MaverickBian

John Hussman: Preparing for Extreme Possibilities

Today's rally, at best, would be short-lived.

Tons of bad news within next couple quarters from around the world would punch down S&P 500 to its new low.

More than one month money market freeze would no doubt have hurt a lot of businesses a lot, sure not reflected in this quarter but in next couple of quarters.

And housing downward trends are still intact, almost globally. If the housing market shed by another 15%, what would happen to all business investments and sonsumers spending? Try to think, if everyone's 401K shed by 30%~40%, and your house's value shrink on a monthly basis without end soon, then what would you as a consumer do? spending a lot or save a lot. No doubt much less spending, which ironically represents 2/3 of US GDP. From this perspective, you will see tons of very nasty numbers just like today's consumer confidence.

Another big concern would be higher and higher unemployment rate. If 1 million more lost their jobs at an average of annual compasation of 50K(some from very high paid industry like Wall Street), then consumers' spendings would have been hurt very much on an aggregate level.

Also, ironically, Naumuri saved Lehman Asia and MUFJ saved Morgan Stanley, but they need some super rich guys to save themselves if Neikki goes much deeper.

And most importantly, today's rally occurred only after 2:00pm with light volume. Sure, a lot of deep-pocketed guys like fund managers, in order to assure a big stampede, tried their best to build a mirage that bottom has reached. Personally, I deeply doubted it. Based on current tailspin speed, every quarter, S&P shed by 12%. If the recession will go deeper, which most analysts and economists have assured so, then we may see 600 as you first claimed in your article.

Anyway, be prepared for the raining days from now on unless you're pretty sure economy has turned around, which will be at least 2~3 quarters away.