JMKel: The problem is......
The most laughable words in the midst of a secular bear market (which is still what we're in until proven otherwise) are: "It's a stockpickers market". I don't know how many of the bozo analysts and mutual fund managers such as Cardillo and Friedman have been spouting this nonsense for the past two years. Look at their returns for the past 12-24 months to see how successful their strategy of bottom-fishing in a bear market has been.
Regardless of valuations (and they are correct in this regard--
there ARE many undervalued stocks out there, although the general market is NOT undervalued by historical measures), when the market is in a downtrend, it drags everything down with it, undervalued stocks as well as overvalued stocks. The stocks currently at book value or cash value may decline less than their peer indices, but they still go down. It is little comfort if your undervalued stock declines 10-15% while the market drops 25-30% -- you still have a loss of 10-15%.
Hussman's point is that solid, LT bull markets do not start from current valuations based on the past 100 years of stock market history. If you want to try playing it as a trade, that's fine. However, the history of ALL bubbles is that not only does the market return to the historic mean valuations, they ALWAYS decline further than the mean. I believe Hussman and other bears are correct when they say that we have several years of slow, steady declines ahead of us.
