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The danger of a bear market.

With recent disappointing U.S. economic reports confounding expectations that the U.S. economy is on the mend, John Hussman's bearish views of the market are sounding increasingly urgent. "Run, don't walk," is the approach he gives in his latest weekly letter to clients.

Okay, he's referring specifically to speculative holdings here. But by "speculative" he's not necessary talking about just penny stocks – but rather any stock you don't intend to hold through a market cycle. As he explains:

"One way to gauge your speculative exposure is to ask the simple question – what portion of your portfolio do you expect (or even hope) to sell before the next major market downturn ensues? Almost by definition, that portion of your portfolio is speculative in the sense that you do not intend to carry it through the full market cycle, and instead expect to sell it to someone else at a better price before the cycle completes. With respect to those speculative holdings, and when to part with them, my own view is straightforward. Run, don't walk."

Mr. Hussman has been bearish on the markets for some time, which looked awfully painful during the stock market's tremendous gains at the start of the year and an onslaught of upbeat economic news. Now, though, U.S. economic news has begun to stumble, with initial jobless claims in particular ticking higher in recent weeks.

While some observers attribute this backup in claims to distortions caused by the Easter holiday, not to mention just plain old volatility, Mr. Hussman believes there is something more serious at work here.

"We're already seeing deterioration in economic data, but it remains largely dismissed as noise," he said. "An acceleration of economic deterioration as we move toward mid year would be more difficult to ignore."

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