Hussman Weekly Market Comment: Capitulation Everywhere
The "rotation"
fallacy has emerged even in the work of analysts that we admire. Ray Dalio of
Bridgewater talked on CNBC last week of a move “out of” cash and “into” stocks,
seemingly reversing comments he made only weeks ago at the Dealbook conference
(h/t PragCap) where he suggested that risk premiums are likely to expand, that
the effects of QE are diminishing as we do more rounds, that we’re facing
austerity, that growth is flagging, that the economy is facing unprecedented
risk, and that we face a slowdown with very little room to maneuver. Meanwhile,
Albert Edwards of SocGen suggested that there has been an excessive “move away
from equities” in recent years – instead of noting, for example, that the
volume of U.S. government debt foisted upon the public (even excluding what has
been purchased by the Fed) has doubled
since 2007, not to mention other sources of global debt issuance, while the
market capitalization of stocks has merely recovered to its previously
overvalued highs.