Stock market crash: Expert warns of 66% plunge, negative returns - Business Insider

Stock market crash: Expert warns of 66% plunge, negative returns - Business Insider: %22Oh%2C%20man.%20The%20unwinding%20of%20this%20bubble%20is%20going%20to%20be%20painful.%22%0A%0AThat%27s%20what%20John%20Hussman%20%u2014%20the%20former%20economics%20professor%20turned%20president%20of%20the%A0Hussman%20Investment%20Trust%20who%27s%20known%20for%20his%20persistently%20bearish%20views%20%u2014%20said%20in%20a%20recent%20client%20note%20in%20reference%20to%20today%27s%20stock%20market.%0A%0A%22I%20continue%20to%20expect%20the%20S%26P%20500%20Index%20to%20lose%20two-thirds%20of%20its%20value%20over%20the%20completion%20of%20the%20current%20market%20cycle%2C%22%20he%20said.%20%22That%20loss%20would%20not%20even%20breach%20historical%20valuation%20norms%2C%20but%20it%20would%20at%20least%20bring%20our%20estimates%20of%20long-term%20expected%20S%26P%20500%20returns%20closer%20to%20their%20historical%20average%2C%20in%20contrast%20to%20the%20negative%2010-12%20year%20prospects%20we%20observe%20at%20present.%22%0A%0AThe%20reasoning%20behind%20Hussman%27s%20call%20can%20be%20distilled%20into%20two%20distinct%20portions%3A%20market%20valuations%20and%20market%20internals.%20The%20way%20he%20sees%20it%2C%20long-term%20returns%20are%20steered%20by%20valuations%2C%20while%20short-term%20returns%20are%20carried%20by%20investor%20psychology%20through%20sentiment%20and%20penchant.%0A%0AHussman%20provides%20the%20following%20example%20to%20demonstrate%20his%20thinking.%0A%0A%22For%20example%2C%20investors%20may%20very%20well%20be%20willing%20to%20pay%20%24100%20today%20in%20return%20for%20an%20expected%20%24100%20cash%20flow%20a%20decade%20from%20now%2C%22%20he%20said.%20%22Sure%2C%20doing%20so%20will%20essentially%20lock%20in%20an%20expected%20return%20of%20zero%2C%20but%20nothing%20prevents%20rabid%20speculators%20from%20driving%20the%20price%20to%20%24110%20in%20the%20short%20run.%20In%20that%20case%2C%20investors%20will%20be%20thrilled%20with%20the%20current%20price%2C%20but%20they%20will%20simultaneously%20be%20locking%20in%20negative%20prospective%2010-year%20returns.%22%0A%0A