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John P. Hussman 4 Oct 18
1/ There's no such thing as investors coming "off the sidelines" w/o other investors going on. Every outstanding share has to be held by someone at all times. Investors now require someone else to arrive and accept a higher price & lower return than they've already bargained for.
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John P. Hussman 4 Oct 18
Replying to @hussmanjp
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John P. Hussman 4 Oct 18
Replying to @hussmanjp
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John P. Hussman 4 Oct 18
Replying to @hussmanjp
4/ Yes, valuations have been beyond their historical norms for some time, but there's no evidence that the *correlation* between valuations and subsequent long-term market outcomes has changed, aside from the same transitory cyclical "error" that we see at other market extremes.
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John P. Hussman 4 Oct 18
Replying to @hussmanjp
5/ … and it's rather straightforward to see that transitory cyclical fluctuations in investor confidence are the main reason why *actual* 12-year market returns sometimes deviate from those one would have projected 12-years *earlier* on the basis of valuations alone.
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John P. Hussman 4 Oct 18
Replying to @hussmanjp
6/ ... so if you want to dismiss valuations and market internals here, that's fine, because someone has to hold every share at every point in time. There's no such thing as investors getting out in aggregate, so those who hold stock here should be those who can tolerate the risk.
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John P. Hussman
7/ … and because I try not to discuss market risk without being very open about my own error in this half-cycle, the reason for it, why things diverged so strongly from our experience in previous complete cycles, and what was required to address it, here it is in a nutshell...
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John P. Hussman 4 Oct 18
Replying to @hussmanjp
8/ ... so if market internals improve uniformly, suggesting that investors have taken the speculative bit in their teeth again, you can expect my own outlook to shift neutral or constructive (though with a safety-net given current valuation extremes). Here and now, however...
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