Money and Finance
- Hussman Weekly Market Comment: The Journeys Of Sisyphus
Link to: The Journeys of Sisyphus As we discussed several months ago, that hope of succeeding rests on what economist J.K. Galbraith called “the extreme brevity of the financial memory.” Part of that brevity rests on ignoring the forest for the trees,...
- Hussman Weekly Market Comment: The Siren's Song Of The Unfinished Half-cycle
Given the extent and maturity of the recent advance, it’s very odd that analysts are now beginning to toss around the idea that stocks have entered a secular bull market. These notions are based not on the level of valuation, nor on the duration of...
- Hussman Weekly Market Comment: Overlooking Overvaluation
Presently, on the basis of smooth fundamentals such as revenues, book values, dividends and cyclically-adjusted earnings, the S&P 500 is somewhere between 40-70% above pre-bubble valuation norms, depending on the measure. That’s about the same point...
- Nightmare On Wall Street: This Secular Bear Has Only Just Begun - By Ed Easterling
Secular bull markets are great parties. Investors arrive from secular bears really wanting to take the edge off. As the bull proceeds, above-average returns become intoxicating. By the time it is over, the past decade or two has delivered bountiful returns. ...
- John Mauldin's Outside The Box: Game Changer - By Ed Easterling
Investors are confronting the reality of the current secular bear market. It is both the consequence of the previous secular bull market and the precursor to the next secular bull. The duration of the current secular bear period is uncertain. Should inflation...
Money and Finance
Hussman Weekly Market Comment: Closing Arguments: Nothing Further, Your Honor
“For as long as I can remember, veteran businessmen and investors – I among them – have been warning about the dangers of irrational stock speculation and hammering away at the theme that stock certificates are deeds of ownership and not betting slips… The professional investor has no choice but to sit by quietly while the mob has its day, until the enthusiasm or panic of the speculators and non-professionals has been spent. He is not impatient, nor is he even in a very great hurry, for he is an investor, not a gambler or a speculator. The seeds of any bust are inherent in any boom that outstrips the pace of whatever solid factors gave it its impetus in the first place. There are no safeguards that can protect the emotional investor from himself.”
- J. Paul Getty
I’ve often noted that even a run-of-the-mill bear market decline wipes out more than half of the preceding bull market advance. I doubt that the present instance will be different. Indeed, cyclical bear market declines that occur in the context of secular bear markets average a market loss of about 39%, wiping out about 80% of the prior bull market advance. We presently estimate a nominal total return for the S&P 500 of just 3.2% annually over the coming decade. It is not pessimism, but optimism – and optimism born of a century of evidence – that we expect stocks to provide more favorable opportunities for investment over the completion of this cycle. It is that carefully-studied optimism that leads us to reject the notion that investors are forced to crawl to the ground and “lock in” low prospective long-term returns, while ignoring severe intermediate-term risks to capital.
I’ll note in passing that the Shiller P/E reached 24 last week (S&P 500 divided by the 10-year average of inflation-adjusted earnings). Secular bear market lows have typically taken the Shiller P/E below 8 before durable secular bull market advances have taken hold. Valuations are a long way off from that, though I would expect at least one or two more complete bull-bear cycles to emerge before the market achieves valuations that would support a durable secular uptrend. There will be plenty of significant opportunities to periodically accept market exposure even if a secular bull market is nowhere in sight.
The perception that investors are “forced” to hold stocks is driven by a growing inattention to risk. But Investors are not simply choosing between a 3.2% prospective 10-year return in stocks versus a zero return on cash. They are also choosing between an exposure to 30-50% interim losses in stocks versus an exposure to zero loss in cash. They aren’t focused on the “risk” aspect of the tradeoff, because they believe that they will somehow be able to exit stocks before the tens of millions of other investors who hold identical expectations.
- Hussman Weekly Market Comment: The Journeys Of Sisyphus
Link to: The Journeys of Sisyphus As we discussed several months ago, that hope of succeeding rests on what economist J.K. Galbraith called “the extreme brevity of the financial memory.” Part of that brevity rests on ignoring the forest for the trees,...
- Hussman Weekly Market Comment: The Siren's Song Of The Unfinished Half-cycle
Given the extent and maturity of the recent advance, it’s very odd that analysts are now beginning to toss around the idea that stocks have entered a secular bull market. These notions are based not on the level of valuation, nor on the duration of...
- Hussman Weekly Market Comment: Overlooking Overvaluation
Presently, on the basis of smooth fundamentals such as revenues, book values, dividends and cyclically-adjusted earnings, the S&P 500 is somewhere between 40-70% above pre-bubble valuation norms, depending on the measure. That’s about the same point...
- Nightmare On Wall Street: This Secular Bear Has Only Just Begun - By Ed Easterling
Secular bull markets are great parties. Investors arrive from secular bears really wanting to take the edge off. As the bull proceeds, above-average returns become intoxicating. By the time it is over, the past decade or two has delivered bountiful returns. ...
- John Mauldin's Outside The Box: Game Changer - By Ed Easterling
Investors are confronting the reality of the current secular bear market. It is both the consequence of the previous secular bull market and the precursor to the next secular bull. The duration of the current secular bear period is uncertain. Should inflation...