Money and Finance
- Hussman Weekly Market Comment: Formula For Market Extremes
Link to: Formula for Market Extremes Market extremes generally share a common formula. One part reality is blended with one part misguided perception (typically extrapolating recent trends as if they are driven by some reliable and permanent mechanism),...
- Hussman Weekly Market Comment: Shifting Policy At The Fed: Good For Long-term Growth, Bad For Cyclical Bubbles
Link to: Shifting Policy at the Fed: Good for Long-Term Growth, Bad for Cyclical BubblesWith regard to the debt markets, leveraged loan issuance (loans to already highly indebted borrowers) reached $1.08 trillion in 2013, eclipsing the 2007 peak of $899...
- Hussman Weekly Market Comment: Restoring The "virtuous Cycle" Of Economic Growth
Link to: Restoring the "Virtuous Cycle" of Economic GrowthIn a healthy economy, the productive activity of one sector opens a vent for the productive activity of other sectors of the economy. The useful allocation of resources in one area of the...
- Hussman Weekly Market Comment: The Truth Does Not Change According To Our Ability To Stomach It
Our estimate of prospective 10-year nominal S&P 500 total returns has eroded to just 2.3%, suggesting that equities are likely to underperform even the relatively low returns available on 10-year Treasury bonds in the coming decade. Those estimates...
- 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,...
Money and Finance
Hussman Weekly Market Comment: Yes, This Is An Equity Bubble
Link to: Yes, This Is An Equity Bubble
Now, as we observed in periods like 1973-74, 1987, and 2000-2002, severe equity market losses do not necessarily produce credit crises in themselves. The holder of the security takes the loss, and that’s about it. There may be some economic effects from reduced spending and investment, but there is no need for systemic consequences. In contrast, the 2007-2009 episode turned into a profound credit crisis because the owners of the vulnerable securities – banks and Wall Street institutions – had highly leveraged exposure to them, so losing even a moderate percentage of their total assets was enough to wipe out their capital and make those institutions insolvent or nearly-so.
At present, the major risk to economic stability is not that the stock market is strenuously overvalued, but that so much low-quality debt has been issued, and so many of the assets that support that debt are based on either equities, or corporate profits that rely on record profit margins to be sustained permanently. In short, equity losses are just losses, even if prices fall in half. But credit strains can produce a chain of bankruptcies when the holders are each highly leveraged. That risk has not been removed from the economy by recent Fed policies. If anything, it is being amplified by the day as the volume of low quality credit issuance has again spun out of control.
- Hussman Weekly Market Comment: Formula For Market Extremes
Link to: Formula for Market Extremes Market extremes generally share a common formula. One part reality is blended with one part misguided perception (typically extrapolating recent trends as if they are driven by some reliable and permanent mechanism),...
- Hussman Weekly Market Comment: Shifting Policy At The Fed: Good For Long-term Growth, Bad For Cyclical Bubbles
Link to: Shifting Policy at the Fed: Good for Long-Term Growth, Bad for Cyclical BubblesWith regard to the debt markets, leveraged loan issuance (loans to already highly indebted borrowers) reached $1.08 trillion in 2013, eclipsing the 2007 peak of $899...
- Hussman Weekly Market Comment: Restoring The "virtuous Cycle" Of Economic Growth
Link to: Restoring the "Virtuous Cycle" of Economic GrowthIn a healthy economy, the productive activity of one sector opens a vent for the productive activity of other sectors of the economy. The useful allocation of resources in one area of the...
- Hussman Weekly Market Comment: The Truth Does Not Change According To Our Ability To Stomach It
Our estimate of prospective 10-year nominal S&P 500 total returns has eroded to just 2.3%, suggesting that equities are likely to underperform even the relatively low returns available on 10-year Treasury bonds in the coming decade. Those estimates...
- 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,...