John P. Hussman of the Hussman Funds also has weekly economic commentary. Like Grantham, he has deep respect for financial history, bubbles, fair value, etc. His two funds are hedged and have good returns with low risks.
Hussman was a professor of economics and international finance at the University of Michigan. In the mid-1980’s, Dr Hussman worked as an options mathematician for Peters & Company at the Chicago Board of Trade.
“Banks Pass Stress Test – Regulators Fail Ethics Test” by John P. Hussman, Ph.D. May 11, 2009
“Even if we have observed the ultimate lows of this downturn (which I would not take as given), it does not follow that the decline we’ve observed over the past 18 months will be progressively recovered without a great deal of intervening difficulty. The S&P 500 has retraced just over 25% of its bear market loss. The 904 level on the S&P 500 was a 25% retracement, and 977 would be a 1/3 retracement, which is not unreasonable. Aside from such retracements, the idea of a “V-shaped” recovery in the market is strongly odds with “post-crash” market behavior, which generally features a long and drawn-out flat period for years afterward. Given the enormous overhang of Alt-A and option-ARM resets scheduled to begin later this year, extending into 2012, such a profile would not be surprising in the present case.
To put the current downturn into similar context, the chart below overlays several historical crashes, with the time scale measured in months. The downturns include the Great Depression (purple), the Japanese Nikkei index which peaked in 1989 (blue), the gold market which peaked in 1980 (green), and the S&P 500 which peaked in 2007 (red).
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