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John Hussman remains bearish, again noting record-high corporate profit margins, and their...

John Hussman remains bearish, again noting record-high corporate profit margins, and their tendency to revert to the mean. He estimates the nominal return on the S&P to be 4.1% over the next decade, a slim margin over 10-year Treasurys that has only been seen near epic market peaks or during the 90s bull run. There's a lot of room between those 2 outcomes, what's a punter to do?
Comments (21)
  • bbro
    , contributor
    Comments (9319) | Send Message
     
    How about grind up in price to frustrate volatility paqlyers???
    2 Apr 2012, 08:14 AM Reply Like
  • Tschurin
    , contributor
    Comments (313) | Send Message
     
    Hussman would do well to follow this maxim, "“Have an opinion on what the market should do; but don’t decide what the market will do.” Considering how pathetic the returns of his Strategic Growth Fund are, it's amazing that he gets as much ink as he does.
    2 Apr 2012, 08:21 AM Reply Like
  • Conventional Wisdumb
    , contributor
    Comments (1802) | Send Message
     
    Tschurin,

     

    I always despise an ignorant ad-hominem especially from someone considered a competitor.

     

    Easy enough to check your assertions on his website or anywhere else but he has handily outperformed the S&P since inception in 2000 which not many PM's can say.

     

    http://bit.ly/H8I79X
    2 Apr 2012, 10:22 AM Reply Like
  • Tack
    , contributor
    Comments (12726) | Send Message
     
    CW:

     

    It's interesting to note that all of Hussman's advantage was attained in the 2000-2002 period because his 10-year annual return of 2.88% is almost identical to the SPX, which has gained 2.815% annually since April 1, 2002.
    2 Apr 2012, 12:21 PM Reply Like
  • Conventional Wisdumb
    , contributor
    Comments (1802) | Send Message
     
    Tack,

     

    Well considering 80% of managers underperform the S&P that's still a good performance and on a risk-adjusted basis he blows them away.

     

    In any event it's like comparing apples and oranges. He runs a low-volatility equity fund by design which means his drawdowns during sell-offs are far less than the market. He greatly outperformed during the 2008-09 cycle so it really is a matter of what you want in an investment.

     

    He expects to outperform during a full-market cycle not during specific periods of time and therefore he is not for everyone but he is good for a buy and holder who is prone to panic.

     

    I just object to an uninformed, nasty commentary based upon an a falsehood or a misunderstanding of how he manages money.

     

    If those who spent their time criticizing Hussman actually read what he wrote they might learn something especially when it comes to accurately forecasting long-term S&P returns which he does quite well.

     

    You can read his commentary without investing in his fund should you not like his approach.

     

    Good luck.
    2 Apr 2012, 12:35 PM Reply Like
  • bbro
    , contributor
    Comments (9319) | Send Message
     
    Hussman does not perform well in bull markets...in the previous
    bull market from 3/05/03 to 10/05/07...HSGFX was up 49%...SPY
    was up 103%
    2 Apr 2012, 12:41 PM Reply Like
  • Tschurin
    , contributor
    Comments (313) | Send Message
     
    Dear Wisdumb

     

    As you may not know, “ad-hominem” means “against the man” and I said nothing negative about Hussman personally [I don’t know him], merely about the results of one of his funds. I’d say that people who are ignorant of what words mean should be careful about accusing others of making ignorant statements.

     

    Secondly, I’m not a competitor in that I don’t run any mutual funds and in fact I had clients invested in Hussman’s Strategic Growth Fund [HSGFX] for some time.
    2 Apr 2012, 12:42 PM Reply Like
  • Tschurin
    , contributor
    Comments (313) | Send Message
     
    Dear Wisdumb

     

    Thirdly, it’s true that when the market crashes, as it has twice since Hussman started HSGFX, his relative performance viz the 500 is good [of course so has keeping your money in a money market fund]. And since the market crashed just as he started the fund in 2000, his performance since-inception is relatively good viz the 500. If however we take some neutral time period, say ten years, and compare his results to other managers they aren’t that great. I have a list of mutual funds that I’ve put clients in over the years and 40 of them have ten-year track records. HSGFX ranks 35th out of 40; that is nothing to brag about. His fund has basically done nothing over the past eight years. If you think that’s good investing then we probably will never agree.
    2 Apr 2012, 12:43 PM Reply Like
  • Conventional Wisdumb
    , contributor
    Comments (1802) | Send Message
     
    bbro,

     

    I can't believe you of all people would datamine to show someone in the worst possible light. That is dishonest.

     

    How about his performance from 2000-2003? or from 2000-2007?

     

    I'll answer that for you - he blew away the S&P during both of those periods. So yes you can say he is weaker in bull markets and better in bear markets and overall he outperforms assuming you stuck with him.

     

    That link I posted http://bit.ly/H8I79X, shows the performance and the worst you could conclude is that you might have done better elsewhere, but you certainly would have done a lot worse. Even the best money managers have periods of underperformance.

     

    I am puzzled by all of these attacks against Hussman. Why shoot the messenger?

     

    And for the record, I have never held one of his funds now or in the past.
    2 Apr 2012, 12:51 PM Reply Like
  • bbro
    , contributor
    Comments (9319) | Send Message
     
    Fair enough...From 3/05/03 to 3/09/09 HSGFX was up 39%
    and SPY was DOWN 8%...like i pointed out he performs best in bear
    markets....now if we go from 3/05/03 to Friday's close 3/30/12 it
    was HSGFX up 33%...SPY up 87%....Bottom Line Hussman is best
    if you have been long and then switch to Hussman as a bear market
    starts....problem is bull markets last much longer than bear markets
    and there so much better hedges out there now that buying his mutual fund.

     

    CW,,,i certainly am not a part of any of these personal attacks..don't
    give them any mind...
    2 Apr 2012, 01:02 PM Reply Like
  • Conventional Wisdumb
    , contributor
    Comments (1802) | Send Message
     
    bbro,

     

    ."now if we go from 3/05/03 to Friday's close 3/30/12 it
    was HSGFX up 33%...SPY up 87%"

     

    I didn't know that you were able to know exactly when a bull market begins before it happens. Please share your process with us.

     

    $10, 000 dollars invested in 2000 with Hussman is worth just under $20k today.
    The same $10k invested in the S&P at the same time is worth about $12k today.

     

    All you have proven is that returns are endpoint sensitive, the biggest scam going in financial marketing.
    2 Apr 2012, 01:12 PM Reply Like
  • Tack
    , contributor
    Comments (12726) | Send Message
     
    bbro:

     

    I just had to hit the cancel key because you posted a key point I was just about to make, i.e., that over time markets have a decided upside bias, so any investment persistently hedged to the downside will underperform over time. It might make some folks sleep better, knowing they won't suffer as much volatility, but they're paying a steep price for that "insurance," whether they realize it or not.
    2 Apr 2012, 01:13 PM Reply Like
  • bbro
    , contributor
    Comments (9319) | Send Message
     
    Fair enough again...sorry my data starts 11/21/00....From 11/21/00 to 3/30/12....HSGFX up 80%..SPY up 28%...VTSMX (Total market) up
    152%....I always like to look at performance in a full bull market and
    a full bear market....Obviously I don't know when a bull market begins
    but I use a software package I have had for almost 20 years to generate signals,,,very few signals....selection is of obvious importance (thus the difference between SPY and VTSMX)
    2 Apr 2012, 01:22 PM Reply Like
  • Tschurin
    , contributor
    Comments (313) | Send Message
     
    Dear Wisdumb

     

    You keep telling people to go to his website. I long ago studied his website quite carefully and Hussman’s stock picking skills are very good. However he ruins the benefit of that skill by keeping his foot on the brakes most of the time, by heavily hedging his market exposure [As you know, he discusses his hedging levels regularly]. That’s why I offered the quotation [attributed to Bernard Baruch] about knowing the difference between what the market should and what it will do. Because he seems to hedge as if he knows what the market will do and, for much of that time, he's been wrong, his fund's results have suffered and as a result HSGFX's performance relative to other investment options over the past decade has not been good. You can talk about market cycles all you want; a decade is a long time.
    2 Apr 2012, 01:26 PM Reply Like
  • Fin858
    , contributor
    Comments (462) | Send Message
     
    that's why i sell put options on my favorite companies. To capture that insurance premium that so many people are willing to pay.
    2 Apr 2012, 01:35 PM Reply Like
  • rukm
    , contributor
    Comments (14) | Send Message
     
    Hedged In
    Are you saying - this time is different?
    2 Apr 2012, 08:22 AM Reply Like
  • Conventional Wisdumb
    , contributor
    Comments (1802) | Send Message
     
    According to the market cap to GDP ratio, Buffet's favorite metric for broad valuation, Hussman is more optimistic:

     

    http://bit.ly/yXvIhT
    "As of today, the Total Market Index is at $ 14753.1 billion, which is about 98.3% of the last reported GDP. The US stock market is positioned for an average annualized return of 3.9%, estimated from the historical valuations of the stock market. This includes the returns from the dividends, currently yielding at 2.19%.
    As pointed out by Warren Buffett, the percentage of total market cap (TMC) relative to the US GNP is “probably the best single measure of where valuations stand at any given moment.”"
    2 Apr 2012, 10:25 AM Reply Like
  • WMARKW
    , contributor
    Comments (10250) | Send Message
     
    "The hope for continued high profit margins really comes down to the hope that government and the household sector will both continue along unsustainable spending trajectories indefinitely"

     

    Pretty Simple.
    2 Apr 2012, 12:46 PM Reply Like
  • untrusting investor
    , contributor
    Comments (9923) | Send Message
     
    WM,
    The NBR Business Report tonight showed that earnings pre-announcements for Q1/12 are pretty dismal. Negative about 90, Positive about 30, Neutral about 10. So negative earnings pre-announcments running at about 3:1 now. By far the worst earnings pre-announcements since 08/09. Will be interesting to see how the market holds up in April & May, but seems like 2012 just might mirror 2010 and 2011 and repeat a sell in May and go away type reaction yet again.
    2 Apr 2012, 08:00 PM Reply Like
  • Tack
    , contributor
    Comments (12726) | Send Message
     
    UI:

     

    Are you counting in 2012 on new:

     

    -- Japanese earthquake and tsunami
    -- Thailand floods
    -- end-of-QE anxieties
    -- fears that U.S. will default on its debts
    -- downgrade of U.S. sovereign debt

     

    If you're not, I might suggest that 2012 isn't likely to imitate 2011.

     

    P.S. When pre-announcements have been lowered, that just makes meeting expectations easier, not more difficult.
    2 Apr 2012, 08:37 PM Reply Like
  • Conventional Wisdumb
    , contributor
    Comments (1802) | Send Message
     
    I'll repost a comment I made previously because apparently we're all making the same points again.

     

    No point in defending Hussman during the bull-phase of a market because no one feels bad when stocks and markets are rising and no one gives credit to those that run contrary to the current thinking regardless of their track record.

     

    I read his stuff because I think he is the most intelligent quantitative analyst out there and he writes in a form that most people can understand with a little patience and effort which unfortunately is in short supply in today's 140 character attention span.

     

    No one has to take his investment advice but they should read his commentary especially if you manage your own money.

     

    By the way these were the opening paragraphs on his Nov 12, 2007 commentary:

     

    "Expecting a recession

     

    In recent months, I've repeatedly noted that while recession risks were gradually increasing, there was not sufficient evidence to expect an imminent economic downturn. Most economists still believe this. On Saturday, the consensus of economists surveyed by Blue Chip Economic Indicators indicated expectations that growth will be sluggish into next year, but that there will be no recession. Unfortunately, the economic consensus has never accurately anticipated a recession. For my part, the outlook has changed. I expect that a U.S. economic recession is immediately ahead.

     

    This conclusion is based on the combined weight of several classes of indicators, including asset prices, reliable survey measures, and measures of labor market activity. One way to understand this change in outlook is to examine our 4-indicator “rule of thumb” – a simple composite of readily obtainable indicators that have been observed in every U.S. recession. It is a syndrome of conditions that are logically and historically related to economic weakness, none particularly informative when observed individually, but important when they occur together."

     

    That's around three weeks after the S&P hits its all time high. I would say that was prescient and incredibly contrarian. Was it a fluke?

     

    Well since he backs up his reasoning with facts and figures, I would say no. It wasn't a guess based upon feelings.

     

    The good thing about Hussman is that he is completely open about his record and his writings are archived all the way back to 2000.
    2 Apr 2012, 12:59 PM Reply Like
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