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How does a bear market start? Overvaluation followed by risk aversion

As I scour the internet and read many opinions, one long term investing companion I have found interesting over the years is John Hussman, PhD.  He uses a very clear valuation model to look at the expected returns of the US stock market 12 years from now if you purchased shares TODAY.  In his latest market letter, he pointed out that the Sept 20th peak had an implied annual return in 12 years of less than 0.5%.  Would you really like to be 6% wealthier in 12 years after a massive amount of gyrations in the stock market?  Or would you prefer to buy shares when there is a better chance you would be making 7+% annually on your investment?  His models help investors do just that.

If you enjoy reading about the markets, I’d encourage you to read his latest market letter HERE.

I personally am off to an investment conference this upcoming weekend on Friday and Saturday.  Just as I did last year, I will publish a post for subscribers only on what I discovered at the conference some time before the end of the month.