John Hussman, smart guy, should you listen to his forecasts

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larryswedroe
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Re: John Hussman, smart guy, should you listen to his foreca

Post by larryswedroe »

First relative to performance, here is table I put together at end of last year. You can draw your own conclusions

1999-2013
5-Year Annualized Returns (%) 10-Year Annualized Returns (%) 15-Year Annualized Returns
(%)
Berkshire Hathaway (BRK) 13.0 7.7 6.4
Vanguard 500 Index (VFINX) 17.8 7.3 4.6
U.S. Large Value (DFLVX) 21.0 8.9 8.1
U.S. Small (DFSTX) 23.8 10.2 10.8
U.S. Small Value (DFSVX) 22.9 10.0 12.3
Real Estate (DFREX) 16.4 8.2 10.4
Equal-Weighted Fund Portfolio 20.6 9.1 9.5


James
The fact that he has $30b in cash doesn't mean he isn't buying, just that he isn't using all the cash he has generated. We don't know what if anything he has been buying

As to forecastsing, no unlike Hussman who is forecasting a drop I don't believe Buffett is doing that, if he was he would be selling. He isn't forecasting anything IMO. Just doesn't want to buy more at these prices. Just my opinion of course as neither of us knows what he is thinking. But I do believe he isn't forecasting, remember he tells people to ignore all forecasts.

As to value investing, value investing is the Larry Portfolio, it's all value.

And yes IMO discipline does trump skill especially since little evidence that there is enough skill to generate alpha.

So yes take his advice which you can find in my book, Think, Act and Invest Like Buffett. He says for example, don't time market, don't listen to forecasts and don't try and pick stocks--use index funds

Larry
jaab
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Re: John Hussman, smart guy, should you listen to his foreca

Post by jaab »

bowest wrote:Has not outperformed what? BRK is up fourfold versus the S&P500 over the past 15 years.
a systematic multifactor model, I'd assume. keep in mind that those models are not a new invention but go back to the 1970s with guys like Stephen Ross (APT model), Robert Merton (ICAPM), Barr Rosenberg (BARRA consulting, now part of MSCI and Rosenberg Investments, now AXA Rosenberg) and others. They improved the more or less failed single factor CAPM from the 1960s, be it with macroeconomic factors or microeconomic ones as proxy for macro influences (mainly Rosenberg). Much of what had been considered skill (alpha) before turned into plain factor exposure. In fact, the famous Fama/French model is a huge step back compared to Rosenberg's practitioner work 15 years earlier. He already had a dozen or so style factors, currencies, industries, country market factors AND separate beta factors (because low beta anomaly), ... Thus claiming outperformance over the S&P500 is a bit lame today and has been since the 70s. Good for self marketing though.
james22
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Re: John Hussman, smart guy, should you listen to his foreca

Post by james22 »

larryswedroe wrote:Never confuse strategy and outcome.
The uncorrected half-cycle advance since 2009 has been accompanied by a resurgence of proponents advocating that stocks should simply be bought and held indefinitely, regardless of price. Some of these proponents have also used this mid-cycle victory-at-halftime as an opportunity to be rather impolite about it.
larryswedroe wrote:…valuations matter…
Following Graham, we go back to the importance of arithemetic in understanding why buy-and-hold strategies regularly reach their height of popularity at moments like the present.

The returns that major stock market indices achieve over time can be reliably understood from the standpoint of where valuations stand at the start of a given window, and where they are at the end. At extremely elevated valuations, as we presently observe (on measures that are actually historically reliable), the past total returns of a buy-and-hold approach will always look quite favorable, because the backward-looking performance window ends at a quite favorable point.

But this also generally means that the forward-looking performance window starts at the worst possible point, and unless valuations also happen to be elevated at the end of that window, future total returns are likely to be quite disappointing.


http://www.hussmanfunds.com/wmc/wmc140915.htm
Topic Author
larryswedroe
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Re: John Hussman, smart guy, should you listen to his foreca

Post by larryswedroe »

James
No idea why you wrote or quoted that, to me it's basically jibberish, investment porn--especially since market prices are driven by active investors, not passive, and the idea that buy and hold hit its peak say in 1929, or 68, or 99 (leading to bubbles) is just nonsense.
Larry
bowest
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Re: John Hussman, smart guy, should you listen to his foreca

Post by bowest »

In fairness to Hussman, his last two letters do acknowledge that buy and hold is appropriate if you are disciplined over the long term.
I actually agree very much with the principle that investors committed to a buy-and-hold discipline should stick to that discipline through thick and thin.
You just have to be ready to sit tight through the 'thin' with the potential 40-55% loss he sees coming over the next few years. Buckle up!
dognose
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Re: John Hussman, smart guy, should you listen to his foreca

Post by dognose »

Hussman maintains that the stock market is poised for a 40-55 percent drop after years of massive gains fueled in part by extraordinary and unprecedented easing by the U.S. Federal Reserve. He admits that he has erred over the last few years because he was conducting excessive fiduciary "stress testing" designed to protect his clients. Even Hussman says he'll get back into the market when valuations are more attractive.

When all the shouting and all the snarky comments are over, it doesn't seem to me that Hussman is being unreasonable. Even John Bogle says the market likely will drop by at least 30 percent once or twice over the next decade or so. People can agree or disagree with Hussman, but all he's really saying is that the market will drop significantly after a huge run-up, and that's it's obviously better to buy in when valuations are lower. Not sure what's new or revolutionary or even particularly controversial about any of this? It's hardly "gibberish," as the great Larry Swedroe argues. With the (big) exception of the extraordinary accommodation by the Federal Reserve, isn't this more or less a "normal" business cycle in action? The Federal Reserve may well have removed some of the usual volatility from the market in recent years, but that accommodation is ending. Buy-and-hold investors are in for a real roller-coaster ride, but again, isn't that always the case?

It's perfectly OK to dismiss "forecasts," since most are usually wrong. But it's a mistake to deny the basic business cycle. And, if nothing else, Hussman is essentially reminding us of the long-term business cycle.
axxs
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Re: John Hussman, smart guy, should you listen to his foreca

Post by axxs »

guys guys,arent u being too harsh on john hussman?this childish rebuking of facts and intellect has to stop.it is a shameful behaviour almost reminiscent of religious folks and believers of creationism.......its almost like u guys are afraid of intelligence and masterful analysis and brilliant insights(that some do posses) other than some over simplistic mantras that a holy book tells u....convinent and easy to understand for the feeble mind and overly simplistic to the point of being obvious.its scary u know,sometimes u guys make index investing look like a religious cult.lets not question anything lets not defy anything.God will provide.

what u bogleheads and willian bernsteiners are proponents of isnt that the same thing as a broken clock is right twice a day?this ridiculous theory of buy and hold,if u hold something long enough,10,20 or even 40 years......eventually u would be right....isnt that the same as john hussman's hypothesis only in a different angle?

imagine if someone came up to me and recommended boglehead strategy of investing in the S&P500 index in nov 1999 just before the eve of the major crash of 2000.....and he keep insisting u gotta BELIEVE!!!!!PLEASE BELIEVE ME!!!!!!PLEASE!!!!!!It would have taken me nearly 10 years of believing......Oct of 2009 before i even broke even.....and another 4 more years of hyper bull market before i even smelt a profit?what if the bull market never happened?what if the recovery was painful and slow and un quantitative easing,what if s&p500 took 5 years before it even reached 1000 again?John Hussman would be there saying "I told you so".
Jebediah
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Re: John Hussman, smart guy, should you listen to his foreca

Post by Jebediah »

axxs wrote:guys guys,arent u being too harsh on john hussman?this childish rebuking of facts and intellect has to stop.it is a shameful behaviour almost reminiscent of religious folks and believers of creationism.......its almost like u guys are afraid of intelligence and masterful analysis and brilliant insights(that some do posses) other than some over simplistic mantras that a holy book tells u....convinent and easy to understand for the feeble mind and overly simplistic to the point of being obvious.its scary u know,sometimes u guys make index investing look like a religious cult.lets not question anything lets not defy anything.God will provide.
I think there's some truth here. There is often a faith that "stocks will provide" no matter what. And that stocks are the only worthwhile investment.
axxs wrote:what u bogleheads and willian bernsteiners are proponents of isnt that the same thing as a broken clock is right twice a day?this ridiculous theory of buy and hold,if u hold something long enough,10,20 or even 40 years......eventually u would be right....isnt that the same as john hussman's hypothesis only in a different angle?
Yes there's a similarity. Difference is that BH strategy doesn't require constant, futile, resource-and-life-sucking guessing about what's going to happen next.
axxs wrote:imagine if someone came up to me and recommended boglehead strategy of investing in the S&P500 index in nov 1999 just before the eve of the major crash of 2000.....and he keep insisting u gotta BELIEVE!!!!!PLEASE BELIEVE ME!!!!!!PLEASE!!!!!!It would have taken me nearly 10 years of believing......Oct of 2009 before i even broke even.....and another 4 more years of hyper bull market before i even smelt a profit?what if the bull market never happened?what if the recovery was painful and slow and un quantitative easing,what if s&p500 took 5 years before it even reached 1000 again?John Hussman would be there saying "I told you so".
10K in VTSAX on 11/1/1999 is now worth almost 22K. Yes there was the risk that it would never come back. Nothing you can do about that. If you don't like it, or if you can't be patient, don't invest.
axxs
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Re: John Hussman, smart guy, should you listen to his foreca

Post by axxs »

actually 10k invested in the S&P 500 on nov 1999 to 2014(15 years)would yield only a return of 36% or 2.1% annualized......according to this calculator....http://dqydj.net/sp-500-return-calculator....

i noticed u took ur VTSAX figures from the vanguard site....ur figures are wrong,yes its true 10k invested would return 22k but only if u invested on aug 2004 near the bottom of the market......
Jebediah wrote:
axxs wrote:guys guys,arent u being too harsh on john hussman?this childish rebuking of facts and intellect has to stop.it is a shameful behaviour almost reminiscent of religious folks and believers of creationism.......its almost like u guys are afraid of intelligence and masterful analysis and brilliant insights(that some do posses) other than some over simplistic mantras that a holy book tells u....convinent and easy to understand for the feeble mind and overly simplistic to the point of being obvious.its scary u know,sometimes u guys make index investing look like a religious cult.lets not question anything lets not defy anything.God will provide.
I think there's some truth here. There is often a faith that "stocks will provide" no matter what. And that stocks are the only worthwhile investment.
axxs wrote:what u bogleheads and willian bernsteiners are proponents of isnt that the same thing as a broken clock is right twice a day?this ridiculous theory of buy and hold,if u hold something long enough,10,20 or even 40 years......eventually u would be right....isnt that the same as john hussman's hypothesis only in a different angle?
Yes there's a similarity. Difference is that BH strategy doesn't require constant, futile, resource-and-life-sucking guessing about what's going to happen next.
axxs wrote:imagine if someone came up to me and recommended boglehead strategy of investing in the S&P500 index in nov 1999 just before the eve of the major crash of 2000.....and he keep insisting u gotta BELIEVE!!!!!PLEASE BELIEVE ME!!!!!!PLEASE!!!!!!It would have taken me nearly 10 years of believing......Oct of 2009 before i even broke even.....and another 4 more years of hyper bull market before i even smelt a profit?what if the bull market never happened?what if the recovery was painful and slow and un quantitative easing,what if s&p500 took 5 years before it even reached 1000 again?John Hussman would be there saying "I told you so".
10K in VTSAX on 11/1/1999 is now worth almost 22K. Yes there was the risk that it would never come back. Nothing you can do about that. If you don't like it, or if you can't be patient, don't invest.
Jebediah
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Re: John Hussman, smart guy, should you listen to his foreca

Post by Jebediah »

morningstar, total return

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larryswedroe
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Re: John Hussman, smart guy, should you listen to his foreca

Post by larryswedroe »

FWIW
I think it's "jibberish" because the evidence shows it's not actionable in way to generate excess returns. Huffman certainly hasn't--and one study on 100 pension plans that engaged in this sort of tactical asset allocation showed that NOT A SINGLE ONE benefit. Thus to me it's jibberish, even if he writes intelligently as I noted. I always find his arguments intelligent and perhaps even persuasive, but I almost always ignore them for reasons that IMO they have no value
Larry
axxs
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Re: John Hussman, smart guy, should you listen to his foreca

Post by axxs »

impossible....what sorcery is this?

i think this is like S&P500?except it has small cap and value in it?which gives it a premium over the years?
Jebediah wrote:morningstar, total return

Image
Last edited by axxs on Tue Sep 16, 2014 2:08 pm, edited 1 time in total.
technovelist
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Re: John Hussman, smart guy, should you listen to his foreca

Post by technovelist »

axxs wrote:impossible....what sorcery is this?
Jebediah wrote:morningstar, total return

Image
I imagine that's with dividends reinvested...
In theory, theory and practice are identical. In practice, they often differ.
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HomerJ
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Re: John Hussman, smart guy, should you listen to his foreca

Post by HomerJ »

axxs wrote:impossible....what sorcery is this?
Dividends... a lot of financial sites for some unexplainable reason, only show price-to-price... Criminal really.

Always use Morningstar charts since they show re-invested dividends... Dividends add 2% every year to your returns.
james22
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Re: John Hussman, smart guy, should you listen to his foreca

Post by james22 »

Every argument you make for (history, rationale) and in defense of (strategy ≠ outcome) SV and CCF strategies, Larry?

They can be applied to Hussman's.

Likewise the arguments you've made against Hussman here can be made against SV and CCFs (underperformance, unpopularity, this time is different).

(Both strategies do require discipline given tracking error.)

But whatever. Time will tell.
beammeupscotty
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Re: John Hussman, smart guy, should you listen to his foreca

Post by beammeupscotty »

Time will tell? Time already has told the story -- epic failure. Hussman charged clients > 1% annually and has managed to lose nearly 15% in nominal terms over the last 10 years and underperform the market since inception (14 years). Absolute return? Absolutely awful. It's practically impossible for an investor in his fund to ever catch up to a simple balanced buy-hold-rebalance portfolio, even if he suddenly starts making brilliant calls from here on.

Image

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larryswedroe
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Re: John Hussman, smart guy, should you listen to his foreca

Post by larryswedroe »

James
As already noted time has told the story.
And not just with Hussman, but an industry that has tried to benefit from such Tactical Asset Allocation that Hussman preaches. One study on 100 pension plans engaging in it, by hiring the "Hussman's" of the world found that not one single one outperformed. Studies on TAA mutual funds have found they have dramatically underperformed.
Again, I'm not saying at all that one should ignore valuations, but the problem is acting on them in the way Hussman advises has already been shown to be a loser's game and why Buffett advises individuals to not only ignore forecasts but not engage in timing.
Remember, that the act of rebalancing gets one the buy low and sell high type strategy without the forecasts.
Larry
james22
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Re: John Hussman, smart guy, should you listen to his foreca

Post by james22 »

beammeupscotty wrote:It's practically impossible for an investor in his fund to ever catch up to a simple balanced buy-hold-rebalance portfolio, even if he suddenly starts making brilliant calls from here on.
Really?

By the time the 2000-2002 decline partially unwound the bubble, the S&P 500 had lagged Treasury bills all the way back to May 1996.

...by the time the market bottomed in early 2009, the decline had wiped out the entire total return of the S&P 500 – in excess of Treasury bills – all the way back to June 1995.

...

History teaches clear lessons about how this episode will end – namely with a decline that wipes out
years and years of prior market returns.

http://www.hussmanfunds.com/wmc/wmc140908.htm
james22
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Re: John Hussman, smart guy, should you listen to his foreca

Post by james22 »

larryswedroe wrote:James
As already noted time has told the story.
Where are we in the market cycle, Larry?
larryswedroe wrote:And not just with Hussman, but an industry that has tried to benefit from such Tactical Asset Allocation that Hussman preaches. One study on 100 pension plans engaging in it, by hiring the "Hussman's" of the world found that not one single one outperformed. Studies on TAA mutual funds have found they have dramatically underperformed.
Why do you think it fair to lump Hussman with all others? Are you like all other financial advisors?
larryswedroe wrote:I'm not saying at all that one should ignore valuations...
How does "valuation matter" if you don't act on it?

I don't invest in Hussman's funds, but I believe in aligning my market exposure with expected return. I appreciate Hussman for freely sharing his estimate of valuation.

http://www.hussmanfunds.com/wmc/wmc130506.htm
beammeupscotty
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Re: John Hussman, smart guy, should you listen to his foreca

Post by beammeupscotty »

james22 wrote:
beammeupscotty wrote:It's practically impossible for an investor in his fund to ever catch up to a simple balanced buy-hold-rebalance portfolio, even if he suddenly starts making brilliant calls from here on.
Really?

By the time the 2000-2002 decline partially unwound the bubble, the S&P 500 had lagged Treasury bills all the way back to May 1996.

...by the time the market bottomed in early 2009, the decline had wiped out the entire total return of the S&P 500 – in excess of Treasury bills – all the way back to June 1995.

...

History teaches clear lessons about how this episode will end – namely with a decline that wipes out
years and years of prior market returns.

http://www.hussmanfunds.com/wmc/wmc140908.htm
Really. See the charts above. If you had invested in a balanced, low-cost allocation similar to Wellington (approximately 60/40) vs. Hussman Strategic Growth for the last 10 years, you would have nearly triple the amount of money (~$22 vs. $8K). It's highly unlikely that the Hussman fund will ever catch up, even if stocks tank 75% or more.
postingname
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Re: John Hussman, smart guy, should you listen to his foreca

Post by postingname »

Hussman is a favorite punching bag on the Morningstar boards. But it isn't for his forecasts per se, it's for the fact that he has a MODEL that he doesn't follow. Since I don't follow Hussman, I'm not in a position to evaluate whether or not his model is sound, but according to some of his critics, it's a pretty decent model. Hussman's major flaw, according to them, is that he OVERRIDES his model.

So that's another way of looking at Hussman. Evaluate whether or not his actual model is right or wrong, since that is his intellectual framework. The fact that his periodic commentaries and his actual portfolio decisions deviate from his model is another issue altogether.
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jeffyscott
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Re: John Hussman, smart guy, should you listen to his foreca

Post by jeffyscott »

dognose wrote: Even Hussman says he'll get back into the market when valuations are more attractive.
He didn't last time and said the same, didn't he...that he was waiting for more attractive valuations. More attractive valuations came and went, Hussman invented new reasons for still not investing.
technovelist
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Re: John Hussman, smart guy, should you listen to his foreca

Post by technovelist »

I'm smart too, so should everyone listen to me? :confused
In theory, theory and practice are identical. In practice, they often differ.
Browser
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Re: John Hussman, smart guy, should you listen to his foreca

Post by Browser »

technovelist wrote:I'm smart too, so should everyone listen to me? :confused
Yes. What do you advise? (insert graphic of an ear here)
We don't know where we are, or where we're going -- but we're making good time.
technovelist
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Re: John Hussman, smart guy, should you listen to his foreca

Post by technovelist »

Browser wrote:
technovelist wrote:I'm smart too, so should everyone listen to me? :confused
Yes. What do you advise? (insert graphic of an ear here)
I advise staying away from people who think they can forecast the markets.
You'll get my invoice shortly. :sharebeer
In theory, theory and practice are identical. In practice, they often differ.
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matjen
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Re: John Hussman, smart guy, should you listen to his foreca

Post by matjen »

You would have thought Hussman would have crushed it this week. I think he was up 11 bps.
A man is rich in proportion to the number of things he can afford to let alone.
Easy Rhino
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Re: John Hussman, smart guy, should you listen to his foreca

Post by Easy Rhino »

i like to read Hussman to keep my irrational exuberance in check.
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