Its all Fun and Games till Someone Gets Hurt!

 Market

Insanity

Pushing Extremes

John P. Hussman, Ph.D.
President, Hussman Investment Trust

November 2020

The one reality that you can never change is that a higher-priced asset will produce a lower return than a lower-priced asset. You can’t have your cake and eat it. You can enjoy it now, or you can enjoy it steadily in the distant future, but not both – and the price we pay for having this market go higher and higher is a lower 10-year return from the peak.

– Jeremy Grantham, CNBC, November 12, 2020

In calling the current market the third “Real McCoy” bubble of recent decades, Jeremy Grantham described, in his own words, what I call the Iron Law of Valuation: a security is nothing more than a claim on some set of future cash flows that investors expect to be delivered into their hands over time.

 The higher the price an investor pays today for some amount of cash in the future,

 the lower the long-term return the investor can expect on that investment.

DYI:  Sky high valuations for the U.S. stock market all under a cloud of medical corruption – fake virus – fake pandemic – on a world wide basis.  When this sky high valuation house of cards collapses is unfortunately unknowable but in the meantime its all fun and games till someone gets hurt!  How far down??  From absolute peak to absolute bottom I would have your expectations built around 65% to 80% decline.  This may take more than two possibly three cycles to achieve but for now it is painfully obvious that stocks on a general basis are no bargain.  Hussmann’s chart for 60% stocks, 30% bonds, 10% T-bills for investors holding this asset allocation 12 years hence should expect a negative 1.56% average annual return!  Hold onto your precious metals and cash better valuations are ahead.  The Great Wait Continues…

DYI