It may be coming!

It  is coming, and for the sake of the economy we hope it is not too big. We have seen very interesting action in global markets. Asia is seeing a whole lot of volatility. We are also seeing emerging markets getting very bearish and more developed markets just preparing to get weak. We are seeing increased volatility in global currencies versus the dollar and the dollar rallying hard. This tells me that we are seeing fear over the ending of global easing by central banks. Let's look at this from a slightly different perspective. First of all, the markets have a positive drift above risk-free rates. If so, right now the market shouldn't move in any direction in the long term. So, if easing stops or at least slows, bonds will get crushed making interest rise, increasing positive drift. However, stocks will fall because there needs to be a reversion to the mean, so stocks and bonds again have negative correlation. And, if easing stops, the markets will freak considering the way the market reacts to Bernanke. So, I think we can see a very large and dramatic reversion to the mean in global equity markets. Afterwards, the market may have room for a very large rally.