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Hussman Strategic Growth Message Board

  • nefariouswu nefariouswu Jun 2, 2013 6:16 PM Flag

    John Hussman says fair value is 900 on the S&P.

    He didn't come out and give the number, maybe because he was embarrassed, but he did say the market is 80% "above what I consider to be fair value." So, divide Friday's close by 1.8 and you get about 900.

    This number is so ridiculous I don't even know where to begin. He is obviously married to his thesis now. How could anybody really think the market should drop almost 50% from here? Nuts.

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    • First, I think if you re-read the comments, I don't think you will find that he says that the market should do anything (I'm not looking at it so I may be wrong on that but I don't think so). I think one of his best quotes, from a number of years ago, was, "there is no "wrong" direction for the market."
      Okay, without going into additional discussion, let's say that the market (S&P 500) is at 1608. Let's say the p/e ratio is 18.85 (per Barron's), that gives you an earnings figure of about 85.30. If the market was to all of a sudden trade at (your figure of) 900 (with no change in earnings), that would give you a p/e of 10.55 (if my math is correct). If that figures looks "nuts" to you, I really think you need to look a little deeper at the history of the market. It might seem nuts for this generation of investors but not for the "old timers." And no, I'm not 90 years old, but I have been accused of sounding like a 90 year old. All the best to you. g.

      • 1 Reply to gcalvt
      • I agree its well within the realm of possibility. Emerging markets are trading at close to this valuation now and they've already had a decent drop in their earnings. Its true that young investors like myself have never experienced a real bear market. Sure 2001 and 2008 were scary but prices jumped back fairly quickly. I'm optimistic on the market, particularly internationally but never rule out what the market can do. While I think its very unlikely that we'll see p/e ratios close to 7 as we saw in 1982(at least not without significant inflation), a decline in earnings coupled with a compression of the pe ratio close to 11-12 can mean a very significant decline.

    • i cant beiieve you just said the market cant drop 50 %. of course it can.

      fair value is just a number and because it can does not mean it will.

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