Be Very Scared

If you are long stocks despite John Hussman’s warnings, here is a warning you should take very, very seriously.

“Stocks are very cheap,” Greenspan said today at the Bloomberg Washington Summit hosted by Bloomberg Link, citing “a very low price-earnings ratio.”

“There is no place for earnings to grow except into stock prices,” said Greenspan, who served as Fed chairman from August 1987 to January 2006.

This is a man whose forecasting ability is almost magical – he is consistently and reliably wrong. On the other hand, hear from David Rosenberg, who has been pretty consistently correct:

What we have on our hands right now is a recovery built of straw instead of bricks. An economic expansion and bull market built on rampant expansion of the Fed and Federal governments’ balance sheet is neither sustainable nor desirable. I am convinced that we will, before long, be replaying something along the lines of the reversal of the tech mania and the reversal of the housing mania, which were equally unsustainable.

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