For the lazy people who don’t like to slog through Hussman’s entire data laden weekly tome, I’ve picked out the most pertinent sections. For the really lazy, I’ve bolded the most important sentences. When everyone on Wall Street is using the same algorithms in their HFT supercomputers, and John Q. Public isn’t even in the market, who will these supercomputers sell to when they all get the sell signal at the same time? When that time comes, and it won’t be long, I’ll be munching popcorn and watching the festivities unfold. The talking heads, government apparatchiks, and Ivy League educated big swinging dicks on Wall Street will declare a national emergency and demand another bailout. Will we be stupid enough to fall for it again, or will we start hanging bankers?
The higher the price an investor pays for a given stream of expected cash flows today, the lower the return that an investor should expect over the long-term. As detailed below, investors have responded to zero interest rates by driving stock valuations up to the point where expected market returns over the coming decade are also zero. Given that outcome, one is quite free to say that stocks are reasonably valued “relative” to zero interest rates, but one should still expect zero 10-year returns on stocks.
My impression is that’s not how investors are thinking. Particularly at market peaks, investors seem to believe that regardless of the extent of the preceding advance, future returns remain entirely unaffected. The repeated eagerness of investors to extrapolate returns and ignore the Iron Law of Valuation has been the source of the deepest losses in history.
Current valuations are above the 2007 peak, and are now within about 15% of the 2000 extreme.
What we haven’t seen at any point in history is the combination of dismal projected returns for the S&P 500 coupled with a similarly dismal yield-to-maturity on bonds. The coming decade will be an underfunding disaster for corporate pension plans, endowments, and municipalities, most that still typically plan around an assumed rate of return closer to 8%. The most reliable measures we identify suggest that nominal total returns on a conventional asset mix are likely to be closer to 1% annually. Quantitative easing has already given investors, at least on paper, the gains that they would otherwise have waited years longer to achieve (again, at least on paper). Particularly in equities, investors who do not have a very long horizon and cannot actually tolerate a 50% loss should consider realizing those paper gains now and cutting exposure to a tolerable level. That’s not market timing – it’s sound financial planning that may be quite overdue. My impression is that the window of opportunity is closing quickly.
Recall that the 2000-2002 and 2007-2009 collapses were accompanied by Fed easing, not tightening. “Following the Fed” would have been disastrous in each case, as the Fed cut rates persistently and aggressively as the market lost half its value. Indeed, the Fed began cutting rates several weeks before the 2007 peak. The Fed also did not tighten within a year of the 1929 peak.
How many investors do you suspect will be available to absorb your shares at current price levels once they begin trying to exit simultaneously?
Look around, and all you’ll see are other bulls who share virtually identical beliefs despite the fact that many of those beliefs are contradicted by historical evidence. As I’ve detailed in recent weeks, stocks have been in a clear price-volume distribution pattern for nearly a year. The NYSE Composite has gone nowhere since last July, while the Dow and S&P 500 are back to their late-December levels. Soon, the only ones who will be available to take the buy side against sell orders are, well, value investors like me, and we don’t see value anywhere near current levels. The rule is simple. Once market internals have deteriorated, the exit rule for bubbles is that you only get out if you panic before everyone else does.
Frankly, history suggests that a rather ordinary completion to the present market cycle would involve the S&P 500 losing more than half of its value.
Based on the combination of obscene valuations and increasing deterioration across a wide range of market internals, our outlook remains hard-defensive here.
At present, market losses that may seem like “worst case” scenarios are actually quite run-of-the-mill expectations. As Santayana wrote, “Those who do not remember the past are condemned to repeat it.”
I watched Atlas Shrugged part III last night and missed the entire thrilling EVAN and the Panic episode here.
But at least I saw the characters Dagny Taggart and John Galt sneak off to the RR basement for a little nooky before TEOTWAWKI.
If I hadn’t read the book, I wouldn’t have had a clue. I didn’t listen to the speech. I think we are living it.
I think Evan learned his English from Yoda
You convinced me Quinny, I’m heading for the exit and investing in precious metals, such as bullets.
LLPOH, THANKS . I am also deslexic to some extent. Is it that i am to be shamed and never achieve my full potential for the rest of my life because of a handycap? would it be proper to rewrite the post using paragraphs or my feble attempt at them ?
Hussman has lost 2/3 of his personal money and clients money so far.
He keeps playing double or nothing.
Put your money in cash and at least it will retain its nominal value. Not so by shifting to government bond from stocks.
Hussman has not lost 2/3 of his personal money. Why make idiotic shit up? You are a fucking liar and lose all credibility as a commenter.
His fund has an average annual return of 1% for the last 5 years and 4.6% for ten years. His fund is up 1% YTD and is beating the S&P 500.
You’re a douchebag.
Here are the facts that obliterate your lies.
http://www.marketwatch.com/investing/Fund/HSTRX?countrycode=US
The more it snows, the higher the mountain rises.
As more time passes without an avalanche, the snow mass gets higher and deeper, but common sense informs us that each increase in the height of the snow mass brings with it the promises of an even larger avalanche.
————————
When Mount St. Helens came to life and began to rumble, large numbers of tourists arrived to experience the spectacle. In video interviews some of the locals said it was much ado about nothing, that the mountain might rumble for a century without anything notable occurring.
Some of those people were among those killed when the northern face of the mountain sluffed down and the volcanic pressure below erupted SIDEWAYS, not upward.
Trees don’t grow to the sky, and the behavior of stocks these past 3 years are nothing short of astonishing (and not in a good way.) We don’t know when, and one can go broke betting against a mania, but sooner or later this thing is going to blow and those sitting in stocks will discover they’re too close to the mountain to escape.
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“When stock prices fall, the money doesn’t go somewhere else. It disappears.
When bond yields rise (and their prices fall), the money doesn’t go somewhere else. It disappears.
When land or home prices fall, the money doesn’t go somewhere else. (Yes, you guessed it.)”
-DC
All very much true in a system in which credit is money and money is credit.
I was thinking about money in general and our monetary system specifically and something I hadn’t thought of before occurred to me.
Money always only has value because people have confidence in it and I do believe Martin Armstrong’s evaluation that the best measure of people’s confidence is the velocity of money. I fully believe that the current war on cash is designed to both kill deflationary (falling velocity) pressures by eliminating the hoarding of cash and also to allow for negative interest rates sometime in the future.
But, I think there is a new reason why this will ultimately fail: money MUST be fungible. The only reason people have confidence in digital money is because they believe that $1 on their screen has exactly the same value and is completely interchangeable with the dollar bill in their hand. Digital currency was built on this foundation of being fungible with physical.
Will the sheep maintain confidence when their is no cash or will they recognize that the numbers on their screen really are just numbers?
Damn anonymous. Above was mine.
Stocks have again reversed higher from a very obvious (to everyone) support level.
As far as I’m concerned, the real question will be, what happens if a rally (assuming this reversal to up continues for more than a few hours) gets near the Exponential Moving Averages (EMA’s) I watch and then chokes?
Unless the SPX recaptures 2100 and maintains it, this *could* finally be the long expected avalanche in its early phase.
[img]http://bigcharts.marketwatch.com/kaavio.Webhost/charts/big.chart?nosettings=1&symb=spx&uf=0&type=2&size=2&sid=3377&style=320&freq=1&entitlementtoken=0c33378313484ba9b46b8e24ded87dd6&time=8&rand=346162903&compidx=aaaaa%3a0&ma=5&maval=13&lf=4&lf2=32&lf3=256&height=553&width=579&mocktick=1[/img]
Of course NO ONE knows the future. Although we can guess that a 40 year period of prosperity purchased on the Credit Card will not turn out to be all sorts of happy.
This 6 year “Central Banker Put” rally surely looks long in the tooth.
The declines of 2000-2002 and 2007-2009 taught people to NEVER sell, never capitulate, stocks always come back.
I’m fairly sure this is the perfect setup for the greatest asset value collapse in three centuries.
[img]http://bigcharts.marketwatch.com/kaavio.Webhost/charts/big.chart?nosettings=1&symb=spx&uf=0&type=2&size=2&sid=3377&style=320&freq=3&entitlementtoken=0c33378313484ba9b46b8e24ded87dd6&time=20&rand=2121204580&compidx=aaaaa%3a0&ma=5&maval=13&lf=4&lf2=32&lf3=256&height=553&width=579&mocktick=1[/img]
Stocks may have topped, or they may still run higher…no one knows…but sooner or later the avalanche will come and SPX prints above 2100 will be a distant memory.
Notice that the 2007-2009 decline was considerably steeper than the prior one in 2000-2002.
My expectation is that when the 2015(?) to ? decline comes, it will be steeper still. Are people now convinced to hang tight, that the Fed has their back, that only fools try to time stock market investing?
Have we yet reached the point when even the long-term, perpetual bears have thrown in the towel and capitulated to what seems like a permanent uptrend?
Have market watchers 100% (to the last man and woman) embraced the belief that Central Bankers can, if they choose, keep stocks rising for years yet to come?
I don’t know the answers here. I just know that this won’t reverse until Every Single Person has booked passage on this Poseidon Adventure.
liston to the Hagmann and Hagmann report . from last night’s show billionaires listen to them . you can youtube the show.
Maggie says: I watched Atlas Shrugged part III last night and missed the entire thrilling EVAN and the Panic episode here.
———-
Maggie, I hope you liked part III more than I did–thought it was disappointing compared to I and II. The actors weren’t as good either (hadn’t seen that person who played her brother since Ally McBeal!)
@Rise Up… I did NOT care for it; as I said — if I hadn’t read it I would have been completely lost.
But I think it might have been at least as good as the Evan Panic saga here…
And today, my real estate broker told me of “new” rules that have gone into effect concerning sales of residential property… Am so happy Nick and I sole the albatross house in Oklahoma last year. Dancing in the street… well, dancing in the gravel road.
Evan is just Smokey trying to fuck with us.
I’m willing to bet 12 months from this very moment the S&P is higher than it is today.
“Do not wait for your financial planner/broker to warn you that you are about to be robbed, it ain’t gonna happen.” — Bea
This. Did your financial planner warn you to get out before the crashes in 2000 and 2007? So many of those “financial planners” (they are SALESMEN, people, not “planners”) are just ripping you off to make a buck for themselves. The stock guys tell you to buy what they want to get rid of, and they tell you to sell the stuff they want for themselves. Others churn your account for commissions and fees. There might be a few honest ones out there, but they are probably stupid. No smart financial salesman could possibly have any true belief in the system they are selling. They probably get sales materials from their corporate masters (at T. Rowe Price or Ameriprise or Whateverthefuck) and foolishly believe every word they read.
If the financial system doesn’t make sense to you, it’s probably not because you are stupid, it’s because it is a giant con. It doesn’t make sense to you because it doesn’t make sense, period. The financial system should have collapsed in 2008 but was propped up by trillions of printed money, and that has made fantastic short-term gains for a few people in a club you don’t belong to. They’re using that cash to buy back their own stock and all the real estate they can get their hands on.
If you can’t figure out what to do with your money besides putting it in the financial system, you are doing it wrong. First, get out of debt. The middle-class people I know (those who are left) spend about a third of their time paying on debts, a third of their time paying the government, and they are left with precious little left over. If you don’t have debt, that third is gone, and then you don’t have to work as much, and then presto! Suddenly you don’t have to pay the government that much either. You’d be amazed how far an unencumbered paycheck can stretch.
I do accounting and financial reporting. Nothing glamorous or “meaningful,”, but companies need someone who will get things right and spot mistakes before they happen. The company I work for is happy with me. I work two weeks a month for them, just doing their month-end close, so their full-time financial analyst (a job title I used to have) doesn’t have to screw around with it. I’ll pick up some full-time hours during the winter, when they’re neck-deep in year-end close.
With the time I have free, I’m discovering all kinds of things I enjoy doing. After you are dead, it won’t matter how you spent your time. It matters NOW how you spend your time, right now, while you are spending it. We all have to do some things we’d rather not do, like work because we need money or exercise so we don’t get fat. But it doesn’t have to be the majority of your time. Find a way to spend as much of your time as you can doing things you enjoy and being happy. You’ll NEVER look back and regret that! It took me a few years to pay off my 2BR condo and get myself situated so I could have this life, but I’m only 45 and already semi-retired. I might keep working part-time until I’m 70. Maybe by the time I’m 60 I’ll be down to working three months of the year, helping companies with year-end stuff. The same kind of thing could work for anyone who does seasonal work, though.
Let the financial salesmen piss up a rope. Stop putting all your extra time into doing stuff you hate because you think you need to feed that beast. You don’t, and you’ll be making the world a better place by starving it. (And having fun at the same time.)
I think we’ll see a collapse in purchasing power, but not in nominal terms. Owning a senator is a great way to protect yourself in a recession. Anybody seeing Weimar-ish storm clouds coming?
Admin, Sallie Mae is forgiving student debt for certain schools (mostly diploma mills).
http://www.theguardian.com/us-news/2015/jun/09/us-forgive-student-loans-disgraced-corinthian-colleges-collapse
I can’t keep track of how everything is tied together, so I was wondering about your take on it all.
1. Will this be a big enough shock to bring down the system? The money-lending/laudering/leveraging sphere is one giant jenga tower with fewer and fewer blocks.
2. How far will this spread? Will it start affecting brick and mortars that are uncertified, like bob jones?
3. What conditions will be set for loan forgiveness? Will it be certain schools, or something along the line of “national service”?
4. If the effects are widespread, how fast will it all happen? Overnight, over a month, or just another step on the long way down?
nowhereman – I believe you have good stuff to say. I did not think it “feeble”.
Long, strung -together sentences make it difficult to read. Even if you don’t get the paragraphs entirely correct, put in some line-breaks.
Like this. It helps the readers a lot.
Thanks for playing! Keep it up.
Now listen up chillen’.
Yo mammas told you to believe the news ‘cos they tell ya the truth.
…and the reality of the talking heads is this:
Evan just single-handedly killed voice to text and swiping technologies in one post.
Yeah, I’m back, bitches.
trading tip of the day… go long CNY …George is in and so should you..
To avoid this scenario, Soros called on the U.S. to make a “major concession” and allow China’s currency to join the International Monetary Fund’s basket of currencies. This would make the yuan a potential rival to the dollar as a global reserve currency.
In return, China would have to make similar major concessions to reform its economy, such as accepting the rule of law, Soros said.
Allowing China’s yuan to be a market currency would create “a binding connection” between the two systems.
http://www.marketwatch.com/story/soros-sees-risk-of-another-world-war-2015-05-19
@ Sensetti,
So will be the SPX be higher June 9, 2017 than June 9, 2016?
How about 2018 vs 2017? 19 vs 18, 20 vs 19, or 21 vs 20?
For the record, betting on an uptrend is generally wise; stocks spend more time in uptrends than in downtrends.
OTOH, after 6 years of essentially vertical rally, 300% up from 666 on the SPX, with the last 3 years being as regular as a metronome without a single noticeable pullback, and with corporate profits dropping for (I think it’s) 9 straight quarters (oh, yes, but THEY BEAT EXPECTATIONS!) and GDP printing negative already this year, it seems unwise to me to expect much more continuation of this absurd, credit-bubble-on-credit-bubble rally.
Flash: From a newsletter I get.
“In other news from Asia. the MSCI, did NOT approve Chinese equities to be included in their index, saying that there were a few important issues related to market accessibility that must be resolved first, and after those issues are resolved, the shares can be added, even outside the regular schedule of its annual market classification review. Now that tells me that China is so close to having their equities as a part of the MSCI index that they can taste it!
Yesterday, I told you how the markets were betting that the MSCI was going to announce that Chinese equities would be included in the MSCI fund. Steve Sjuggerud, wrote about this in his Daily Wealth letter yesterday. $400 Billion will move into Chinese stocks, based on the decision by the MSCI. $9.5 Trillion of investor money is benchmarked to MSCI indexes. Large investors like to track indexes. So if a stock is added to a stock market index, big dollars flow into that stock. And if a stock is booted out of an index, the stock is sold heavily. This time, we’re not just talking about moving a stock into or out of an index. We’re talking about moving an entire country into an index. This is a Major Event!”
Yes, it’s an important step for China. And it’s not really whether or not the equities make it into the MSCI at this time, but more about the fact that they will eventually. And the thing to think about here is these Chinese equities will have to be bought in the local exchange using renminbi, are you following the dots here folks?
renminbi ..another currency created out of thin air…just what the worlds needs, more debt backed money in competition with other central bank created jack….what could possible go wrong?
I dunno, there’s that rumor that China is buying gold and silver so when the day comes and the dollar is no longer king their fiat will be at least partially backed by metals and not debt and a promise to tax it’s citizens more.
We’re all just pawns.
There are no “markets”. Just one enormous scheme of manipulation – courtesy of the Fed, big banks, major investors, and Wall Street picking winners and losers.
I’m sorry to be a broken record but as long as investors keep playing along with this scheme and the Fed keeps throwing trillions into the pot, I suspect they may be able to keep the manipulated, artificial, corrupt scheme going – at least until enough food, water, and energy resources deplete or some other catastrophe occurs. Extremely wealthy people, private investors in the Fed, and members of the BIS who run the show can’t do anything about this.
Resource depletion or other catastrophe absolutely trumps all lies and corruption.
card, If the renminbi where include in the SDR basket it would be highly unlikely that the Chi-coms would risk backing it with gold. and if not included in the SDR and backed by gold, it would mean certain war between the petro-dollar and the Chinese currency…don’t see it happening either way.
I work.with a lot of young people (college age.) Lately I’ve been surprised how informed they are regarding the Ponziness of it all, even understanding the Greek situation on a deeper level than what you get from mainstream news propacrapa. They know perfectly well China is never getting paid back and they are amassing more gold than Fort Knox held before it was sold out. These are normal kids, not intellectual giants. The moral of the story is you’d have to be an oblivious clueless dope to not see the magnitude of the problems with the financial state of the world today.