In their latest Q3 2022 Letter, Elliott Management explain why current market extremes are worse than the post-WWII period. Here’s an excerpt from the letter:
Imagine a big warehouse, filled with little knots of people fighting fiercely, with each struggle happening over a different point of contention, topic, ideology or gripe. We think of this metaphor because of the complexity of the struggles occurring during this extraordinary bear market, which will shape pools of capital, careers, missions, and prosperity or poverty over the next period of weeks and months.
We are framing it this way because there are a number of themes involved. Usually, a bear market contains one major catalyst or driving factor, maybe two. At present, there is a grab bag of issues affecting securities prices, many of which have reached extreme, off–the–charts levels of intensity. Some of these trends have started to reverse and normalize, but most seem to require deeper re–ratings than we have seen to date if they are to provide sufficient value at the onset of the next cycle.
Predictions of how much stock, bond and real estate prices are likely to fall, top to bottom, and whether a mild or severe recession is likely, miss the point. The point is that an extraordinary confluence of extremes and problems have made possible a set of outcomes that would be at or beyond the boundaries of the entire post–WWII period.
Investors should not assume that they have “seen everything” on account of experiencing the 1973 to 1974 bear market and oil embargo, the 1987 crash, the dot–com crash, or the 2007 to 2008 GFC.
You can read the entire letter here:
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