Return-free risk

Hussman Funds/John P. Hussman/1-14-2022

cartoon of lemming going over a cliff, one has a gold parachute“In an economy where the Fed has lost every systematic tether to common sense, empirical evidence, and concern for financial stability, it’s worth beginning this first market comment of 2022 by recalling the ways we’ve adapted in order to navigate that environment. In a world where securities are regularly described on CNBC as ‘plays,’ it’s clear is that the financial markets presently have little to do with ‘investment’ – at least not by Benjamin Graham’s definition as ‘an operation that, upon thorough analysis, promises safety of principal and an adequate return.’”

USAGOLD note: Hussman’s latest delves into the return of your capital in a market so distorted none of the old verities matter any longer. In our view, it is not that modern-day investors do not see what is going on, it is that they choose to ignore it. He features a quote from Albert Einstein: “The difference between genius and stupidity is that genius has its limits.” “By relentlessly depriving investors of risk-free return,” he says, “the Federal Reserve has spawned an all-asset speculative bubble that we estimate will provide investors little but return-free risk.” That situation is made all the worse, and more compelling, by inflation and the plummeting real rate of return. The wise lemming will bring along a golden parachute.

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