John Hussman: Stocks Too Expensive, Correction Due

Wednesday, 16 Feb 2011 08:10 AM
By Greg Brown

Put John Hussman squarely in the doubter’s column. In his latest note to investors, the fund manager makes the case that the current bull market will end in tears soon enough.

He points out that the S&P 500 has surpassed a cyclically adjusted price-earnings, or P/E, ratio of 24 (that is, earnings adjusted for inflation, a measure favored by Yale professor Robert Shiller).

Aside from the dot-com days and just after, as the housing bubble inflated, we haven’t seen this kind of market valuation since 1929, Hussman warned.

“We should not deserve to be called ‘investors’ if we fail to recognize that valuations are richer today than at any point in history, save for the few months before the 1929 crash, and a bubble period that has been rewarded by zero total return for the S&P 500 since 2000,â€