Wednesday, August 10, 2016

Morton's Fork
"In all of the exuberance about low interest rates 'justifying' elevated equity valuations, what’s striking is how little investors appear to appreciate the Morton’s Fork - two opposing possibilities that lead to the identical outcome - they’re actually facing. Whether one believes that economic growth will remain dismal and interest rates will remain low, or that economic growth will accelerate and interest rates will gradually normalize, the inevitable outcome for market returns is likely to be very much the same. Specifically, investors should fully expect that over the coming 12-year horizon, the nominal total return of the S&P 500 will average less than 1.5% annually .. Whatever you do with your own portfolio, think carefully about the assumptions you are relying on, and whether those assumptions can be backed by evidence. Too many investors seem mesmerized by the idea that central banks have near-magical powers, never fully defined, and never clearly articulated. The best advice I can offer is this: put your assumptions into words, and then take them to the data to make sure that what you believe is actually true."
- John Hussman
LINK HERE to the essay

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