John P. Hussman, Ph.D.
Market conditions presently match those that have repeatedly preceded either market crashes or extended losses approaching 50% or more. Such losses have not always occurred immediately, but they have typically been significant enough to wipe out years of prior market gains. Aside from the 2000-2002 instance, they also have historically ended at valuations associated with prospective 10-year S&P 500 nominal total returns in excess of 10%. At present, reliable valuation measures are associated with estimated total returns for the S&P 500 of just 2.0% annually over the coming decade. On the basis of historically reliable measures, the S&P 500 would have to move slightly below the 1000 level to raise its prospective returns to a historically normal 10% annually. Given short-term interest rates near zero, economic disruptions would probably be required in order to produce that outcome over the completion of the current cycle, and we have no forecast or requirement for that to occur. Of course, there is no shortage of historically unreliable measures available to offer assurance that equity valuations are just fine.
Regardless of whether the market’s losses in this cycle turn out to be closer to 32% (which is the average run-of-the-mill bear market loss) or greater than 50% (which would be required to take historically reliable valuation measures to historical norms, though most bear markets have continued to undervalued levels), it’s going to be difficult to avoid steep losses without a plan of action. In our view, that action should be rather immediate even if the market’s losses are not. However uncomfortable it might be in the shorter-term, the historical evidence suggests that once overvalued, overbought, overbullish conditions become as extreme as they are today, it’s advisable to panic before everyone else does.
U.S. pensions ‘cash negative’ by 2016:
America's sprawling 401(k) pension system will turn cash flow negative in 2016, threatening disruption for asset managers and selling of equities, according to analysis by Cerulli Associates, a research house.
However, by 2016 it forecasts that inflows will be $364 billion and outflows $366 billion, with the deficit only widening year on year after that as the core of the baby-boomer generation retires.
Amin Rajan, chief executive of Create Research, a consultancy, said IRAs tend to have a 20-35 per cent exposure to equities, compared with 45-60 per cent in 401(k) plans. This suggests equity-focused houses could lose market share to bond-based rivals such as Pimco and Principal Global Investors as the demographic changes mean the 401(k) system shrinks relative to the IRA market, which is already larger at about $5.4 trillion.
Personal Income Tax Revenues Show
Significant Softening in the Fourth
Quarter of 2013
Preliminary Figures for the First Quarter of 2014
Signal Possible Declines in Income Tax Collections
Are Americans filling up on too much debt?
Americans love cars and debt, so it's only natural that they would combine the two. A new report finds that auto loans are becoming more supercharged than ever as financing terms reach record highs. However, consumers should remember to steer clear of buying more car than they can really afford.
The average auto-loan term increased to 66 months during the first quarter, according to Experian Automotive, a global information services company. That is the highest level since Experian began publicly reporting the data in 2006.
DYI Comments: NOBODY RINGS A BELL AT THE TOP! We are now close to the end of a business cycle along with a credit cycle (cars compared to houses). Corporations around the world are using their over inflated stocks to effect "Merger Monday" and its back with a vengeance!Making matters worse, nearly 25% of all new vehicle loans originated during the quarter had terms extending out 73 months to 84 months, representing a 27.6% surge from a year earlier. The average amount financed for a new vehicle loan also reached an all time high of $27,612.
Merger Monday's back: TWC, Nest, Suntory bids
DYI's 10 year averaged annual estimated return is approaching ZERO. PLEASE NOTE: That is a nominal return before taxes, fees, trading costs, and inflation. Depending on your fund your estimated 10 year return is NEGATIVE.
The S&P 500 dividend yield is 1.86% as report by Multpl.com
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