If theres a shift to risk aversion that happens before crashes(except 1973) , why not wait for that to happen before being fully hedged?
That being said, i think his advice to consider TIPS is a good one. The 10 year tips yield is now at 0.59%(it was at -0.74 just in april), which i think is definitely more attractive then treasuries unless you believe inflation in the next decade will average less than 1.93%.
Are you two serious? Hussman has a PhD in economics. He's spent years developing, testing and refining his models. He gets paid over 20 million a year for doing what he does. He KNOWS what he's doing. Do you guys really think you can flippantly come up with better schemes than what Dr. Hussman has developed?
And one would think with all that intelligence and credentials that Hussman would be smart enough to know that no one can successfully time the markets. Yet he keeps trying and failing and modifying his models, etc.
you can put that one on me, I think Floyd has a little more faith. I think Dr. Hussman is very intelligent and will likely do quite well particularly on a risk-adjusted basis. I do doubt how much you can tell the future from the past, even with strong regressions and models. I do agree with him that this is a bad place for significant exposure to the US market although I do think that there's pockets of value.
When a crash happens it's REAL fast and the initial drops can be extreme. But maybe compromise on your point and hedge against the volatile sectors while waiting with the lower risk holdings (vs. hedging with options against the S&P).