Hussman is legendary

[bargainman]

https://markets.businessinsider.com/news/stocks/stock-market-crash-1929-prediction-sp500-outlook-overvalued-john-hussman-2024-3

 

Hmm apparently Hussman is a legendary investor.  Anyone know what his returns have been?

[Gregmal]

The Wagyu of feces. Top notch. 

[Parsad]

He's not as bad as Greg makes him out to be. 

 

He's another manager who has gotten stuck as a perma-bear in the last decade because the natural gravity of stocks (fundamentals) seem to be detached from history.  Joining the pile that includes Grantham, Klarman, Gary Schilling, Taleb, Burry, Roubini, David Rosenberg, etc. 

 

Who knows, they may be the ones who are right over the next decade!

 

For me, buy what you find to be fundamentally cheap and average down.  And if you can't really find much, let the cash build up and don't let it burn a hole in your pocket.  Just be patient!

 

Otherwise, buy ETF's and just average in over time!  Cheers!   

[longlake95]

4.39% CAGR since inception (2002). 

https://www.hussmanfunds.com/strategic-total-return-fund/

[thepupil]

11 hours ago, bargainman said:

https://markets.businessinsider.com/news/stocks/stock-market-crash-1929-prediction-sp500-outlook-overvalued-john-hussman-2024-3

 

Hmm apparently Hussman is a legendary investor.  Anyone know what his returns have been?

He’s a strangely good stock picker.

 

I theorize he’s super smart, knows his niche as permabear and just owns it. He can pick stocks that outperform and then hedges it all away. If he can maintain okay AUM…so be it.

 

this is based on old stuff that he used to put out that his actual stocks OP’d the index, but based on recent results don’t think that can be true. So you have poor stock picking compounded by shorting a bull market…rough.

 

can’t find the updated chart….I wouldn’t be surprised if lawyers made him take it down or if he didn’t update because it got less flattering 

 

 

Edited March 23 by thepupil

[longlake95]

I think he is too smart. I prefer the dim-bulb approach. 

[james22]

He's a perfect example of Taleb's Dr. John.

[thepupil]

 

there it is...I don't have the underlying data, but crazy to me that he'd be a good mutual fund manager if he ran unhedged...given the unhinged overly intellectualized perma-bearism...typically those folks aren't good business analysts/stock pickers, but he, at least on an inception to date basis, appears to be. 

 

Edited March 23 by thepupil

[mcliu]

Wow. Is it really a hedge if the opportunity cost is 90%? 11k actual vs 100k “unhedged”.
 

-50% over 20 years doesn’t sound like a hedge.
 

Also this is a mutual fund not a hedge fund.. Pretty crazy that he can do this.

[ValueArb]

3 hours ago, mcliu said:

Wow. Is it really a hedge if the opportunity cost is 90%? 11k actual vs 100k “unhedged”.
 

-50% over 20 years doesn’t sound like a hedge.
 

Also this is a mutual fund not a hedge fund.. Pretty crazy that he can do this.

Was he hedging against the market going up?

[Gregmal]

I’ve also generally over time grown skeptical of the guys who really only outperformed during that 1999-2004 period. Seems like a period of time when it was just very easy to follow the textbook value investor stuff versus actually having to making a lot of qualitative reads and skilled trades. 

[thepupil]

3 hours ago, Gregmal said:

I’ve also generally over time grown skeptical of the guys who really only outperformed during that 1999-2004 period. Seems like a period of time when it was just very easy to follow the textbook value investor stuff versus actually having to making a lot of qualitative reads and skilled trades. 

Yes, another way to frame his performance is he always hedged to beta so when he made $$$ he was generating lots of alpha; once alpha went away, no more $$$ and you just bear brunt of being short market.

 

again just looking at the lines and not doing any analysis beyond that.

[SongDonkey.AI]

The most incomprehensible thing about this gentleman is how he managed to not go out of business…

[james22]

Over the past 15 years Hussman, 48, has thrown himself into understanding the disorder — ever since his son, J.P., was diagnosed with it as a child. Because the vast majority of cases show a family link (a relative on J.P.’s mother’s side is autistic), Hussman has focused on its genetic causes. Almost completely self-taught, he’s spent nights and family vacations poring over obscure scientific textbooks (he says he’s Amazon.com’s best customer) and research abstracts. He not only funded a genomics center at the University of Miami, but has spent years collaborating with scientists there.

 

Finally, this year the science journal Molecular Autism published his findings in a paper that top researchers are calling a breakthrough. The dense, 16-page article features Ph.D.-level mathematics and abstruse genetic analyses. (We’ll spare you the details, but you can check it out here.)

 

“I found it really interesting,” says Dan Geschwind, a leading autism researcher at UCLA’s School of Medicine. Joseph Buxbaum, another top researcher at Mount Sinai School of Medicine, says, “People are beginning to think about other areas where the mathematics and statistics have really evolved, and then bringing them back to genetics. This is a really neat example.” Buxbaum himself is using methods borrowed from astrophysics to research autism.

 

Hussman’s advance, researchers say, consists of the patterns he has found across hundreds of autism cases. Each person is the result of millions of genetic coin flips that occur across the human genome. Hussman’s algorithm can detect unusual clusters of flips that may be linked to autism. There’s a second benefit too. If you look at each coin flip separately to find the ones causing autism, you miss something because the flips are interconnected by genetic material — one flip can influence another.

 

Until now, autism researchers haven’t been able to fully incorporate that influence into their research. Hussman created a way to do that, using complex statistics he learned from studying markets. “In finance, when you see the same signal across two different markets or countries, you take that as a stronger signal of information than if you only saw that signal in one market,” he says. “It’s similar in genetics.”

 

https://archive.ph/R5VYY

https://www.hussmanfunds.com/wmc/wmc110131.htm

[Parsad]

On 3/23/2024 at 10:43 AM, Gregmal said:

I’ve also generally over time grown skeptical of the guys who really only outperformed during that 1999-2004 period. Seems like a period of time when it was just very easy to follow the textbook value investor stuff versus actually having to making a lot of qualitative reads and skilled trades. 

 

True!  A bunch made their reputation then and marketed the hell out of it.  Performance afterwards was mediocre or below.  Cheers!

[mattee2264]

Where a lot of these guys go wrong is they believe too much in mean reversion and the "lessons" of market/economic history which  makes it difficult for them to accept that maybe this time it is different and they forget that economic laws are not like the laws of physics and are not immutable. 

 

These guys anchor on valuations being in the top 1% of the historical range with a CAPE of 35.  But when over the long pull valuations trend upwards then it isn't as scary as it sounds.  100-150 years ago America was an emerging economy mostly engaged in the primary and secondary industries that were very competitive. So valuations were correspondingly low. These days America is a hyper advanced modern economy with globally dominant technology and service companies with fantastic market positions so it is not surprising valuations are a lot higher. 

 

Also the Fed's desire to maintain excess liquidity in the financial system and flood the system with liquidity at the first sign of trouble is very supportive to valuations because all that money usually ends up in stocks. Likewise financial repression seems inevitable given the size of the Federal debt which again supports higher valuations by keeping the cost of capital low and enabling financial engineering such as debt funded buybacks which create additional scarcity (reducing the sharecount) and give a constant bid to share prices. And ditto with all the pension contributions flowing into stocks as institutions increasingly favour higher equity allocations. 

 

Besides market valuations are distorted by Mag7 that constitute 30% of the index. Ex-Mag7, valuations look pretty reasonable if you believe that we are still in a low to moderate inflation and interest rate environment. And downright cheap if you think that AI can increase productivity for old economy companies. 

 

Mag7 stocks may be valued at PE ratios two to three times the median PE ratio.  But their margins, returns, growth rates are way higher than the rest of the market. Of course they argue that their valuations, growth rates and returns and margins will eventually revert to the mean which will create large losses for investors. 

 

Hussman's latest missive is a well written description of this argument: 

"In the short run, there’s no question that strong demand for new, scarce products, such as AI chips, can enable a company to enjoy extremely high profit margins. Still, it’s dangerous for investors to treat these high profit margins as permanent, and to value stocks as if those profit margins will be sustained indefinitely. Put simply, the combination of a high growth rate and a high profit margin has never proved to be permanent. The current crop of “glamour stocks” increasingly relies on both here"

 

But again there are some logical flaws. 

 

The profit margins and growth rates do not have to be permanent. You just need a long enough period of high earnings and earnings growth to justify the DCF valuation. And that is where Big Tech companies have excelled. They have achieved earning power and market caps that were previously unthinkable because as well as dominating their own large global markets they have disrupted multiple other markets and have navigated various technological changes to stay at the forefront and fend off competition. As a result they have managed to avoid the fate of most growth companies which see their growth slow down or even turn down as a result of encroaching competition, market saturation, maturity of their product and industry life cycles and mismanagement. Cloud and now AI have been godsends for them and if the pace of AI progress continues AI could be the gift that keeps giving as they will enjoy multiple product upgrade cycles and an adoption curve that gives an incredible growth runway so long as some start up doesn't come out of nowhere and steal their market share. 

 

 

 

 

 

 

[james22]

6 hours ago, mattee2264 said:

Where a lot of these guys go wrong is they believe too much in mean reversion and the "lessons" of market/economic history which  makes it difficult for them to accept that maybe this time it is different and they forget that economic laws are not like the laws of physics and are not immutable. 

 

Exactly.

 

On 3/24/2024 at 2:49 PM, james22 said:

Hussman’s advance, researchers say, consists of the patterns he has found across hundreds of autism cases.

 

When your strength is finding patterns, you find them everywhere.

Edited March 31 by james22