Posts Tagged ‘John P. Hussman’

Zen Lessons in Market Analysis

Definitely one to pin on the fridge with a magnet: "Inquiry means not using the mental creation, but allowing yourself to get in touch, and to try to see how things truly are. We practice not to be influenced by the name, because when we are caught in the name we can’t see reality.” – Ilene 

Zen Lessons in Market Analysis

Courtesy of John P. Hussman, Ph.D.
All rights reserved and actively enforced.

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“The best way of preparing for the future is to take good care of the present, because we know that if the present is made up of the past, then the future will be made up of the present. All we need to be responsible for is the present moment. Only the present is within our reach. To care for the present is to care for the future.”

Thich Nhat Hanh

Thich Nhat Hanh

This week’s comment is dedicated to my dear friend Thich Nhat Hanh, a Vietnamese Buddhist monk who was born on October 11, 1926, having been born previously in January of that same year, and twice again about 25 years earlier, not to mention countless other times through his ancestors, teachers, and other non-Thich Nhat Hanh elements. Thay (the Vietnamese word for “teacher”) would simplify this by saying that today is his eighty-third “continuation day,” because to say it is his birthday is not very accurate.

If the quote at the top of this page looks somewhat familiar to our long-term shareholders, it may be because the practice of tending to the present moment – responding to prevailing conditions rather than relying on forecasts – is central to our investment discipline.

Focusing on the present moment doesn’t imply ignoring the past or failing to consider the future. It’s clear, for example, that we put a great deal of attention on estimating future cash flows and discounting them appropriately in order to evaluate whether various investments are priced to deliver satisfactory long-term returns. We certainly devote our attention to macroeconomic pressures and latent risks that threaten to become full-blown crises later. Still, we rarely make near term forecasts. Nor do we answer surveys like “where do you think the S&P 500 will be at year-end?” – a question that falls entirely outside of our way of thinking – like asking Columbus what…
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Post-Crash Dynamics

Post-Crash Dynamics

post-crash dynamics, half full or half emptyCourtesy of John P. Hussman, Ph.D.

The U.S. economy lost a quarter of a million jobs in July. Meanwhile, over 400,000 workers abandoned the labor force (and are therefore no longer counted among the unemployed), which prompted a slight decline in the unemployment rate despite the job losses. In the context of an economy still strained by high levels of consumer debt and still record delinquency and foreclosure rates, labor market conditions are still troublesome. Still, the pace of job losses and new unemployment claims has clearly softened from the pace we observed early in the year.

If we knew that this was a standard economic downturn, we might conclude that the recent improvements are durable. However, nothing convinces us that this is a standard economic downturn. As for market action, the major indices have generally been strong, as has breadth (as measured by advances versus declines), but the “investor sponsorship” evident from trading volume has been uncharacteristically dismal compared with initial advances of past bull markets. So here too, we have very strong concerns that the recent advance may not be as durable as investors appear to believe.

All of that said, we aren’t inclined to fight even what we view as errant analysis, and the Strategic Growth Fund has about 1% of assets allocated to near-the-money index call options – about enough to gradually close down about 40% of our hedge in the event that the market advances markedly higher from here, but without putting us at risk of much loss in the event of failure. With investors now anticipating and pricing in a sustained economic recovery, as well as a spectacular earnings rebound (see Bill Hester’s piece – Earnings Growth Forecasts May Require a Robust Economic Recovery – additional link below), a lot of things will have to go right from here in order to sustain higher prices than we currently observe.

Frankly, our call option allocation here is something of a paean to a notion – a sustained economic recovery and new bull market – that I have no belief in whatsoever. But at this point, the broad strength in the major indices, even lacking volume sponsorship or favorable valuation, requires that we allow for the possibility of additional investor speculation. Even if we do observe such an outcome, it’s difficult to envision that the S&P 500…
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The Outlook is Not Up, But Very Widely Sideways

Courtesy of John P. Hussman, Ph.D.

Introduction, by my friend Tom Burger

A good Hussman commentary. Hussman’s valuation metrics are very solid, in my opinion — sort of a variation on Benjamin Graham’s technique of using a multi-year earnings average. But forget the mathematics: his valuation metric told us that stocks were wildly overvalued immediately preceding the recent market crash, and modestly undervalued at the low. That ought to be worth something. I remember the so-called "Fed Model" said that stocks were significantly undervalued at the market peak, and wildly undervalued at the last market bottom. Doesn’t take a whole lot of thought to evaluate those two options based on recent experience. Hussman has also published some good reports that show how his valuation metric would have performed during the Great Depression — quite well.
 
Hussman provides an excellent discussion on what the recent Treasury and Fed moves mean in terms of balance sheet changes for banks, Treasury, and Fed. In general, he tries to clear up some oft-repeated fallacies about cash flows, liquidity, and what not. The air-waves are apparently full of utter nonsense. (I don’t listen to the chatter). I think Hussman is an unusually clear thinker and an extremely knowledgeable guy.
 
Tom, at Applying the Lessons of Free Market Economics

The Outlook is Not Up, But Very Widely Sideways

John P. Hussman, Ph.D.
All rights reserved and actively enforced.

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Valuation Update: We estimate that the S&P 500 is currently priced to deliver total returns over the next decade in the range of 6.5-9.0%, centered at an expected total return of about 7.8% annually. Stocks are modestly overvalued here, except on metrics that assume a permanent recovery to 2007′s record profit margins (which were about 50% above the historical norm).

On normalized profit margins, sustainable S&P 500 earnings are slightly above $60 on the index. That’s certainly higher than the 7 bucks of net earnings that companies in the index have reported over the past 52 weeks, but unfortunately, even at current prices, the S&P 500 is near 16 times normalized earnings.

You can get that basic figure a lot of ways. Currently, book value on the S&P 500 is slightly above $500. Outside of the past 15 years, when the economy was building up to…
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Phil's Favorites

Was coronavirus really in Europe in March 2019?

 

Was coronavirus really in Europe in March 2019?

Courtesy of Claire Crossan, Glasgow Caledonian University

The novel coronavirus – SARS-CoV-2 – may have been in Europe for longer than previously thought. Recent studies have suggested that it was circulating in Italy as early as December 2019. More surprisingly, researchers at the University of Barcelona found traces of the virus when testing untreated wastewater samples dated March 12, 2019.

The study was recently published on a preprint server, medRxiv. The paper is currently being subject to critical review by outside experts in preparation for...



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Biotech/COVID-19

Was coronavirus really in Europe in March 2019?

 

Was coronavirus really in Europe in March 2019?

Courtesy of Claire Crossan, Glasgow Caledonian University

The novel coronavirus – SARS-CoV-2 – may have been in Europe for longer than previously thought. Recent studies have suggested that it was circulating in Italy as early as December 2019. More surprisingly, researchers at the University of Barcelona found traces of the virus when testing untreated wastewater samples dated March 12, 2019.

The study was recently published on a preprint server, medRxiv. The paper is currently being subject to critical review by outside experts in preparation for...



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Zero Hedge

The Sinking Titanic's Great Pumps Finally Fail

Courtesy of Charles Hugh Smith, OfTwoMinds blog

The greater fools still partying in the first-class lounge are in denial that even the greatest, most technologically advanced ship can sink.

On April 14, 1912, the liner Titanic, considered unsinkable due to its watertight compartments and other features, struck a glancing blow against a massive iceberg on that moonless, weirdly calm night. In the early hours of April 15, the great ship broke in half and sank, ending the lives of the majorit...



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ValueWalk

These coronavirus stimulus benefits will expire this month

By Aman Jain. Originally published at ValueWalk.

The CARES Act was signed into law on March 27 by President Donald Trump. Along with the stimulus checks, the relief package offered several benefits. Many of these benefits were one-time or came with an expiration date. Let’s take a look at the coronavirus stimulus benefits that are set to expire this month.

Coronavirus stimulus benefits that will expire soon

One of the first benefits of the CARES Act that will expire is the extension to file your taxes. The original deadline to file taxes was April 15. Due to the coronavirus pandemic, the deadline was extended to July 15.

There were reports that this ...



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Chart School

Dow 2020 Crash Watch - Update

Courtesy of Read the Ticker

Like 1929 the markets have bounced. This time it is on the back of the FED $6.5T money printing.

Previous Post: Dow 2020 Crash Watch 

But can the FED blow $6T every time the market rolls down to test support.

Yes, maybe before the US 2020 elections the FED will do 'what it takes'. But post elections not so much, the year 2021 is a long way from the next election (presidential or congress) and defense of the markets may not be so supportive at $6T or $10T per market smash. The FED may hesitate, and that will be window for stocks to break lower.

The 36 month simple moving a...

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Kimble Charting Solutions

Red Hot China Attempting Key Breakout, Says Joe Friday

Courtesy of Chris Kimble

China ETF (FXI) has been “Red Hot” of late? Is it about to run out of steam or will it remain on fire going forward?

This chart of FXI comes from Investors Business Daily and Marketsmith.com. It reflects that FXI is above key long-term moving averages and its RS ratings is moving sharply higher of late.

Line (1) has been support and resistance several times over the past 3-years. The rally of late has FXI ...



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The Technical Traders

Retail Traders & Investors Squeezed to Buy High-Risk Assets Again

Courtesy of Technical Traders

Yes, we certainly live in interesting times.  This, the last segment of our multi-part article on the current Q2 and Q3 2020 US and global economic expectations, as well as current data points, referencing very real ongoing concerns, we urge you to continue using common sense to help protect your assets and families from what we believe will be a very volatile end to 2020.  If you missed the first two segments of this research article, please take a moment to review them before continuing.

On May 24th, 2020, we published this ...



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Lee's Free Thinking

These Charts Show COVID 19 Is Spreading in the US and Will Kill the Economy

 

These Charts Show COVID 19 Is Spreading in the US and Will Kill the Economy

Courtesy of  

The COVID 19 pandemic is, predictably, worsening again in much of the US. Only the Northeast, and to a lesser extent some Midwestern states, have been consistently improving. And that trend could also reverse as those states fully reopen.

The problem in the US seems to be widespread public resistance to recommended practices of social distancing and mask wearing. In countries where these practices have been practi...



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Digital Currencies

Blockchains can trace foods from farm to plate, but the industry is still behind the curve

 

Blockchains can trace foods from farm to plate, but the industry is still behind the curve

App-etising? LDprod

Courtesy of Michael Rogerson, University of Bath and Glenn Parry, University of Surrey

Food supply chains were vulnerable long before the coronavirus pandemic. Recent scandals have ranged from modern slavery ...



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Members' Corner

Coronavirus, 'Plandemic' and the seven traits of conspiratorial thinking

 

Coronavirus, 'Plandemic' and the seven traits of conspiratorial thinking

No matter the details of the plot, conspiracy theories follow common patterns of thought. Ranta Images/iStock/Getty Images Plus

Courtesy of John Cook, George Mason University; Sander van der Linden, University of Cambridge; Stephan Lewandowsky...



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Insider Scoop

Economic Data Scheduled For Friday

Courtesy of Benzinga

  • Data on nonfarm payrolls and unemployment rate for March will be released at 8:30 a.m. ET.
  • US Services Purchasing Managers' Index for March is scheduled for release at 9:45 a.m. ET.
  • The ISM's non-manufacturing index for March will be released at 10:00 a.m. ET.
  • The Baker Hughes North American rig count report for the latest week is scheduled for release at 1:00 p.m. ET.
...

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Promotions

Free, Live Webinar on Stocks, Options and Trading Strategies

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Feb. 26, 1pm EST

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Phil will discuss positions, COVID-19, market volatility -- the selloff -- and more! 

This week, we also have a special presentation from Mike Anton of TradeExchange.com. It's a new service that we're excited to be a part of! 

Mike will show off the TradeExchange's new platform which you can try for free.  

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Mapping The Market

How IPOs Are Priced

Via Jean Luc 

Funny but probably true:

...

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About Phil:

Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

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