I’ve commented before that I have great respect for John Hussman, PhD, of Hussman funds. Here‘s the longer term view from Mr. Hussman.
“For the third time in a decade, the Federal Reserve has embarked on a policy
that addresses structural economic problems by provoking speculation in asset prices.
The first two attempts were ultimately followed by stock market declines greater than
50% each....
My expectation is that this attempt to create what the economist Ludwig von Mises called “illusory prosperity” will end no better than it has in the past. As von Mises wrote in 1931, before the worst portion of the Great Depression: “Credit expansion cannot increase the supply of real goods. It merely brings about a rearrangement. It diverts capital investment away from the course prescribed by the state of economic wealth and market conditions. It causes production to pursue paths which it would not follow unless the economy were to acquire an increase in material goods. As a result, the upswing lacks a solid base…Sooner or later, it must become apparent that this economic situation is built on sand.” February 21, 2011, The Hussman Funds Letter to Shareholders by John P Hussman, Ph.D. (used with permission of Hussman Funds - http://www.hussmanfunds.com)
The VIX came down 10% today and other indicators improved as well, so the NTSM system moved to HOLD. This is not unusual for corrections, since there are many who will buy-the-dip. At this point I have no reason to question our earlier SELL call.
The volume today was about 15% below the 20-day moving average for volume. That shows there was not much conviction in the up-move today…I think we have more down days ahead.
