12/24/13 The Ebb Tide

http://www.hussmanfunds.com/wmc/wmc131216.htm I make it a point to read John Hussman's weekly comments. He's been 'wrong' for quite some time, warning of a correction that he estimates will be in the -50% range. However, he was wildly bullish in the early Nineties, correctly warned about market excesses in 2000, 'right' to become bullish again in 2003, and 'right' in becoming defensive in 2007. His research appears to be solid, and he attributes his recent 'miss' of the 2010-13 rally to insisting (following the 2008-9 Crash) that his methodology be 'tightened' to include Depression-era data. You can read his explanations in detail in the archived commentary. I'm linking the above article mainly because I believe solid managers have a right to an occasional 'miss,' and because I believe he will soon be proven 'right' in his call for a severe correction. There aren't many asset classes that are not overvalued at this point, IMO> stocks, bonds, and real estate are all richly priced. Stocks (in the US, at least) have had a good run (+173% for the SPX since 2009). 2013 was the beginning of the end for the 30-year bull market in bonds (ie, a reversal in interest rates is inevitable). And with rising mortgage rates, real estate prices will begin to moderate. All of the above is 'normal.' The markets are cyclical, reflecting the underlying cyclical nature of the investors who determine the pricing of assets. I would encourage you to read a few of Hussman's articles, and be prepared to sit out the next Bear to the extent possible. I'm guessing all of your portfolios are near multi-year highs, having achieved outsized gains the past 5 years. Don't let the ebb tide take it back.