This is 100% of the story in my opinion. I’ve heard lots of debate about whether the Fed should be popping asset bubbles and that debate always seems to reference housing and equities. The comparisons between the two asset classes don’t make sense to me in the context of financial crises. Because of the debt on housing, I’ve always thought of a housing bubble as fundamentally being a debt bubble, not an asset bubble.

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I have no relation, by the way, just a fan of Hussman’s knowledge and way of doing things (and a shareholder in some of his mutual funds).

Do you mean that people think mistakenly that there is a connection? That is, there is no fundamental (whatever that is) relation between the two, but people trade stocks as if there is? How might one compute or value what that assumed relation is?

Kling above (3):  One can hope that even a large “correction” in stock prices would not produce a financial crisis.

A large drop in stock prices recognizes that there is much less wealth stored in businesses than before thought. People lose savings. I think that alone is a financial crisis. What more does financial crisis mean?

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