Money and Finance
- Hussman Weekly Market Comment: We Learn From History That We Do Not Learn From History
Link to: We Learn From History That We Do Not Learn From History “We learn from history that we do not learn from history.” Georg Wilhelm Friedrich Hegel Last week, Investors Intelligence reported that bullish sentiment surged...
- Hussman Weekly Market Comment: Baked In The Cake
“I can feel it coming, S.E.C. or not, a whole new round of disastrous speculation… and finally the inevitable crash. I don’t know when it will come, but I can feel it coming, and, damn it, I don’t know what to do about it.” - Bernard Lasker,...
- Hussman Weekly Market Comment: Declaring Victory At Halftime
Last week, the S&P 500 came within 1% of reprising a syndrome that we’ve characterized as a Who’s Who of Awful Times to Invest, featuring a Shiller P/E over 18 (S&P 500 divided by the 10-year average of inflation-adjusted earnings), the S&P...
- Hussman Weekly Market Comment: Number Five
Examine the points in history that the Shiller P/E has been above 18, the S&P 500 has been within 2% of a 4-year high, 60% above a 4-year low, and more than 8% above its 52-week average, advisory bulls have exceeded 45%, with bears less than 27%,...
- Hussman Weekly Market Comment: An Angry Army Of Aunt Minnies
As of Friday, the S&P 500 was within 1% of its upper Bollinger band at virtually every horizon, including daily, weekly and monthly bands. The last time the S&P 500 reached a similar extreme was Friday April 29, 2011, when I titled the following...
Money and Finance
Hussman Weekly Market Comment: Confidence Abounds
Confidence abounds. Last week, Investor’s Intelligence reported a surge in advisory sentiment to the highest bullish percentage since October 19, 2007. The National Association of Active Investment Managers (NAAIM) reported that the 3-week average equity exposure among its members increased to the highest level on record. We observe warnings from nearly every variant of overvalued, overbought, overbullish, rising-yield conditions that have accurately warned investors of oncoming market losses in a century of data, not to mention in real-time in 2000 and 2007 (see for example, my October 2007 comment Warning – Examine all Risk Exposures).
As one of many historically effective variants of this syndrome, define “overvalued” as a Shiller P/E anything higher than 18 (given an actual multiple of 25.7 here, any objections to the Shiller metric are quibbles); define “overbought” as the S&P 500 at least 8% over its 200-day average, and just to be extreme about it – within 2% of a 5-year high; define “overbullish” as a 2-week average of bulls greater than 54% with bears less than half that level – below 27%; define rising yields as a 10-year Treasury yield higher than it was 6 months earlier.
Prior to 2013, those conditions were observed only in June 2007 – about 2% from a bull market peak that would be followed by a 55% market loss; July 1999 – when optimistic investors could at least look for the S&P 500 to advance another 8% to the ultimate bull market peak in 2000, after which the market lost half its value – but not without a 12% correction between July and October 1999 first; the August 1987 pre-crash peak; the December 1972 peak, a few weeks before the New York Times quoted then-analyst Alan Greenspan saying “It’s very rare that you can be as unqualifiedly bullish as you can now” – immediately followed by a 50% market plunge; and (using imputed sentiment data) August 1929.
The deeply unfortunate part of this story is that since early 2013, these strenuously overvalued, overbought, overbullish, rising-yield conditions have been observed not only in recent weeks, but also in May 2013, with a close call as early as February 2013. No material market weakness has emerged during this period, which encourages investors to ignore the risk altogether, rather than consider the likelihood that this risk is increasing, despite being unrealized to-date.
- Hussman Weekly Market Comment: We Learn From History That We Do Not Learn From History
Link to: We Learn From History That We Do Not Learn From History “We learn from history that we do not learn from history.” Georg Wilhelm Friedrich Hegel Last week, Investors Intelligence reported that bullish sentiment surged...
- Hussman Weekly Market Comment: Baked In The Cake
“I can feel it coming, S.E.C. or not, a whole new round of disastrous speculation… and finally the inevitable crash. I don’t know when it will come, but I can feel it coming, and, damn it, I don’t know what to do about it.” - Bernard Lasker,...
- Hussman Weekly Market Comment: Declaring Victory At Halftime
Last week, the S&P 500 came within 1% of reprising a syndrome that we’ve characterized as a Who’s Who of Awful Times to Invest, featuring a Shiller P/E over 18 (S&P 500 divided by the 10-year average of inflation-adjusted earnings), the S&P...
- Hussman Weekly Market Comment: Number Five
Examine the points in history that the Shiller P/E has been above 18, the S&P 500 has been within 2% of a 4-year high, 60% above a 4-year low, and more than 8% above its 52-week average, advisory bulls have exceeded 45%, with bears less than 27%,...
- Hussman Weekly Market Comment: An Angry Army Of Aunt Minnies
As of Friday, the S&P 500 was within 1% of its upper Bollinger band at virtually every horizon, including daily, weekly and monthly bands. The last time the S&P 500 reached a similar extreme was Friday April 29, 2011, when I titled the following...