Hussman Funds - Weekly Market Comment: Strenuously Overbought - September 21, 2009.
I remain wary of current market valuations. I've held throughout 2009 that the S&P will close around 950 which would require a roughly 11% correction from current levels. Hussman makes the case more eloquently than I would so please read.
Hedging downside risk is like an insurance premium. You pay the premium but hope you'll not need the insurance. When you do, you're glad you kept making the payments. If we don't have the pullback I expect then you're return will be slightly below an unhedged portfolio but still positive. If we do have a correction, you won't be immune but will likely see less of a decline than unhedged peers and that will be worth the "premium".
I remain wary of current market valuations. I've held throughout 2009 that the S&P will close around 950 which would require a roughly 11% correction from current levels. Hussman makes the case more eloquently than I would so please read.
Hedging downside risk is like an insurance premium. You pay the premium but hope you'll not need the insurance. When you do, you're glad you kept making the payments. If we don't have the pullback I expect then you're return will be slightly below an unhedged portfolio but still positive. If we do have a correction, you won't be immune but will likely see less of a decline than unhedged peers and that will be worth the "premium".
