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Hussman responds to Marks (even though Marks wasn't addressing Hussman)


racemize
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Good read. I didn't notice anything about his book.

 

I think he is more right than wrong, but at the same time I think Tepper, Marks and Buffett will make more money than bears like Hussman and Grantham across the cycle. Simply because great investors are more likely to treat market valuation as a hobby and security analysis as a full time job.

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All I really need answered is if Grantham and Hussman are right so often, where are their returns?  Not market beating like Buffett, Marks and Tepper.  They are playing a fools game in which no one has the right answer because the economy is not machine and is run by people who are not always rationale.  I have been tempted to invest based upon some of Gratham's ideas then I look at his returns and caution comes to mind.  What am I missing?

 

Packer

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Even a broken clock is right twice a day.

 

Hussman plays on the fact that extreme views get air time, even if he is wrong 11 times out of 12, when number 12 rolls around he will tell everyone i told you so. He might actually be approaching that hour where his views are briefly vindicated, but the forcing of his views down everyone's throat is a bit hard to stomach.

 

When the next major market correction rolls around he will suffer less in the short term and enjoy the limelight, then proceed to miss the rebound and suffer underperformance over the long run. The idea that markets are a mechanical thing that can be neatly timed near the brink, and reinvested in to take part in the rebound is silly.

 

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All I really need answered is if Grantham and Hussman are right so often, where are their returns?  Not market beating like Buffett, Marks and Tepper.  They are playing a fools game in which no one has the right answer because the economy is not machine and is run by people who are not always rationale.  I have been tempted to invest based upon some of Gratham's ideas then I look at his returns and caution comes to mind.  What am I missing?

 

Packer

 

As far as Grantham is concerned, you need to understand where he is coming from. His firm invests money for institutions and his objective is to earn a couple of percent over the respective asset class returns. He is spectacularly successful in that regard if you measure it over the full market cycle. If you look at his record of asset class predictions  over the next 7 or 10 years period around the time of the internet bubble, he nailed it something like 10 out of 10 in rank order of performance.

 

He started one of the very first index fund, so he is not really into security selection. In addition, the firm now manages something like $100 billion.

 

Vinod

 

 

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In Hussman's defense, it takes real guts to lay out his rationale every week for why the fund is positioned that way it is. I do not think anyone would do such a thing if they do not have real conviction.

 

The problem I see is that he thinks the way markets behaved the past 100 years are pretty much how markets behave in the next 100 years. Thus you see not a hint of probabilistic thinking, for example, by even entertaining the thought that profit margins might be higher in the future than in the past or that they could be higher for a longer period of time then they have in the past, etc. He seems pretty convinced they would revert in short order.

 

Vinod

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You are correct about Grantham, he did pretty good coming out of the telecom crash but has lagged since the financial crisis.  He also has large money constraints but he also gets paid pretty well for those constraints and he has definately developed a large library of value oriented financial books/articles.

 

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