Two great pieces this weekend from John Hussman and William Hester at Hussman Funds. I would highly encourage readers to take a moment to read both pieces in their entirety. John Hussman’s piece attacks a topic we recently covered – the coming wave of mortgage resets that will create further headwinds for housing. Hester’s piece shows how the leading indicators of the economy are far from justifying the v-shaped recovery theory – a view the ECRI would vehemently disagree with. With large secular risks still at play and valuations stretched Hussman’s funds remain largely hedged as they continue to focus on downside risk.
Although I’ve been very bullish at critical junctures during this rally (including the March 8th low and before each important earnings season) I still agree to a large extent with the secular argument that Hussman and Hester so eloquently elaborate on. We are still confronted with enormous structural problems in the U.S. economy and although money printing can alleviate pressures in the near-term, this has never proven to be a sustainable economic growth strategy. Furthermore, we have directly addressed exactly none of the actual causes of the crisis – our bloated and omnipotent banking sector, the ever experimenting Federal Reserve and regulation.