This morning, a kind Sloper emailed me a link that Dutch has been kind enough (there’s a lot of kindness on Slope…….) to post in the comments section. I appreciate this, because I definitely missed it, since I only read a small portion of the comments that flow through.
The link was to an article, which is the Hussman Funds commentary from the week ending July 29. It’s a fantastic post, and I urge you to read the whole thing, but two paragraphs jumped out at me in particular:
I fear that investors may conclude that I’ve abandoned our risk-conscious investment discipline at the point in the coming market cycle that I advocate an aggressive investment stance. It’s worth observing now that conditions warranting such a position have historically been the norm and not the exception. In the context of a 13-year period of stock market returns averaging only about 2% annually, with two separate market losses of 50% and 55% in the interim, it’s not entirely surprising to find good, risk-conscious value investors being mistakenly considered to be permabears.
There’s no question that my fiduciary inclinations to stress-test against Depression-era data in 2009 resulted in a “miss” that our valuation measures and the resulting ensemble methods clearly could have captured. There’s no question that I’ve struggled with the distortions of quantitative easing. That’s partly because of an ingrained ethic – well supported by historical evidence – to pursue investment actions that will be of service to the economy rather than those that promise to do violence to it. When the Federal Reserve is hell-bent on doing violence by distorting financial markets, discouraging savings, and promoting speculation as a matter of policy – however well-intentioned that violence may be – we’re going to struggle some, because the eventual outcome of chasing an overvalued, overbought, overbullish market will be – and always has been – gruesome.
I have nothing to add to such a superbly-constructed expression of thought………except to ask you to read it again. And a third time. And a fourth. Because your fellow countrymen have no idea what’s coming.