John Hussman has issued a mea culpa in his latest missive. He managed to avoid the bear market but has also completely missed the recent bull market. He blames his underestimation of investors willingness to return to risk taking. In other post-bubble environments it took longer before investors embraced risk again.
I must disagree with John Hussman in what his mistake was. By his own estimate, the fair value of the S&P 500 was 900 around the time of the bear market lows, using normalized profit margins and normalized P/E ratios. However, he thought that the market would get even more undervalued because after past bubbles that is what occurred.
At the bear market lows the S&P 500 was nearly 25% below John Hussman's own estimate of fair value and he did not add any market exposure. He is managing long term money in a mutual fund and there is little excuse not to have any market exposure under those conditions, especially when his main guide is valuation.