John Hussman

Read the October 2017 Market Comment from John Hussman, PhD, titled "Why Market Valuations are not Justified by Low Interest Rates" found at the following link: https://www.hussmanfunds.com/comment/mmc171009/ a) Explain how the dividend-growth model estimates the price of a stock (refer to your textbook). What happens to the price when the interest rate is higher or lower? b) Explain Hussman's argument that if interest rates are low because growth rates are low, then stock prices should not be higher (hint, see part a). c) Explain Hussman's argument that comparing prices to earnings (ie, using a P/E ratio) is not useful for estimating future investment returns. d) Explain why U.S. real GDP growth is expected to be low over the next few years. e) What does Hussman conclude about the current level of stock market valuations