For the past several months, we have heard many top hedge fund and other analysts voicing their concern about the markets, with some forecasting a crash or at least a sharp plunge because of overvaluations.
Former hedge fund manager Jim Rogers, now residing in Asia, told Business Insider that the greatest crash of our lifetime will happen "later this year or next." He says, "Be worried."
Another well-known analyst, Marc Faber, told CNBC that he sees a plummet of 40% or more, and "it will end very badly, extremely badly." He didn’t say when.
Analyst David Stockman, former budget director for President Reagan, said on CNBC, "a gigantic, horrendous storm" is not far away.
The power of proper market timing cannot be underestimated. Even Jim Rodgers, with his extremely bearish views, explained “I may fall apart first though because my timing is so bad.”
All these people have decades of experience in the markets. They are well known and we like to read their analysis of the markets. But there are times when our view diverges.
Since early September, our view at Dohmen Capital Research has been that, although over the longer-term the very bearish view has a high probability of being right, there is a difference in timing. And as we say, “timing is everything.”
As you can see in the chart below, the large trading firms (i.e. large speculators) have been reducing exposure to growth stocks throughout the year (blue line), even while the Nasdaq 100 (green line) has continued to climb to new record highs.
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