Question
When does
the Pin
Burst this Bubble?
What's Changed? What's Different This Time?
This raises another question: how will the deflation of the Everything Bubble play out?
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Formula Based Asset Allocation*** STOCKS *** BONDS *** GOLD *** CASH................................ GeoPolitics/Economics...Removing Theory from Conspiracies
Question
When does
the Pin
Burst this Bubble?
|
J. Paul Getty Quote!
John P. Hussman, Ph.D.
President, Hussman Investment Trust
When a speculative bubble collapses – and I suspect this one will end like others before it – it isn’t because people take money “out” of the market. Every dollar a seller takes out is the same dollar a buyer just brought in. Prices collapse because the sellers are more eager to get out than the buyers are to get in, and a price decline is needed in order for stocks and cash to exchange hands (that’s why it’s called a stock exchange).
The hypervalued market capitalization people call “wealth” simply vanishes because market capitalization is just price times shares, and the only way to get sellers and buyers to trade with each other is for the trade to happen at a lower price. With market valuations just shy of their recent record extreme, it may be helpful to seriously consider your exposure to risk, and the full-cycle losses that have resolved speculative episodes across history.
Cologuard
Poop in a
Bucket!
Cologuard
Duel
Economies
Highlighted
Not just
the top 1% thinks and feels that everything is just fine it is the top
10%. As we move down the top percentages
those numbers trusting in the professional class drops significantly. Once you’re in the bottom 50% trust has
vanished and for good reason especially during and after the COVID SCAM.
Does anyone believe the inflation numbers our government puts out?? Add on 50% to what ever number they are touting. If they say the inflation number is 4% then you know the overall REAL number is 6%. Or attempting to tell us that the economy is booming when it takes both spouses working and many times a spouse has an additional part time job to fill in the gaps. So forth and so on!
The
Bear is
Poised
To Strike
The
Question is Only When?
At todays valuation* – Money Chimp.com – the next ten years estimated return for
stocks held or purchased today (S&P 500 index or all stock growth fund) is –
drum roll please – negative 1.89% total return!
The chart below though a tad dated clearly shows higher the percentage
of stock ownership as a group, in this case the entire U.S. population, lower
the future returns. As confidence in
markets builds more and more people pile into stocks pushing up all of the
fundamentals until valuations become unsustainable and the house of cards collapses.
*8-30-2024 Shiller PE 36.06 dividend yield 1.29% for S&P 500
Excerpt below from Charles Hugh Smith Substack
In the fairy tale, the economy is "strong" for all the right reasons: people are investing in new companies, spending lots of money, hiring more employees, and so on. In this fairy tale version of economics, the occasional spot of bother-- a "weakening economy"--is deftly resolved by the central bank lowering interest rates, which magically encourages everyone to return to their happy speculative, consumerist ways.
In La-La-Land, there are no bubbles, just enthusiasm for new technologies with limitless potential to reap billions in new profits. It's not a bubble, we’re assured, it's simply strong fundamentals: sales are soaring, profit margins are fattening, and there's no end in sight.
The chart of the dot-com bubble's euphoric ascent and eventual collapse is instructive: note how strong fundamentals eventually returned to the pre-La-La-Land level, wiping out all the wealth created by the bubble.
--As the stock market becomes more expensive, a conservative investor's stock allocation should go down. The rationale recognizes the reduced expected future returns for stocks, and the increasing risk.
--The formula acknowledges the increased likelihood of the market falling from current levels based on historical valuation levels and regression to the mean, rather than from volatility. Many agree this is the key to value investing.