Either we're talking about 'timing the market' or we're forgetting about that topic entirely and just talk about 'buying cheap stocks with a margin of safety and safe dividends'. You guys are jumping back and forth between disciplines.
Well, great looking companies, with great management, and all that other great stuff often have that reflected in their price. I would suggest Apple as a case in point today (though not trading at an exorbitant PE). WMT, CSCO, MSFT, INTC as cases in point circa 2000. Gods 11 years ago, the managements of these companies are now depicted as the gangs that can't shoot straight. There are fortunes to be made in decent businesses that are going through a rough patch or whose board interests and shareholder interests may have temporarily diverged or are struggling with growth. Guys like Price, Ackman, Einhorn, Buffett, Marks, Rogers have made billions by recognizing this, and, of course, all became big enough to occasionally influence the necessary changes.
'He'll even buy a Street favorite if he isn't paying a big premium for things that haven't happened yet. He mentions Polaroid. "At some price, you don't pay anything for the future, and you even discount the present. Then, if Dr. Land has some surprises up his sleeve, you get them for nothing."' Can anyone think of current businesses that are offering the future for free, or even discounting the present? At the risk of repeating myself, AAPL is trading less than $300 per share once you strip out cash, and should earn $28 this year. <11 times earnings is cheap on present earnings, and completely discounts any future growth prospects. Any others?
We're saying that lots of stocks are very attractively valued at present, especially compared to the alternative. Therefore, the best move is to invest in them, rather than say bonds or cash, or even the index.
<15 times earnings (<12 times once cash is backed out) is not comparable to 50-100 times earnings. With identical business prospects, the former is a screaming buy and the latter is a screaming sell. And the whole point of crashes, bear markets, and such, is precisely that they do throw up excellent companies at attractive prices. You either get value at dirt cheap prices, or prime growth stocks selling like a run-of-the-mill value stock (AAPL at <10 times ex-cash forward earnings is a good example - even MSFT would be cheap at that price, and MSFT is ex-growth). The current street sentiment to AAPL (and large cap tech in general) is one of extreme scepticism as to the sustainability of their earnings growth, the complete opposite of 2000. Otherwise, they'd be at 30-40 times earnings, like high growth stocks often trade at. Yet, the earnings have showed no signs of slowing, in fact they keep beating spectacularly, and the stock keeps outperforming the S&P (as it has done during this crash). When street sentiment is one way, and market action and fundamental data points are the other, you go with the latter - on big size. Divergence between reality and sentiment is where the biggest opportunities lie.
That can be looked at 2 ways. I don't know anybody who doesn't have a house full of apple products and an investment portfolio loaded with apple stock. When everybody loves the products, loves the stock, and yet the PE remains at 15, maybe that's as good as it'll ever get. Apple may do just fine post-Jobs, but I am unable to buy anything so trendy (although I own an apple laptop and desktop). I'm seeing equally tasty stuff elsewhere and will just have to leave profits on Apple shares for the rest of the planet to have.
FWIW I believe its quite likely Hussman has removed his hedges during this panic and is probably fully long right now. He traded like this in the past
The argument is very simple - you can put your money in cash (0%), Treasuries (2.3%), corporate bonds (3-6% depending on credit risk), junk bonds (7-9%), or equities (6-10%+). Given those prospective returns, a healthy allocation to equities seems to make sense. It is not a matter of being forced to buy. It is a matter of having money to invest, and choosing which investments offer the best trade-off of return vs risk. Every investment has risk, even cash (can lose to inflation, and find prices running up without you). I don't ignore the possibility that the next couple of years may offer much better buying opportunities. I just can't predict that reliably, all I can know for sure is what the current opportunities are. If equities offer more attractive opportunities relative to the risk involved, then it makes sense to put in a sizeable allocation to them. Any market except cash can always go down significantly in price. And even cash has risk, because inflation could soar along with asset prices. So your argument about "it might be better to wait" can be applied to any investment at any time. The chance that prices may be significantly lower in future is offset by the chance that prices may be significantly higher in future - and in either case, I will be earning dividends on my stocks, while you are earning 0% on cash.
But prices were only 15% or so lower than when he was saying equities suck. So the return is only 17-20% higher. If return X sucks so bad as to have no exposure, then return 1.2 X is hardly that appealing either. If Hussman went 100% long during the crash, he is either a logically inconsistent hypocrite, or is operating on market timing rather than valuation. More likely IMO (assuming he's consistent) is he went somewhat long, which means he is waiting for a 1932 before getting fully long.