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March 12, 2012 at 10:24 AM
Portfolio manager John Hussman, whose bear market warnings have been snubbed by a market up nearly 10% this year and 24% since October lows, has stepped up his prophecy of doom, saying present conditions put this market in the most negative 1.5% of historical periods in which to invest.
In his latest missive to investors on Monday, the former finance professor and manager of the eponymous fund family elaborates on an attention-getting comment last week warning that the same market conditions that led to massive market crashes in 1987, 2000 and 2007 prevail today. An article in this week’s Barron’s approvingly cites Hussman’s analysis that we are currently in a “who’s who of awful times to invest” and advocates assuming a defensive posture in today’s market.
The key conditions that Hussman (left) associates with markets about to crash are an S&P 500 trading sharply above its 52-week moving average and more than 50% above its four-year low; a “Shiller P/E” well above 18; a 10-year Treasury well above levels reached six months ago; and high bullishness and low bearishness among investment advisors. Those top-of-the-roller coaster historical periods led to immediate sell-offs of about 10% or even higher, followed by plunges of some 50% thereafter in 2000-2002, for instance, or in 2007-2009. Hussman was on record calling that last market drop in July 2007.
