Record Extremes, Alternative Investments, and the Hippo

By John P. Hussman – Hussman Funds

As historically-informed investors, we have to observe that current conditions are no less extreme than at the 1929 and 2000 bubble peaks. Even so, we needn’t rely on any pointed forecast or scenario about what might happen next. We can take good care of the future simply by taking good care of the present moment, again and again, as conditions change.

In order for valuations to reach the most extreme level in the history of the U.S. financial markets, it must be true, by definition, that valuations have plowed through every lesser extreme, time and time again, without consequence. Unfortunately, the deferral of consequences is often confused with the absence of consequences. As investors, we should be capable of seeing both the possible continuation of the bubble, and also the possible collapse of the bubble. Knowing that both are possible, and refraining from being locked into any forecast or scenario, we see better what to do and what not to do.