Do Foreign Profits Explain Elevated Profit Margins? No. 

John P. Hussman, Ph.D.

We continue to view stocks as strenuously overvalued, but that alone does not drive our investment stance. What concerns us beyond valuations is the full ensemble of overvalued, overbought, overbullish conditions, coupled with textbook speculative features (soaring margin debt, heavy issuance of low-grade “covenant lite” debt, heavy initial public offerings of speculative companies), and growing internal divergences in price action and leadership. Our avoidance of market risk, and tightly hedged investment stance, does not reflect expectations of immediate market losses in this specific instance, but instead reflects the experience of severe average losses when similar conditions have been observed in a century of historical data. 

This time may be different. That is certainly the perennial argument, and at least in recent years, enthusiasm about quantitative easing has made it so. Still, we don’t observe any mechanism by which quantitative easing affects the economy or stock prices except by depriving investors of safe yield and making them feel forced to reach for yield in more speculative assets. This is essentially the same process that created the housing crisis, and we view the speculation in equities as equally severe today. Our concerns about market risk at present should be taken in the context of our great optimism about the prospects for strong investment opportunities over the completion of the present market cycle. The Hussman Funds remain defensively positioned in equities, with a moderately constructive stance toward Treasury securities and precious metals shares.

DYI Comments:  What John Hussman is saying, nobody rings a bell at the top.  It is better to look very stupid when these conditions prevail than really stupid after the losses begin to pile up.
Of course the rest of his article is always worth one's time.

DYI