John Hussman

McThai
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John Hussman

Mensajepor McThai » 29 Nov 2012 01:33

A 26 de noviembre de 2012:

"... stocks are overvalued, and market conditions have moved in a two-step sequence from overvalued, overbought, overbullish, rising yield conditions (and an army of other hostile indicator syndromes) to a breakdown in market internals and trend-following measures... "

"...Our estimates of prospective stock market return/risk, on a blended horizon from 2-weeks to 18-months, remains among the most negative that we’ve observed in a century of market data..."

http://www.hussmanfunds.com/wmc/wmc121126.htm

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Re: John Hussman

Mensajepor McThai » 28 Ene 2013 22:28

2 meses después del comentario anterior, Hussman es aún más pesimista:

"As of last week, market conditions joined 1929, 1972, 2000, 2007 and 2011 (less memorable, but still associated with a near-20% market decline) as one of the worst periods on record to accept market risk, based on the syndrome of overvalued, overbought, overbullish, rising-yield conditions presently in place. These conditions comprise the following: S&P 500 overvalued with the Shiller P/E (the ratio of the S&P 500 to the 10-year average of inflation-adjusted earnings) greater than 18; overbought with the S&P 500 within 3% of its upper Bollinger band (2 standard deviations above the 20-period average) at daily, weekly, and monthly resolutions, more than 7% above its 52-week smoothing, and more than 50% above its 4-year low; overbullish with the 2-week average of advisory bullishness (Investors Intelligence) greater than 52% and bearishness below 28%; and yields rising with the 10-year Treasury bond yield higher than 6-months earlier. The present instance may turn out differently than past ones. The enthusiasm of investors here certainly encourages that belief. Then again, virtually by definition of the foregoing syndrome, investors were equally enthusiastic at those prior market peaks."

http://www.hussmanfunds.com/wmc/wmc130128.htm

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Dalamar
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Re: John Hussman

Mensajepor Dalamar » 05 Mar 2013 07:48

These conditions represent a syndrome of overvalued, overbought, overbullish, rising yield conditions that has emerged near the most significant market peaks — and preceded the most severe market declines — in history:

1.S&P 500 Index overvalued, with the Shiller P/E (S&P 500 divided by the 10-year average of inflation-adjusted earnings) greater than 18. The present multiple is actually 22.6.

2.S&P 500 Index overbought, with the index more than 7% above its 52-week smoothing, at least 50% above its 4-year low, and within 3% of its upper Bollinger bands (2 standard deviations above the 20-period moving average) at daily, weekly, and monthly resolutions. Presently, the S&P 500 is either at or slightly through each of those bands.

3.Investor sentiment overbullish (Investors Intelligence), with the 2-week average of advisory bulls greater than 52% and bearishness below 28%. The most recent weekly figures were 54.3% vs. 22.3%. The sentiment figures we use for 1929 are imputed using the extent and volatility of prior market movements, which explains a significant amount of variation in investor sentiment over time.

4.Yields rising, with the 10-year Treasury yield higher than 6 months earlier.
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Re: John Hussman

Mensajepor Dalamar » 09 Mar 2013 08:56

Let’s be clear about what Bernanke is saying: “[A ‘deferred asset’] is an asset in the sense that it embodies a future economic benefit [to the Fed] that will be realized as a reduction of future cash outflows [to the public].

In effect, to the extent that the Fed experiences losses because it overpaid for Treasury securities that it bought from primary dealers (comprising the too-big-to-fail banks and Wall Street investment firms), the U.S. public will pay for those losses without any need for Congressional legislation. This doesn’t mean that the Fed will refrain from continued quantitative easing, but we should all understand how this policy works, and the risks and potential costs that it quietly imposes on the public.

Another assertion that makes me wince is the idea that “since 2009, there has been an 85% correlation between the monetary base and the S&P 500.” This is a distressing use of statistics, because two data series will always have an extremely high correlation if both series capture an uncorrected diagonal move. For example, it is equally true that since 2009, there has been a 94% correlation between beer prices in Iceland and the S&P 500. That’s not to dismiss the enormous effect that Fed policy has had on the markets in recent years, but the implication of an “85% correlation” is that if one increases, the other is sure to increase as well. There is little basis in the data for that belief. The exception is that when stocks are down significantly from their level of 6-months prior, monetary easing is often eventually capable of boosting confidence and reversing recent spikes in risk premiums.”

In case you’re wondering, since 2000 there has been only a 9% correlation between the monetary base and the S&P 500, but a 99% correlation between the monetary base and the price of beer in Iceland. Why? The S&P 500 has experienced massive up and down cycles, while the monetary base and beer prices have both trended higher over time.

5% nominal growth would likely make it inappropriate to hold short-term interest rates below 2% for another 14 years. So either the Fed will reverse its present course, or we will experience unacceptable inflation, or we will experience persistently weak growth like Japan has experienced since 1999, when it decided to take Bernanke’s advice to pursue quantitative easing. My guess is that we will experience unacceptable inflation, beginning in the back-half of this decade.Imagen
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Re: John Hussman

Mensajepor Dalamar » 30 Ago 2014 20:31

If one reviews market action surrounding major pre-crash peaks such as 1929, 1972, 1987, 2000, and 2007, you’ll observe a sort of “resilience” in the major indices on a day-to-day and week-to-week basis even after market internals had already corroded. In 1987, for example, the break following the August bull market peak was largely recovered over the course of several weeks before failing rapidly in October. In 2000, the market actually experienced a series of 10-12% corrections and recoveries before a final high in September that was followed by a loss of half the market’s value. In 2007, the initial break in mid-summer was fully recovered, with the market registering a fresh nominal high in early October that marked the end of the bull market and the start of a 55% market collapse.

As economic historian J.K. Galbraith wrote about the advance leading up to the 1929 crash, the market’s gains “had an aspect of great reliability… Indeed the temporary breaks in the market which preceded the crash were a serious trial for those who had declined fantasy. Early in 1928, in June, in December, and in February and March of 1929 it seemed that the end had come. On various of these occasions the Times happily reported the return to reality. And then the market took flight again. Only a durable sense of doom could survive such discouragement. The time was coming when the optimists would reap a rich harvest of discredit. But it has long since been forgotten that for many months those who resisted reassurance were similarly, if less permanently, discredited.”

None of this implies that the market will or must collapse in short order. Stocks remain strenuously overvalued, overbought, and overbullish, but those conditions have persisted uncorrected much longer in the present instance than they have historically. That doesn’t encourage us to abandon our concerns, but it does make us less aggressive about investment stances that rely on any immediate unwinding of what we continue to view, along with 1929 and 2000, as one of the three most reckless equity bubbles in the historical record.

Our perspective is straightforward: on the basis of measures that have been reliably correlated with actual subsequent market returns in market cycles across a century of data, we estimate that the S&P 500 Index will be no higher a decade from now than it is today. On the basis of nominal total returns (including dividends), we estimate zero or negative returns for the S&P 500 on every horizon shorter than about eight years.
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Re: John Hussman

Mensajepor Dalamar » 13 Nov 2014 06:12

John Hussman: What's interesting here is that if you think about equities, they're not a claim on next year's prediction of earnings by Wall Street analysts. A stock, in fact any security, is a claim on any long-term stream of cash flows that investors can expect to be delivered to them over a very long period of time.

When you look at equities you can calculate something calledduration. It's essentially the effective life of a security over which you are collecting cash flows in return for the amount you pay. For the S&P 500 the duration is about 50 years. In other words it is a very, very long-term asset. The only reason you would want to price that asset based on your estimate of next year's earnings is if you were convinced that next year's earnings are actually representative of the very, very long-term stream -- and I'm talking 50 years or so of earnings that you're likely to get -- that those earnings are in a sense accurately proportional to the whole long-term stream.

What's amazing about that is that is it has never been true. It has never been true historically. If you look at corporate profits and especially corporate profit margins, they're one of the most cyclical and mean-reverting series in economics. Right now, we have corporate profits that are close to about 11% of GDP, but if you look at that series you will find that corporate profits as a share of GDP have always dropped back to about 5.5% or below in every single economic cycle including recent decades, including not only the financial crisis but 2002 and every other economic cycle we have been in.

Right now stocks as a multiple of last year's expected earnings may look only modestly over valued or modestly richly valued. Really if you look at the measures of valuation that are most correlated to the returns that stocks deliver over time say over seven years or over the next 10 years the S&P 500 in our estimation is about double the level of valuation that would give investors a normal rate of return.

So right now, we've got stocks valued at a point where we estimate the 10 year prospective return on the S&P 500 will be about 1.6 to 1.7% annualized -- talking right now with the S&P 500 at 2032 as of today's close.

Chris Martenson: I guess 1.6 or 7% doesn't sound bad if you are getting 0% on your risk-free money, I guess. But this says that any move by the Fed to normalize -- which means rates have to go up -- any move to drain liquidity from the system is going to have its own impact. If we held all things equal, a normalization effort is going to then basically expose that the stock market is roughly overvalued by 100%.

John Hussman: 100%, yes. I actually think the case is a little bit harsher than that; in fact, quite a bit harsher than that.

The idea that well, "1.7% isn't so bad" or "1.6% isn't so bad" ignores the fact that really in every market cycle and economic cycle we have had a point where stocks were fairly valued or undervalued.The only cycle in which we didn't see that was actually the 2002 low where stocks actually ended that decline at an overvalued level on a historical basis. But valuations were still relatively high on a historical basis in 2002. They got slightly undervalued in 2009, but not deeply.

On a historical basis, what's interesting is that if you look at measures of valuation that correct for the level of profit margins, you actually get about a 90% correlation with subsequent 10 year returns. That relationship has held up even over the past several decades. It has held up even over the past 5 years where the expected return that you would have forecasted based on time-tested valuations turned out to be pretty close to what you would have forecasted 10 years earlier.

Right now, like I say, we are looking at stocks that have been pressed to long-term expected returns that are really dismal. But more important than that, in every market cycle that we've seen with the mild exception of 2002, we've seen stocks price revert back to normal rates of return. In order to get to that point from here, we would have to have equities drop by about half.
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