Analyste de Boston

John Hussman: Risk Management and Convex Return Profiles

Dear GordonG,
Thanks for "doing our homework" and showing how wrong Hussman has been as a perma-bear for 15 years.

I emphatically agreed with his rationales (the ones I read, from 2002 on) on the fundamentals, but I DISAGREED on how to invest until the RE mkt began collapsing. Investors truly focused on fundamentals were punished until the Great Bear - they may be punished more, for awhile, for their prudence & discipline.

Sad to admit, but true!

On Nov 03 07:38 AM GordonG wrote:

> Deseret News, The (Salt Lake City, UT) - June 12, 1994
>
> NEWSLETTER SAYS STOCKS ARE A BEAR
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A Tale of Two Markets: Overvalued Stocks and the Declining Dollar

The Fed's & Treasury's E-Z money policies are designed for one, and only one purpose: to save Wall Street's *ss. They "bailed" out GS and the investors in a Reaganite version of Sprinkle Down Economics - and Main Street loses again.

Given the "doubling" of the monetary base announced early this year, it was a no-brainer that a new bubble would form first & fastest in the riskiest, most speculative (paper) investments. That's Wall Street's product to SELL, after all.

Starting from 1971, with REAL inflation and including the monetary base DOUBLING in 2009, Gold is still "cheap" @ UNDER USD$1,200. (in 2009 Dollars.)

Where to Get 50X Leverage on Stock Indices

Since this is the 'random thread of digressions,' has SA figured out how to BAN the spammer Cretin? Can't they just block his Turkish IP ?

Beyond GLD: Four Alternative Gold ETFs

This is a confusing typo:
"while almost all of GDXJ consists of large cap firms" should read
"while almost all of GDX consists of large cap firms"

I can think of one very good reason to invest in GDXJ and NOT GDX. It should be obvious to all.

If you invest in country funds like SA or Oz or other commodity producer/sector ETFs/MFs, you probably already have significant to the major miners!

OTOH, it's very unlikely diversified investors with 10-20 other ETF investments would have any appreciable exposure to the junior miners.

How risky is GDXJ, is the overriding question? I'd suppose that's an aggressive play, perhaps only suitable for long-term investors.

JUNIOR MINERS FOR DIVERSIFICATION, in LONG TERM PORTFOLIOS.

Advisors Are Hesitant to Jump on ETF Bandwagon

It makes sense that - after a huge Bear Market & collapse - advisors affirmatively answered they MIGHT use ETFs more in coming years. They should 'look' to make changes; that doesn't mean they will, either.

I'm not surprised 55% use ETFs now; but I am shocked (of that 55%) that's only 5% of their portfolios. What %age AUM (in the 55%) is that, btw? Bet their clients lost big-time in the 2007-09 Great Bear, and will suffer again if it re-commences in 2010 or 2011 !

It appears advisors are moving verrrry slowly into these index products. Clients will regret that! Presume ETF exposure is overwhelmingly in commodities, currencies, and niche sectors (like KOL, PKN, WIP, etc.) where no mutual fund is available, from the limited info presented here. 5% ? Wow, that's missing the boat.

The average 2020 lifecycle fund investor is still DOWN -24% since 10/9/07. Going forward, s/he needs a +32% return just to break even. Assuming bonds hold steady, that's an estimated +44% gain in equities from here. Can that happen for mutual fund owners, without a Stimulus 2?

Don't count on it.

Producer Prices Bottoming

Gasoline prices UP +62% YTD (10 months)? A massive now-undeniable gold signal, UP +50% for 12 months?

Can we examine the last five times these synchronous events appeared, and look at the NEXT 24 months? 1972-75, 1978-80, 2006-08 ... is that it? Greenscam's "magical moment" notwithstanding (1986-87 witnessed weaker oil prices), does anyone else get that sinking feeling in the stomach?

Two Great Bounces: 1929 vs. Today

Should we care more about 1929 or 1907?

I find Chris Ciovacco's analysis more informative, if you must stare at a chart:
www.marketoracle.co.uk...

John Hussman: Risk Management and Convex Return Profiles

Hussman is BRILLIANT, but he jumped in waaay too early last Fall. Pity he didn't follow his own logic & calls (I thought I did!) with more certainty. My Portfolio ended up +15% for 2008.

His Growth Fund (HSGFX) got badly burned, and he turned conservative at the most inopportune time! For 12 Months, his fund is DOWN -16%, while the S&P500 (SPY) is UP +8%. (My Model is UP +71%, and clients are gladly cycling some gains into PM bullion.)

Now Hussman is hedging his bets on the 'purported' rally... or answering performance concerns of investors? Hard to tell, but catch-up is wicked painful!

Emerging Markets ETFs Still Have Room to Grow

The biggest shocker in last September's decline, for asset allocators, should be how well EM equities performed. Usually "the most risky" asset class, they didn't do much worse than the broad US market indices overall.

The next big swan dive will probably show EM to be a marginally better investment on risk metrics than US equities, even better if there's a Dollar crisis included.

It's not decoupling but entails a radical reorientation of our VAR.

2 New Ways to Hedge Inflation with ETFs

I like Tom's articles but wonder if this is a (paid?) puff piece

GRES is the first global resources hedged ETF : how is it "hedged" exactly? It sounds like a F-o-F commodity producers index. Fine, but I don't even see that GRES includes commodities, which might theoretically hedge the equity portion.

This article raises more alot more questions than it answers, unfortunately.
Grade: F

Why a Gold Bug Isn't Buying Gold Now

I don't look to Gold for high Alpha, but rather low Beta.

I'm not a chartist, and as an asset allocator I've struggled to understand PMs for many years. I intuitively knew my colleagues were all wrong (dismissing Gold altogether), but I don't buy the wild optimism/dire pessimism of gold bugs either. I'm also opposed to thinking of Gold as a speculative investment; rather, it's just a hedge against a worsening financial & economic picture.

What percentage, PMs? I simplify this answer with the retort, "Whatever serious likelihood you'd ascribe to a Dollar Crash." (That's your MINIMUM, in bullion.) I also favor cycling 30% of Equity Market gains into PMs, after your paper portfolio gains +25%, +50%, etc. My rally Model is UP almost 60% since 3/9/09.

Asset allocation is a discipline, and I'm not so concerned with timing or today's prices (which will be irrelevant numbers after hyperinflation hits.) Gold is UP 50% since 3q07... while the money supply is UP +115% !. On that USD-relative basis, Gold would still be at discounted at $1,400./oz. So it's "cheap" now.

If the value of your paper currency will be debased & inflated in the near term, why not begin moving into hard assets with discipline? Temporary price fluctuations are a small inconvenience for the security of REAL value in bullion. As a wedge in the asset allocation, 10-20% sounds reasonable for an older, conservative investor.

I agree with the author in favor Palladium too: I suspect (fear?) we'll see that metal go parabolic within 12 months.

ETFs That Get Hit the Hardest When the Dollar Jumps

Did the nearly $2bln in Galleon funds just liquidated have ANY effect at all?

In Search of Healthy Currencies

There is no alternative to the Dollar NOW. Everyone knows this (or should) and until something is in the works that's the Devil-We- Know.

Don't presuppose there will BE no alternatives going forward, that's absurd. But it won't be any fun getting there, either...

Just as some pretend "no one" anticipated the catastrophic collapse, there's a peculiar anglocentric delusion the US Dollar is somehow immune to the Ultimate Crisis. Study history, folks!

The circumstances of dead fiats can be enlightening: the reasons are varied.
www.dollardaze.org/blo...

I'll offer a prognostication here: if we have another deflationary crash within 2-3 years, that probably won't kill the Dollar. But the NEXT one probably will.

Until then we trade, trade, trade ... and cycle profits into the barbarous relic!

ETF Securities Plans a Physical Palladium ETF

Palladium was still trading near it's 10 year lows when I screeched at clients to BUY, BUY, BUY the bullion back in April ($USD 230./oz) Prices being relative, Palladium was cheap then!

1) In 1982-83, the avg of USD$ 87./oz was the 25 year LOW: that's $134. in Jan 2009 inflation-adjusted (CPI) Dollars. In REAL inflation-adjusted Dollars, that's more like $154.

2) Palladium was trading as low as $164.-179. in December-January, that's our current floor. If the historic avg price was about $130. (1983-97) that's about $173. in Jan 2009 inflation-adjusted (CPI) Dollars. In REAL inflation-adjusted Dollars, the historic range of $130. more like $219. In 2009, Palladium was trading near $220. until mid-May.

3) For the last decade or so (1997-2009) the avg price was $335. Palladium is trading at that level right now, so it still looks reasonably priced relative to historic averages.

Betting on Natural Gas, Part II: Investing Ideas

There's no reason you can't drive a natgas-powered car TODAY, if you live in many metro USA areas.
gas2.org/2008/04/29/na.../
www.weststart.net/ccm/...
www.afdc.energy.gov/af.../