YOU CAN’T SQUEEZE WATER FROM A ROCK

10 comments

Posted on 26th April 2014 by Administrator in Economy |Politics |Social Issues

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“Fed has created a world where best action may be cash out, not buy high, and wait. Can’t squeeze water from rock. Wait for the rain.”

John Hussman

10 Comments
  1. Stucky says:

    That chart makes perfect sense to me.

    ::end /sarc::

    Of course, I am a dumbass. Really.

    26th April 2014 at 9:36 am

  2. Doug says:

    26th April 2014 at 10:40 am

  3. RedTrack.ME says:

    […] Source: John Hussman via The Burning Platform blog […]

    26th April 2014 at 5:25 pm

  4. Buy-And-Hold (And Lose For 10 Years?) says:

    […] Source: John Hussman via The Burning Platform blog […]

    26th April 2014 at 5:55 pm

  5. Buy-And-Hold (And Lose For 10 Years?) - Exploring the News says:

    […] Source: John Hussman via The Burning Platform blog […]

    26th April 2014 at 9:31 pm

  6. Buy-And-Hold (And Lose For 10 Years?) | FXCharter says:

    […] Source: John Hussman via The Burning Platform blog […]

    26th April 2014 at 11:35 pm

  7. El Coyote says:

    Doug, keep posting your song, eventually it will become a hit. Constant play worked for el chombo:

    27th April 2014 at 1:43 am

  8. Frogman says:

    So… what do the colors represent? 0-10 …what? Some units would be helpful.

    27th April 2014 at 2:18 am

  9. farragut says:

    Froggy,

    The colors correspond to the CAPE value. Green is a starting CAPE value of 0-10. So, the left-most cluster of bars represent the expected return one year later. For example, if the CAPE is currently at 0-10, one year later it averages a ~7% – 8% return. If the CAPE is currently at 10-15, the average return is slightly less. If the CAPE is currently at 15-20, the average return is expected to be around 4%-5% one year later. If CAPE is currently at 20-25, the average return is expected to be around 1%-2%. And if the CAPE is currently at 25+, the average return is expected to be around 3%-4% one year later.

    Now, take those same time starting CAPE values, but extend the time frame from one year to five years later. What kind of average returns would the average investor expect to see? According to the chart, if the investor started investing when the CAPE was between 0-10, we could expect to see an approx 50% return–five years later. If the investor started investing when the CAPE was between 10
    15 or 15-20, the average investor could expect to see average returns of around 10%, and a return of approx 0% if he started investing when the CAPE was between 20-25. And, not surprisingly, if the investor put money to work in equities when the CAPE was 25 or higher, then his expected average return would be a whopping negative return of almost 20%!

    As of Apr 25, the CAPE was 25.16 (see: http://www.multpl.com/shiller-pe/ ). Can it go higher? Much higher? Sure; 1929 & 1999 bear witness to this. But look at the S&P500 index 3, 5, and 10 years after these two high points (see: http://www.multpl.com/s-p-500-price/ ). Not a pretty picture, is it?

    27th April 2014 at 9:30 am

  10. Stucky says:

    farragut

    That’s exactly what I thought it meant. I just wasn’t 100% positive.

    27th April 2014 at 9:41 am

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