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  • Investors Always Get Killed At Cycle Tops, Small Caps Look Like A Trap, And It's Way Too Early To Buy Energy Stocks [View article]
    I do understand how the money supply is measured and works.
    And how the measurement of such activity affects the observed aggregates. But, when a loan is repaid, the money changes hands, going back to the lender. The lender reduces the loan asset, and increases the cash asset. The borrower reduces cash, and the debt liability. The aggregate effect is a reduction of gross assets and liabilities, with no net change.

    But, because the money supply statistics measure gross amounts, the reduction of credit will be reflected as a reduction of the aggregate money supply measure.
    Jan 2, 2015. 09:48 PM | Likes Like |Link to Comment
  • Investors Always Get Killed At Cycle Tops, Small Caps Look Like A Trap, And It's Way Too Early To Buy Energy Stocks [View article]
    When margin loans are paid back the money does not disappear.
    It is returned to the lender. And is available for other use.
    Jan 2, 2015. 01:14 PM | 1 Like Like |Link to Comment
  • Investors Always Get Killed At Cycle Tops, Small Caps Look Like A Trap, And It's Way Too Early To Buy Energy Stocks [View article]
    Look back at the history and you will see that my statements are true.

    The stock market generally rises during periods of economic growth, and declines around recessions. It is very obvious if you see it on a graph.

    The prolonged severe declines have come when there are recessions.
    Of course, brief declines and other blips can come at anytime.

    It makes logical sense that the stock market would be correlated with the economy since profits are also correlated with the economy.
    Jan 2, 2015. 01:02 PM | 1 Like Like |Link to Comment
  • John Hussman: The Line Between Rational Speculation And Market Collapse [View article]
    His performance is the real world test his analysis.
    Jan 1, 2015. 04:40 PM | Likes Like |Link to Comment
  • Investors Always Get Killed At Cycle Tops, Small Caps Look Like A Trap, And It's Way Too Early To Buy Energy Stocks [View article]
    Short-term fluctuations are independent of the economic trend.
    But, they largely reflect changes in the opinion about the economy.
    The stock market anticipates changes in the economy.

    Longer-term the stock market is very highly correlated with the economy.
    All prolonged bull markets coincide with expanding profits and economic growth. All severe prolonged declines come with recessions.
    Jan 1, 2015. 02:51 PM | 1 Like Like |Link to Comment
  • John Hussman: The Line Between Rational Speculation And Market Collapse [View article]
    The last 10 years includes one of those 50% declines.
    So, it is a good measure of Hussman's performance and strategy.
    Even with that, he hugely under-performs over those 10 years.

    Buy and hold outperforms Hussman.
    Cash outperforms Hussman.

    Hussman's investors would be better off if they never invested.
    Jan 1, 2015. 12:29 PM | 1 Like Like |Link to Comment
  • John Hussman: The Line Between Rational Speculation And Market Collapse [View article]
    The S&P 500 has positive numbers for all of those intervals.

    Including dividends, the S&P 500 has roughly doubled in the last 10 years, a period that included the worst bear market decline since the Great Depression.

    During the same period Hussman's fund lost money.
    Dec 31, 2014. 01:23 AM | 1 Like Like |Link to Comment
  • Country CAPE Ratios: Wizard In 2013, Dunce In 2014? [View article]
    During the last 30 years there have been two prolonged severe declines in the stock market, being mid 2000 to late 2002, and then late 2007 to early 2009. I avoided both declines almost entirely.

    I was aggressively invested before and after these two declines.
    Dec 31, 2014. 01:03 AM | Likes Like |Link to Comment
  • Can U.S. Stocks Four-Peat In 2015? [View article]
    With very different demographics, and very different market positions in the world economy, Japan and the US will have very different results, even with the same monetary policy.
    Dec 30, 2014. 11:08 AM | Likes Like |Link to Comment
  • John Hussman: The Line Between Rational Speculation And Market Collapse [View article]
    Prolonged declines never come without warning.
    It only seems that way to those who watch the wrong things.

    As for Hussman being proven right in the fullness of time...
    Yes. Just like a broken clock.

    Of course there will be another prolonged bear market.
    It is a natural part of the cycle.

    The question is not IF it will happen.
    The question is WHEN.

    Hussman has been very wrong, for a very long time.
    Dec 30, 2014. 10:48 AM | Likes Like |Link to Comment
  • Country CAPE Ratios: Wizard In 2013, Dunce In 2014? [View article]
    Fundamental to my investing strategy is the notion that I will sell during the frothy market top. I do not hold through cyclical declines.
    So, I don’t care about long-term buy-and-hold returns. I only care about what lies between here and the selling point at the cycle top.

    Given this strategy, recognizing the cycle top is of paramount importance to me. So, I watch the economy as it progresses.
    This is the tide in which everything swims.
    Indicators include Wages, Oil, Commodities, Interest Rates, Inflation, Corp Profits, GDP…

    The market will peak when recession is on the near horizon, and profits are in jeopardy. The outlook/expectations will swing severely, and stock prices will fall. The severe decline will come roughly with the recession.

    So, I watch for signs of recession, signs that the economy is nearing exhaustion. The end-of-cycle top will come when the economy has become overheated, and can no longer expand in a cost effective manner. When input costs have been bid up to overheated levels, and consumers have binged to unsustainable levels. So, demand will be overheated, and supply constrained. Wages, commodities, energy, and interest rates will be at elevated levels, and profits will be struggling. The yield curve will invert. Optimism will have all but replaced fear among the general public. And taxi drivers will have become investors.

    Ironically, these conditions of excess will be interpreted optimistically, driving valuations to higher levels for a frothy but unsustainable market top.
    Dec 29, 2014. 08:18 PM | 1 Like Like |Link to Comment
  • Country CAPE Ratios: Wizard In 2013, Dunce In 2014? [View article]
    The simplified overview answer is that I watch those things that affect GDP growth and corporate profits, on a forward-looking basis. The macroeconomic cycle and trend is the foundation of my analysis.

    While I do consider/estimate the long-term profit and GDP trends, I mainly focus on where these fundamentals are headed in the near future (one or two years). So, I am comfortable with above trend conditions if I expect them to last for a while.

    I do not rely on old data such as the last ten years of earnings.
    And analysts' forecasts are problematic.

    I do consider investor psychology, and the cycle progression of diminishing fear, which enables lower ERPs and thus, higher PEs.

    I ride out the volatile blips and corrections on the way to the cycle top.
    As long as GDP and profits rise, and fear softens, I ride the tide.
    Of course, at some point the party must end, and stock prices will enter a prolonged decline as we enter a recession.

    So, I sell when I believe cycle has run its course, and recession is looming.
    Dec 29, 2014. 08:05 PM | 1 Like Like |Link to Comment
  • John Hussman: The Line Between Rational Speculation And Market Collapse [View article]
    Bad models and bad metrics lead to bad forecasts.
    If reality does not fit your model, then your model is wrong.

    Hussman has been very wrong for a very long time.
    He is probably focusing on the wrong things.

    We all know that there will be a decline at some point.
    There is no value in telling us that, and negative value in being premature with the forecast.

    The value is in accurately forecasting the TIMING of the decline.
    Dec 29, 2014. 04:21 PM | 1 Like Like |Link to Comment
  • John Hussman: The Line Between Rational Speculation And Market Collapse [View article]
    It is not a voice of reason if the voice is nearly always wrong.

    A voice of reason recognizes market conditions, and shifts with the market. Bullish on the way up, and bearish when it is time to sell.

    Sooner or later the market will top and decline.
    But, being wrong for half a decade is counterproductive.
    Dec 29, 2014. 04:15 PM | 1 Like Like |Link to Comment
  • Can U.S. Stocks Four-Peat In 2015? [View article]
    Japan has very different and difficult demographics - a shrinking population, and rapidly shrinking workforce-age population.

    Very hard to grow GDP with their demographic profile.

    I certainly would not buy residential real estate in Japan.
    Nearly all assets in Japan should continue to have declining demand, and downward pressure on real prices.

    Europe also has difficult demographics.

    The US population is still growing. But, our workforce is shrinking in relative size as the boomers retire. The previous surge in workforce-age population was a major factor in our 1980s and 1990s GDP growth.
    (Cheap oil also helped a lot.) But, that population trend peaked and reversed during the 2000s. Now we have demographic headwinds.
    But, nowhere near as difficult as Japan.
    Dec 29, 2014. 02:07 PM | Likes Like |Link to Comment
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