On Being a Worrywart

It’s a long road to wisdom,
but it’s a short one to being ignored

—The Lumineers

My mother-in-law and I are worriers. Her specialty is the family. If it’s not the kids, it’s the grandkids, the nieces and nephews, or her great, extended family spread across the country. “I borrow trouble,” she says, “I know it.” She is our matriarch and claims the right to worry, however much we may try to otherwise sway her. But we don’t mind. It animates her daily devotions and she names each of us in her prayers every night. This is a comfort. She is a wonderful woman, and we sense that, if anyone has God’s ear, Louanne does.

My worry is that I’ll run out of ways to describe the insane risk in the financial markets, or my chicken little act will bomb with my readers before the apocalypse I speak of arrives. Hence, I’m grateful to be able to do a little borrowing myself this week. In this instance, some words from a respected independent market guy.

My thanks to fellow trader Tom Finch for passing along John Hussman’s current thinking. Hussman is one of a small group of money managers who have been on the right side of history over the past couple of decades. These are his recent comments:

“Regardless of very short-term market direction, it is urgent for investors to understand where the equity markets are positioned in the context of the full market cycle. While the most extreme overvalued, overbought, overbullish, rising-yield syndrome we define has generally appeared only at the most wicked market peaks in history, investors have ignored those conditions over the past year. We can’t be certain when the deferred consequences will emerge. But a century of market history provides strong reason to believe that any intervening gains will be wiped out in spades.

“It’s instructive that the 2000-2002 decline wiped out the entire total return of the S&P 500 – in excess of Treasury bills – all the way back to May 1996, while the 2007-2009 decline wiped out the entire excess return of the S&P 500 all the way back to June 1995. Overconfidence and overvaluation always extract a terrible payback.”

‘Nuff said.

Cheers,

Rod

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