{"id":25509,"date":"2017-09-12T07:19:47","date_gmt":"2017-09-12T12:19:47","guid":{"rendered":"http:\/\/olduvai.ca\/?p=25509"},"modified":"2017-09-12T07:19:47","modified_gmt":"2017-09-12T12:19:47","slug":"three-massive-bubbles-in-17-years-when-will-this-one-bust-a-60-decline-coming","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=25509","title":{"rendered":"Three Massive Bubbles in 17 Years: When Will This One Bust? A 60% Decline\u00a0Coming?"},"content":{"rendered":"
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Three Massive Bubbles in 17 Years: When Will This One Bust? A 60% Decline\u00a0Coming?<\/a><\/h3>\n<\/header>\n
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John Hussman\u2019s presents a message no one wants to hear because nearly everyone is too busy believing for the third time in 17 years that \u201cIt\u2019s different this time\u201d.<\/p>\n

Last week Hussman wrote about Valuations, Sufficient Statistics, and Breathtaking Risks<\/a>. This week it\u2019s more of the same with his post Behind the Potemkin Village<\/a>.<\/p>\n

The markets are so overvalued now that Hussman expects a 60% decline from here.
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There\u2019s an apocryphal story that in 1787, during the journey of Empress Catherine II to Crimea, Prince Grigory Potemkin, the governor of the region, erected fabricated villages along the Dnieper River, which would be disassembled after she passed by, and rebuilt again downstream overnight.<\/p>\n

When one examines the collapses of the tech bubble and the housing bubble, it\u2019s evident that one of the central elements of those collapses was the gradual recognition by investors that the overvalued pieces of paper they were holding were actually little Potemkin Villages; temporarily glorious and impressive on the surface, but backed by much less than investors had imagined was there. What sort of \u201ccatalyst\u201d is needed for a Potemkin Village or a Ponzi scheme to disappoint? Only the gradual or sudden discovery of the reality behind it: the recognition that there is no \u201cthere\u201d there.<\/p>\n

Market returns don\u2019t just emerge from nowhere. They are driven by the sum of three factors: growth in fundamentals, income from cash distributions, and changes in valuations (the ratio of prices to fundamentals). For example, the 10% annual total return of the S&P 500 since 1960 also derives from growth in S&P 500 revenues averaging 5.7% annually since the 2000 peak, dividend income averaging about 3.0% annually, and a much steeper increase in the S&P 500 price\/revenue ratio contributing 1.3% annually (taking the current price\/revenue multiple to the same level observed at the 2000 market peak).<\/p><\/blockquote>\n

…click on the above link to read the rest of the article…<\/p>\n<\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

Three Massive Bubbles in 17 Years: When Will This One Bust? A 60% Decline\u00a0Coming? John Hussman\u2019s presents a message no one wants to hear because nearly everyone is too busy believing for the third time in 17 years that \u201cIt\u2019s different this time\u201d. Last week Hussman wrote about Valuations, Sufficient Statistics, and Breathtaking Risks. This […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[1799,15965,14648,13390,11995,690,2084,4562,5537],"class_list":["post-25509","post","type-post","status-publish","format-standard","hentry","category-economics","tag-bubbles","tag-john-houseman","tag-michael-shedlock","tag-mishtalk","tag-potemkin-village","tag-risk","tag-statistics","tag-stock-market-bubble","tag-stock-valuations"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/25509","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=25509"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/25509\/revisions"}],"predecessor-version":[{"id":25510,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/25509\/revisions\/25510"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=25509"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=25509"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=25509"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}