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John P. Hussman, Ph.D. Profile picture
@hussmanjp
Jul 17, 2023 • 7 tweets • 4 min read • Read on X
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As "quantitative tapering" continues, you'll see an enormous number of bad takes about "collapsing" M2, bank credit and so forth.

It will help to understand it's not loans that are declining, but idle cash reserves, held indirectly by depositors, well in excess of FDIC coverage. Image
2/ QE didn't encourage greater lending by banks. Bank lending since 2008 has grown at just 3.4% - slowest growth rate in U.S. history.

QE created a pile of (previously) zero-interest reserves that someone had to hold, everyone wanted to get rid of, and in aggregate, could not. https://t.co/fMqmjfPWBytwitter.com/i/web/status/1…
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3/ So what did QE accomplish? For more than a decade, someone - in aggregate - had to hold those Fed liabilities at zero. That discomfort caused investors to lose their minds trying to pass it off, buyer to seller, driving other investment assets to zero prospective returns. https://t.co/mj3ucsk0Xgtwitter.com/i/web/status/1…
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4/ The problem is that market cap is not "wealth." The wealth is in the cash flows. Extreme valuation only allows one holder to obtain a wealth transfer from some buyer who will hold the bag. Deferring risk does not eliminate risk. Here's what over a decade of ZIRP has created. https://t.co/JXYftA5lhztwitter.com/i/web/status/1…
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5/ Here is what people are calling a "new bull market." On our most historically reliable measure, equity valuations are more extreme than at any point in U.S. history prior to December 2020, with the exception of a few weeks surrounding the 1929 peak. Image
6/ Same valuation metric versus actual subsequent 12-year S&P 500 nominal total returns in data since 1928

More on valuations, popular "but what about" considerations, and other details here: https://t.co/LkOi7QndWhhussmanfunds.com/comment/mc2302…
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7/ Same metric with S&P 500 levels. The dotted lines use prevailing Treasury bond yields at each point in time to show levels that would be associated with varying "risk premiums" relative to bonds. The yellow bubbles show where estimated S&P 500 return vs bonds was negative. Image

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More from @hussmanjp

John P. Hussman, Ph.D. Profile picture
Mar 14
1/ A thread and data on Inspectors General, government spending, and “waste, fraud, and abuse.” If you prefer alternate data, at least require it to reflect audit and analysis, and not just opinion, cynicism, simulation, or retracted "receipts" (as much of DOGE’s work has been). Image
2/ If one’s goal is to detect waste, fraud, and abuse, your first act in office would not be to expel the independent Inspectors General, who serve as watchdogs against waste, fraud, and abuse. Their latest report includes thousands of investigations and successful prosecutions. Image
3/ One might imagine that slashing the number of career civil servants is a great way to save money, the fact is that federal employment as a share of the civilian labor force is near the lowest level in history. The firing spree isn’t to save money. It’s to install loyalists. Image
Read 11 tweets
John P. Hussman, Ph.D. Profile picture
Dec 22, 2024
@Acyn 1/ Having first proposed (JADD 2001) that autism reflects disruption in GABAergic signaling and excitatory/inhibitory balance (now a prevailing consensus) and having directed a neuroscience lab, it's important to reiterate: large scale studies show no link to vaccines. Image
@Acyn 2/ Very large case-control studies and meta-analyses involving millions, both in the U.S. and abroad show no association between vaccines and autism. The belief to the contrary traces to a small 1990's study that was falsified and later retracted.
sciencedirect.com/science/articl…
@Acyn 3/ One of the main reasons "autism" prevalence has increased is diagnostic thresholds have changed profoundly. From the 1950's to the early 1990's, "autism" was synonymous with "Autistic Disorder" (Kanner type, nonspeaking, profound). This level of severity was and is still rare. Image
Read 9 tweets
John P. Hussman, Ph.D. Profile picture
Nov 7, 2024
1/ Quick update on market conditions.

Valuations have pushed to the most speculative extreme in U.S. history.

While valuations are informative about long-term and full-cycle outcomes, they are emphatically not useful indications of market outcomes over shorter horizons. Image
2/ Even taking record earnings and year-ahead earnings estimates at face value, using operating earnings that exclude extraordinary items, the S&P 500 price/forward operating earnings of 22 is at levels only seen at the 2000 and 2022 market peaks.

Again, not a near-term measure. Image
3/ The long-term outcomes of extreme valuations across history are clear. Still, the consequences of rich valuations can be deferred so long as valuations are even more extreme at the end of a given time period.

[Geek's Note: serial correlation does not bias a linear estimator] Image
Read 7 tweets
John P. Hussman, Ph.D. Profile picture
Oct 19, 2024
1/ One would think that with all the society-changing technological innovation since 2000, GDP growth and S&P 500 revenue growth would have been faster, not slower, than in the past. Investors make the repeated mistake of basing valuations on excitement instead of arithmetic. Image
2/ Consider the largest three tech stocks in 1999: Microsoft, Cisco, and Intel. Their total returns, respectively, since 2000 have averaged 10.38%, 1.88%, and -0.11%. Average 4.05%.

Seeing the largest companies go on to lag, as a group, is the norm, not the exception. Image
3/ In contrast, compared with Microsoft's $600bn market cap, Amazon's was just $26 bn in 1999, with a price/sales multiple of 26 on a low base of revenues.

Revenue growth averaging 30% annually (from that low base) since 1999 resulted in a 17% annual return as the PSR fell. Image
Read 6 tweets
John P. Hussman, Ph.D. Profile picture
Sep 29, 2024
Notes on the Harris-Walz economic plan - a thread. 🧵

The elements of a strong plan are always productive investment, easing employment barriers, a level playing field so working families participate in what they produce, and reducing vulnerability.
“Over the past several decades, our economy has grown better and better for those at the very top, and increasingly difficult for those trying to hold on to a middle class life.”

[Productivity may not translate into living standards if tax policies reward profits over wages] Image
“I want Americans and families to not just be able to get by but to be able to get ahead. To be able to thrive.”

[Which requires moving away from policies that focus on profits and ignore externalities that hollow out the middle class] Image
Read 16 tweets
John P. Hussman, Ph.D. Profile picture
Jul 29, 2024
On average, how much does the 10-year Treasury yield fall during the 12-18 month period following the start of a recession?

It doesn't. Image
On average, how much does the core PCE inflation rate fall during the 12-18 month period following the start of a recession?

It doesn't. Image
On average, how much does the U.S. unemployment rate rise during the 12-18 month period following the start of a recession?

About 2% (again, on average) Image
Read 5 tweets

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