Money and Finance
- Hussman Weekly Market Comment: Low And Expanding Risk Premiums Are The Root Of Abrupt Market Losses
Link to: Low and Expanding Risk Premiums are the Root of Abrupt Market Losses Through the recurrent bubbles and collapses of recent decades, I’ve often discussed what I call the Iron Law of Finance: Every long-term security is nothing more than a claim...
- Hussman Weekly Market Comment: It Is Informed Optimism To Wait For The Rain
Link to: It Is Informed Optimism To Wait For The RainBased on valuation metrics that have demonstrated a near-90% correlation with subsequent 10-year S&P 500 total returns, not only historically but also in recent decades, we estimate that U.S. equities...
- Hussman Weekly Market Comment: Not In Kansas Anymore
Even in the event that quantitative easing is sufficient to override hostile market conditions in the near-term, it is worth noting that long-term outcomes are likely to be unaffected. We presently estimate a prospective 10-year total return on the S&P...
- Hussman Weekly Market Comment: Secular Bear Markets - Volatility Without Return
Present market and economic conditions highlight a fairly dramatic disparity between continued economic and valuation headwinds (particularly on a “cyclical” horizon of 18-24 months) and complacent short-term conditions that rest on the continuation...
- Hussman Weekly Market Comment: Simple Arithmetic
As I've noted several times in recent months, bond market spreads imply very low near-term (3-6 month) probability of default in any Euro-area country. A sovereign default is much more likely to occur near the end of the next bear market, whenever...
Money and Finance
Hussman Weekly Market Comment: Things I Believe
1) Investors dangerously underestimate the risk of an abrupt and possibly severe equity market plunge
2) Agreement among "experts" is not your friend
3) Downside risk tends to be elevated precisely when risk premiums and volatility indices reflect the most complacency
4) We did not avoid a second Great Depression because we bailed out financial institutions. Rather, the collapse in the economy and the surge in unemployment were the direct result of a gaping hole in the U.S. regulatory structure that prevented the rapid restructuring of insolvent non-bank financials. Policy makers then inappropriately extended the "too big to fail" doctrine to ordinary banks. Following a striking loss of public confidence that resulted from arbitrary policy responses, coupled with fear-mongering by exactly those who stood to benefit from public handouts, the self-fulfilling crisis was contained by a change in accounting rules that effectively disabled capital requirements for all financial companies. We are now left with a Ponzi scheme.
5) The U.S. economy is recovering, but that recovery is vulnerable to even modest shocks.
6) The U.S. fiscal position is far worse than our present $1.3 trillion deficit and nearly 100% debt/GDP ratio would suggest.
7) A long period of generally rising interest rates will not negate the ability of flexible investment strategies to achieve returns, provided that the increase in rates is not diagonal, and the strategy has the ability to vary its exposure to interest rate risk.
8) Stocks are a poor inflation hedge until high and persistent inflation becomes fully priced into investor expectations. At the same time, short-dated money market debt has historically been a very effective inflation hedge.
9) It will be harder to inflate our way out of the Federal debt than investors seem to believe.
10) It will be harder to grow our way out of the Federal debt than investors seem to believe
11) Based on a variety of valuation methods that have a strong historical correlation with subsequent long-term market returns, we estimate that the S&P 500 is presently priced to achieve a total return averaging just 3.6% annually over the coming decade.
12) The specific features of a given economic cycle don't change the mathematics of long-term returns - they simply affect the level of valuation that investors demand or are willing to temporarily tolerate.
2) Agreement among "experts" is not your friend
3) Downside risk tends to be elevated precisely when risk premiums and volatility indices reflect the most complacency
4) We did not avoid a second Great Depression because we bailed out financial institutions. Rather, the collapse in the economy and the surge in unemployment were the direct result of a gaping hole in the U.S. regulatory structure that prevented the rapid restructuring of insolvent non-bank financials. Policy makers then inappropriately extended the "too big to fail" doctrine to ordinary banks. Following a striking loss of public confidence that resulted from arbitrary policy responses, coupled with fear-mongering by exactly those who stood to benefit from public handouts, the self-fulfilling crisis was contained by a change in accounting rules that effectively disabled capital requirements for all financial companies. We are now left with a Ponzi scheme.
5) The U.S. economy is recovering, but that recovery is vulnerable to even modest shocks.
6) The U.S. fiscal position is far worse than our present $1.3 trillion deficit and nearly 100% debt/GDP ratio would suggest.
7) A long period of generally rising interest rates will not negate the ability of flexible investment strategies to achieve returns, provided that the increase in rates is not diagonal, and the strategy has the ability to vary its exposure to interest rate risk.
8) Stocks are a poor inflation hedge until high and persistent inflation becomes fully priced into investor expectations. At the same time, short-dated money market debt has historically been a very effective inflation hedge.
9) It will be harder to inflate our way out of the Federal debt than investors seem to believe.
10) It will be harder to grow our way out of the Federal debt than investors seem to believe
11) Based on a variety of valuation methods that have a strong historical correlation with subsequent long-term market returns, we estimate that the S&P 500 is presently priced to achieve a total return averaging just 3.6% annually over the coming decade.
12) The specific features of a given economic cycle don't change the mathematics of long-term returns - they simply affect the level of valuation that investors demand or are willing to temporarily tolerate.
- Hussman Weekly Market Comment: Low And Expanding Risk Premiums Are The Root Of Abrupt Market Losses
Link to: Low and Expanding Risk Premiums are the Root of Abrupt Market Losses Through the recurrent bubbles and collapses of recent decades, I’ve often discussed what I call the Iron Law of Finance: Every long-term security is nothing more than a claim...
- Hussman Weekly Market Comment: It Is Informed Optimism To Wait For The Rain
Link to: It Is Informed Optimism To Wait For The RainBased on valuation metrics that have demonstrated a near-90% correlation with subsequent 10-year S&P 500 total returns, not only historically but also in recent decades, we estimate that U.S. equities...
- Hussman Weekly Market Comment: Not In Kansas Anymore
Even in the event that quantitative easing is sufficient to override hostile market conditions in the near-term, it is worth noting that long-term outcomes are likely to be unaffected. We presently estimate a prospective 10-year total return on the S&P...
- Hussman Weekly Market Comment: Secular Bear Markets - Volatility Without Return
Present market and economic conditions highlight a fairly dramatic disparity between continued economic and valuation headwinds (particularly on a “cyclical” horizon of 18-24 months) and complacent short-term conditions that rest on the continuation...
- Hussman Weekly Market Comment: Simple Arithmetic
As I've noted several times in recent months, bond market spreads imply very low near-term (3-6 month) probability of default in any Euro-area country. A sovereign default is much more likely to occur near the end of the next bear market, whenever...