What a great article! http://usmarket.seekingalpha.com/article/27566 John Hussman: Investing Like Rip Van Winkle Posted on Feb 20th, 2007 Excerpt from fund manager John Hussman's weekly essay on the U.S. market: Papa Van Winkle -- asleep beneath a shady tree. He's made just 11 trades in a half-century. He falls asleep for years at a time. I'd never recommend his approach in practice -- there are far better ones, with less risk. Also, it would be excruciatingly difficult to live through at times, if you were awake, because it would seem that you were missing opportunities of a lifetime. Nevertheless, old Rip has come out pretty well over the years. He's outperformed the S&P 500 since 1960, 1970, 1980, 1990, and even over the past decade. And though he's earned over three times what the S&P 500 has achieved, including dividends, his deepest pullback over that period has been less than half of what the S&P 500 has periodically lost. He slept through most of the 1973-74 bear market, through the '87 crash, through the 2000-2002 bear market. Shhhhh. He's asleep now too. What's Papa Van Winkle's secret? Simple. He doesn't overstay his welcome in overvalued markets. Once the price/peak earnings multiple on the S&P 500 hits 19, he looks for the most minimal confirmation to get out -- either a decline in the S&P 500 below its 10-week moving average, or a drop in investment advisory bearishness (Investors' Intelligence) below 30% bears. Then he goes to sleep. Once he does, he snores through everything -- even improvements in valuations -- until the S&P 500 drops 30% from its highs on a weekly closing basis. No less. Sometimes he sleeps for years on end. Sometimes he misses enormous short-term advances. No matter. They're never retained by investors anyway... The Rip Van Winkle strategy illustrates an essential point: advances in overvalued markets are regularly given back at great cost to investors who overstay, and can be avoided at no cost to long-term investors. I believe that there are ways to capture a reasonable portion of such advances at controlled risk. But there are also times when the attempt to capture speculative gains in overvalued markets would demand too much precision and leave risks poorly controlled. At those times, investors can and should sleep through them (or at least hedge their portfolios), comfortable that any missed, incremental market gains are unlikely to be retained over time.