Hussman shows a risk of 50-66% [US stock]market losses

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white belt
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Re: Hussman shows a risk of 50-66% [US stock]market losses

Post by white belt »

@classical_Liberal

You are correct that the blockchain technology can be used for a central bank to even more tightly control the money supply. Effectively we're talking about getting rid of the middle man (the commercial banks) in the monetary policy process because the government will be able to directly give to consumers in seconds rather than the weeks/months it takes for the current system to send out stimulus checks. But this also means that things like taxation, influencing behavior (e.g. if you are on welfare you can no longer spend $$ at liquor stores), social credit, etc turn dystopian quite quickly. However, no one is having a frank discussion about any of these things yet. There was a recent interview with Mike Green on Macrovoices about the topic that I recommend listening to if you are skeptical about CBDC: https://www.macrovoices.com/937-macrovo ... l-currency

In that interview Erik Townsend posits that CBDC will change society more than the internet and Mike Green thinks there should be a "Federalist Papers" type public discussion for CBDC because it is so disruptive to how societies and the government function. I don't know what this will mean for how the US gov't is structured, but it will certainly require a change in roles. I mean already we've seen some muddying of roles because the Fed isn't even able to buy bonds according to the Federal Reserve Act, but it did in 2020 anyway. I suspect Congress will still be asleep at the wheel on this sort of thing for a few more years. Cryptocurrency is still seen as a weird speculative investment, not as a legitimate challenge to government's monopoly on currency. But eventually the government will realize they can harness the same technology for their goals (I hope citizens will have some say in this).

The cat is out of the bag with distributed ledger technology and there is no going back at this point. It's just a question of what the world will look like. Sorry for hijacking this thread, I debated posting this in the BTC thread but I guess we're already talking about it here.
Last edited by white belt on Sat Jan 23, 2021 4:33 pm, edited 1 time in total.

jacob
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Re: Hussman shows a risk of 50-66% [US stock]market losses

Post by jacob »

@white belt - I realize that fiction books are not really proof of concept as much as an exploration of scenarios, but in Kim Stanley Robinson's latest book, "The Ministry for The Future", government block chain based currency has been introduced and used to stamp out all financial whitewashing and money laundering activities of the old paper/traceless/fog transaction system with the original/primeval bitcoin currencies being relegated to criminal activities and thus valued accordingly.

classical_Liberal
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Re: Hussman shows a risk of 50-66% [US stock]market losses

Post by classical_Liberal »

...
Last edited by classical_Liberal on Fri Feb 05, 2021 2:02 am, edited 1 time in total.

The Old Man
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Re: Hussman shows a risk of 50-66% [US stock]market losses

Post by The Old Man »

shemp wrote:
Sat Jan 23, 2021 4:00 pm
But infinite supply of money, yes. And that's all that matters to investors.
Hyperinflation. The US Dollar is the world's reserve currency, so the USA has more runway than most; however, hyperinflation has not worked anywhere. What matters to investors is confidence. Hyperinflation will destroy that confidence.
shemp wrote:
Sat Jan 23, 2021 4:00 pm
... inflation plus tax rates made real profits disappear.
I agree. However, inflation in the absence of high marginal tax rates is still a major problem. Inflation complicates management decision-making thereby negatively impacting profits.

white belt
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Re: Hussman shows a risk of 50-66% [US stock]market losses

Post by white belt »

@c_L

Good point. I think a place to watch for early indications of how this plays out is China because they are ahead of the game on digital wallets and a social credit system.

Also I agree that the Amazon situation is entirely possible (it’s already technically possible if someone puts the data together). I mean the fact that Silicon Valley technologists can silence the leader of the free world at the push of a button should indicate the enormous power they currently have over society. Maybe that will change if the Biden administration starts trust-busting.

latearlyFI
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Re: Hussman shows a risk of 50-66% [US stock]market losses

Post by latearlyFI »

The Old Man wrote:
Sat Jan 23, 2021 5:11 pm
can silence the leader of the free world at the push of a button should indicate the enormous power they currently have over society. Maybe that will change if the Biden administration starts trust-busting.
I think that's a fallacy though, he could go to the WH Press room, or go on a RW news show anytime, so he wasn't silenced. He's just calling it that because he can't incite the craziness as easily, the platforms allowed for that more because it's "just" tweets, not an announcement on a major "news" channel

white belt
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Re: Hussman shows a risk of 50-66% [US stock]market losses

Post by white belt »

@latearlyF

I mean we can argue semantics, but the reach and audience on the popular social media platforms dwarfs that of traditional news outlets. I don’t really want to turn this into an entire censorship debate, my point is that the technologists have more influence on global narratives than traditional media outlets.

Edit: Also consider that younger generations spend a lot of time on social media and generally don’t consume information from news outlets.

Mister Imperceptible
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Re: Hussman shows a risk of 50-66% [US stock]market losses

Post by Mister Imperceptible »

jacob wrote:
Sat Dec 01, 2018 6:00 pm
The idea/hope that all that paper money will someday collapse into gold is an old one. It's not something I would bet on. Why not collapse into something else like farmland or luxury condos?
Condo and Currency Collapse

“Six, and this may be the most counterintuitive point about the monetary system. We hope that seeing it in this analogous situation with a collapsed building, it becomes clearer. The decay in value—and certainly market price—is not linear. We assume that the selling price of a condo in this building held steady up until 23 June. Zillow shows one unit sold for $700k as late as 17 June. On 24 June, the price went to zero. This is because it’s not a problem of quantity, dilution, hidden tax, or a transfer of purchasing power. It is a problem of soundness. That is, the building slowly became unsound as the structure rotted. Then it failed, catastrophically. Such failures tend to be that way.”

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Bankai
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Re: Hussman shows a risk of 50-66% [US stock]market losses

Post by Bankai »

In the meantime, Nasdaq doubled since the original post.

Mister Imperceptible
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Re: Hussman shows a risk of 50-66% [US stock]market losses

Post by Mister Imperceptible »

GDX and SIL are also up 78%. So has the Nasdaq doubled or has the denominator lost half its value?

Are people generally earning twice as much money as 3 years ago?

Image

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jacob
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Re: Hussman shows a risk of 50-66% [US stock]market losses

Post by jacob »

Non-profitable technology index. That has to be the peak of cynicism. I like these guys. Where's the ETF? :-P

2Birds1Stone
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Re: Hussman shows a risk of 50-66% [US stock]market losses

Post by 2Birds1Stone »

ARKNPT incoming

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Seppia
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Re: Hussman shows a risk of 50-66% [US stock]market losses

Post by Seppia »

jacob wrote:
Wed Jul 07, 2021 12:59 pm
Where's the ETF? :-P
That would be ARKK :lol:
https://cathiesark.com/arkk/complete-holdings
Seriously, 3/4 of the mkt cap looks to be either in outright frauds or in money losers

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Seppia
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Re: Hussman shows a risk of 50-66% [US stock]market losses

Post by Seppia »

Bankai wrote:
Wed Jul 07, 2021 12:06 pm
In the meantime, Nasdaq doubled since the original post.
Mister Imperceptible wrote:
Wed Jul 07, 2021 12:26 pm
GDX and SIL are also up 78%. So has the Nasdaq doubled or has the denominator lost half its value?
Still, if you staid in cash you'd have lost big.
I like Hussman, but he's been so catastrophically wrong for so long that matching his performance would be a statistical feat similar to matching Warren Buffett's returns :lol:

WFJ
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Re: Hussman shows a risk of 50-66% [US stock]market losses

Post by WFJ »

"Liars figure and figures lie" is the old saying. At any point in time, one can find an unlimited number of charts using real data to show that "The end is near" for any market at any time. One benefit of using financial data is that there are 1,000's of variables with millions of individual data points available for free evaluation. The downside is that any ex-post evaluation of this data will result in finding significance that is nothing more than a spurious relationship. One must do an ex-ante evaluation or an out of sample test to have any validity to these charts.

One of my favorite indicators is Harry Dent, who has predicted 100 of the last 3 bubbles and amazingly at it again.

https://www.thinkadvisor.com/2021/03/10 ... d-of-june/

When Hussman, Dent, Schiff make a 15% upside year end price targets or endorse some fly by night market scam (Dent is long Bitcoin for example), it's time to get out. Nobody knows if these "analysts" are just slaves to the regressions, meaning they have concluded more traffic is generated from bombastic negative predictions or if they have consumed their own Kool-Aid, but are always wrong in the long run. What is also very odd is that at market bottoms, they are also extremely negative and even when correct, they never get long and make money on recoveries.

JCD
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Re: Hussman shows a risk of 50-66% [US stock]market losses

Post by JCD »

I recently heard a commentary that actually gave me a deep insight into why Hussman and the mean-reverting wing of value(*) folks might be wrong that actually was insightful to me. I tried to capture the essence of it, but it actually is a near hour long lecture:

"We've been growing money supply for the last 40 years at least 3x faster than nominal GDP... we've created too much capital... How we use capital... today however, almost all the new businesses are relatively capital light...  They [new businesses] eat tangible assets, whether it is factories, roads or human beings. ... As the cost of capital continues to drop, what happens is every project becomes viable, and everybody is bidding for every project, at that point in time returns for projects decline. ... Cost of capital has to fall even further....  Humans are no longer the key productivity drivers....  We are living in a world of a declining marginal utility of labor... but not far enough to replace us all together. ... Intangible assets don't have capacity limitations...  They also have spillover effects, one industry may spill over into another.  In a world of irrelevance... [he discusses how degrees may become worthless and replaced by micro-courses] one day you are learning cooking, next day it's IT...

How do you invest in that climate?  If the risk free rate is 0, if the equity premium is 0, valuation is infinite.  Whenever the cost of capital is low... The dispersion of multiples increases...  Any company that can defy growth limitations, disinflation limitation, and somehow grow becomes infinitely expenses.  The same infinity company that suddenly stumbles and does not know how to go forward instantaneously becomes infinitely cheap.  But a normal company... just gets cheaper, and it will continue to get cheaper.  ...

The world of financialization, the world of information age and technology is a world of no mean reversion.  Nobody wants to mean revert.  When you ask people, would you like to go to liberal capitalism, they say "Yes that is a good idea.", but when you mention it might imply your houses are not worth what you paid them, are you okay with that? "No, no, I'm not okay with that." Do you recognize that a lot of factories need to close?... People don't want to mean revert.  Mean reversion is not possible.  It is not to say value cannot run up. But at the end of the day, intangibles will keep eating up tangibles..." - Viktor Shvets, https://youtu.be/2ta0lHdOF68?t=277

If you buy into the idea of no mean reversion with ever increasing levels of capital generation going out forever, then of course anything without growth will be worthless in the end. If you just keep up with capital generation, then you're still behind relative to the growth names. I'm not saying this will be true forever, but Tobias Carlisle claimed that value has historically been held back for decades during previous tech booms (trains, automotive transport). So it isn't a completely crazy idea based upon historical analysis to assume Hussman will be wrong for much longer than historical mean reversion would suggest.

(*) It might be worth noting I tend towards this camp, but this is probably the most persuasive argument I have heard to suggest my default position is wrong.
Last edited by JCD on Sat Jul 17, 2021 11:18 am, edited 1 time in total.

giskard
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Re: Hussman shows a risk of 50-66% [US stock]market losses

Post by giskard »

JCD wrote:
Wed Jul 14, 2021 10:29 am
I recently heard a commentary that actually gave me a deep insight into why Hussman and the mean-reverting wing of value(*) folks might be wrong that actually was insightful to me. I tried to capture the essence of it, but it actually is a near hour long lecture:

"We've been growing money supply for the last 40 years at least 3x faster than nominal GDP... we've created too much capital... How we use capital... today however, almost all the new businesses are relatively capital light...  They [new businesses] eat tangible assets, whether it is factories, roads or human beings. ... As the cost of capital continues to drop, what happens is every project becomes viable, and everybody is bidding for every project, at that point in time returns for projects decline. ... Cost of capital has to fall even further....  Humans are no longer the key productivity drivers....  We are living in a world of a declining marginal utility of labor... but not far enough to replace us all together. ... Intangible assets don't have capacity limitations...  They also have spillover effects, one industry may spill over into another.  In a world of irrelevance... [he discusses how degrees may become worthless and replaced by micro-courses] one day you are learning cooking, next day it's IT...

How do you invest in that climate?  If the risk free rate is 0, if the equity premium is 0, valuation is infinite.  Whenever the cost of capital is low... The dispersion of multiples increases...  Any company that can defy growth limitations, disinflation limitation, and somehow grow becomes infinitely expenses.  The same infinity company that suddenly stumbles and does not know how to go forward instantaneously becomes infinitely cheap.  But a normal company... just gets cheaper, and it will continue to get cheaper.  ...

The world of financialization, the world of information age and technology is a world of no mean reversion.  Nobody wants to mean revert.  When you ask people, would you like to go to liberal capitalism, they say "Yes that is a good idea.", but when you mention it might imply your houses are not worth what you paid them, are you okay with that? "No, no, I'm not okay with that." Do you recognize that a lot of factories need to close?... People don't want to mean revert.  Mean reversion is not possible.  It is not to say value cannot run up. But at the end of the day, intangibles will keep eating up intangibles..." - Viktor Shvets, https://youtu.be/2ta0lHdOF68?t=277

If you buy into the idea of no mean reversion with ever increasing levels of capital generation going out forever, then of course anything without growth will be worthless in the end. If you just keep up with capital generation, then you're still behind relative to the growth names. I'm not saying this will be true forever, but Tobias Carlisle claimed that value has historically been held back for decades during previous tech booms (trains, automotive transport). So it isn't a completely crazy idea based upon historical analysis to assume Hussman will be wrong for much longer than historical mean reversion would suggest.

(*) It might be worth noting I tend towards this camp, but this is probably the most persuasive argument I have heard to suggest my default position is wrong.
This was such a good comment. If you think about the world working in this perspective the outperformance dynamic of ARK makes sense. I lost so much money buy reading Ben Graham's "The Intelligent Investor" ten years ago when I first started investing it's not even worth thinking about.

There is another dynamic that multiplies this effect too, it's not just growth vs value. It's growth companies leveraging new technology vs every other legacy business. Maybe it's all down to the money supply but I think technology is at least as important.

This is the dynamic we are seeing in real time: you have a struggling grocer like Kroger trying to modernize and having to buy "software solutions" from legacy vendors like IBM. You have IBM making a crappy "E-Commerce" solution to sell to legacy companies with literal sales people going to negotiate a contract. They hire IBM consultants to make this pile of crap work, spend countless hours integrating into their legacy systems, and the end result is something buggy and unreliable that takes incredible resources to maintain.

Then you have new companies like Shopify that can spin up an E-Commerce presence for a customer instantly with zero additional marginal cost and they will capture a percentage of payments through their new customer's store. A new home delivery grocery can start up and use services like these or Stripe or Twilio, etc and it's going to have a much better outcome and huge growth prospects because it's going to be cheaper and work better.

One of these groups is growing, every other group is basically struggling to keep up. Even IBM is left behind (they still do business like it's 1995,even if they are slightly ahead of their customers). Everything that is not leveraging the new ways selling, getting customers, managing accounts, building infrastructure and building products is going to get left behind.

And to everyone saying that the market can crash 50% ... so what? If you bought a basket of the best tech stocks 5 years ago you did 3-10x on your money depending on what that basket was made of. You get a 50% haircut and so what? Can you take a 50% haircut on Kroger or IBM, no you would actually be down 50% because these companies have no growth prospects at all.

xmj
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Re: Hussman shows a risk of 50-66% [US stock]market losses

Post by xmj »

Everything that is not leveraging the new ways selling, getting customers, managing accounts, building infrastructure and building products is going to get left behind.
This is a very good point - you can create a business these days for next to no capital expenditure, by leveraging multiple software as a service providers in new ways.

One issue I see with this is - a lot of these new "middleware" firms are not yet cashflow positive. They may be profitable, but their focus on growing, growing and growing means they're playing a game of musical chairs. At some point the music stops, the free money runs out, new investment rounds fall through, and then the question becomes one of runway & survival.

Which, if you're looking at this from a due diligence / risk management perspective, is an operational risk you have to be aware of: The middleware you've just integrated with might just . . . shut down overnight, leaving you with the need to either find a similar-but-not-perfectly-substitutable competitor and reintegrate with their changed API, or restructure and pivot your business.

Either of these then requires a significant stack of capital to do these with. Which is a thing many of the B2C businesses forget.

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