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Results 301–350
of 357 found.
Baby Steps
by John Hussman of Hussman Funds,
Our view is that the Federal Reserve will taper its program of quantitative easing this week, in the range of a $10-15 billion reduction in the pace of monthly debt purchases. The Fed really has no communication problem about this the economic impact of further quantitative easing has had diminishing returns, and the economic drag from fiscal reductions has thus far been smaller than the Fed feared when it justified QEternity on the basis of those concerns last year.
The Lesson of the Coming Decade
by John Hussman of Hussman Funds,
Even if the S&P 500 Index goes nowhere over the coming decade - as historically reliable measures of valuation suggest - it will probably go nowhere in an interesting and volatile way, providing better value and opportunities that are well-supported by historical evidence. The challenge will be to maintain discipline even when frustration begs investors to abandon it.
The Outlook Will Shift as Conditions Shift
by John Hussman of Hussman Funds,
Though I expect that the present cycle will be completed by a market loss on the order of 40-55%, conditions can certainly emerge over the course of this cycle that could warrant a more constructive stance than we have presently, though possibly less extended than wed like. The most likely constructive opportunity would emerge from a moderate retreat in market valuations, ideally to oversold conditions from an intermediate-term perspective, coupled with an early firming in measures of market internals.
Extreme Brevity of the Financial Memory
by John Hussman of Hussman Funds,
The period of generally rich valuations since the late-1990s (associated with overall market returns hardly better than Treasury bill returns since then) has created a tolerance for valuations that, in fact, have led to awful declines, and have required fresh recoveries to elevated valuations simply to provide meager peak-to-peak returns.
The Minsky Bubble
by John Hussman of Hussman Funds,
In his classic treatise on speculation, Manias, Panics and Crashes (originally published in 1978), the late Charles Kindleberger laid out a pattern of events that has periodically occurred in financial markets throughout history. Drawing on the work of economist Hyman Minsky, the conditions he described are likely far more relevant at the present moment than investors may recognize.
Baked in the Cake
by John Hussman of Hussman Funds,
Once the risk premium is beaten out of stocks, there is no way out, and nothing that can be done about it. Poor subsequent returns, market losses, and the associated destruction of financial security (at least for the bag-holders) are already baked in the cake. This should have been the lesson gleaned from the period since 2000, but because it remains unlearned, it will also become the lesson of the coming decade.
All of the Above
by John Hussman of Hussman Funds,
Market internals remain broken here. That may change, and it might even change soon. Until it does, we would be inclined to tread carefully, because this may be the highest level investors will see on the S&P 500 for quite some time. Choosing between potential catalysts - credit strains in China, the risk of disappointing earnings, or economic weakness, the incoming data is consistent with one conclusion: all of the above.
Market Internals Suggest a Shift to Risk-Aversion
by John Hussman of Hussman Funds,
Our primary attention here is on market internals. If they improve, I expect that well adopt at least a moderately constructive view. Presently, however, my impression is that investors have shifted from risk-seeking to risk-aversion. This shift is not because of a hawkish Fed, but in spite of a dovish one - something more appears to be going on. Its tempting to wait until a stronger and more specific catalyst emerges, but the financial markets have demonstrated repeatedly over time that market losses come first, and the catalyst becomes evident afterward.
The Price of Distortion
by John Hussman of Hussman Funds,
Corporate profits have benefited in recent years from enormous fiscal distortions that have bloated margins 70% above their historical norms. Stock prices have benefited in recent years from enormous monetary distortions that have suppressed interest rates and encouraged investors to reach for yield. Combining those effects, investors have been encouraged to chase stocks, placing elevated price/earnings multiples on already elevated earnings. Investors who value stocks on the basis of these distortions are likely to discover in hindsight that they have paid a very dear price.
2009 vs. 2013
by John Hussman of Hussman Funds,
One of the most strongly held beliefs of investors here is the notion that it is inappropriate to Fight the Fed reflecting the view that Federal Reserve easing is sufficient to keep stocks not only elevated, but rising. Whats baffling about this is that the last two 50% market declines both the 2001-2002 plunge and the 2008-2009 plunge occurred in environments of aggressive, persistent Federal Reserve easing.
Following the Fed to 50% Flops
by John Hussman of Hussman Funds,
One of the most strongly held beliefs of investors here is the notion that it is inappropriate to Fight the Fed reflecting the view that Federal Reserve easing is sufficient to keep stocks not only elevated, but rising. Whats baffling about this is that the last two 50% market declines both the 2001-2002 plunge and the 2008-2009 plunge occurred in environments of aggressive, persistent Federal Reserve easing.
Rock, Paper, Scissors
by John Hussman of Hussman Funds,
Theres a sort of rock-paper-scissors relationship to financial indicators. Trend following factors typically trump valuations alone, while overvalued, overbought, overbullish syndromes trump trend-following and monetary considerations. Monetary factors tend to be most effective as confirmation of other measures, particularly of trend-following factors, but only in the absence of overvalued, overbought, overbullish syndromes.
Aligning Market Exposure With the Expected Return/Risk Profile
by John Hussman of Hussman Funds,
Some risks and market conditions are more rewarding than others. My objectives for this weeks comment are very specific. First, to demonstrate using a very simple model that investment returns do indeed vary systematically with market conditions. Second, to demonstrate that overvalued, overbought, overbullish conditions have historically dominated trend-following measures when they have emerged. Third, to demonstrate the impact of accepting investment exposure in proportion to the return/risk profile that is associated with a given set of market conditions.
When Rich Valuations Meet Poor Economic Data
by John Hussman of Hussman Funds,
Given the full set of market conditions that we observe, including the persistent overvalued, overbought, overbullish syndrome that has developed in recent months, our concerns about stocks are not dependent on the direction of the economy over the coming quarters. An economic downturn would simply add immediacy to those concerns.
Increasingly Immediate Impulses to Buy the Dip (or, How to Blow a Bubble)
by John Hussman of Hussman Funds,
A tendency toward increasingly immediate attempts by investors to buy every dip in the market reflects a broadening consensus among investors that there is no direction other than up, and that any correction, however, small, is a buying opportunity. As investors clamor to buy ever smaller dips at increasing frequency, the slope of the markets advance becomes diagonal or parabolic. This is one of the warning signs of a bubble.
Taking Distortion at Face Value
by John Hussman of Hussman Funds,
The U.S. stock market presently reflects two unstable features. One is that extraordinary monetary policy specifically quantitative easing has created an ocean of zero-interest money that someone has to hold at each point in time, and that provokes a speculative reach for yield. The other is that extraordinary fiscal policy, coupled with household savings near record lows, have joined to elevate profit margins more than 70% above their historical norm, as the deficit of one sector has to emerge as the surplus of another.
We Should Already Have Learned How This Will End
by John Hussman of Hussman Funds,
The bear market losses that complete each market cycle have different catalysts. Some feature recession, some feature inflation, some feature credit events, but nearly all feature a spike in risk premiums from levels that have become both low and complacent. Thats the underlying risk that overvalued, overbought, overbullish, rising-yield conditions have reliably identified over time.
Investment, Speculation, Valuation, and Tinker Bell
by John Hussman of Hussman Funds,
The most important questions investors should be asking are these: what do they know that can be demonstrated to be true; and what do they believe that can be demonstrated to be untrue. It is best to make these distinctions deliberately, lest the financial markets clarify these distinctions for investors later, against investors will, and at great cost.
Two Myths and a Legend
by John Hussman of Hussman Funds,
The present market euphoria appears to be driven by two myths and a legend. Make no mistake. When investors cannot possibly think of any reason why stocks could decline, and are convinced that universally recognized factors are sufficient to drive prices perpetually higher, euphoria is the proper term.
Out On A Limb - An Investor's Guide to X-treme Monetary and Fiscal Conditions
by John Hussman of Hussman Funds,
Massive policy responses, directed toward ineffective ends, are scarcely better than no policy response at all. A look at the current monetary and fiscal policy environment, as well as more effective policy initiatives, and why they make sense.
A Reluctant Bear's Guide to the Universe
by John Hussman of Hussman Funds,
In recent years, I've gained the reputation of a "perma-bear." The reality is that I'm quite a reluctant bear, in that I would greatly prefer market conditions and prospective returns to be different from what they are. There's no question that conditions and evidence will change, unless the stock market is to be bound for the next decade in what would ultimately be a low-single-digit horserace with near-zero interest rates. For my part, I think the likely shocks are larger, and the potential opportunities will be greater than investors seem to contemplate here.
Puppet Show
by John Hussman of Hussman Funds,
What's fascinating is that in the presence of what are not thin strings, but massive cables supporting the economy like a puppet, the only response that Wall Street can muster is "Hey! He's walking!" as if the puppet is capable of motion without being propped up to a nearly reckless extent.
Declaring Victory at Halftime
by John Hussman of Hussman Funds,
Present overvalued, overbought, overbullish, rising-yield conditions fall within a tiny percentage of market history that is associated with dismal market outcomes, on average. Its true that we've observed extreme conditions since about March 2012 with little resolution aside from short-term declines. But the S&P 500 remains only a few percent from its March 2012 high, and if history is any guide, the extension of these unfavorable conditions is not likely to reduce the depth of the market loss that can be expected to resolve them.
The Good Without The Awful
by John Hussman of Hussman Funds,
Generally speaking, the very best times to be long are when a market decline to reasonable or depressed valuations is followed by an early improvement in market internals (breadth, leadership, positive divergences, price-volume behavior, and so forth). This is a version of a general principle: bullish investors should look for uniformly positive trends to be coupled with an absence of particularly hostile features such as overvalued, overbought, overbullish conditions. Put simply, we are looking for the good without the awful.
Aspirin for a Broken Femur
by John Hussman of Hussman Funds,
The Federal Reserve under Bernanke is like a bad doctor facing a patient with a broken femur. Being both unable and unwilling to restructure the broken bone, he announces that he will keep shoving aspirin down the patient's throat until the bone heals.
Secular Bear Markets - Volatility Without Return
by John Hussman of Hussman Funds,
There is enormous risk, in my view, in the temptation to accept zero interest rates and low single-digit prospective market returns as an enduring characteristic of the financial markets while ignoring the unsustainable distortions that have produced this environment.
Overlooking Overvaluation
by John Hussman of Hussman Funds,
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 they reached at the beginning of the 1965-1982 secular bear period, as well as the 1987 peak.
Little Dutch Boy
by John Hussman of Hussman Funds,
In the Mary Mapes Dodge book titled Hans Brinker, there is a fictional story within the story of a little Dutch boy who, on his way to school, notices a hole in the dyke. Having nothing else to fix the leak, he plugs the hole with his finger and stays there through the night until workers come to repair it. We are now into the fourth year of efforts to print trillions of little Dutch boys out of dollars and euros in order to stop a tide from crashing through a fundamentally damaged dyke. All of this has bought time, but no workers have arrived, and no real repairs have been done.
Stream of Anecdotes
by John Hussman of Hussman Funds,
Analysts who interpret economic data as a stream of unconnected anecdotes are likely to find recent data encouraging, and will easily dismiss any concern about a U.S. recession on that basis. For our part, the internals of the economic picture new orders, backlogs, real income growth, and even the employment components of prominent economic surveys continue to deteriorate. Based on dozens of economic variables and methods that account for leading/lagging relationships (e.g. unobserved components estimates) our view remains that the U.S. economy has already entered a recession.
Distinction Without a Difference
by John Hussman of Hussman Funds,
In recent weeks, market conditions have fallen into a cluster of historical instances that have been associated with average market losses approaching -50% at an annualized rate. Of course, such conditions don't generally persist for more than several weeks the general outcome is a hard initial decline and then a transition to a less severe average rate of market weakness (the word "average" is important as the individual outcomes certainly aren't uniformly negative on a week-to-week basis).
The Data-Generating Process
by John Hussman of Hussman Funds,
For anyone who works to infer information from a broad range of evidence, one of the important aspects of the job is to think carefully about the structure of the data what is sometimes called the "data-generating process." Data doesn't just drop from the sky or out of a computer. It is generated by some process, and for any sort of data, it is critical to understand how that process works. In the financial markets, the data-generating process is often very misunderstood.
Passed Pawns
by John Hussman of Hussman Funds,
I've long been fascinated by the parallels between Chess and finance. Years ago, I asked Tsagaan Battsetseg, a highly ranked world chess champion, what runs through her mind most frequently during matches. She answered with two questions "What is the opportunity?" and "What is threatened?" At present, I remain convinced that the key opportunity lies in closing down exposure to risk.
Number Five
by John Hussman of Hussman Funds,
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%, and the 10-year Treasury yield has been above its level of 20-weeks prior. While there are numerous similar ways to define an "overvalued, overbought, overbullish, rising-yields" syndrome, there are five small clusters of this one in the post-war record.
Leap of Faith
by John Hussman of Hussman Funds,
Both the economy and the financial markets will do fine in the longer-term, but to imagine that there will not first be major challenges and disruptions is a leap of faith and a leap over a century of economic and financial history that screams otherwise.
Eating the Future
by John Hussman of Hussman Funds,
Every security on Earth works like this. The higher the price you pay for a given set of expected future cash flows, the lower your prospective future rate of return. Higher prices essentially take from future prospective returns and add to past returns. Conversely, lower prices take from past returns and add to future prospective returns.
Low-Water Mark
by John Hussman of Hussman Funds,
As of Friday, our estimates of prospective return/risk for the S&P 500 have dropped to the single lowest point we've observed in a century of data. There is no way to view this as something other than a warning, but it's also a warning that I don't want to overstate. This is an extreme data point, but there has been no abrupt change; no sudden event; no major catalyst. We are no more defensive today than we were a week ago, because conditions have been in the most negative 0.5% of the data for months.
Results 301–350
of 357 found.
