This week's John Hussman Weekly Market Comment contains a good explanation of what effects the government bailout efforts will have on economy. According to John Hussman, the $1 Trillion bailout money Treasury and Fed put into the system, serves on purpose in creating lend-able funds. Worse, it crowds out private money that could be put into the system responsibly.
Read the complete article by the professor.
On market climate, John Hussman stated that:
Happy invest!
Read the complete article by the professor.
On market climate, John Hussman stated that:
As of last week, the Market Climate for stocks remained characterized by mixed valuations – modestly overvalued on the basis of most fundamental measures except those that assume a sustained return to the record profit margins of 2007, and slightly undervalued if one assumes that a return to those profit margins is a given. Market action was also mixed – volume continues to show fairly tepid sponsorship relative to durable market advances. Meanwhile, price action has been very favorable on the basis of breadth, but with the strongest leadership from industry groups with the least favorable balance sheets and financial stability. It is not typical for the industries that suffer worst in a bear market to be the ones that lead the subsequent bull market. That sort of “leadership by losers” however, is very characteristic of bear market rallies. That's not to say that we can immediately conclude that stocks are in a bear market advance as opposed to a new bull market, but as usual, we don't spend much of our energy making assumptions about things that aren't observable. At present, the observable evidence is that stocks are priced to deliver modestly sub-par long-term returns, but still in the range of about 8% annually over the coming decade, while market action is favorable enough for us to carry an index call option position in the range of 1-2% of assets here, in order to soften our hedge in the event that the market experiences a more sustained advance, without strongly compromising our defense against fresh weakness. Aside from that 1-2% in index calls, the Strategic Growth Fund continues to hold a strong hedge against the market risk of the stocks in the portfolio.
Happy invest!
