Posted on 09/17/2012 6:18:51 AM PDT by blam
HUSSMAN: Market Conditions Have Hit The Single Worst Point That We Have Ever Observed
Joe Weisenthal
Sep. 17, 2012, 4:19 AM
As markets hit multi-year highs (in part due to positive action from the Fed and the ECB), fund manager John Hussman says something dramatic:
As of Friday, our estimates of prospective return/risk for the S&P 500 have dropped to the single lowest point we’ve observed in a century of data. There is no way to view this as something other than a warning, but it’s also a warning that I don’t want to overstate. This is an extreme data point, but there has been no abrupt change; no sudden event; no major catalyst. We are no more defensive today than we were a week ago, because conditions have been in the most negative 0.5% of the data for months. This is just the most negative return/risk estimate we've seen. It is what it is.
Hussman's general approach is to look at an "ensemble" of datapoints, and then compare them to previous market periods to see how stocks generally performed after this signals emerged.
He notes that "single lowest point" does not necessarily mean most overvalued (which was in 2000), but merely that the complete ensemble gave the most negative reading.
So what makes this moment so fraught with risk?
Hussman gives a taste of his secret recipe for measuring the market:
Despite the uniformity of negative signals we presently observe, I can’t say with certainty that this particular instance will produce negative market outcomes, or that we won’t find ourselves at odds with a speculative, richly valued, overbought, overbullish but still-advancing market. But even setting aside our particular methods, we have a very mature market advance, at a high Shiller P/E, atop nearly every upper Bollinger band
(snip)
(Excerpt) Read more at businessinsider.com ...
Wall Street or its numbers have never reflected real world working man’s reality until it has collapsed, as it has done before. =.=
We have a stock market reacting only to Bernanke pumping more electronic digits into the banking system. It is not reacting to an optimistic future of business conditions causing the value of the companies stocks to rise. A nation of fed stimulus junkies investing is not a path to long term wealth and prosperity.
Bernanke is doing it because our government can’t get their act together to take the necessary steps to save a sinking ship.
Cool.
Those who have enough money to play the QE game should be happy, but millions of people feel the squeeze in living expenses every time the Fed infused market jumps. Bernanke probably hasn’t noticed, but salaries and wages haven’t gone up in four years, (unless you are a Fed employee, like people Ben may know) and overall they are down. Bernanke might as well be clubbing people over the head, and stealing their grocery and gas money. It would be more honest.
As long as the Federal Reserve keeps printing money for the banks, and as long as the administration keeps raising the risks of normal business, personal, and mortgage lending... then the banks will continue to plow much of the new Monopoly money into the stock market as one of the only other available places to put it.
Yes, this is a bubble. And yes, like any other bubble it will necessarily “pop” or deflate one of these days.
Meanwhile, given the political situation in WashDC, the stock market is about all that’s left of the American economy...
“Hold on tight!”....
It’s hard to make any sense out of reports like this. It’s message seems to be: ‘’Run for the lifeboats! But, then again, maybe not.’’
However, it is possible to evaluate certain theories. For example, technical analysts have recently been predicting that, according to their charts and waves and tea leaves, when the S&P 500 reaches 1446, that will be the end of the long-term bull market. The S&P 500 is now at 1456, having shot up during the past few days of QE3-induced market euphoria. But it’s coming down.
We’ll see in the next few weeks whether technical analysis has any merit or whether it’s a sham whose predictions we can safely disregard and not waste our time on in the future.
The Fed printing money may be good for Wall Street, but the rest of the nation is in the midst of Stagflation. Been there done that in the mid to late 70’s. The end result is not pretty.
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