John Hussman

[ericd1]

I find John Hussman's commentary interesting and very much on target.

 

What do others think?

 

[UhuruPeak]

I try to read him every week, or at least every few weeks.  I had my wife's IRA invested with him for a little while but sold the fund to invest myself in '08 (I did better through largely-lucky moves between ORH, FFH & BRK).  I think his fund will continue to outperform the mutual fund universe for peak-to-peak and trough-to-trough cycles - which is how he wants to be judged.  His and FAIRX are the only funds I have ever owned.  I sold both last year, but would sleep well at night in either.

[ericd1]

Sorry I meant to post this link with my previous comment on Hussman.

 

He runs one of the few mutual funds that actively hedges the portfolio, although he states he will drop the hedges when appropriate.

 

http://www.hussmanfunds.com/wmc/wmc090316.htm

[UhuruPeak]

Yeah - he's dropped the hedges late last year ('08) but that proved too early so he ended the year in the red (lost 9% I think).  He had to hedge again in '09 and only had about 1% OTM calls as of early last week I seem to recall.  These things are hard to time (and he doesn't try), so he's most likely missed the recent run-up.

 

 

Historically (since inception), he's outperformed the market on his stock-selection skills alone, but also added further value through the hedging.  I really think he is the real deal even if using a different strategy than most value investors would.

[Viking]

I have been reading his weekly newsletter each Sunday night for the past year or so. I find he can get repetitive at times (who has something interesting to say every week?). Bottom line is I really do enjoy his commentary as it is not mainstream, he educates and he explains his logic.

[boingo]

Hussman is a sharp person.  Look at his letters for one about "ovoboby" or something to that.  Times when markets were over valued, over bought, over bullish, & yield pressures. 

 

 

 

[Guest]

Amazingly, Hussman's flagship fund, HSGFX, has now underperformed the S&P 500 since inception. That's after starting it in July of 2000 (near the bubble of bubbles).

 

A $10,000 investment in July of 2000 would have turned into about $15,200 in Sept of 2002 vs $5,675 for the S&P 500.

 

That same $10,000 would have grown to $20,557 in Feb of 2009 vs $5,801 for the S&P 500. Over 3.5x the amount. And yet, through all those brains and hedges skills he has managed to underperform the market even with two brutal, brutal bear markets.

 

That $10,000 today would be worth about $16,588 vs $16,991 for the S&P 500.

 

Perhaps he'll be right again soon though. We shall see.

[peter1234]

These are incredible/unbelievable numbers. He never really had big draw downs, just constantly under performed the index due to the hedges over the years.

 

Thanks for bringing it up. Shows the power of a passive index.

;)

[Vish_ram]

For many investors, a market returns with lower volatility (of the negative variety) is a big deal.

 

 

These are incredible/unbelievable numbers. He never really had big draw downs, just constantly under performed the index due to the hedges over the years.

 

Thanks for bringing it up. Shows the power of a passive index.

;)

[randomep]

For many investors, a market returns with lower volatility (of the negative variety) is a big deal.

 

 

These are incredible/unbelievable numbers. He never really had big draw downs, just constantly under performed the index due to the hedges over the years.

 

Thanks for bringing it up. Shows the power of a passive index.

;)

 

Yes thanks. It really puts things in perspective.

 

I like to analyze people who are wrong to see if I can purge myself of whatever defect that caused the error. I see Hussman as being too rigid. He is a big time bear but no matter how bad things got (like 2009) he found a way to rationalize his bearish views. Truely great investors can see the reality and be flexible..... others have mentioned call the same things something else, which I forget......

 

But for example, I think it was Paulson or Burry or both who wanted to go long on banks in 2008, which would have been a good call.

 

 

[Guest wellmont]

it's pretty simple. he's not a business analyst. he doesn't take a business, tear it apart, value it, and pay 30% of it's true value, which you could do in mar 09. when he looks at a stock he doesn't see some organic machine that either spits out cash or consumes it. He sees quotes on a screen. instead of searching one by one for bargains, he was looking at macro, price trends, reading "white papers",  studies, and watching Japanese economist youtube speeches. He probably thought the market wasn't cheap because the Shiller P/E ratio was too high.

[randomep]

it's pretty simple. he's not a business analyst. he doesn't take a business, tear it apart, value it, and pay 30% of it's true value, which you could do in mar 09. when he looks at a stock he doesn't see some organic machine that either spits out cash or consumes it. He sees quotes on a screen. instead of searching one by one for bargains, he was looking at macro, price trends, reading "white papers",  studies, and watching Japanese economist youtube speeches. He probably thought the market wasn't cheap because the Shiller P/E ratio was too high.

 

Actually as I recall, and I don't have the source to back it up, but he wrote that he knew in 2009 the market was cheap and it would return 10% over the next decade BUT he had a fiduciary duty to avoid a depression style scenario, so he didn't go long. So, in other words, he thought the market was cheap but it was going to get cheaper, so he waited for cheaper, AND he is still waiting 5yrs later.

 

[KCLarkin]

Actually as I recall, and I don't have the source to back it up, but he wrote that he knew in 2009 the market was cheap and it would return 10% over the next decade BUT he had a fiduciary duty to avoid a depression style scenario, so he didn't go long. So, in other words, he thought the market was cheap but it was going to get cheaper, so he waited for cheaper, AND he is still waiting 5yrs later.

 

Yes, he knew it was expensive before the crash and knew it was cheap after the crash. And he still screwed it up. This is why market timing has such a bad reputation.

[hardincap]

http://hussmanfunds.com/pdf/hsgperf.pdf

 

Remarkable difference between his equity returns and total (hedged) returns.

[Guest]

http://hussmanfunds.com/pdf/hsgperf.pdf

 

Remarkable difference between his equity returns and total (hedged) returns.

 

Dang. He should run an unhedged fund. Those aren't bad returns at all.

 

9.4% vs 3.68% for the S&P 500 and 7.21% for Russell 2000.

[randomep]

http://hussmanfunds.com/pdf/hsgperf.pdf

 

Remarkable difference between his equity returns and total (hedged) returns.

 

Dang. He should run an unhedged fund. Those aren't bad returns at all.

 

9.4% vs 3.68% for the S&P 500 and 7.21% for Russell 2000.

 

But this is the first time I have ever seen anyone publish the results of his fund and then publish the results of a portion of his fund. Kind of reminds me of Greenspan saying well the lassez-faire free markets worked very well for the last 20yrs, except 2008.

 

 

[peter1234]

How does he select his stocks? He seems to mainly talk about market valuation and his hedges.

 

Has anyone heard him talk about stocks? Does he have a big team selecting stocks or does he use some type of quant screen?

[EliG]

Has anyone heard him talk about stocks?

Yes, here:

 

[peter1234]

Thank you, these are 3 good minutes.

 

Looks like he looks for cheap & good stocks (like magic formula). Also uses DCF "his secret sauce".

 

Quantitative screens as a start, then validation by hand "do I believe what the screen says?"

 

:)

 

[NormR]

Ouch: A Critique of John Hussman’s Chart of Estimated Future Equity Returns

[peter1234]

Thank you.

:)

 

Fascinating. Looks like a serious piece of work.

::)

 

I am sure we will hear from John on this.

 

I wonder if he will take down GMO's 7 year model next?

;)

[Nnejad]

I don't know.. I glance through that critique and think, geez, Hussman's 6.3% nominal growth assumption is way too high for today's low inflation/growth environment. I'd think that alone would more than counter-act the other arguments.