Thread by @hussmanjp

1/ When investors ask "Where is the bottom?" it helps to be clear whether one is talking about an interim low or a final low. The completion of a market cycle typically includes a series of interim spike lows followed by extended but ultimately temporary recoveries...

2/ What we do know is even at current levels, the S&P 500 is only 17% below the most extreme valuations in history, on measures we find best correlated with actual subsequent market returns across history. The 2000 low was ~49% below current levels. The 2009 low was ~61% lower.

3/ So the question isn't whether this is a "generational" opportunity. It's not. We're 17% below the extremes of psycho-bunny insanity.

Whether we have a new bear market to navigate or a resumption of a bull, the uniformity or divergence of internals will help distinguish that.

4/ … and as usual (especially for my loving trolls), here's a discussion of my admitted error in recent years, and what I did to address it in late-2017. Learn from it, and you'll avoid the mistake of concluding or imagining that valuations and market internals can be ignored.

5/ Probably needless to say, market internals remain ragged and unfavorable here, and the combination with still-rich valuations creates further "trap door" risks.

… here's more on what I mean by "internals" - see also the text in my charts, and my regular monthly comments.

6/ A reminder that the effect of monetary policy on the market depends heavily on whether investors are inclined toward speculation or risk-aversion (which we gauge via internals). When investors are risk-averse, risk-free money is a desirable asset, and doesn't fuel speculation.

7/ So for those hoping for emergency rate cuts, it might help to examine the historical outcomes of those events. @TaviCosta also has some nice charts on that topic.

This from October 2007.