John Hussman – Why Prospective Returns Are Low - By Robert Huebscher

Monetary and fiscal policies have driven our economy into an unstable equilibrium, pushing investors into higher-yielding securities, according to John Hussman.  But those higher yields are illusory, he said, because corporate profit margins are too high to be sustainable.

“This creates an environment where stock returns prospectively are very low,” Hussman said. “In fact, all returns are prospectively very low.”

Hussman is the president and principal shareholder of Maryland-based Hussman Econometrics Advisors, the investment advisory firm that manages the Hussman Funds. He rarely gives interviews and almost never speaks in public, but he spoke at the Wine Country Investment Conference last week. That event was sponsored by Mish Shedlock and his firm, California-based Sitka Pacific Capital Management, as a benefit for ALS, the disease which claimed Shedlock’s wife last year.

Quantitative easing (QE) has distorted market dynamics and pushed investors into riskier assets. “That is really the point of QE,” Hussman said. “It is to create discomfort and cause a search for yield. “

I’ll discuss Hussman’s opinions on monetary policy and corporate profit margins and his forecast for equity returns.

……………..

Related video: U.S. Stock Market Is ‘Overvalued, Overbought and Overbullish’: John Hussman