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There’s a big story in Barron’s this weekend titled “The Worst of Times to Buy Stocks?,” which highlights the gloomy warnings of well-known investor John Hussman and technical guy Walter J. Zimmermann Jr.Hussman’s bearishness is well-known, but the article by Randall W. Forsyth boils down Hussman’s bearishness to five criteria:
• The Standard & Poor’s 500 trading at more than 8 per cent above its 52-week exponential moving average.
• The S&P 500 up more than 50 per cent from its four-year low.
• The “Shiller P/E,” based on the cyclically adjusted trailing 10-year earnings, developed by Yale economist Robert Shiller, greater than 18; it’s currently 22.
• The 10-year Treasury yield higher than six months earlier.
• The Investors Intelligence’s bullish advisory sentiment over 47 per cent, and bearishness under 25 per cent. in the latest data the numbers were 47.9 per cent bulls and 26.6 per cent bears.
Apparently all those conditions are nearly in place now, as they were in 1987, 2000, and 2007.
Meanwhile, Zimmerman agrees with all that, plus he cites the inevitability of a market decline owing to rising taxes, austerity, too much bullishness, and gas prices. He sees a “perfect storm” manifesting itself within days.
(Via Josh Brown)