The extreme sell-off we saw in markets yesterday reminded me very much of the big moves in the 2008-2009 bear market where correlations went to 1 and multiple asset classes declined simultaneously. We had multiple bubbles brewing simultaneously and as is often the case with mean reversion, the pendulum is likely to swing well beyond the mean. It took Japan the better part of two decades to work off the excesses of its late 1980s dual stock and real estate bubbles and the Nikkei 225 has not yet surpassed its late 1980s peak more than three decades later. In our last Insider Weekends article I wrote,
Some market participants are seeing the action last week as signs of capitulation but if this is anything like the bear market after the dot com bubble burst, we have a ways to go before the market stabilizes.