Hussman: The Gas Pedal Is Useless When The Spark Plugs are Gone

`` Once market internals deteriorate, central bank easing fails to provoke speculation, on average. The gas pedal is useless when the spark plugs are gone. Worse, central bank easing, in the context of unfavorable market internals, is typically a response to unexpected economic weakness. As a result, such "panic" easings are often followed by a further collapse... Last week, Bank of Japan Governor Haruhiko Kuroda, supported by a slim 5-4 board vote, announced a move to cut short-term interest rates to negative -0.1%... While the knee-jerk response to central bank easing moves is invariably positive, investors should be careful to recognize the context surrounding this move. Based on the broad market action of Nikkei component stocks, market internals in Japan have deteriorated sharply since December, in contrast to most of the period since August 2012. ''