Looks like Hussman should have a no hedge option?

[flesh]

https://www.gurufocus.com/news/580392/john-hussman-hedging-and-opportunity-costs

 

It appears to me that you have to assume much more frequent corrections than history provides to do well with excessive hedging. At least his AUM has been killed, if I was him, I'd feel horrible. Alternatively, I'd write weekly letters to keep my delusion alive. He could create two separate funds, one long, one short, and give options. However if he did this, he'd have to come to grips with reality, that evidently wouldn't do.

 

Absent the value nirvana period of out performance during the dot com bust, his ex hedge results would be quite mediocre although above average.

 

I don't want to be negative but he holds a unique space in which he's frequently referenced/held in high esteem yet steals money from his mystified investors..... I don't think that's too strong a word. It's difficult to find greater atrocities even if his hedges created a 50% out performance next year, excluding those temporarily lucky fresh investors.

 

Finally, he could offer a t-bill fund in which the mgmt fee is = to the t-bill return and give his investors some relief. Hopefully, he wouldn't hedge the US govt...... one can dream.

 

 

 

 

 

 

 

 

[Gregmal]

Pretty remarkable if you extract some of the numbers. His longs outperform generally, so his short book must be running -30% or so in 8-9 months. Pretty brutal.

[james22]

I don't want to be negative but he holds a unique space in which he's frequently referenced/held in high esteem yet steals money from his mystified investors..... I don't think that's too strong a word.

 

Yeah, steal is too strong a word because his investors aren't mystified - he is very, very clear his concerns and actions.

 

It's difficult to find greater atrocities even if his hedges created a 50% out performance next year, excluding those temporarily lucky fresh investors.

 

Have you seen how other value investors are doing in this market?

[Cigarbutt]

-Potential perspective of the investor who would want to buy units in an investment fund.

 

Did they have access to a valid description of the fund's market cycle thesis and the associated explicit use of (costly) hedges?

Isn't the AUM curve proving the survival of the fittest theory if the funds are disconnected from reality?

 

-Potential perspective from the value investor watching this.

 

Hasn't it been shown that, in general, fund investors buy funds at relatively high levels and sell funds at relatively low levels (Malbar studies et al)?

Doesn't that mean that one should look [glow=red,2,300]prospectively[/glow], for a specific idea, to assess the potential value going forward?

If the return curve shown in the last few years would be for a specific firm, wouldn't that attract the attention of a hungry contrarian value investor for potential value?

When we smell potential opportunity and when we decide to go in, isn't usual to average down (for some time) before relative positive outperformance?

 

-Concluding remarks.

 

I am not saying that investing along Mr. Hussman since 2009 has been a good idea. The answer is clear.

I am not even stating that investing along him is a good idea now. But it could be.

I am just saying that the idea is relatively better now.

How better? That is the question.

The ironic thing is that the potential outperformance could occur at a nadir point for AUM.

 

Investment returns are skewed.

The challenge is to be on the right part of the curve.

 

[Tim Eriksen]

His performance wasn't even very good from 2001 to 2005 when value investors made a killing.  Glad I have never wasted time following him.

[Guest]

Here are the results from 2001-2005. I'd say these numbers are pretty good (or great even).

 

For his main fund (strategic growth) from Jan 1st 2001-Dec 31st 2005, a $10,000 investment would have turned into about $17,600 vs $10,275 for S&P 500. SEQUX  would have been $14,124. Average Large Value fund would have been $11,878 and DODGX comes in at $16,871

[Cigarbutt]

Appreciate that you took time to describe a valid point.

A lot of noise. Need to filter.

To outperform, one has to find the pockets of value.

Timing does matter as being early can be equivalent to being wrong (?last part of the article from the first post).

 

I'm not saying that 2017 is 1929 but here's a potentially relevant quote from someone sticking his neck out and commenting on waste.

 

"The Board thus found itself subjected to a cross fire from two opposing camps, one blaming it for meddling too much, the other for not meddling enough. To cool observers it was clear beyond doubt, first, that the Board's attempt to bring about a loan contraction without adequately increasing rediscount rates had proved an impracticable and wasteful experiment, and second, that unless a more effective course were pursued the country was headed for a most serious catastrophe. What my own thoughts and apprehensions were in the matter I laid down in a statement published March 7th, 1929, a reprint of which will be found as Appendix ThirtySeven. This statement is referred to, not for the doubtful satisfaction of seeing one's views vindicated, but in order to show that it was entirely possible, indeed easy enough, at that time to foresee what inevitably had to occur unless we promptly mended our ways." (my bold)

 

From Paul M. Warburg

The Federal Reserve system its origin and growth  1930

 

Yeah, probably off-the-mark and need to be shouted down.

 

[Sharad]

https://www.gurufocus.com/news/580392/john-hussman-hedging-and-opportunity-costs

 

It appears to me that you have to assume much more frequent corrections than history provides to do well with excessive hedging. At least his AUM has been killed, if I was him, I'd feel horrible. Alternatively, I'd write weekly letters to keep my delusion alive. He could create two separate funds, one long, one short, and give options. However if he did this, he'd have to come to grips with reality, that evidently wouldn't do.

 

Absent the value nirvana period of out performance during the dot com bust, his ex hedge results would be quite mediocre although above average.

 

I don't want to be negative but he holds a unique space in which he's frequently referenced/held in high esteem yet steals money from his mystified investors..... I don't think that's too strong a word. It's difficult to find greater atrocities even if his hedges created a 50% out performance next year, excluding those temporarily lucky fresh investors.

 

Finally, he could offer a t-bill fund in which the mgmt fee is = to the t-bill return and give his investors some relief. Hopefully, he wouldn't hedge the US govt...... one can dream.

 

If he quits, I think that would be one of the greatest indicators to hedge or raise cash in one's portfolio.

[KinAlberta]

https://www.gurufocus.com/news/580392/john-hussman-hedging-and-opportunity-costs

 

It appears to me that you have to assume much more frequent corrections than history provides to do well with excessive hedging. At least his AUM has been killed, if I was him, I'd feel horrible. Alternatively, I'd write weekly letters to keep my delusion alive. He could create two separate funds, one long, one short, and give options. However if he did this, he'd have to come to grips with reality, that evidently wouldn't do.

 

Absent the value nirvana period of out performance during the dot com bust, his ex hedge results would be quite mediocre although above average.

 

I don't want to be negative but he holds a unique space in which he's frequently referenced/held in high esteem yet steals money from his mystified investors..... I don't think that's too strong a word. It's difficult to find greater atrocities even if his hedges created a 50% out performance next year, excluding those temporarily lucky fresh investors.

 

Finally, he could offer a t-bill fund in which the mgmt fee is = to the t-bill return and give his investors some relief. Hopefully, he wouldn't hedge the US govt...... one can dream.

 

If he quits, I think that would be one of the greatest indicators to hedge or raise cash in one's portfolio.

 

Yes, I totally agree.

 

What never seems to get recognized is Hussman's incredible sense of fiduciary responsibility. It's very much like he's being investing a widow's money all these years - but being relegated to a market of equities. The rest of the world always finds ways to justify any level of risk taking in any market. Hussman looks at worst case scenarios and probabilities. His problem being that he can't seem to accept the fact that emotions, perceptions and many, many relativistic factors rule and the data thus evolves. 

 

 

"Indeed the temporary breaks in the market which preceded the crash were a serious trial for those who had declined fantasy. Early in 1928, in June, in December, and in Februrary and March of 1929 it seemed that the end had come. On various of these occasions the [New York] Times happily reported the return to reality. And then the market took flight again. Only a durable sense of doom could survive such discouragement. The time was coming when the optimists would reap a rich harvest of discredit. But is has long since been forgotten that for many months those who resisted reassurance were similarly, if less permantently discredited. To that the Times, when the real crash came, reported the event with jubilation would be an exaggeration. Nevertheless, it coverted it with an unmistakable absence of sorrow." ― John Kenneth Galbraith, The Great Crash of 1929

 

 

 

 

“The worst continued to worsen. What looked one day like the end proved on the next day to have been only the beginning. Nothing could have been more ingeniously designed to maximize the suffering, and also to insure that as few people as possible escape the common misfortune. The fortunate speculator who had funds to answer the first margin call presently got another and equally urgent one, and if he met that there would still be another. In the end all the money he had was extracted from him and lost. The man with the smart money, who was safely out of the market when the first crash came, naturally went back in to pick up bargains. The bargains then suffered a ruinous fall. Even the man who waited for volume of trading to return to normal and saw Wall Street become as placid as a produce market, and who then bought common stocks would see their value drop to a third or a fourth of the purchase price in the next 24 months. The Coolidge bull market was a remarkable phenomenon. The ruthlessness of its liquidation was, in its own way, equally remarkable.”

― John Kenneth Galbraith, The Great Crash of 1929

 

 

 

 

108-year-old investor: 'I doubled my money in 1929 crash – and I'm still winning'

Investment veteran Irving Kahn, who has weathered every financial storm since the 1920s, reveals everything he has learned

 

“Investors must remember that their first job is to preserve their capital. After they’ve dealt with that, they can approach the second job, seeking a return on that capital.”

 

...

 

“We basically look for value where others have missed it. Our ideas have to be different from the prevailing views of the market. When investors flee, we look for reasonable purchases that will be fruitful over many years. Our goal has always been to seek reasonable returns over a very long period of time. I don’t know why anyone would look at a short time horizon. In my life, I invested over decades. Looking for short-term gains doesn’t aid this process.”

 

...

 

Advice for investors who go it alone

 

Mr Kahn said: “I would recommend that private investors tune out the prevailing views they hear on the radio, television and the internet. They are not helpful. People say 'buy low, sell high’, but you cannot do this if you are following the herd.

“You must have the discipline and temperament to resist your impulses. Human beings have precisely the wrong instincts when it comes to the markets. If you recognise this, you can resist the urge to buy into a rally and sell into a decline. It’s also helpful to remember the power of compounding. You don’t need to stretch for returns to grow your capital over the course of your life.”

 

 

http://www.telegraph.co.uk/finance/personalfinance/investing/11048689/108-year-old-investor-I-doubled-my-money-in-1929-crash-and-Im-still-winning.html

[Sharad]

He would do much better if he simply hedged himself by holding 30% cash. His problem seems to be that he needs to show the appearance of doing "something" to hedge out performance. A 30% cash anchor would have been much better at allowing him to be ready for the big drop he's been waiting for since 2010. He's too professorial for me - the academic bubble got him stuck in a theoretical world. The economics vacuum works in the lab or in the mind but not with animals, like humans, with our desires and wants. Too bad. He's extremely intelligent and has many great ideas, but gets stuck defending himself rather than thinking like the average investor or group of investors.

[james22]

I have in general been over-intellectualizing the working of the market for a few decades. I have had too strong a belief that investors would at least be influenced by past data in a sensible way. The market, however, appears not to care at all about the past or to learn much from it.

 

https://www.gmo.com/docs/default-source/public-commentary/gmo-quarterly-letter.pdf?sfvrsn=46