OVERLY GENEROUS

How does one spell misallocation of capital?

Actually, without much thought, it's rather easy: reckless monetary policy.

Some folks are a bit kinder than we are; they call it, as was noted in a weekend piece in Barron's, "overly generous" MP. If this term came from an Englishman, we'd better appreciate it, since the Brits are masters of understatement.

In this case, it came from a Frenchman who reportedly has been watching markets for some 40 or so years. We take our hat off to longevity, like its twin brother loyalty, an attribute not much appreciated, in these times. One of today's paradoxes is everyone's a free agent in a world being pushed and shoved into total submission to the shackles and constraints of globalism. We'd tell you to go figure, but that's something high on the hit list of global bureaucrats and regulators, too.

For a long time investors scurried farther and farther out on the limb of market risk, mostly forced by central bank policy that only the limp, the lame and the loony would find appealing. Sometime late last year that changed. 

Anyway, according to the blurb, this Frenchman thinks U.S. stocks will experience a 50% decline in the not too distant future. What you might find interesting about the Frenchman's statement is the premise nearly everyone worries about, over-valuation, really has little to do with big market sell offs.

We will give you three guesses and the first two don't count as to what really causes these cyclical bear markets. We like to be overly generous in our policies.