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* John Hussman — the outspoken investor and former professor who's been predicting a stock crash — says traditionally diversified portfolios are set to offer their worst returns since the Great Depression over the next 12 years.* Hussman explains why he sees a US stock market drop of more than 60% coming, and breaks down why the Federal Reserve's past actions have created the situation. There's never been a worse time to be a conventional portfolio manager. Well, maybe back in the deepest, darkest throes of the Great Depression that crushed the US economy way back in 1929. But not...

RARE HUSSMAN INTERVIEW: Profit Margins Will Collapse, Stocks Will Tank Henry BlodgetApril. 11, 2013, 6:20 AM Fund manager John Hussman of the Hussman Funds has been hammering on what is probably the biggest risk to future stock performance: The risk that today's record-high profit margins will fall, taking corporate earnings down with them. Those who want stocks to keep charging higher have come up with a list of many reasons why it's "different this time" and today's profit margins will keep on increasing. These include: Almost half of big corporate profits now come from international operations, so profit-to-US GDP measures...

HUSSMAN: Investors Don't Realize How Quickly All Of Their Recent Profits Could Get Destroyed Joe WeisenthalDec. 24, 2012, 7:05 AM In his latest weekly note, John Hussman is very bearish and he blasts the Fed for not correctly fixing the economy. This is very standard for him. One interesting observation regards the fragility of investor gains: The stock market is only a few percent from its 6-month high at present, and even an overextended move to about 1490 would put the S&P 500 at its upper Bollinger band (two standard deviations above the 20-period moving average) on daily, weekly and...

HUSSMAN: It Is Now One Of The Worst Times To Invest In History Joe Weisenthal March 3,2012In his latest note, John Hussman argues that it's one of the worst times to invest. Period. Based on his proprietary soup of risk indicators for the market, the current exuberant situation puts it on par with some of the great peaks, including 1998-2000. Importantly, the market is again characterized by an extreme set of conditions that we've previously associated with a "Who's Who of Awful Times to Invest." The rare instances we've seen this syndrome historically are reviewed in that previous weekly comment....

HUSSMAN: The Recession Is Still Coming, And The Europe Mess Has Barely Gotten Started Joe Weisenthal Oct. 17, 2011, 6:16 AM So you think last week's rally and firmer than expected data means we're out of the woods? Ha! In his latest note, John Hussman spills some cold water. From my perspective, Wall Street's "relief" about the economy, and its willingness to set aside recession concerns, is a mistake born of confusion between leading indicators and lagging ones. Leading evidence is not only clear, but on a statistical basis is essentially certain that the U.S. economy, and indeed, the global...

John Hussman: It's Official, The Data Says Another Recession Is Coming Joe Weisenthal Jun. 28, 2010, 12:48 PM Fund manager John Hussman (via PragCap), who's been bearish for awhile, says it's now clear that a double-dip is coming. Based on evidence that has always and only been observed during or immediately prior to U.S. recessions, the U.S. economy appears headed into a second leg of an unusually challenging downturn. A few weeks ago, I noted that our recession warning composite was on the brink of a signal that has always and only occurred during or immediately prior to U.S. recessions,...

“The best way to destroy the capitalist system is to debauch the currency.” Vladimir Lenin, leader of the 1917 Russian Revolution Last week, while Congress and the nation were preoccupied with the holidays, the Treasury made a Christmas eve announcement that it would be providing Fannie Mae and Freddie Mac unlimited financial support for the next three years. The Treasury's press release notes: “At the time the Federal Housing Finance Agency (FHFA) placed Fannie Mae and Freddie Mac into conservatorship in September 2008, Treasury established Preferred Stock Purchase Agreements (PSPAs) to ensure that each firm maintained a positive net worth....

***The following are excerpts. It is far better to read the entire commentary (long but good). The graph is scary - it will make sense if you read the whole commentary .*** Last week, the U.S. Treasury Secretary advanced two proposals; one was a call for regulatory reform that is absolutely essential to the resolution of the current financial crisis. The other was a recipe for the insolvency of the FDIC, which would squander public funds to subsidize private speculation in troubled mortgage securities. [snip] Indeed, the only way for the toxic asset sale to increase shareholder equity is if...

It is difficult to believe that the U.S. government is contemplating taking on the bad assets of these institutions at probable taxpayer loss and effectively immunizing the bondholders (and shareholders) of these companies. . . the Treasury proposal to address current financial difficulties places corporate bondholders ahead of the public, rewards irresponsible risk-taking, and sets a precedent for future bailouts. Moreover, we know from a long history of economic experience across countries that a major expansion of government liabilities is invariably followed by multi-year periods of extremely high inflation, particularly when it is not matched by a similar expansion of...