'There is no way to peace. Peace is the way.'<blockquote>'To be clear, we’ve adopted a flat, neutral outlook at present. Still, if overbought conditions were to ease by a few percent without a clear deterioration in market internals, we wouldn’t object to a constructive investment outlook, provided a safety net and ideally something that might benefit in the event that severe tail risks unfold. We would not, however, even dream of carrying an unhedged investment stance, which is unfortunately the position that most investors, retirees, and pension funds have adopted.
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In a world so urgently in need of peace and civility, it’s equally urgent to recognize that answering hatred with hatred never leads to that goal. My friend and teacher Thich Nhat Hanh, who was nominated for the Nobel Peace Prize by Dr. King, has often said “There is no way to peace. Peace is the way.” The first peaceful step always begins with the recognition by each side that the person they would call their enemy also suffers. In our common humanity, each of us might be like the other if we had suffered the same way – whether that suffering takes the form of injustice, poverty, violence, abuse, or even ignorance. In a world where people – on both sides of the word “enemy” – seem so inclined to carelessly pour their reservoir of suffering onto others without recognizing their shared humanity, our best cause for hope still resides in the wisdom of peacemakers like Dr. King. One can’t read his words without coming away better for it.'
- John P. Hussman, Ph.D.,
When Speculation Has No Limits, January 15, 2018</blockquote>
'Over the coming years, we expect roughly $20 trillion in capitalization to be erased from the U.S. equity market; a figure that is roughly the same size as U.S. GDP itself..'<blockquote>'Like the 1929 and 2000 market peaks, Wall Street is pushing a great deal of loose analysis intended to “justify” current valuations, imagining that just because prices have reached a certain level, they must actually belong there. Arguments like “valuations are justified given the level of interest rates,” or “given the recent tax cuts,” or “given a growing economy with low inflation” sound reasonable enough, but as we’ve detailed at length in recent months, they don’t hold up to the scrutiny of careful discounted cash flow analysis.
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The bottom line is that we fully expect a market retreat on the order of 50-65% over the completion of the current cycle. That’s a different statement than saying that it must occur immediately. If we’ve learned one thing in this speculative half-cycle, it’s to refrain from underestimating the speculative extremes that investors are capable of embracing. The appropriate response is not to try to “justify” current valuations, but rather to recognize the speculative factors that allow them to temporarily persist, and to closely monitor the uniformity and divergence of market internals. Given the potential for abrupt shifts, we’re partial to establishing tail-risk hedges early, but given the low level of implied volatility in the options market, those hedges are remarkably inexpensive relative to historical norms.
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Over the coming years, we expect roughly $20 trillion in capitalization to be erased from the U.S. equity market; a figure that is roughly the same size as U.S. GDP itself..
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By the completion of this market cycle, there will likely be no talk of the “cost” of getting out too early. The 2000-2002 collapse wiped out the entire total return of the S&P 500 – in excess of T-bill returns – all the way back to May 1996. The 2007-2009 collapse wiped out the entire excess total return of the S&P 500 all the way back to June 1995. We correctly anticipated the extent of both collapses. I can’t emphasize strongly enough how much of our challenges in the recent half-cycle traced to our bearish response to “overvalued, overbought, overbullish” syndromes- which we’ve since subordinated to our measures of market internals, with no exceptions.
Frankly, I expect that the completion of the current cycle will wipe out the entire excess total return of the S&P 500 all the way back to roughly October 1997. That outcome would not even require our most reliable measures of valuation to revisit their historical norms. If you know how our measures of valuation and market action helped us to navigate prior
complete market cycles, you know that it would be a mistake to underestimate the full-cycle risks investors currently face, regardless of whether or not those risks are realized immediately.'
- John P. Hussman, Ph.D.,
Survival Tactics for a Hypervalued Market, January 2018</blockquote>
'On China, he says the big investment boom is over and that it's an export-led economy.'<blockquote>'What this basically means is in 2018, we can expect a slowing of leading US economic indicators, even if you factor in fiscal policy, and this has implications on portfolio positioning.
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On China, he says the big investment boom is over and that it's an export-led economy. "China's PMIs follow exports, so we need to watch any slowdown in its trade, especially if the US dollar starts appreciating“ (putting pressure on the renminbi and forcing another massive devaluation there which will export more disinflation/ deflation throughout the world and clobber risk assets).'
- Leo Kolivakis,
Outlook 2018: Return to Stability? January 10, 2018</blockquote>
'I see overwhelming support for my view that we are witnessing history’s greatest financial Bubble. Things turned crazy in 2017 and, if the first four sessions of 2018 are any indication, markets are taking “crazy” up a notch.'<blockquote>'Bubbles are self-reinforcing but inevitably unsustainable inflations. Asset Bubbles are fueled by some underlying source of unsound monetary inflation. Major speculative Bubbles and manias are always propelled by key misperceptions and resulting monetary disorder. Bubble flows intensified in 2017, as misperceptions became only more deeply embedded in the Structure of Securities Market Pricing. Loose finance is ensured indefinitely.
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I see overwhelming support for my view that we are witnessing history’s greatest financial Bubble. Things turned crazy in 2017 and, if the first four sessions of 2018 are any indication, markets are taking “crazy” up a notch.
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Because of the unprecedented globalization of Bubble Dynamics during this protracted cycle, I have special concern for geopolitical risks. Pondering what might unfold this year leaves me uncomfortable.'
- Doug Noland,
Issue 2018: Market Structure, January 6, 2018</blockquote>
'..The reality is that it’s a global Bubble fueled by globalized liquidity. Central bank QE liquidity is fungible - $14 TN and counting.'<blockquote>'This might be the most fascinating market backdrop of my career. Not yet as dramatic as 1987, 1990, 1994, 1997, 1998, 1999, 2000, 2002, 2007, 2008, 2009 or 2012 – but, heck, we’re only two weeks into 2018 trading.
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There is a prevailing view in the U.S. that QE doesn’t matter. The Fed ended balance sheet expansion a few years back, and financial markets didn’t miss a beat. Better yet, the Fed is now contracting its balance sheet holdings and stock market gains have only accelerated. The reality is that it’s a global Bubble fueled by globalized liquidity. Central bank QE liquidity is fungible - $14 TN and counting.'
- Doug Noland,
Mania, January 13, 2018</blockquote>
Context (Banking Reform - English/Dutch) '..a truly stable financial and monetary system for the twenty-first century..'<blockquote>
'..we have too much of the wrong type of debt and thus the velocity of money has been falling since 1997.''2017 was a fateful year of central bank failure to tighten financial conditions..''..Amazingly, catastrophic market distortions evolved gradually enough over years..'(The Housing Bubble)
Does The Hype Match What’s Really Happening? January 17, 2018
(The Housing Bubble)
Talk Of Substantial Price Cuts, January 16, 2018
Genesis - Land Of Confusion'You're the voice, try and understand it''In this world we're just beginning to understand the miracle of living'..Future of Peace and Love</blockquote>