Hussman on Solvency Issues

Thanks again goes to Nathan. He is on fire. I read Hussmans stuff on and off. This writeup I really liked.

http://www.hussmanfunds.com/wmc/wmc080317.htm

What we observed last week is clearly a liquidity problem – the solvency problems are only beginning

Yep the solvency issue has a ways to run.

But don't be too hard on Bernanke. The lending binge of recent years (both in the mortgage and private equity markets), coupled with enormous growth in the Federal debt, has left the Fed in a no-win situation. Bernanke's problem is that he came into his role as Chairman believing too strongly in the ability of the Fed to affect the real economy.

Yeah and people still have undying faith in the Fed. You will get capitulation with the Fed does something dramatic and Wall St. finally says who cares.

This below was my favorite part.

Good investors may change their investment exposure substantially over the course of a market cycle, but they don't imagine they can forecast short-term outcomes. Good investors put themselves in the position of being able to respond instead of being forced to react. We'll take our evidence as it arrives. For now, we remain defensive.