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#39: John Hussman On Navigating One Of The Most Overextended Stock Markets Of All Time

Superinvestors and the Art of Worldly Wisdom

CHAPTER

The Role of Signal Extraction in the Overvalued Market

I came from this background of thinking about, you know, monetary economics, but also rational expectations. And I had an academics mind toward it that well overvaluation should not at some point be rational. That was just not proving out very well. So basically in the late 90s, I said, all right, how do I actually distinguish between an overvalued market that continues to advance and one that drops like a rock? The answer is: Do we see uniformity or do we see divergence and deterioration?

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