Hussman Funds

My view is that the market is undervalued, that it is priced to deliver
attractive long-term returns, and that there is an increasing
likelihood of a major bear market advance – but I don’t believe that
any of this puts a “floor” below the market in the very short term, and
I don’t believe markets are apt to bottom while everyone is still
looking for a bottom.

As an economist, it’s clear that the
parallels to 1929 are terribly overblown, not least because unlike the
Great Depression, governments in this instance have opened a floodgate
of liquidity, capital and base money – which they failed to do back
then. Even if we were to completely zero out two solid years of
earnings for the S&P 500, the fact is that more than 90% of the
value of U.S. stocks would reside in the cash flows beyond that point.
The main issue for good, established companies here is not the risk to
the long-term stream of cash flows, but to what extent the uncertainty
about the coming year or two of earnings will frighten investors to
sell at depressed prices (thereby pricing stocks to deliver even higher
long-term returns).

Posted by email from thehardtrade2′s posterous

Last 5 posts by MacroMan

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