The thundering word: thrown from the bull ship A delightful piece of strategy lands from BoAML man Michael Harntett, assessing both what the bulls are saying and, just as important, what remains unsaid. We note that nobody seems to ask about commodities and few seem to ask about China, the old leadership. And, nobody seems to talk about the "Tails" of inflation and deflation. We believe contrarians should at least consider hedges. There is a performance chasing aspect to this. Also in our inbox is the Nacubo-Commonfund study of US endowments for the 2013 fiscal year (which tracks the academic, not the Roman calender). Preliminary FY2013 returns broken out by asset class are: · Domestic equities: 20.5 percent · Fixed income: 2.4 percent · International equities: 14.4 percent · Alternative strategies: 8.6 percent · Short-term securities/cash/other: 1.0 percent Those alternative strategies are trailing somewhat, but even among the laggards note that: Commodities and managed futures returned -6.0 per cent, the year's only investment strategy to report a negative return. More support, were it needed, to make the consensus choice to embrace central bank support for asset prices. Indeed, one of the strategist's concerns is that stimulus leads to excessive speculation before it leads to stronger growth. How might that be illustrated in a slightly spurious but topical fashion? For BoAML's part they think that the world economy is nearly but not quite at "escape velocity." Until a virtuous cycle emerges that starts with stronger housing activity and flows to stronger bank lending and stronger small business hiring, we believe growth in the US, Japan, and Europe will struggle to expand at a pace that does not require central bank liquidity injections and zero interest rates. They note that lending to small business in the US is rising year-on-year for the first time since 2008, although we would say that such lending tends merely to track the progress of economic growth, rather than lead it. The recent Federal Reserve Survey of loan officers found looser corporate credit but demand lagging. Regarding loans to businesses, the October survey results generally indicated that banks eased their lending policies for commercial and industrial (C&I) loans and experienced little change in demand for such loans over the past three months. There was little change in household lending standards. But as we said, BoAML are not wildly bullish, a fact illustrated with reference to their super sentiment speedometer. Following a summer rally that has seen almost $7.5 trillion added to global market cap, our composite Bull & Bear Index, our favored cross-asset measure of investor sentiment, is now close to a cautionary sell signal. The Index is currently at 7.2, up from 1.8 in July. A breach of 8.0 has historically preceded a 5-8% correction for MSCI AC world over the next 1-2 months. Bulls should hold on tight. Word. Related Links: How the mighty have fallen: EM edition - FT Alphaville Thundering metaphors - FT Alphaville Money go-round theme du jour, bond beat cash - FT Alphaville