Weedon & Co. L.P. reprinted a very articulate interview with money manager John Hussman recently called Going Full Cycle. The Husman Strategic Growth Fund has trounced the returns and particularly risk-adjusted returns of the S&P 500 over the past 7 years, even though it has only averaged the risk free rate over the past 3 years. By avoiding the declines of 2000-2002, Husman is once again living proof that investors who can avoid big losses in a down market only need to make about 1/3rd of the gains in the up market to come out dramatically ahead overall. Hussman makes some key points about why current valuations are historically very high again and why he currently has the defensive posture of a fully hedged portfolio, opting to earn just the risk free cash rate while equity markets are raging on to new all-time highs. A present duration of 60 on the S&P 500 is one of the many metrics he points out as likely to present a poor risk/return for investors from here. Worth the 9 page read.
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