|An Academically Credentialed Money Manager Issues Warnings About The Equities Markets|
|Wednesday, April 25, 2012 14:53|
The new Edelman report says that 68% of investors put their faith in academics. Technical experts are a close second at 66%. So if an academic starts a money management firm, how valuable would they rank his advice?
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In the case of portfolio manager John Hussman, Ph.D., the advice would be to get completely out of the equities markets. He bases his view on metrics he believes investors are not seeing, especially for equities performance over the next year and a half or so. Stated bank earnings may include reductions in loan loss reserves; distressed values in the bonds of debtor nations have been also been counted as earnings.
Both of these reporting twists can mislead investors about the quality of the entities behind them. And Hussman says it’s only a matter of time before investors will no longer tolerate the easy money policy the Fed is trying to maintain. With the Fed’s own portfolio leveraged at a 50% level, a rise in interest rates could jeopardize its own liquidity. Through the voice of an academically credentialed money manager, investor confidence may get the chance to be vetted.