Posts Tagged ‘Hussman’

Hussman on Misallocating Resources, Market Valuations, Earnings Estimates, and Public Policy

Hussman on Misallocating Resources, Market Valuations, Earnings Estimates, and Public Policy

Courtesy of Mish

Once again John Hussman has written an excellent weekly column. This week, in Misallocating Resources, Hussman talks about stock market valuations, PE ratios, bailouts, and other things.

Let’s start with a look at stock market valuations.

Market Valuations and Earnings Estimates

From Hussman…

On a valuation basis, the S&P 500 remains about 40% above historical norms on the basis of normalized earnings. The disparity between our valuation assessment and the putative undervaluation being touted by Wall Street analysts is so great that a few remarks are in order. First, virtually every assessment that "stocks are cheap" here is based on the ratio of the S&P 500 to year-ahead operating earnings estimates, and often comes with a comparison of the resulting "earnings yield" with the depressed 10-year Treasury yield. What’s fascinating about this is that this is the same basis on which analysts deemed stocks to be about 40% undervalued just prior to the 2007 top, following which the market plunged by more than half. There’s a great deal of analysis regarding forward operating earnings that I published in 2007, but probably the most comprehensive piece was Long Term Evidence on the Fed Model and Forward Operating P/E Ratios from August 20, 2007.

Optimism is Insane

I happened to mention similar thoughts last week in a Tech Ticker with Joe Weisenthal: Mish: Say No to Stocks, Because Optimism Is "Insane"

The optimism I mentioned was in relation to earnings estimates, not trader sentiment measures such as bull vs. bear measures.

Continuing with Hussman …

When you hear analysts say that the historical average P/E ratio is about 15, you have to recognize that this is the normal P/E based on trailing 12-month earnings after subtracting all writeoffs and other charges. Forward operating earnings are invariably much higher, and it turns out that the comparable historical norm, as I discuss in that 2007 piece, is only about 12. If you exclude the late 1990′s bubble valuations, you get a historical norm closer to 11.5. The 1982 and 1974 market lows occurred at about 6 times estimated forward operating earnings.

A final observation is crucial. Current forward operating earnings estimates assume profit margins for the S&P 500 companies that are nearly 50% above their long-term historical norms. While


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Hussman Blasts Geithner, Bernanke, Keynes; Why Keynesian Stimulus Always Fails

Hussman Blasts Geithner, Bernanke, Keynes; Why Keynesian Stimulus Always Fails

Courtesy of Mish 

In his latest post, John Hussman takes a well deserved swipe at illegal Fed operations, Geithner, Bernanke, and Keynesian stimulus.

Please consider a few snips from Implications of a Likely Economic Downturn.

…. With regard to "stimulus" plans, my difficulty with last year’s policies is not so much an aversion to government spending as it is a rebuke of the notion that government spending is by its nature stimulative or beneficial to the economy. The issue is how this real value is used. Is it used to advance socially useful outcomes which private individuals, through some failure of coordination, could not achieve? Or is it used to defend bondholders, industries, and institutions with which the policymakers are most closely aligned?

The Keynesian view is that government spending is simply a monolithic letter "G." Keynes cared little about the productivity or lack thereof to which public resources were devoted, even writing " If the Treasury were to fill old bottles with bank-notes, bury them at suitable depths in disused coal-mines which are then filled up to the surface with town rubbish, and leave it to private enterprise on well-tried principles of laissez-faire to dig the notes up again… there need be no more unemployment." The only difference between Keynes and Tim Geithner is evidently that Geithner prefers to place the bottles a bit closer to Wall Street.

…Meanwhile, I continue to believe that both Bernanke and Geithner’s hands should be tied quickly. If we have learned anything over the past 18 months, it is clear that these bureaucrats can misallocate an enormous quantity of public resources with mind-numbing speed. The diversion of public resources to the bondholders of failing financials – to precisely the worst stewards of capital in society – is not stimulative, but ruthless. A second economic downturn should encourage the repudiation of the policies that Bernanke and Geithner pursued during the first.

Basic ethical principle dictates that policy makers should not burden ordinary Americans to pay the losses that well-informed bondholders voluntarily took when they lent money to failing institutions. From my perspective, it is urgent to recognize that Fannie Mae and Freddie Mac obligations are not legally obligations of the U.S. government, that its backing was always at best implicit, and that even the Treasury’s distressingly generous 3-year promise


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Phil's Favorites

Passive Products and Active Users

 

Passive Products and Active Users

Courtesy of 

The 20 largest ETFs have $1.556 trillion in assets. While the indexes they track are passive, their users are anything but. Over the previous twelve months, the total trading volume in these products was a whopping $11.529 trillion.

A recent paper from ...



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Insider Scoop

10 Stocks To Watch For October 17, 2019

Courtesy of Benzinga

Some of the stocks that may grab investor focus today are:

  • Wall Street expects Morgan Stanley (NYSE: MS) to report quarterly earnings at $1.13 per share on revenue of $9.70 billion before the opening bell. Morgan Stanley shares rose 0.9% to $43.19 in after-hours trading.
  • Analysts expect Intuitive Surgical, Inc. (NASDAQ: ISRG) ...


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Zero Hedge

In The Fed, We Trust?!

Courtesy of ZeroHedge View original post here.

Authored by Michael Lebowitz and Jack Scott via RealInvestmentAdvice.com,

Part one of this article can be found HERE.

President Trump recently nominated Judy Shelton to fill an open seat on the Federal Reserve Board. She was recently quoted by the Washington Post as follows:

“(I) would lower rates as fast, as efficiently, and as expeditiously...



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The Technical Traders

Market Trend Change Triggered Today

Courtesy of Technical Traders

CLICK HERE TO GET REAL TIME TRADE ALERTS!

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Kimble Charting Solutions

High Times Going To Return For Pot Stocks?

Courtesy of Chris Kimble

High times for pot stocks do not come to mind when looking at this 6-pack!

On average, these stocks have declined nearly 50% since recent highs.

Are pot stocks about to experience “High Times” again?

The large declines since recent highs has each of these stocks testing support at each (1).

If the pot stocks are to move higher, these key support lines need to hold.

Out of these six stocks, ABBV is reflecting relative strength to the others, as it has been moving higher off support the past 60-days.

...

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Chart School

Review of Andrew CardWell RSI with Wyckoff price waves

Courtesy of Read the Ticker

RSI measures relative strength of price action of a set period versus prior set periods. It helps review the price swings or waves, the power of each price thrust into new ground, or lack of it. Price thrust like many things relies on energy, and energy is not a constant, it has a birth, a life and a death and relative strength helps us see that cycle. 

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Digital Currencies

Zuck Delays Libra Launch Date Due To Issues "Sensitive To Society"

Courtesy of ZeroHedge View original post here.

Authored by William Suberg via CoinTelegraph.com,

Facebook is taking a much more careful approach to Libra than its previous projects, CEO Mark Zuckerberg has confirmed. 

“Obviously we want to move forward at some point soon [and] not have this take many years to roll out,” he said. “But ...



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Lee's Free Thinking

Look Out Bears! Fed New QE Now Up to $165 Billion

Courtesy of Lee Adler

I have been warning for months that the Fed would need new QE to counter the impact of massive waves of Treasury supply. I thought that that would come later, rather than sooner. Sorry folks, wrong about that. The NY Fed announced another round of new TOMO (Temporary Open Market Operations) today.

In addition to the $75 billion in overnight repos that the Fed issued and has been rolling over since Tuesday, next week the Fed will issue another $90 billion. They’ll come in the form of three $30 billion, 14 day repos to be offered next week.

That brings the new Fed QE to a total of $165 billion. Even in the worst days of the financial crisis, I can’t remember the Fed ballooning its balance sheet by $165 bi...



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Biotech

The Big Pharma Takeover of Medical Cannabis

Reminder: We are available to chat with Members, comments are found below each post.

 

The Big Pharma Takeover of Medical Cannabis

Courtesy of  , Visual Capitalist

The Big Pharma Takeover of Medical Cannabis

As evidence of cannabis’ many benefits mounts, so does the interest from the global pharmaceutical industry, known as Big Pharma. The entrance of such behemoths will radically transform the cannabis industry—once heavily stigmatized, it is now a potentially game-changing source of growth for countless co...



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Mapping The Market

How IPOs Are Priced

Via Jean Luc 

Funny but probably true:

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Members' Corner

Despacito - How to Make Money the Old-Fashioned Way - SLOWLY!

Are you ready to retire?  

For most people, the purpose of investing is to build up enough wealth to allow you to retire.  In general, that's usually enough money to reliably generate a year's worth of your average income, each year into your retirement so that that, plus you Social Security, should be enough to pay your bills without having to draw down on your principle.

Unfortunately, as the last decade has shown us, we can't count on bonds to pay us more than 3% and the average return from the stock market over the past 20 years has been erratic - to say the least - with 4 negative years (2000, 2001, 2002 and 2008) and 14 positives, though mostly in the 10% range on the positives.  A string of losses like we had from 2000-02 could easily wipe out a decades worth of gains.

Still, the stock market has been better over the last 10 (7%) an...



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Promotions

Free eBook - "My Top Strategies for 2017"

 

 

Here's a free ebook for you to check out! 

Phil has a chapter in a newly-released eBook that we think you’ll enjoy.

In My Top Strategies for 2017, Phil's chapter is Secret Santa’s Inflation Hedges for 2017.

This chapter isn’t about risk or leverage. Phil present a few smart, practical ideas you can use as a hedge against inflation as well as hedging strategies designed to assist you in staying ahead of the markets.

Some other great content in this free eBook includes:

 

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