MadeTheAccountForWSB

1/2 Many have sent me Hussman’s latest. I agree with virtually all of it on the valuation and forward expected return front. And then he chimes in with passive… John is in the “this is a rationalization for why the bubble is everlasting” camp. John’s last communication to me in Dec 2020. “What distresses me the most is the assumption that somehow Fed intervention and passive investing disable the arithmetic between current prices and future returns (for a given set of future cash flows). In other words, they're assuming that long-term returns continue to be high indefinitely.” (@hussmanjp ) Like others, John has been fighting the good fight on valuation so long, he fails to see an ally. Passive “permanently” shifts valuations UNTIL their flows either reverse or are offset by other flows (redemptions, insider/secondary, new issues). It’s not magic, it’s recognition of an empirically less elastic market than EMH ASSUMED. The cash on the sidelines remains (unless used to pay down debt). How we buy and what we buy matters.