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Overstimulation Risk

Among the many strange, unforeseen changes of the last year is a new respect for Keynesian economic theory. Practically everyone in power now agrees that deficit spending produces GDP growth. They differ only on its expected magnitude and duration. The few exceptions...

Controlling the Curve

If time is money, then interest rates are the price of time. The most important interest rates in the world are for US Treasury securities. This is why I’ve long said it makes no sense for a committee to set those rates. The markets could do just fine without that...

The Grip Tightens

This is part two of my 2021 forecast series. I began last week (you can read it here) discussing a three-handed alien race envisioned by science fiction writers Jerry Pournelle and Larry Niven. They had two regular hands and a third “gripping hand,” which though less...

Year of the Gripping Hand

This week’s letter is the first part of my 2021 forecast. There is simply too much to cover in one letter, and today we’ll start with the most important factor, a known unknown, that I think will be the driver for 2021. Before beginning, I want to make two points, one...

Waiting For The Last Dance

Executive Summary The long, long bull market since 2009 has finally matured into a fully-fledged epic bubble. Featuring extreme overvaluation, explosive price increases, frenzied issuance, and hysterically speculative investor behavior, I believe this event will be...

Stock Market Party

"History repeats itself, that's one of the things that's wrong with history.” The end of 2020 has me looking back. I started writing the letters that later became Thoughts from the Frontline back in the late 1990s. Similar to COVID-19 today, we had a giant macro issue...

Survival of the Biggest

The essential point to grasp is that in dealing with capitalism we are dealing with an evolutionary process… At the heart of capitalism is creative destruction. …Situations emerge in the process of creative destruction in which many firms may have to perish that...

Elites on the Edge

Growing income and wealth inequality were on my (and probably your) radar screen long before COVID-19 came along. The pandemic has made them both more obvious and more urgent. The actions by the Federal Reserve have widened the gap. We are now in a situation where...

Pushing Extremes

  John P. Hussman, Ph.D. President, Hussman Investment Trust November 2020 The one reality that you can never change is that a higher-priced asset will produce a lower return than a lower-priced asset. You can’t have your cake and eat it. You can enjoy it now, or...

A Chance for Normalcy

Last week I talked about the polls misleading us. I, for one, didn’t see a high probability of a Biden presidency combined with a Republican Senate. But, pending recounts, legal actions, and some run-off elections, that’s probably what will happen. We will muddle...

Complexity Wins Again

Here in Puerto Rico we are now an hour ahead of Eastern Time, as we don’t do daylight savings time. I stayed up much later than normal on election night to watch the returns. I knew fairly early, when Florida and North Carolina looked so close, we weren’t going to see...

What Will Not Change

“If I have seen further it is by standing on the shoulders of Giants.” If you feel a bit overwhelmed, you’re not alone. A lot is happening right now. The US has a big election next week. We’re all on edge about the pandemic, which appears to be getting worse again,...

The Green Shoots of 2020

Appearing on 60 Minutes, Fed Chair Ben Bernanke said the recession’s end was in sight because the Fed’s asset purchases were generating “green shoots.” They turned out to be slow-growing shoots. The US unemployment rate kept getting worse for seven more months...

Herd Mentality

  John P. Hussman, Ph.D. President, Hussman Investment Trust October 2020 That the rate of interest will be lower when commerce languishes and when there is little demand for money, than when the energies of commerce are in full play and there is an active demand...

Caught in a Debt Trap

We're caught in a trapI can't walk outBecause I love you too much baby Elvis Presley’s rendition of Suspicious Minds topped the record charts in 1969. The lyrics portray a romance that couldn’t work, but was also impossible to escape. That’s also a good way to...

Timeline to the New Normal

Like everyone else, I am weary of this pandemic mess. I want to travel freely, enjoy dinner with friends, hug, and shake hands. And, of course, I want everyone who lost jobs and businesses to get them back. I wasn’t thrilled with the economy a year ago, but I’d take...

Debt Bugs and Windshields

"There is no means of avoiding the final collapse of a boom brought about by credit expansion." —Ludwig von Mises Economic recovery is coming, we are told, because the economy has found a new equilibrium. We are supposedly adapting to the new-normal pandemic world,...

Stall Speed Economy

When Cornwallis surrendered to George Washington at Yorktown in 1781, tradition has it that the British band played an old English children’s folk tune, “The World Turned Upside Down.” Painting by John Trumbull If buttercups buzz’d after the bee,If boats were on land,...

Inflation Virus Strikes Fed

One little-noted aspect of central bank policy is how rarely “policy” happens. Officials at the Federal Reserve and elsewhere long ago learned how to achieve their goals without actually doing anything. Creating perceptions is often enough to modify people’s behavior....

Yikes

  John P. Hussman, Ph.D. President, Hussman Investment Trust September 2020 The most striking similarity between the 1920s and 1990s bull markets is the notion that traditional measures of stock valuation had become obsolete. – Edward Chancellor, Devil Take The...

Light in the COVID Tunnel

If you ever think you just can’t win, I know how you feel. I’m labeled both a doomsayer and a Pollyanna—sometimes in reaction to the same letter. In fact, I am neither. I used to be the “muddle-through” guy who acknowledged difficulty but expected eventual success....

Yellow Flag Jobs Data

As I file this letter Friday morning, people are reacting to the July jobs report. My own reaction: The headline report is absurd. I will explain further at the end of this letter. But first, I have another topic. Regular readers know I worry about debt, mainly that...

European Resurgence

One of COVID-19’s many less-than-obvious consequences is the way it makes us look inward. Facing mortality has always done that, of course. West Texas Judge Roy Bean reportedly said, “Nothing focuses the mind like a good hanging.” For the vulnerable and those of us of...

Valuation Inflation

“In the short run, the market is a voting machine but in the long run, it is a weighing machine.”             —Benjamin Graham You may have noticed a bit of manic activity in the stock market. You may have also noticed inflation (as measured by various government...

Small Business Blues

Politicians love saying small businesses are important to the economy. In this case, it isn’t just rhetoric. The millions of little companies with a handful of workers are, collectively, more important than the few hundred large enterprises we see in the news. That’s...

The Blacker Swan

“A similar effect is taking place in economic life. I spoke about globalization in Chapter 3; it is here, but it is not all for the good: it creates interlocking fragility, while reducing volatility and giving the appearance of stability. In other words, it creates...

A Recession Like No Other

We just spent the better part of a decade wondering when the next recession would strike. The last two months we stopped wondering. It’s here and a grand council of esteemed economists has confirmed it. On June 8, the Business Cycle Dating Committee of the National...

Where We Go from Here

Predictions are difficult, especially those about the future. That old proverb (often attributed to Yogi Berra) is right but you can’t live without making certain presumptions. You presume your car will start, your refrigerator will stay cold, the lights will turn on...

Economics in Orbit

The history of humanity, at least as taught in most schools, is really about two seemingly opposite forces: human innovation and human conflict. The same intelligence that lets us accomplish great things also sets us against each other. But sometimes, we rise above...

Rewinding the Tape

We finished the Virtual Strategic Investment Conference yesterday. I can honestly say it was simply the best conference I have ever attended or been privileged to host. The ability to bring together so many exciting speakers, something schedules would not have allowed...

Reflection Week

I knew this letter’s topic months ago. It was going to be a review of the Strategic Investment Conference, which would have just concluded fabulously in sunny Scottsdale. Well, something intervened. Coronavirus precautions kept us from having an in-person conference....

Five Viral Lessons

We live in truly historic times. “There are decades when nothing happens, and weeks when decades happen,” says a quote usually attributed to Vladimir Lenin. It certainly fits now. For thousands of years, people who lived through what we call “history” didn’t realize...