james22

Can valuation time indexing too. I guess. My point was if you are unsure if you can beat the market but unsure if you want to index, why not make the S&P 500 50% of your portfolio (or more or less)? If you only find one investment every one or two years, maybe the right answer is 80% index and 20% 2 or 3 names. IDK, just something to consider. Two reasons: asset location differences (restrictions, tax treatment) and asset classes/sectors preferences. I'm restricted to only a few attractive few index funds in my 401k, so value time there between TSM/TIM and TBM. I prefer index-like funds for SV, ISV, and EM classes and Energy and PM&M sectors and so value time between them and STT in my Roth IRA. I prefer dividend-paying individual stocks of a type (FRFHF) in my Roth IRA, adding when attractive. I prefer non-dividend-paying individual stocks of a type (BRK, MKL) in taxable, adding when attractive.

Can valuation time indexing too.

It is perfectly fair to question Hussman's reliance on "hard, historically reliable evidence." (After all, he didn't forecast the March 2009 FASB 157 change.) But it seems unfair to call him a permabear or question his duty to investors.

The reality is that my reputation as a “permabear” is entirely an artifact of two specific elements since the 2009 low, but that miscasting may not become completely clear until we observe a material retreat in valuations coupled with an early improvement in market internals. Despite my reputation in recent years as a “permabear,” I’ve actually had quite a variable relationship with equity risk across three decades in the financial markets, and that relationship has always depended on market and economic conditions. For someone who has been labeled both a “perma-bear” over the past decade, as well as a “one lonely raging bull” in the early 1990's (Los Angeles Times), I can't say that either description is fitting at the moment. One of the things that some forget is that we shifted to a constructive stance between those two crashes in early 2003, and initially moved toward a constructive stance after the market collapsed in late-2008 (see Why Warren Buffett is Right and Why Nobody Cares) until a parade of policy errors forced us to entertain Depression-era outcomes. My 2009 stress-testing miss and the awkward transition that resulted certainly injured my reputation during this uncompleted half-cycle. Still, having addressed that “two data sets” problem, I expect no similar stress-testing response in future market cycles. Meanwhile, I have every expectation that the current speculative extremes will end in tears for those inclined to dismiss hard, historically reliable evidence by mumbling “permabear.” In recent years, I've gained the reputation of a "perma-bear." The reality is that I'm quite a reluctant bear, in that I would greatly prefer market conditions and prospective returns to be different from what they are. People often like the idea of being part of an exclusive club, sometimes the more exclusive the better. As Groucho Marx put it, “I’d never join a club that would have me as a member.” With the percentage of bearish investment advisors recently plunging to just 14%, investment bears are certainly a rather exclusive group, mostly representing advisors who are considered “permabears.” What’s odd is how little affinity I feel with members of that group. Though I seem to be one of the better-identified members, those who actually understand our narrative in recent years should recognize that I stumbled into this clubhouse quite unintentionally. The fact is that I’ve become constructive or aggressively bullish after each bear market retreat in the past quarter century. The main difficulty began with my 2009 insistence on stress-testing our methods against Depression-era data, which cut short our late-2008 turn to the constructive side (see Why Warren Buffett is Right and Why Nobody Cares). When we shift our outlook over the completion of the current market cycle and begin encouraging a constructive or even leveraged stance, those who’ve incorrectly inferred that I’m some sort of “permabear” may become bewildered, or even believe that I’ve abandoned my investment discipline. The permabear label may be satisfying in a sort of “kick him when he’s down” kind of way, but it doesn’t explain the success prior to 2009. An alternative explanation for our challenges in this half-cycle is that I’m simply a permabear. But that’s harder to square with my being a fully-leveraged “lonely raging bull” in the early 1990’s, or with our strongly constructive shift (despite valuations that were still elevated relative to historical norms) in early 2003 as a new bull market was taking hold, and is also inconsistent with our similarly constructive shift after the market plunge in 2008. google: permabear site:hussman.com Reminiscences of a misidentified permabear In October 2008, after the market had plunged by more than 40%, our valuation measures indicated a clear shift to undervaluation. The challenge that emerged was not that valuations were rich, but that measures of what we call “early improvement in market action” which were quite reliable in post-war data were whipsawed like mad in the final months of 2008, as they were in the Depression-era. I leave everything I’ve written online – right, wrong, or neutral – and you can see us walk into that challenge in real-time by reviewing my rather constructive October 20, 2008 comment Why Warren Buffett is Right and Why Nobody Cares (note the section on early improvement in market action). Measured from the market’s peak to trough, we came out of the 2007-2009 collapse virtually unscathed, but we were certainly whipsawed in late-2008. The similarity of that market action to Depression-era outcomes, coupled with what I viewed as misguided policy actions, forced a stress-testing decision that I still view as a necessary and fiduciary response. The resulting ensemble methods address that "two data sets" challenge, and we've validated them in data from market cycles across history. Taking our present methods to that period (without training them on that data), sufficient improvement in market internals did not emerge until early 2009. The market conditions required to navigate both Depression-era data and post-war data are simply more demanding than in post-war data alone. Of course, in real-time we were working to address that "two data sets" problem, and those methods were not available to us. It’s quite easy in hindsight to assert that my insistence on stress-testing every aspect of our approach was unnecessary given improved valuations during the crisis. But it’s important to recognize that during the Depression, valuations similar to those of 2008 and 2009 were followed by an additional two-thirds loss of the market’s value. As for whipsaws, the Dow followed the initial 1929 crash by advancing fully 48% between November 13, 1929 and April 17, 1930, and then losing more than 80% of its value from there. In hindsight, what finally ended the credit crisis in 2009 was a stroke of the pen – the March 2009 FASB 157 change that replaced mark-to-market accounting with “significant judgment” – making the risk of widespread bank failures vanish through the magic of erasers and sharpened pencils. Fed interventions and troubled asset purchases did not end the crisis. Though Fed purchases of mortgage securities clearly supported the housing market, the other policies were largely an expensive sideshow. The “miss” that resulted in the interim of our 2009-2010 stress-testing is the real story behind my “permabear” reputation, because I doubt that anyone would think twice or second-guess our concerns about present speculative conditions in the absence of that miss. http://www.hussman.com/wmc/wmc140324.htm

Outperformance over ten-year periods is difficult, sure, but who cares? All that matters is end performance. Remember that the 2000-2002 market loss wiped out the entire total return of the S&P 500 – in excess of Treasury bill returns – all the way back to May 1996. Remember that the 2007-2009 market loss wiped out the entire total return of the S&P 500 – in excess of Treasury bill returns – all the way back to June 1995. Hussman

Always be skeptical of loud mouths. Especially if they're after your money. This guy is not properly incentivized to give you good market forecasts (this is apart from the fact that I think macro forecasting is **** anyway). I'm skeptical anyone who reads Hussman would consider him a doomsaying loudmouth.

You believe being early is the same thing as being wrong, Jurgis? Well if timeframe for prediction is not specified, it is just invalid prediction. Hussman has always specified the time frame as the end of the market cycle. It wouldn't be if he provided the time frame for his argument. And yet he - as most pundits - hides behind "it will happen at some point". Are not arguments demonstrated right or wrong at the end of market cycles? Remember: The 2007-2009 collapse wiped out the entire total return of the S&P 500, in excess of risk-free Treasury bills, all the way back to June 1995. So if I tell you that KO will disappear as a company, you'll consider me a prophet even though I'll have to repeat (probably for couple decades) that "oh shucks, I'm early, but I'm not wrong"? If the collapse of KO will wipe out all its returns from today, sure. But, hey, the end of the current market cycle will demonstrate Hussman right or wrong. He'll be considered an oracle if one would have done better following his advice than holding the S&P500 and not if one would have done worse. Not much for him to hide behind.

You believe being early is the same thing as being wrong, Jurgis? Hussman's point: "actually no, it’s really not." Or at least, it wasn't then. Let's wait and see. (I was right on tech in the 90s. Why has my performance since then been worse?)

As one of the few who anticipated both the 2000-2002 and 2007-2009 collapses (and having shifted in 2003 to a constructive outlook in-between), what I thought the film [The Big Short] particularly got right was just how excruciating the wait was before the crisis unfolded, even for those who expected it (see, for example, my November 2007 weekly comment Critical Point). Though I don’t take leveraged positions in credit default swaps, or sell bank stocks short, even refusing to take equity market risk in the later stages of that bubble was excruciating enough. One had to suffer fools parroting things like “being early is the same thing as being wrong” until the collapse demonstrated that, actually no, it’s really not. The 2007-2009 collapse wiped out the entire total return of the S&P 500, in excess of risk-free Treasury bills, all the way back to June 1995. http://www.hussmanfunds.com/wmc/wmc160104.htm

BRK @ $125

BRK @ $127

You plan to continually rebalance? At no cost?

Paying a tenth of 1% to track a benchmark seems very, very cheap. Fund: https://personal.vanguard.com/us/funds/snapshot?FundId=5702&FundIntExt=INT ETF: https://personal.vanguard.com/us/funds/snapshot?FundId=0920&FundIntExt=INT

Vanguard's Energy fund (VGELX)

DFA...

BRK @ $130

Kyle Bass: there is a "massive opportunity in energy." "If you are going to allocate capital for the next three to five years, you should do it now" into the energy space over the next 6 months.

5% Energy (VGELX), Hell or high water.

Would anyone not buy if fell to buy-back? A Hussman fan, I'm half expecting a crash (and so might expect to be able to later buy at better than buy-back), but believe I'll always have to buy at buy-back.

Our portfolio manager Cale Smith has nearly all of his family’s life savings invested in the Tarpon Folio. https://www.islainvest.com/portfolios/

Thanks for this, sculpin. Interesting.

Why hold anything but your highest conviction? Because no matter how convinced by Hussman I might be, against the possibility of a not-crash I hold some defensive socks too, knowing they'll drop in a crash, but knowing they'll do better than cash otherwise.

Was it a mistake? We only see one version of history. The smart money bought at -50% in the Great Depression too, only to see another -80%. Fairfax (and Hussman) may have rightly played the odds and just just been beat by a lucky draw. Yes, it was 100% a mistake. I expected them to load up and they didn't. I admit my mistake. I shouldn't have made assumptions about what they would be doing, instead I should have sold it and just bought them all directly. I didn't say they made the mistake. I said that I made a mistake in remaining with FFH under the assumption that they were loading up. I effectively only had 50% of my capital in the stock market when I had imaginings of much, much more.. Sorry, gotcha. But while I'd think it a mistake to remain with FFH assuming they were loading up in last month's dip (they've been pretty clear that's not the opportunity they've been waiting for), I'd not think it your mistake in early 2009 unless they were as clear they wouldn't be loading up - what were they communicating then? Because if clear communication important, it might be a mistake remaining with them today if you believe they proved themselves unclear back then.

Was it a mistake? We only see one version of history. The smart money bought at -50% in the Great Depression too, only to see another -80%. Fairfax (and Hussman) may have rightly played the odds and just just been beat by a lucky draw.

I hold BRK, MKL, and FRFHF. And always consider BAM, L, Y, LUK, GLRE, and TPRE. I'd probably add to BRK and FRFHF today (quality, valuation) but not to MKL or BAM (valuation) or L, Y, LUK, GLRE, or TPRE (quality). Edited to add: I'd consider OAK and PSHZF too, but don't want to deal with K-1 and 8621 forms.