When Speculators Prosper Through Ignorance By John P. Hussman, Ph.D.
* February 20, 2017
Market conditions aside, I am also dismayed by the increasingly mean-spirited, divisive, weakly-informed, and nearly pathological mode of governance that is unfolding before us. For now, Wall Street seems to love every bit of it. Then again, we should repeatedly have learned that once blinded by speculation, Wall Street has never had the capacity to recognize a massive toxic liability until it implodes and rains havoc on the entire country. Given historically offensive overvaluation, extended by a post-election blowoff (see Time Stamp of Speculative Euphoria), an economic environment lacking the precursors for sustained growth (see Economic Fancies and Basic Arithmetic), and a mode of governance that practically courts disruption (see On Governance), I expect that the next few years will not go well for risk-seeking strategies, except those explicitly constructed to benefit from market weakness and volatility. The word “risk” has taken on a purely theoretical connotation in recent years, to the extent that it is now seen as equivalent to “return.” Investors are likely to rediscover that its actual meaning is quite distinct, and devastatingly real.