You know that friend who always predicts doom and gloom? The one who’s been saying “the market’s gonna crash” since 2010? Well, meet John Hussman – Wall Street’s most famous permabear who actually called the 2000 dot-com crash and the 2008 financial meltdown. And guess what? Even he’s starting to crack.
In his latest monthly commentary (yes, he still writes those), Hussman dropped a bombshell with a title that sounds like a therapy breakthrough: “How I Learned To Love the Bubble (Even Before it Bursts).” I mean, when your career is built on being the guy who says “this won’t end well,” admitting you might need to play along is pretty huge.
Here’s the deal: Hussman has been warning about “trap door” conditions for years – basically when stock valuations are so ridiculously high that any bad news could send everything tumbling. His favorite metric (the ratio of total market cap to revenue for non-financial stocks) is literally at higher levels than 2021, 2000, and even 1929. Yeah, that 1929.
But here’s where it gets interesting. While Hussman’s been sitting on the sidelines with his doom-and-gloom predictions, the market’s best days have been happening during these exact “dangerous” periods. Since 2020, when valuations have stayed consistently bonkers, these explosive up days have been showing up about 15% of the time – and they’ve accounted for more than half of the S&P 500’s total returns.
So what’s a permabear to do? Hussman basically said, “Fine, I’ll play your stupid game.” He’s reduced his downside hedges to allow for more upside potential, even during what he still believes are bubble conditions. It’s like finally admitting that maybe, just maybe, you should buy Bitcoin even though you think it’s digital tulips.
“I recently came to the realization that I’ve been discriminating against the bubble,” he wrote. Translation: “I’ve been so busy being right about valuations that I forgot about making money.”
Don’t get too excited though – this isn’t Hussman turning into a raging bull. He’s still convinced we’re in a speculative bubble that will eventually collapse and cause “a great deal of suffering.” But he’s decided to “find and cultivate roses here and now, even amid what we are convinced is garbage.”
Think of it like this: You’re at a party you think is going to end badly, but instead of leaving early, you decide to at least grab some free drinks while you’re there. You’re still planning your exit strategy, but you might as well enjoy the ride.
For anyone hoping Hussman would turn full bull as their signal to sell, he’s got bad news: “I’ll gently suggest that the title of this comment may be as much as you can ever hope to get.”
So there you have it – even Wall Street’s most famous pessimist is learning to dance while the music’s still playing. Just don’t expect him to stop watching the exits.