John Hussman: The Muni Market Has Fallen Off “The Cliff” And Equities Are Next
Nov. 15, 2010
In his latest weekly note, John Hussman highlights last week’s muni bond plunge, and warns of a coming cliff dive:
Last week, the return/risk profiles that we estimate for stocks, bonds and even gold declined abruptly, based on the metrics we track. We don’t know how long this shift will persist, but at present, investment risk appears to have spiked considerably, and our estimates of prospective market returns have deteriorated. The abruptness of the shift in market conditions is exemplified by the weakness observed in Irish, Greek and Spanish debt, as well as the plunge in municipal bonds (particularly, as Barry Ritholtz observes, in CA issues – see the chart below), which was steep enough to erase nearly a full year of progress in just three days.