E Suffering With Sontag

At the end of the year, we were thinking of Susan Sontag for some reason. We took “Against Interpretation and Other Essays” (1966) down from the shelf and turned to “The Artist as Exemplary Sufferer.” Speaking of ancient Hebrew, Greek, and Oriental literature, she wrote: “Suffering was not the hallmark of seriousness; rather, seriousness was measured by one’s ability to evade or transcend the penalty of suffering, by one’s ability to achieve tranquility and equilibrium.”

Replace “Artist” with “Equity Investor” and which might be the real exemplary sufferer is clear. Like Sontag’s ancients, we prefer to be serious about sidestepping the penalty of investing in what we believe to still be an overvalued stock market.

Back in March, we wrote in these pages:

“In any event, gentle reader, we think equities, even Facebook, are dead money or worse for a while. The likeliest bull market to come, despite Fed tightening, is bonds, we believe. We know that some heavy-hitting interest rate gurus believe bond prices are headed downward. But we think an inverted yield curve looms as the Fed squeezes and investors flee to safer assets. If the 10-year note yield hits 3% (it’s currently about 2.85%), it’s a screaming buy, we think.” (see What Rough Beast?).

And in June, we again expressed our preference for bonds over stocks (see Is Your Daddy Rich And Your Momma Good Lookin'?)

Alas, the bottom in equities has not yet been plumbed, in our view. Here’s why:

How much is that doggie in the window? Valuation has been excessive for some time and remains so despite the December sell-off. For reasons that only the gods know, this pendulum tends to swing way out of whack in both ways, perhaps because human beings expect either the best of all possible worlds or the end of time. In any event, at the end of the Christmas Eve bloodbath, the broad stock market was capitalized at about 123% of gross domestic product, still way too rich, in our view, given signs of a global slowdown, starkly evident in crude oil prices.

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