Mr Hussman is unusually definite on his shorter-term market view tonight. He doesn't often express strong opinions on the short-term, and when he does he's usually right.
Buckle Up.
John P. Hussman, Ph.D.
March 9, 2009
I suspect that the markets are about to get volatile, possibly to an extent beyond what we observed in October and November.
...
While the stock market is extremely compressed, which invites the typical “fast, furious, prone-to-failure” rallies to clear this condition, my larger concern is that market action and credit spreads are demonstrating very little investor confidence, risk-tolerance or commitment to stocks. Value investors know that stocks have been much cheaper at the end of lesser crises (Morningstar had a nice article on value a week ago), and traders are still sellers on advances. My impression is that only prices that allow no room for error (what Ben Graham used to call a “margin of safety”) will be sufficient to prompt robust, committed buying from value investors. This will be a fine thing for investors who keep their heads, are already defensive, and have the capacity to add to their investment exposure on price weakness, but other investors are likely to be shaken out of long-term investments at awful prices. This need not happen in one fell swoop, and we need not observe the “final lows” anytime soon. The problem is that even to get a sustainable “bear market rally,” somebody has to be convinced that stocks are desirable holdings for more than a quick bounce. ...
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