Author Topic: Bear market - John Hussman  (Read 4905 times)

imolina

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Bear market - John Hussman
« on: April 11, 2018, 09:08:48 PM »

https://www.marketwatch.com/story/all-this-volatility-is-following-one-bears-script-for-a-60-tumble-in-the-stock-market-2018-04-10

"the market is careening toward a painful drop of at least 60% and a decade or more of zero to negative returns"

Has this been discussed before?. We all know a crash is coming, but a decade or more of zero to negative returns is scary for me. What are your thoughts?. What can anyone do about this especially if you plan to retire in less than a decade?.


ChpBstrd

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Re: Bear market - John Hussman
« Reply #1 on: April 11, 2018, 09:20:51 PM »
Some fund managers and media personalities get free publicity by sending press releases to financial media writers who are eager to write fresh clickbait. This little economy has been going on for decades.

Once one is aware of this system, the obvious conclusions are to 1) ignore publicity-seeking fund managers, and 2) ignore the financial media.

These articles are always present at any given time. Dig around and you can find virtually the same news flash in every month of every year all the way back to before the beginnings of the internet. They do not change the likelihood of stock market price changes.

Oh, and yes it's been discussed here before. Get ready.

TheAnonOne

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Re: Bear market - John Hussman
« Reply #2 on: April 11, 2018, 10:23:00 PM »
Well, it's already 10% down. Assuming it drops 50% and I keep my job it can't be all bad.

Assuming the worst though seems a bit silly.

Radagast

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Re: Bear market - John Hussman
« Reply #3 on: April 11, 2018, 10:26:08 PM »
We don't know when, we don't know why, we don't know how much, but sooner or later something like that is gonna happen. The US basically had three consecutive 50% losses in '30, '31, '32 for a total near 90%. Japan lost 90% after '89 (not to mention '45). Iceland lost 90% in 08-09. 90% losses and lost decades are expected market behaviour which can be clearly seen everywhere and throughout history. Now you know, and knowing is half the battle.

Diversify up. Own stocks around the world, and 10-40% towards bonds. Possibly real estate or other opportunities. If you are real paranoid gold bullion. If you are worried about sequence of returns risk use a reverse glide path.

Travis

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Re: Bear market - John Hussman
« Reply #4 on: April 11, 2018, 10:53:13 PM »
We don't know when, we don't know why, we don't know how much, but sooner or later something like that is gonna happen. The US basically had three consecutive 50% losses in '30, '31, '32 for a total near 90%. Japan lost 90% after '89 (not to mention '45). Iceland lost 90% in 08-09. 90% losses and lost decades are expected market behaviour which can be clearly seen everywhere and throughout history. Now you know, and knowing is half the battle.

Diversify up. Own stocks around the world, and 10-40% towards bonds. Possibly real estate or other opportunities. If you are real paranoid gold bullion. If you are worried about sequence of returns risk use a reverse glide path.

And for the sake of all that is holy and fluffy in the world, stop watching financial websites and television.  A broken clock is correct twice a day. A financial pundit might be correct one time in his life (and desperately hoping you've forgotten every other time he was wrong).

Radagast

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Re: Bear market - John Hussman
« Reply #5 on: April 11, 2018, 11:30:04 PM »
We don't know when, we don't know why, we don't know how much, but sooner or later something like that is gonna happen. The US basically had three consecutive 50% losses in '30, '31, '32 for a total near 90%. Japan lost 90% after '89 (not to mention '45). Iceland lost 90% in 08-09. 90% losses and lost decades are expected market behaviour which can be clearly seen everywhere and throughout history. Now you know, and knowing is half the battle.

Diversify up. Own stocks around the world, and 10-40% towards bonds. Possibly real estate or other opportunities. If you are real paranoid gold bullion. If you are worried about sequence of returns risk use a reverse glide path.

And for the sake of all that is holy and fluffy in the world, stop watching financial websites and television.  A broken clock is correct twice a day. A financial pundit might be correct one time in his life (and desperately hoping you've forgotten every other time he was wrong).
Yup, its all in The Four Pillars of Investing by William Bernstein, the best investing book.
Pillar 1: Math and theory
Pillar 2: History: don't be surprised by things that happen all the time
Pillar 3: Personal behaviour: you are your own worst enemy
Pillar 4: Financial services and news industry: don't believe their shit

PizzaSteve

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Re: Bear market - John Hussman
« Reply #6 on: April 11, 2018, 11:40:31 PM »
We don't know when, we don't know why, we don't know how much, but sooner or later something like that is gonna happen. The US basically had three consecutive 50% losses in '30, '31, '32 for a total near 90%. Japan lost 90% after '89 (not to mention '45). Iceland lost 90% in 08-09. 90% losses and lost decades are expected market behaviour which can be clearly seen everywhere and throughout history. Now you know, and knowing is half the battle.

Diversify up. Own stocks around the world, and 10-40% towards bonds. Possibly real estate or other opportunities. If you are real paranoid gold bullion. If you are worried about sequence of returns risk use a reverse glide path.

And for the sake of all that is holy and fluffy in the world, stop watching financial websites and television.  A broken clock is correct twice a day. A financial pundit might be correct one time in his life (and desperately hoping you've forgotten every other time he was wrong).
Yup, its all in The Four Pillars of Investing by William Bernstein, the best investing book.
Pillar 1: Math and theory
Pillar 2: History: don't be surprised by things that happen all the time
Pillar 3: Personal behaviour: you are your own worst enemy
Pillar 4: Financial services and news industry: don't believe their shit
Agreed.  It is an unlikely possibility.  This possibility does not invalidate the best investing strategies. 

If it occurs, it would setback some FIRE plans and the backup plans would need to kick in. 

That said, nearly all mustacians would be in a position to buy assets at a huge discount, sold by those without savings or discipline, which is something to consider.

I would add to pillar 4, dont pay the FS industry any fees you can avoid through buying and holding the most efficient asset classes via the most efficient markets (e.g. discount, no fee accounts, brokers, lowest fee, low turnover funds).
« Last Edit: April 11, 2018, 11:43:39 PM by PizzaSteve »

Radagast

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Re: Bear market - John Hussman
« Reply #7 on: April 12, 2018, 12:15:42 AM »
We don't know when, we don't know why, we don't know how much, but sooner or later something like that is gonna happen. The US basically had three consecutive 50% losses in '30, '31, '32 for a total near 90%. Japan lost 90% after '89 (not to mention '45). Iceland lost 90% in 08-09. 90% losses and lost decades are expected market behaviour which can be clearly seen everywhere and throughout history. Now you know, and knowing is half the battle.

Diversify up. Own stocks around the world, and 10-40% towards bonds. Possibly real estate or other opportunities. If you are real paranoid gold bullion. If you are worried about sequence of returns risk use a reverse glide path.

And for the sake of all that is holy and fluffy in the world, stop watching financial websites and television.  A broken clock is correct twice a day. A financial pundit might be correct one time in his life (and desperately hoping you've forgotten every other time he was wrong).
Yup, its all in The Four Pillars of Investing by William Bernstein, the best investing book.
Pillar 1: Math and theory
Pillar 2: History: don't be surprised by things that happen all the time
Pillar 3: Personal behaviour: you are your own worst enemy
Pillar 4: Financial services and news industry: don't believe their shit
I would add to pillar 4, dont pay the FS industry any fees you can avoid through buying and holding the most efficient asset classes via the most efficient markets (e.g. discount, no fee accounts, brokers, lowest fee, low turnover funds).
The book mentions that too ;)

sol

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Re: Bear market - John Hussman
« Reply #8 on: April 12, 2018, 12:24:37 AM »
The US basically had three consecutive 50% losses in '30, '31, '32 for a total near 90%.

No, it did not.  Why would you make such an easily falsifiable claim?  NONE of those three years reached 50%, though one of them was close, and the aggregate over that three year period was -61%, not -90%.  Maybe you're ignoring the ~6 to 9% dividend yields that paid out in those years?

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Japan lost 90% after '89 (not to mention '45).

I hate it when people cite the Japan crash as a "worst case scenario" for stocks.  The Japanese market lost about 70% of its value in the three years after the '89 peak, but it also GAINED just as much in the three years right before the peak.  It was a massive bubble that inflated and then popped, but the long term CAGR of the Nikkei with reinvested dividends is a pretty solid 3.4% after inflation through all of that.  It's not as good as the US market, but it's nothing to sneeze at in the world of international markets.  And it's certainly not the doomsday scenario that some people like to claim it is.

If the US market ever reaches a new all time high and then climbs 800% in nine years, you can start to worry.  To follow the same path as the Nikkei, the SP500 would have had to hit 3k in 2016 and 6k in 2019 and then 12k in 2022.  Instead, we're struggling along at 2600.  There is just no way the Japanese historical drop is in any way analogous to our current situation, so I don't see the benefit in scaring people with it.

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Iceland lost 90% in 08-09. 90% losses

Wow, I'm seeing a pattern in your bad advice.

The Iceland market was up roughly six hundred percent in the four years before the crash.  The run-up and subsequent crash were caused just as much by lax banking laws and stupid exchange rates as they were by normal bubble market forces, so I'm not sure how you can make any reasonable analogies with the US market.  It was a tiny country flooded with foreign money far in excess of it's proportional GDP.  Huge portions of the index went to zero when the companies were nationalized (and then saved and revitalized to support the economy, with no wealth generated for investors).  What features of Iceland's surge and/or crash do you see echoed in the US market today?  Anything at ALL that makes this example relevant in some way?

There is lots to be scared of in the investing world without frightening people with boogeyman stories.  Your advice seems good (diversify, consider RE, etc) but you don't need to exaggerate the history.  It's like telling your teenager he'll get hairy palms if he beats his meat; you quickly lose credibility with such gross distortions.  Why not just lay out the real facts instead?  Those are scary enough.

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Re: Bear market - John Hussman
« Reply #9 on: April 12, 2018, 07:14:49 AM »
He's been aggressively wrong for like a decade.  Surprised he's still in business.

Eric

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Re: Bear market - John Hussman
« Reply #10 on: April 12, 2018, 09:50:55 AM »
Here's what John Hussman was predicting in January 2013.

http://www.hussmanfunds.com/wmc/wmc130114.htm

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With market conditions now recapitulating the most negative overvalued, overbought, overbullish, rising-yields syndromes that we identify, we remain defensive at present. Conditions can change quickly, and we are patiently looking for opportunities to take a more constructive stance, but to reach for gains in a strenuously overbought market, where prospective returns are quite low by our estimates, bullishness is excessive, and competing returns are rising, is a dangerous way to invest in my view.

In 2013, the S&P gained over 30%.  Whoops! 




thenextguy

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Re: Bear market - John Hussman
« Reply #11 on: April 12, 2018, 10:57:31 AM »
Hussman is good at looking at historical patterns and assuming they are going to hold. The problem is that historical patterns don't always repeat themselves.

hodedofome

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Re: Bear market - John Hussman
« Reply #12 on: April 12, 2018, 12:45:37 PM »
He's been aggressively wrong for like a decade.  Surprised he's still in business.

Agree, after 2009 whatever mental model he was using to view the world stopped working. And hes yet to change it.

Travis

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Re: Bear market - John Hussman
« Reply #13 on: April 12, 2018, 12:51:09 PM »
He's been aggressively wrong for like a decade.  Surprised he's still in business.

Agree, after 2009 whatever mental model he was using to view the world stopped working. And hes yet to change it.

He only has to be right once to be a best-seller. The Marketwatches and CNBCs are hoping for the day he'll be correct right after having him speak on their program.

There's a guy named Thomas Friedman who wrote extensively on the Iraq War for NYT early in the war.  He kept saying "the next six months are key" to the end-state of the war.  He said that 14 times in two and a half years. The only difference between Friedman's non-stop predictions and financial pundits is that the former was laughed off the stage for a few years while the latter usually get a pass.
« Last Edit: April 12, 2018, 12:59:01 PM by Travis »

steveo

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Re: Bear market - John Hussman
« Reply #14 on: April 12, 2018, 09:32:02 PM »
I think we are about to see another roaring 20's. Why - because it would suit my retirement plans.

markbike528CBX

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Re: Bear market - John Hussman
« Reply #15 on: April 12, 2018, 10:02:37 PM »
......And for the sake of all that is holy and fluffy in the world, stop watching financial websites and television.  ........

How can one use holy and fluffy in the same sentence?   Only a devil bunny would do that....

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https://news.slashdot.org/story/08/05/21/0130232/was-this-the-first-cc-community-edited-novel
by Remus Shepherd ( 32833 ) <remus@panix.com> on Wednesday May 21, 2008 @12:40PM (#23494216)

Let me introduce you to alt.Devilbunnies [devilbunnies.org], founded in 1993.

It started as a Usenet newsgroup devoted to nonsense. But sometime around 1993, people began generating a consistent storyline within the newsgroup. (The particulars involved intelligent, man-eating rabbits and their quest to enslave humanity, but that's not important for this discussion.) Before very long, the writers in alt.devilbunnies were creating novel-length stories, often with over a dozen contributors, and all set within an internally consistent shared world.

The Devilbunnies phenomenon continued from around 1993 to around 2002, when the authors slowly abandoned the newsgroup. There were multiple attempts to bring the Devilbunnies to the web, or to publish their shared stories. But every time someone began such a project, someone in the community would oppose it for one reason or another. Because the copyright on the devilbunny universe was shared between everyone involved, there was no way of publishing or continuing it if even a single person vetoed the project. So those who wanted to make it bigger eventually gave up. Now the devilbunnies are nothing more than a group of friends who fondly remember stories they wrote together but which will never -- *can* never -- live again in any other format.

I believe alt.Devilbunnies is the first internet-powered collaborative story group. (There are many pre-internet efforts, going all the way to Beowulf and beyond, as others have mentioned.)

It is also my considered opinion that the fate of Devilbunnies awaits any collaborative story project, unless it is a small, close-knit group who have been told in advance that the project is intended for publication and been given clear rules for how it will be done. Copyright laws are strict enough, and legal expenses great enough, that a single bad egg can ruin an entire collaborative fiction project. So be careful, and don't let what happened to alt.Devilbunnies happen to you.

Or in other words, keep an eye on your toes, because those wabbits will eat them if you give them half a chance. And keep your fireaxe handy.

If you (OP) think the above is silly, financial pundits are even sillier.    Just put everything they say into either an Elmer FUDD or  Buggs Bunny voice and see if you notice the humor.

Radagast

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Re: Bear market - John Hussman
« Reply #16 on: April 12, 2018, 11:55:52 PM »
The US basically had three consecutive 50% losses in '30, '31, '32 for a total near 90%.
No, it did not.  Why would you make such an easily falsifiable claim?  NONE of those three years reached 50%, though one of them was close, and the aggregate over that three year period was -61%, not -90%.
Lyin Radagast says market lost 50% three consecutive years, which is 87.5%. Actually it lost 89.2%! NOT THE SAME! He said it started in 1930 and ended in 1932. Actually 1929/9/3 to 1932/7/8! Wrong!!!!!!! Falsifiable News! #MakeDataGreatAgain
Maybe you're ignoring the ~6 to 9% dividend yields that paid out in those years?
I recently noticed that most people only seem to care about price, and only measure against the tippity top top. https://forum.mrmoneymustache.com/welcome-to-the-forum/share-the-love-a-fraternal-hug-for-those-who's-stashes-are-hurting/
I hate it when people cite the Japan crash as a "worst case scenario" for stocks.  I'm sure your opinion is important to you. The Japanese market lost about 70% of its value in the three years after the '89 peak, but it also GAINED just as much in the three years right before the peak.  It was a massive bubble that inflated and then popped, but the long term CAGR of the Nikkei with reinvested dividends is a pretty solid 3.4% after inflation through all of that.  It's not as good as the US market, but it's nothing to sneeze at in the world of international markets.  And it's certainly not the doomsday scenario that some people like to claim it is.

If the US market ever reaches a new all time high and then climbs 800% in nine years, you can start to worry.  To follow the same path as the Nikkei, the SP500 would have had to hit 3k in 2016 and 6k in 2019 and then 12k in 2022.  Instead, we're struggling along at 2600.  There is just no way the Japanese historical drop is in any way analogous to our current situation, so I don't see the benefit in scaring people with it.

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Iceland lost 90% in 08-09. 90% losses

Wow, I'm seeing a pattern in your bad advice. uh huh

The Iceland market was up roughly six hundred percent in the four years before the crash.  The run-up and subsequent crash were caused just as much by lax banking laws and stupid exchange rates as they were by normal bubble market forces, so I'm not sure how you can make any reasonable analogies with the US market.  It was a tiny country flooded with foreign money far in excess of it's proportional GDP.  Huge portions of the index went to zero when the companies were nationalized (and then saved and revitalized to support the economy, with no wealth generated for investors).  What features of Iceland's surge and/or crash do you see echoed in the US market today?  Anything at ALL that makes this example relevant in some way?

There is lots to be scared of in the investing world without frightening people with boogeyman stories.  Your advice seems good Did you read your own post? (diversify, consider RE, etc) Did you know that the diversification mantra was immaculately conceived? It totally was. Basically some happy naive economists decided it seemed like fun. They definitely did not have a history of 90% losses in mind when they thought of it. but you don't need to exaggerate the history.  It's like telling your teenager he'll get hairy palms if he beats his meat; you quickly lose credibility with such gross distortions.  Why not just lay out the real facts instead?  Those are scary enough.
Other False and Misleading Real Facts:
Pretty much the stock market of every nation had a 90% loss if it is more than a few decades old.
The Dutch (Danish? forget) market lost 70% in two weeks
The US market lost 20% in one day. 20% of all your US stock investments. Poof. Between 9:30 and 4:00 ET.
The US Tech Industry lost 90% beginning in 2000, and it was big% of the total market
Amazon lost 50% of its value. Then its remaining investors lost half their remaining investment. Then they lost another half of that. Then 50% of that disappeared.
The Dollar lost 90%, and it never recovered. Ever.
Every currency in the world lost 90%, and never recovered. Ever.
Those are the tip of the iceberg.

Maybe my head is wired weird or I am an inadvertent Stoic, because when I see that list I feel comforted. Hussman says 60% losses ahead? That's not even half as bad as the Great Depression! And those people all came out OK. I see a big long list of things that happened, and I think that not only did people in the past come out OK, but what we're going through now and whatever the financial blabberers predict is way better than what the past was like. I read all of those things and feel a huge sense of relief.

On the other hand, I feel strongly that ignoring history won't make the future easier. If you think that you can't lose money over the short term or even after many years, you will eventually be disappointed. And in that moment of disappointment you might do something, like sell, that makes your loss permanent, instead of the transient losses and long term gains that you so nicely painted above. Or perhaps you will not sell, but live a life of misery and angst for many years because you didn't know. It's better to know in advance what has already happened, so you won't be surprised by very ordinary events.

And the other lesson is diversification. As you pointed out, most of the above happened to very specific subsets of the investable world. So diversify as widely as possible, especially if you are counting on investments for living expenses. The lesson of historic flood records isn't to ignore them because they are scary, it's to use the information you have and build your house above the flood plain.

Telecaster

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Re: Bear market - John Hussman
« Reply #17 on: April 17, 2018, 11:12:08 AM »
He's been aggressively wrong for like a decade.  Surprised he's still in business.

Hussman always sounds rational, but he's about as consistently wrong as anyone I can think of.   You would have to make a serious effort to be as wrong as often as he is. 

UnleashHell

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Re: Bear market - John Hussman
« Reply #18 on: April 17, 2018, 01:24:42 PM »
He's been aggressively wrong for like a decade.  Surprised he's still in business.

Hussman always sounds rational, but he's about as consistently wrong as anyone I can think of.   You would have to make a serious effort to be as wrong as often as he is.

you are describing Jim Cramer.

Telecaster

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Re: Bear market - John Hussman
« Reply #19 on: April 17, 2018, 01:48:24 PM »
^ And Cramer's former partner, Larry Kudlow.  One would think it would be impossible for him to be wrong as often as he is, but somehow he accomplishes it. 

thd7t

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Re: Bear market - John Hussman
« Reply #20 on: April 19, 2018, 12:26:14 PM »
^ And Cramer's former partner, Larry Kudlow.  One would think it would be impossible for him to be wrong as often as he is, but somehow he accomplishes it.
Thank god he's off TV and isn't giving out bad advice that could impact a huge amount of the American population...

...

...oh, shit...

pecunia

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Re: Bear market - John Hussman
« Reply #21 on: April 22, 2018, 07:19:32 AM »
Well - I look at the chart showing that it has come down from the big high over 26,000.  I try to figure this stuff out with my feeble brain.

How much of this is actually based on speculation and how much mirrors an actual financial reality.  At one time I thought it was based on how well a company made and sold a product.  Now I see much of it is based on anticipation of products to be sold.  For example if general Motors announces they are going to sell the Delorean flying car, their stock value goes up.  The new stock value is based on a silly lie.

So, if a crash is to come will it be lessened by the fact that there seems to be good employment opportunities these days, new houses are being built and sold and massive layoffs are not in the news?  Is the P/E number they always babble about a real indication that the stock market is overvalued?

Is this a time to hang on to your hard earned money a bit before buying more index funds?

It really is like gambling.

Travis

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Re: Bear market - John Hussman
« Reply #22 on: April 22, 2018, 09:25:50 AM »
Well - I look at the chart showing that it has come down from the big high over 26,000.  I try to figure this stuff out with my feeble brain.

How much of this is actually based on speculation and how much mirrors an actual financial reality.  At one time I thought it was based on how well a company made and sold a product.  Now I see much of it is based on anticipation of products to be sold.  For example if general Motors announces they are going to sell the Delorean flying car, their stock value goes up.  The new stock value is based on a silly lie.

So, if a crash is to come will it be lessened by the fact that there seems to be good employment opportunities these days, new houses are being built and sold and massive layoffs are not in the news?  Is the P/E number they always babble about a real indication that the stock market is overvalued?

Is this a time to hang on to your hard earned money a bit before buying more index funds?

It really is like gambling.

That increase "on a lie" is people buying the stock while it's still low in anticipation of it going up when those flying cars are sold in a year and the company's profits go up.  That's the very essence of "buying low."  If you wait for the cars to be sold before buying the stock you're too late.  Of course this can get out of hand if people literally buy into the hype too much.

A P/E that is too high is something to be concerned about, but there's not really some mark on the wall that says "the market will tank when the P/E reaches this number."

Radagast

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Re: Bear market - John Hussman
« Reply #23 on: April 22, 2018, 10:40:35 AM »
It really is like gambling.
Gambling is a good analogy. You are the casino. Yes, sometimes a customer will win a giant jackpot and you will be in the red for a while. But a smart casino doesn't sell their slot machines just because somebody hit a jackpot and handed them a loss. They keep enough cash on hand to cover it and carry on, knowing over the long term the odds are heavily stacked in their favor.

Telecaster

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Re: Bear market - John Hussman
« Reply #24 on: April 22, 2018, 01:05:36 PM »
Well - I look at the chart showing that it has come down from the big high over 26,000.  I try to figure this stuff out with my feeble brain.

How much of this is actually based on speculation and how much mirrors an actual financial reality.  At one time I thought it was based on how well a company made and sold a product.  Now I see much of it is based on anticipation of products to be sold. 

100% of the stock value is based on anticipation of future profits.  Been that way since the first stocks were sold.   

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Is the P/E number they always babble about a real indication that the stock market is overvalued?

It can be.  Since the stock price is based on anticipation of future profits, it is informative to know what the stock price is in relation to current profits.  Note the a high P/E does not imply or predict the market will crash, however.

daverobev

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Re: Bear market - John Hussman
« Reply #25 on: April 22, 2018, 06:59:58 PM »
Well - I look at the chart showing that it has come down from the big high over 26,000.  I try to figure this stuff out with my feeble brain.

How much of this is actually based on speculation and how much mirrors an actual financial reality.  At one time I thought it was based on how well a company made and sold a product.  Now I see much of it is based on anticipation of products to be sold. 

100% of the stock value is based on anticipation of future profits.  Been that way since the first stocks were sold.   


Not quite; there is the value of assets/cash held by a company, as well. If you can buy a company for less than its assets... well.

sol

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Re: Bear market - John Hussman
« Reply #26 on: April 22, 2018, 07:05:19 PM »
dstocks were sold.   
Not quite; there is the value of assets/cash held by a company, as well. If you can buy a company for less than its assets... well.

If you assume "future profits" means profits to the investor, not the company, it still makes sense.  The investor is expecting to get his money back plus some, because the company will generate profits.  They can do that through sales, or they can do that through liquidating assets.  Both are profits from the investors point of view.