later; first a few hesitant hands and later attracting the masses, thus with time making it overappreciated and promising low or even negative returns. By then, there are tremendous opportunities somewhere else.

Swedish Central Bank:

Our best estimate for a reasonable rate hike

50 000 basis points

Back in 1992, I had studied business administration, accounting, securities and derivatives valuation etc at Stockholm School of Economics for two years. From a macroeconomic perspective those were turbulent times: One of my professors actually suggested students change banks due to the risk of bankruptcy, and the Swedish central bank raised its policy rate by almost 50 000 basis points to 500 per cent.


Buying call options on banks heading for state receivership


Meanwhile I was trying to buy call options on all but defunct Swedish banks.

Yes, I was a perma bull with no regard to the downside.

The year after, in 1993, I started buying tech stocks in earnest. My “well diversified” portfolio consisted of two stocks: Ericsson (the “safe” bet) and Måldata (a small IT consultancy; “to add some upside volatility”).

In 1994, bears be damned, I became a finance pro: I took a job at a small brokerage, while the doomsday debt clock on the central square outside my window counted the steps toward default and ruin for the Swedish model.

Armed with DCF and CAPM models, straight out of my still warm textbooks, I promptly issued Buy recommendations on construction companies, medical technology firms, computer manufacturers and IT services and software companies. I even through in a few chemical industry companies in the perpetual Buy Everything mix back in 1994-1995.

A perma bull is hard to slow down apparently

In 1996 I took a new job as the head of IT research at Sweden’s largest bank. By then I had become bolder than ever (albeit quite fitting, considering the budding tulip bubble IT boom), thinking others just lacked the right visionary capabilites that I had. My bullish research reports on mainly software companies knew no boundaries at the time, and soon I included so called internet consultancies and a Virtual Reality firm as well. Buy Buy Buy.

Visionary Sprezza

The LTCM and Asian currency crises in 1997-1998 didn’t deter me the slightest: “Temporary!” and “Buy the dip!”, were my mantras.

Toward the end of 1999, however, I finally realized things had gotten out of hand, and by February 2000 I threw in the towel regarding IT shares as well as my then employer, and moved to a hedgefund instead. With my sunny disposition there was always only upside (a start-up hedge fund in March 2000; what could possibly go wrong). For me, that is. For the market not so much.

And that recent LTCM hedge fundcrash in 1998? I couldn’t care less. I was joining a “completely different” hedge fund. With only upside! (actually that turned out to be true — or how does “European Hedge Fund Of The Decade 2000-2009” sound to you?

The three years that followed we (Futuris/Brummer) could do no wrong. E.g., there were always interesting new opportunities to sell short ridiculously valued and cash consuming IT companies. Despite personnel issues at our firm, perma-bull me saw only rainbows and gold all around and in the future. Sure, regarding the stock market, I thought many stocks would fall to just a tenth of their values, but every one of those were “special cases”, and I never predicted doom for the economy or the stock market or financial system as a whole. I definitely was a bull. For me that is, and for the firm, and for short positions on tech stocks.

At the time, and quite often today too, I felt like a one-eyed person, lacking depth of vision, stumbling around, missing half the picture, often being blind-sided and having to correct my inputs and bearings. Yes, I actually gradually became aware of my shortcomings. It still beat everybody else though, in this land of the blind called finance.

In 2004-2006 I focused more on banks, hotels, cruise ships and professional services rather than purely on software companies; and boy was I bullish on banks back then!

There were buybacks to the tune of 7 per cent a year, and dividends at a similar rate on top of that, while P/B ratios were between just 1 and one and a half. Growth was fast, returns were high and credit losses were non-existent. Perma-bull as I am I bought everything, including the recycling company Tomra (Wait, what? Software, Banks,… and Tomra?) which gave me a 100% return in less than a year. What can I say, if you’re bullish, you’re bullish.

In 2006, my bullishness toward stocks waned, but I still managed to find a handful of promising small cap companies and took outsized positions in them. Bad move. Blind bull move. When markets started turning downward in the run-up to the bursting of the housing bubble, and onset of the financial crisis, those smaller companies proved very hard to sell.

“Yes, I’m currently perma bullish on gold”

Stock market bullish-me took a harder hit than ususal in 2007-2008, since I was 1) hit hard on a few long positions right before, and 2) I was proven right* on my house bubble thesis, as well as 3) made a killing on bank shorts* throughout 2008. I imagine gambling addicts are hooked by similar principles*.

* there is nothing more detrimental for an investor than being right on a bearish call

Since then, I’m still a perma bull in every aspect that counts, but not quite so much regarding public stocks. When they are expensive relative to sales, profits and the price of commodities and precious metals, I’d rather stay away and project my inherent and eternal bullishness on other things.

The Buying Opportunity Of The Decade
Actually, in the fall of 2010, when my partners were leaning towards going short again, I wrote a couple of memos (e-mails), where I called the situation “the buying opportunity of the decade”, based on a lot of slack in the economy (exactly the opposite of the current situation).

Since 2015 I’ve regularly been called a “perma bear” (typically by people with less than 10 years of investing experience), and it’s true I’ve had a very negative view of the prospectice returns for the stock market as a whole for a few years. On the other hand I’ve invested heavily in start-ups and scale-ups, all probably depending on the economy staying strong. At the same time I’ve increased my exposure to gold manyfold. Yes, I’m currently perma bullish on gold too.

I’m writing this as I once again saw somebody caliing John Hussman a perma bear on Twitter. Actually, dr Hussman’s history is similar to mine; just longer, better and more objectively based on research. Still, being wrong-footed in just the latest up-cycle is enough to make people, with no understanding of the word, call out thoughtful and accomplished investors like him as “perma bears”.

How about you? Is the grass always grener where you are? Are you too a perma bull like me? What does your bull/bear story look like? And if you don’t have one, due to too little experience, I suggest you tread very carefully the coming years.

My most humble regards,


P.S. Check out my interview on Future Skills with Erik Townsend from MacroVoices. That guy has a lot of wisdom to share about skills, education, analysis and much more. You can find a direct link to the episode here

Gold, God, Quantum physics – are you buying this?

INTRO Per Gessle, the Swede who composed the song “It Must Have Been Love” that was featured in the Julia Roberts movie “Pretty Woman” has said that he only writes when he’s inspired. I’m mostly like that too, all other comparisons aside. This post formed in my head over the course of less than a minute, not unlike this one on The Meaning Of Life.

THEME Contemplating and discussing the true nature of reality over the last six months seem to have led to me being hit by and interacting with a stray inspiraton* five minutes ago, incidentally right after re-watching the amazingly entertaining movie “The Wolf Of Wall Street” during a long and late Saturday brunch.

* a very rare elementary particle

CONCLUSION Cutting straight to the chase, my conclusion is that what matters on the stock market is how consistently and predictably you can earn “money” that can be used for manipulating reality into subjective experiences with certain desired properties (I hint at what those properties might be in my Perspectives article series. Start here).

IN SHORT: DO WHAT WORKS, and take a good hard look at Gran Colombia Gold Corp

This morning Mike Cernovich referenced a quantum physics article in Scientific American that discussed a new slant on how to interpret the problems of wave collapse, observer dependency, matter duality and more. It got me thinking. By the way, if you’re interested, here is my immediate reaction to the article:


God and reality

Winter came, and with it late night discussions about the existence and nature of God. Yes, “God”, as in some kind of power or presence outside the laws of nature, or as the very laws of nature (whatever that’s supposed to mean; I mean are they laws, or aren’t they).

For me the word “God” is too tainted by culture and tradition to possibly serve as the basis of an open minded conversation about existence. As much as I try to suppress images of a potent and aware entity, and replace them with “anything or everything” or “purpose” or some other temporary placeholder, I keep failing.

In parallel with discussing the God delusion we have talked at lenght about reality, not least whether it’s objective or not, i.e., whether reality exists or not.*

(* I’ll just add here that reality does exist. This, here that we experience is reality. In my view, that holds water whether reality actually exists or not, since I think the word ‘reality’ is defined as “this, here” that I experience and I have good reason to assume you experience too)

Solipsism and pragmatism

The conversations have ranged from pure solipsism* to self-referential unusable tautologies such as “the universe is the universe”, “God is all and all is God”, “purpose is the purpose”, and much more.

(* solipsism = I am the only thing that exists and everything else is just a dream – quite a complex dream with billions of dreamed up personalities, trillions of other seemingly independent living things, quadrillions of celestial bodies scattered over trillions of cube light years, evolving over billions of years, including Darwinistic trajectories and thousands av brilliant scientists climbing atop each others’ shoulders to scout ever further. Imagine all that in just one entity, i.e., me, not to mention I have forgotten it all and am lost in my thoughts slowly rediscovering minuscule fractions of it all before imagining dying)

I am a practical person. And, as much as I’m a fan of basic research, understanding that we can’t know when and for what that knowledge might come in handy, pure philosophical word play that doesn’t even aim for practical use, but rather aims for self-containment and non-practicality quickly loses its appeal to me.

By the way, if this post triggers a strong need in you to explain to me all the ways I have misunderstood solipsism or any other branch of philosophy, or quantum physics for that matter, please don’t. This article is not about that at all. Quite the opposite. It’s about doing what works.

The universe is all mental

The quantum physics article Mike linked to builds up to an idea about thoughts being the ultimate building blocks of nature, perhaps a little like the illusive inspiratons I jokingly mentioned above.

These ubiquitous “thoughts”, which I assume are pretty dissimilar from the everyday brain thoughts with which we humans are familiar, interfere with each other as well as with organical thoughts; thus giving rise to the physical reality.

With “thoughts” everywhere, from the empty voids of space to the cores of stars and brains of humans I’m guessing brains acts as a kind of amplifying antenna that can focus inanimate thoughts into living thoughts.

Alright, as much as I try to keep an open mind – on a theory stating that brains and thoughts are not the product of billions of years of evolution, pattern recognition and survival of the most adaptable – trying to comprehend a theory of substrate-free “thoughts” as the ultimate building block is just as difficult as stripping the word “God” of all its religious baggage.

Please explain

Why “thoughts”, I ask? Why not just super strings? They are equally mystical, ethereal, versatile and infalsifiable. Whether you decide to build a world view with turtles all the way down, hyperdimensional strings, gods behind gods in Russian dolls, or thoughts all the way down, doesn’t really matter. You’re still not explaining anything. And you’re not adding anything to the toolbox of improving your own subjective experience (except for the fun it might be to play a meaningless game for a while).

Experience, prediction, manipulation

For me, my experience is all that matters. My reality is my reality, but it’d better be pretty well attuned to the more or less predictable laws of nature for my subjective experience to be sustainably pleasurable.

Experience is all, since non-experience is non-experience. Per definition.

If you want to define these words any differently, be my guest, but I won’t understand you. Hint: if you want to be understood, strive to use unambigous words that people (can) understand.

What interests me are reliable predictions in as much as they allow me to manipulate and control my experiences.

The actual and ultimate truth might be something altogether different and incomprehensible. But that doesn’t matter to me. What matters to me is what I (can) experience.

I can’t remember anything before my birth, and there are no believable recounts of post-death experiences. This, here, this stream of consciousness began some time around the birth of this body, and it seems destined to end with this body (not yet fully counting on uploading or immortality).

So, I can experience what I can experience, and that is what appears to be a physical world of things, including electrochemical patterns in brains. Humans now understand a great deal of what can and does affect us (cause experiences), and of what can be manipulated by us. That’s just another way of saying science has laid out a pretty good map of reliable laws of nature; laws that I consider when making decisions I hope will lead to as meaningful a life as possible.

That which might “exist” but can’t be manipulated or affect us is simply irrelevant. Per definition. The world may be a dream, or nothing at all. Maybe I’m alone, maybe not. Maybe I’m a simulation… Maybe there is a “God”, even though it has left no trace of its existence since the Big Bang.

In any case, my actual personal experiences are more or less limited to sleep, food, love and a few other “experiences”. My aim is to optimize those over the course of my life, by designing as solid and consistent a foundation of predictions and manipulations as I can.

Pragmatism and investing

And, that is also exactly how I would, in the best of worlds, go about my investments. I don’t care whether the world ‘really’ exists (though it should be clear by now, that to me “exists” means whatever this experience is. Per definition), or if a country’s or company’s operational fundamentals exist objectively. I don’t care if “valutions” are real or not.

What I do care about is how to predictably and as consistently as possible make decisions that enhances my potential for manipulating reality into better subjective experiences. That might include maximizing dollar amounts on the stock exchange, or units of gold, or analysing historical metrics patterns. In doing so, I like to rely on consistent laws of nature, rather than fickle gods and “it’s all a dream” fantasies.

What matters isn’t if valuations, profits, money or even the universe is real. What matters is how I feel about it, and not least what I can do to improve on that situation.

P.S: Please, let’s keep “free will” out of today’s discussion.

Gran Colombia Gold Corp

-when did you last see a Price Earnings ratio of 1?

By the way, have you seen this Price/Earnings = 1 company in Canada? Gran Colombia Gold Corp. Disclaimer: this is not an investment recommendation and any losses incurred are your own. In addition, PER=1 might be significantly misleading due to dilution, but I’ll leave that to you. I personally, however, would be surprised if the stock didn’t reach 6 dollars per share by the end of 2018.

The coming stock market crash of 2017-2018

Topic: The case for a 50% downside for stocks in the coming 12 months, and then some

Style: Funny, ’cause it’s true (kind of)

Nota bene: this post should be read in conjunction with my previous post on the bull case for stocks

1 The trend has gone too far

I mean, what are the odds of this trend continuing (see chart) without a major hickup?

Trees don’t grow to the sky. Sooner or later, the human psyche will pull the index back to its long term trend (asymptotic to population growth + productivity growth)

Remember that stocks went nowhere between 1996 and 2009, and 2000 and 2012 or was it 2013? That’s a long time going nowhere and it seems to be about time for a re-run of a crash and no returns fro a dozen year or so.

2 Stocks are expensive

Historical peaks in the S&P 500 ratio have only briefly broken above the 20 level. Today we’re at 24.57. And that’s with significant accounting tricks, massive stimulus, zero interest rates and a generally upbeat mood and risk tolerance at highs. Whenever stimulus wanes, reality comes back to bite creative accountants in the derriere, interest rates stop falling or start rising P/E-ratios are bound to explore earlier depths. And that’s even before taking into account a less optimistic sentiment, as well as increasing actual need for funds.

By the way, here is an alternative valuation measure. It’s based on Price/Sales (from Hussman Weekly the previous week) which is an automatically cyclically adjusted valuation measure (more or less) Notice how the valuation measure has increased 4-fold since 2009. That alone carries an inherent risk of a ca. 75% fall in share prices, if sentiment were to fall to 2009 levels.

A permanently higher plateau?

3 Profits are going… where exactly?

Not that fundamentals are that important, except over very long time periods, but the profits have stalled lately. That’s despite historically hysterical monetary stimulus and budget deficits (essentially fiscal stimulus one way or the other). It’s hard to conceive of a new and bigger wave of stimulus on top of the already failing ones. There is no new China, no new India, no hoping for Africa to pull profits higher when the low hanging fruit in the U.S. and Europe have been plucked.

In addition, after 9 years of expansion a profit recession is way overdue. The profits for S&P companies quite often decrease by 30-50%, and the swings have become bigger since 1980, not smaller.

With both lower earnings multiples and stalling or falling earnings in the cards, a 50% decrease in S&P 500 is actually a quite modest expectation. Time for a black Friday soon?

Labor costs recently hit a low (inverted scale) and profit margins a mirroring high. With the magic of debt (that postpones the need for a real living wage) faltering it’s about time wages reflected living costs, and margins came back to earth. Guess what’ll happen to profits… Hint: it’s not positive.

4 Interest rates are about to rise

This chart speaks for itself, I hope. With interest rates this low, the only way is up. Retirees and pension funds can’t live off of a 2.2% return. Nominal!

Look at the chart, can you honestly say you think rates are going even lower? Anyway, rates don’t really matter, at least not fundamentally. If rates are staying low or going lower, then history teaches us that it’s because growth is low. In terms of equity valuations, lower interest rates and lower growth will cancel each other out. No, matter, unless we go completely digital, interest rates are not going negative (for long). A situation where suppliers want to be paid late, where you’re paid to mortgage your house and so on, simply is to perverse for an economy to take.

5. Dividend yields are low, and if they are about to rise, it’s only because stock prices are about to come crashing down

The dividend yield is lower than the interest rate, but rates are fixed and nominal, whereas dividends are risky and contingent of profits and not least cash flow. Dividends can be reduced or cancelled altogether.

Many more and bigger fundamental reasons to worry

There are of course numerous more reasons to expect lower profits, multiples and share prices, such as profit margins mean reverting (or inverting!), increasing churn rate among the top companies in a digital world etc. No need to mention the boomer cohort retiring, thus both reducing their equity portfolios, and cutting back on consumption (due to uncertainty about longevity and investment returns; feeding into lower sales and profits on top of any other adversity or recession trigger). I also don’t want to spoil any bull party with mentions of the debt ceiling and a congress that actually wants to see the president fail.

Finally, there is that minor detail of all too much debt in all sectors of the economy (government, corporate, student, auto, mortgage, credit cards) having already pulled sentiment and consumption forward, and henceforth putting a lid on future growth.

Oh, I almost forgot The Fourth Turning which with impeccable timing is soon upon us with its convenient total solution to small matters such as a failing European Union, currency wars, nuclear bickering with North Korea, unsustainable pension promises and the obese healthcare sector. Maybe a digital World War III, followed by a gold backed cryptocurrency fiat re-set accord could interest you?

And the bad news?

Technicals don’t look good either. Dr Hussman has frequently noted that high valuations alone rarely slow down equities. However, when the appetite for risk eventually recedes, it’s visible in “market internals”.

He theorizes that when risk is in universal demand it makes asset classes, industries, sectors and companies converge. The mirror image of such bull behavior is widening dispersion in a number of respects as a harbinger of more widespread flight to safety. The FANG phenomenon is hardly new, and narrowing markets are but one example of an early risk off signal for equity markets.

FYI: As of August 14, Dr Hussman no longer calls the rising risk aversion subtle.

Ain’t nuthin’ but a FANG!

As a final word: never forget that all securities have to be held until retired. That means that no matter how far a stock price has fallen there is still 100% owners, and thus potential sellers of the stock left. If falling equities means record high NYSE margin debt will trigger forced selling those potential sellers risk becoming increasingly urgent. And then there is the case of Ponzi schemes which have an uncanny knack of being exposed and exacerbating the negativity right when they do the most harm.

Do you still preach dancing while the music is playing, albeit close to the exits (or remaining chairs)? I mean, central banks have no way to go but ever more retard. The same goes for banks and corporations. They’ll push for just one more quarter of play pretend. Maybe they can pull themselves up by their own hair a final time before the ultimate solution. Some even claim it was the earlier downturns that were anomalies and due to very specific one-time issues.

Well I’m peepin’ and I’m creepin’ and I’m creep-in

But I damn near got caught ’cause my beeper kept beepin’

Now it’s time for me to make my impression felt

So sit back, relax and strap on your seatbelt

I wouldn’t bet on it; there’s no reason to. You can always decide to simply pass on this round and see what happens. Or, you just have to ask yourself if you feel lucky.

Well, do ya? (Please read this post in conjunction with my previous ironic post on the bull case for stocks)

Are you afraid yet? You should be.

The fire is lit, and there are very few exits — small and obscure ones.

You should be

Gold is one of those exits. Bitcoin might be another. Soft commodities could also be worth a look.

Do you want more? Do you want to stay updated? Subscribe, read my book, check in again, tell a friend.

BONUS: Check out Ludvig’s write-up in English of our interview with billionaire and hedge fund founder Martin Sandquist here.