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‘Trap door under the market’ could slash S&P 500 by two-thirds, warns fund manager

John Hussman is at it again.

Of course, the fund manager’s detractors would be quick to tell you, he’s been at it again, wrongly, since the Dutch East India Company went public.

OK, in his defense, it hasn’t been that long. And Hussman has earned some street cred along the way with some strong calls, including nailing the market collapses in 2000 and 2008. In fact, his fund surged to $6.7 billion in assets under management in 2010, before the weight of his misfires brought that figure down to $360.5 million over the ensuing seven years, according to the Wall Street Journal.

So, why do we care about his latest end-of-times outlook?

Maybe we don’t. But after an ugly month like October, doomsayers like Hussman just might resonate a bit more with skittish investors looking for their fears to be validated.

Monday’s early action is only raising more questions.

In our call of the day, the president of Hussman Investment Trust reiterated his longtime stance that there is a menacing “trap door under the market,” which could lead to the S&P 500 SPX, -0.92%  losing two-thirds of its value.

“I have little question that Federal Reserve policy has again produced a bubble that will have extraordinarily disruptive consequences,” he wrote. “The advance of recent years has produced a toxic combination of extreme valuations in every conventional asset class, coupled with a breathtaking mountain of low-grade debt issued by Wall Street to satisfy the yield-seeking speculative demand of investors.”

Hussman, a former professor at the University of Michigan with a Ph.D. in economics from Stanford University, says there could still be some wild moves to the upside before the crash he’s been predicting finally comes through.

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