Monday, August 5, 2013

Hussman's a Must Read This Week

August 5, 2013
Hussman Funds - Weekly Market Commentary: The Minsky Bubble

...investors presently seem to believe that these profit margins are a permanent fixture...

What’s fascinating about QE is that it has no transmission mechanism to the real economy except as a weak can-kicking exercise - and even then only by creating enormous distortions in pursuit of minute "wealth effects."

The fact is that long-term interest rates are virtually unchanged since August 2010, when Bernanke first hinted at shifting to quantitative easing as the Fed’s main policy tool.

It’s worth observing that the 10-year Treasury yield is also well above the weighted average interest rate since 2010.

Meanwhile, margin debt on the NYSE now stands well above 2% of GDP – a level also (and only) reached at the 2000 and 2007 peaks.

A few quick economic observations. Since May, the number of individuals classified as “Employed, usually work part time” has increased by 534,000. The number of individuals classified as “Employed, usually work full time” has declined by 148,000. So its employment (a lagging indicator) has increased in recent months, but composition is deteriorating notably.

Emphasis added. The article is just filled with juicy tidbits.

It would seem that we both were thinking about the impact of part time employees and margin debt this past weekend. Go figure.

And on that note, I'd much rather hold the "The Unloved 10-Year Treasury" to maturity than short it to maturity. I'm experiencing a disturbing sensation of long-term déjà vu.

This is not investment advice.


Stagflationary Mark said...

In my opinion, ZIRP cannot permanently end until the entrance to Candy Mountain is found! It's just past the magical liopleurodon!

Got kidney? ;)

Scoops said...

Hussman is always dead on with his analysis but he is horrible as a fund manager. He's too much of a realist. Gotta play the game, not

BTW...I am locked in an ALLY 5 yr CD at 2.5% last December 21010. Who thought that would be nasdaq 99 returns compared to CDs and Treasury now.

Stagflationary Mark said...


Locked in 2.50%? Holy smokes!

You are earning more than 60x the interest of a 3-month treasury bill right now!

2.50 / 0.04 = 62.5

Over the course of history, very few have ever been able to claim such high returns compared to the "safest" of benchmarks. Congrats! ;)

In all seriousness, beats a sharp kick to the teeth. Those who sat in treasury bills anxiously awaiting the end of ZIRP are still waiting (and with a few less teeth).