söndag 20 juli 2014

Always read Hussman's weekly to insulate from speculation

Hussman explains again (in today's weekly comment) that if stock markets at any time during the following quarter century reaches a secular low in valuations, The S&P will be lower than today (even if it occurs exactly 24 years from now, and earnings keep growing 6% p.a. despite current records margins).

This is just arithmetics and has no element of opinion to it.

The resulting arithmetic is quite simple: even if stocks were to touch a secular low even 24 years from today, and even if fundamentals such as nominal GDP, corporate revenues, and corporate earnings match their long-term peak-to-peak growth rate of 6% annually between now and then, the S&P 500 would actually be below its current level 24 years from now [Calculation: (1.06^24)*(0.5/2.10) = 0.96].

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