S&P 2/3 'correction' - Hussman makes his case.

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ukbogler
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S&P 2/3 'correction' - Hussman makes his case.

Post by ukbogler » Thu Jan 16, 2020 10:45 am

Strange to see such an eloquently written piece about the market imminently crashing by two thirds when we're in the middle of a [(removed) --admin LadyGeek] 'melt-up' :-) :-)
"Investors should keep in mind that market valuations stand nearly three times the historically run-of-the-mill valuation levels from which stocks have historically generated run-of-the-mill long-term returns. In fact, the highest level of valuation ever observed at the end of any market cycle in history was in October 2002, and even that level is less than half of present valuation extremes.

So how do you get to historically run-of-the-mill valuation norms? The answer is simple: Wait nearly 30 years, allowing both the U.S. economy and U.S. corporate revenues to grow at the same rate as the past two decades, while stock prices remain unchanged, with no intervening periods of recession or investor risk-aversion, or alternatively (and far more likely), watch the S&P 500 lose two-thirds of its value over the completion of this market cycle."
https://www.hussmanfunds.com/comment/mc191230/

Mad as that seems, it concurs with rather a lot of other analysis on the topic, most of which now seem to be indicating that decade long returns on the S&P going forward are likely to be awful...

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Re: S&P 2/3 'correction' - Hussman makes his case.

Post by SovereignInvestor » Thu Jan 16, 2020 11:16 am

So the S&P forward PE should be 6 instead of 18.5?

At a forward PE of 6 the earnings yield would be 17%..versus 10Y yield of 1.8%.

That is a 15%+ yield risk premium for stocks over 10Y bonds....assuming no earnings growth ever.

Historically risk premium is around 5%.

His figures are totally ridiculous. His "fair value" provides stocks with a risk premium of 3x the normal...even if there is never any nominal earnings growth which is more conservative than his own assumption (he says earnings growth at GDP) .

Moreover...when he goes through his assumed growth in earnings per share....he totally ignores buybacks. That's why the dividend yield is only 2% for the last 15 years on average...for S&P. Because total shareholder yield is around 5%, but the other about 3% annually since 2005 on average has been buyback so that allows EPS to grow 3% annually faster all else equal. So EPS can grow 3% above nominal GDP...because that's on per share basis.
The companies are paying so little of their profit in dividend. He totally ignores buybacks. Not even to mention half of earnings are from overseas..so why use US only GDP..which is slower growing than foreign? That also is a big issue with using the the Buffett Indictator ot market cap to GDP..because GDP is US only there but the earnings are coming about half from overseas...not like to like comparison.

So many flaws in his thesis.

Here are my various rebuttals to his points.

Market cap to GDP data issues
https://seekingalpha.com/article/413560 ... ull-market

CAPE data issues

https://seekingalpha.com/article/4207295


Idea S&P is anywhere near 1999 or Japan bubbles like he basically alludes to
https://seekingalpha.com/article/4234665

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Re: S&P 2/3 'correction' - Hussman makes his case.

Post by jeffyscott » Thu Jan 16, 2020 11:30 am

I think US stock prices are high and have been for some time, but not the the extent that our investment results resemble this over the past 15 years:

Image
:shock:
Time is your friend; impulse is your enemy. - John C. Bogle

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Re: S&P 2/3 'correction' - Hussman makes his case.

Post by Sconie » Thu Jan 16, 2020 11:37 am

John Hussman has been saying that the market is overvalued and that we are due for a beat market for almost 10 years now-----I suppose that similar to the analogy of the broken clock being correct at least twice a day, eventually he will be right.
I know you think you understand what you thought I said but I'm not sure you realize that what you heard is not what I meant. - Alan Greenspan

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Re: S&P 2/3 'correction' - Hussman makes his case.

Post by nisiprius » Thu Jan 16, 2020 11:38 am

If someone had invested $10,000 into his flagship fund, his oldest, the Hussman Strategic Growth Fund, at inception on 7/24/2000, they would, today, have $9,516.

(Perhaps I should put "growth" in scare quotes, "Hussman Strategic 'Growth' Fund.")

If you had invested the same amount in the Vanguard 500 Index Fund, today you would, today, have $32,582. A tiny bit more in the most-commonly-mentioned-in-Bogleheads fund, the Vanguard Total Stock Market index fund.

Source

Image

If the S&P 500 were to lose 2/3rds of its value tomorrow, and HSGFX lost nothing, you would have $10,860 and you would still be ahead of the Hussman Strategic 'Growth' investor.

Hussman better believe in a coming 2/3rds S&P 500 correction if he wants to justify his fund's performance.

In order to have been better off with Hussman, you need to assume not only that the S&P 500 loses 2/3rds, but that, at the same time, the Hussman Strategici Growth fund gains 15%. Perhaps some Hussman fans who know better than I what is in the "Other" category that he is shorting, can tell us if they think that is likely.

Image
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Re: S&P 2/3 'correction' - Hussman makes his case.

Post by nisiprius » Thu Jan 16, 2020 12:02 pm

(Continuing) Looking at the portfolio for the Hussman Strategic Growth Fund, I see a seemingly unremarkable set of stock investments in all eleven stock sectors, not mirroring their weight in the market but not miles away from it, either. If the S&P 500 lost 2/3rds of its value, it's hard to believe that there wouldn't be comparable losses in his stock investments.
Image

Now, according to the schedule of investments for 6/30/2019,, the fund has
161.6% in "total investments and money market funds at value,"
and 62.6% in "written call option contracts."

Those contracts are:

Image

So, those who understand please help me with this. He has roughly equal amounts in stock and... gee, in one place he calls them "put option contracts" and in another "call option contracts," oh, well...

The S&P loses 2/3rds of its value. Likely, no matter how clever his stock portfolio is, it will lose about 2/3rds of its value, too.

In order for his fund to have beaten the S&P 500 since inception, it must gain about +15% while the S&P 500 is losing 66.6%.

So, he has the right to sell S&P 500 stocks and get their pre-crash values. If he matched his $300 million stock exposure with an equal amount of options, I guess that would mean that his fund would lose nothing, stay level, instead of crashing? But he only has $200 million in S&P 500 options. I guess he also has the right to sell the NASDAQ 100 and the Russell 2000 at their pre-crash values.

If we assume his stocks lose 66.6%, how deep a decline do we need to see in the NASDAQ 100 and Russell 2000 to create a 15% gain on the whole portfolio?
Last edited by nisiprius on Thu Jan 16, 2020 12:05 pm, edited 1 time in total.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

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ukbogler
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Re: S&P 2/3 'correction' - Hussman makes his case.

Post by ukbogler » Thu Jan 16, 2020 12:04 pm

He does indeed seem to be a bit on the 'permabear' side of things, doesn't he? No idea what his valuation methodology is - I expect he explains it elsewhere on the site. It's curious though in that it agrees with a lot of other posts about expected long run performance to be expected after the present crazy bull run. Like this one from last spring....

https://michaelritger.com/2019/05/20/us ... nd-beyond/
Earnings and dividends are real, multiple growth is ephemeral

Reasonable investors look to actual, sustainable cash flows as a touchstone, because over the history of the world’s stock markets the real long-term rate of return has ranged from 4-7%, as delivered by earnings growth and dividends. Anything in excess of that is a temporary consequence of the crowd paying more for each dollar generated by the underlying businesses. Long stretches of high returns must be followed by low or negative returns to bring the indices back to their sustainable long-term trendlines. For the S&P to return to the mid-range of historical valuation right now would require a decline of 40% or more (taking today’s historically high profit margins into account, this might be 60%)
There's a pretty chart towards the bottom, BTW, showing CAPE vs forward 15 year returns.

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Re: S&P 2/3 'correction' - Hussman makes his case.

Post by watchnerd » Thu Jan 16, 2020 12:12 pm

jeffyscott wrote:
Thu Jan 16, 2020 11:30 am
I think US stock prices are high and have been for some time, but not the the extent that our investment results resemble this over the past 15 years:

Image
:shock:
It's trading at all-time low!

Surely a buying signal!

:P
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Re: S&P 2/3 'correction' - Hussman makes his case.

Post by ljb1234 » Thu Jan 16, 2020 12:36 pm

Remember:

"Economists have predicted nine out of the last five recessions"
Last edited by ljb1234 on Thu Jan 16, 2020 12:39 pm, edited 1 time in total.

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Re: S&P 2/3 'correction' - Hussman makes his case.

Post by Forester » Thu Jan 16, 2020 12:37 pm

He could well be right. But I'm not sure there is a course of action to be taken, investors should have their strategy in place already. If the next sell-off does not snap back at 20%, like the last few since the GFC, then there could be a self-fulfilling prophecy of investors rushing for the exits. The difference between being down 40% and 60% may largely be psychology!

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Re: S&P 2/3 'correction' - Hussman makes his case.

Post by jeffyscott » Thu Jan 16, 2020 12:42 pm

nisiprius wrote:
Thu Jan 16, 2020 12:02 pm
(Continuing) Looking at the portfolio for the Hussman Strategic Growth Fund, I see a seemingly unremarkable set of stock investments in all eleven stock sectors...
I don't understand the details regarding the portfolio, but it is a market neutral fund, or at classified as such. So the losses are due to shorting, I presume, via the options.
Time is your friend; impulse is your enemy. - John C. Bogle

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Re: S&P 2/3 'correction' - Hussman makes his case.

Post by james22 » Thu Jan 16, 2020 1:43 pm

I'm with Hussman.

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Re: S&P 2/3 'correction' - Hussman makes his case.

Post by 3funder » Thu Jan 16, 2020 1:49 pm

I agree that US stocks are way too frothy. I wouldn't be shocked if the market lost 35% at some point, but 65%? That's probably not going to happen, and I certainly wouldn't count on it.

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Re: S&P 2/3 'correction' - Hussman makes his case.

Post by wrongfunds » Thu Jan 16, 2020 1:59 pm

nisiprius wrote:
Thu Jan 16, 2020 11:38 am

Source

Image
If you do 50/50, do you get nice monotonically increasing graph avoiding all of those S&P corrections??

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Re: S&P 2/3 'correction' - Hussman makes his case.

Post by watchnerd » Thu Jan 16, 2020 2:27 pm

wrongfunds wrote:
Thu Jan 16, 2020 1:59 pm
nisiprius wrote:
Thu Jan 16, 2020 11:38 am

Source

Image
If you do 50/50, do you get nice monotonically increasing graph avoiding all of those S&P corrections??
But 50/50 loses to Total Bond over that same period and has far deeper draw downs.

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Re: S&P 2/3 'correction' - Hussman makes his case.

Post by TN_Boy » Thu Jan 16, 2020 2:32 pm

ukbogler wrote:
Thu Jan 16, 2020 12:04 pm
He does indeed seem to be a bit on the 'permabear' side of things, doesn't he? No idea what his valuation methodology is - I expect he explains it elsewhere on the site. It's curious though in that it agrees with a lot of other posts about expected long run performance to be expected after the present crazy bull run. Like this one from last spring....

https://michaelritger.com/2019/05/20/us ... nd-beyond/
Earnings and dividends are real, multiple growth is ephemeral

Reasonable investors look to actual, sustainable cash flows as a touchstone, because over the history of the world’s stock markets the real long-term rate of return has ranged from 4-7%, as delivered by earnings growth and dividends. Anything in excess of that is a temporary consequence of the crowd paying more for each dollar generated by the underlying businesses. Long stretches of high returns must be followed by low or negative returns to bring the indices back to their sustainable long-term trendlines. For the S&P to return to the mid-range of historical valuation right now would require a decline of 40% or more (taking today’s historically high profit margins into account, this might be 60%)
There's a pretty chart towards the bottom, BTW, showing CAPE vs forward 15 year returns.
There have been other threads on Hussman; you might find them interesting.

Your remark "He does indeed seem to be a bit on the 'permabear' side of things" is a major understatement.

The great part is, he, unlike most other people who talk about the stock market, puts his money where his mouth is; see his Strategic Growth [sic] fund.

And the performance of that fund, as nisprius shows, has been almost unbelievably bad.

Hussman stands as a shining example of how people predicting market behavior should generally be ignored.

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Re: S&P 2/3 'correction' - Hussman makes his case.

Post by rascott » Thu Jan 16, 2020 2:34 pm

ukbogler wrote:
Thu Jan 16, 2020 10:45 am
Strange to see such an eloquently written piece about the market imminently crashing by two thirds when we're in the middle of a 'FED funny money melt-up' :-) :-)
"Investors should keep in mind that market valuations stand nearly three times the historically run-of-the-mill valuation levels from which stocks have historically generated run-of-the-mill long-term returns. In fact, the highest level of valuation ever observed at the end of any market cycle in history was in October 2002, and even that level is less than half of present valuation extremes.

So how do you get to historically run-of-the-mill valuation norms? The answer is simple: Wait nearly 30 years, allowing both the U.S. economy and U.S. corporate revenues to grow at the same rate as the past two decades, while stock prices remain unchanged, with no intervening periods of recession or investor risk-aversion, or alternatively (and far more likely), watch the S&P 500 lose two-thirds of its value over the completion of this market cycle."
https://www.hussmanfunds.com/comment/mc191230/

Mad as that seems, it concurs with rather a lot of other analysis on the topic, most of which now seem to be indicating that decade long returns on the S&P going forward are likely to be awful...


What total gibberish. In the opening paragraph he states that equities are grossly over valued.... while at the same time saying only a 11% pullback and they would have underperformed t-bills over the last 2 years. So which is it?

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Re: S&P 2/3 'correction' - Hussman makes his case.

Post by rascott » Thu Jan 16, 2020 2:57 pm

What's hilarious about this guy, he made a big "admission" in 2017 that his models were quite wrong from 2010 and onward regarding impact of QE, etc.... and they were making serious adjustments to his fund. He's managed to lose another 25%+ or so since then, it looks like. So much for the adjustment.

Can't imagine how he still has any assets in that fund.

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Re: S&P 2/3 'correction' - Hussman makes his case.

Post by marcopolo » Thu Jan 16, 2020 3:00 pm

TN_Boy wrote:
Thu Jan 16, 2020 2:32 pm
ukbogler wrote:
Thu Jan 16, 2020 12:04 pm
He does indeed seem to be a bit on the 'permabear' side of things, doesn't he? No idea what his valuation methodology is - I expect he explains it elsewhere on the site. It's curious though in that it agrees with a lot of other posts about expected long run performance to be expected after the present crazy bull run. Like this one from last spring....

https://michaelritger.com/2019/05/20/us ... nd-beyond/
Earnings and dividends are real, multiple growth is ephemeral

Reasonable investors look to actual, sustainable cash flows as a touchstone, because over the history of the world’s stock markets the real long-term rate of return has ranged from 4-7%, as delivered by earnings growth and dividends. Anything in excess of that is a temporary consequence of the crowd paying more for each dollar generated by the underlying businesses. Long stretches of high returns must be followed by low or negative returns to bring the indices back to their sustainable long-term trendlines. For the S&P to return to the mid-range of historical valuation right now would require a decline of 40% or more (taking today’s historically high profit margins into account, this might be 60%)
There's a pretty chart towards the bottom, BTW, showing CAPE vs forward 15 year returns.
There have been other threads on Hussman; you might find them interesting.

Your remark "He does indeed seem to be a bit on the 'permabear' side of things" is a major understatement.

The great part is, he, unlike most other people who talk about the stock market, puts his money where his mouth is; see his Strategic Growth [sic] fund.

And the performance of that fund, as nisprius shows, has been almost unbelievably bad.

Hussman stands as a shining example of how people predicting market behavior should generally be ignored.
Do we know if he is putting his money where his mouth is, or just other people's money, while collecting the huge fees?
Once in a while you get shown the light, in the strangest of places if you look at it right.

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Re: S&P 2/3 'correction' - Hussman makes his case.

Post by Chicken Little » Thu Jan 16, 2020 3:11 pm

Fed was recently lowering rates and balance sheet is currently increasing as new record highs stack up in the markets.

I don’t mind these guys grousing. Rules of the game were changed.

WSJ had an article about how FED is considering loaning directly to hedge funds as a new “tool” (didn’t read - paywall).

I don’t know what will happen. I just know I don’t have to sit here and pretend things are “normal“.

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Re: S&P 2/3 'correction' - Hussman makes his case.

Post by watchnerd » Thu Jan 16, 2020 3:17 pm

Chicken Little wrote:
Thu Jan 16, 2020 3:11 pm


I don’t know what will happen. I just know I don’t have to sit here and pretend things are “normal“.
So what will you do about it?
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Re: S&P 2/3 'correction' - Hussman makes his case.

Post by stocknoob4111 » Thu Jan 16, 2020 3:40 pm

This guy is a permabear, I would just ignore him... as has been mentioned, he has been saying there is going to be a imminent catastrophic crash for the last decade.

Also IMHO the S&P 500 is currently cheap given these interest rates. With Bonds yielding nothing demand is going to shift towards equities.

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Re: S&P 2/3 'correction' - Hussman makes his case.

Post by ge1 » Thu Jan 16, 2020 3:53 pm

Hussman is a great example how extremely smart people can be absolutely horrendous money managers. I admire his stamina, for years he literally put out a weekly well written newsletter (I think he is doing it only monthly now). At the peak his fund had 8bn, he managed to bring that down to 249m... Probably mostly his own money and from his foundation.

One of these days he will be right and can enjoy a victory lap, but wow, too be that wrong that long is actually an achievement.

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Re: S&P 2/3 'correction' - Hussman makes his case.

Post by DB2 » Thu Jan 16, 2020 4:00 pm

2/3 loss wouldn't be super shocking given each of the last two recessions each had around 50% drops. That would 'only' be an extra 15% by comparison. Given how large debt is across all areas (student loan debt, auto loan debt, credit card debt, government levels, corporate levels) and the real possibility of the Fed's tools not being nearly as effective as last recessions, I would say it's a real possibility the next recession could be very, very ugly. But then again, it may not.

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Re: S&P 2/3 'correction' - Hussman makes his case.

Post by unclescrooge » Thu Jan 16, 2020 4:02 pm

watchnerd wrote:
Thu Jan 16, 2020 3:17 pm
Chicken Little wrote:
Thu Jan 16, 2020 3:11 pm


I don’t know what will happen. I just know I don’t have to sit here and pretend things are “normal“.
So what will you do about it?
There is a reason for the saying "don't fight the Fed".

If you fight the Fed and lose, who's fault is that?

Complaining the field isn't level misses the point. You knew the odds were tilted against you and you still went all Don Quixote against the Fed. :oops:

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Re: S&P 2/3 'correction' - Hussman makes his case.

Post by marcopolo » Thu Jan 16, 2020 4:04 pm

rascott wrote:
Thu Jan 16, 2020 2:57 pm
What's hilarious about this guy, he made a big "admission" in 2017 that his models were quite wrong from 2010 and onward regarding impact of QE, etc.... and they were making serious adjustments to his fund. He's managed to lose another 25%+ or so since then, it looks like. So much for the adjustment.

Can't imagine how he still has any assets in that fund.
no accounting for behavior. People invested in the Steadman funds for a long time! You may want to sit down before you look those up.
Once in a while you get shown the light, in the strangest of places if you look at it right.

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Re: S&P 2/3 'correction' - Hussman makes his case.

Post by willthrill81 » Thu Jan 16, 2020 4:21 pm

rascott wrote:
Thu Jan 16, 2020 2:57 pm
What's hilarious about this guy, he made a big "admission" in 2017 that his models were quite wrong from 2010 and onward regarding impact of QE, etc.... and they were making serious adjustments to his fund. He's managed to lose another 25%+ or so since then, it looks like. So much for the adjustment.

Can't imagine how he still has any assets in that fund.
I wonder if his clients are buying RYSYX on the side, an S&P 500 index fund with a 2.41% expense ratio that still has $21 million in assets.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Re: S&P 2/3 'correction' - Hussman makes his case.

Post by willthrill81 » Thu Jan 16, 2020 4:24 pm

unclescrooge wrote:
Thu Jan 16, 2020 4:02 pm
watchnerd wrote:
Thu Jan 16, 2020 3:17 pm
Chicken Little wrote:
Thu Jan 16, 2020 3:11 pm


I don’t know what will happen. I just know I don’t have to sit here and pretend things are “normal“.
So what will you do about it?
There is a reason for the saying "don't fight the Fed".

If you fight the Fed and lose, who's fault is that?
That makes me remember the old Bobby Fuller Four song: "I Fought the Law and the Law Won." :D
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Re: S&P 2/3 'correction' - Hussman makes his case.

Post by SovereignInvestor » Thu Jan 16, 2020 4:31 pm

Don't see how he is considered smart.

He is calling for the S&P to trade at 6 forward PE.

That is an earnings yield of 17%. 10Y yield is 1.8%.

That's a 15 point yield risk premium or 3x the historical average assuming no growth. This isn't even a serious forecast...it is laughable.

It's as riciulous as saying the Dow should be 100K now or S&P 10K.

He completely ignores buybacks from his projected EPS growth. The average annually EPS growth rate over last 30 years has been about 6-7% and 3% recently is from buybacks anually...just with retained earnings not paid as dividend. How do you make a prediction about growth while just ignoring the element that has and is responsible for about half of the growth.

I hope people haven't listened to him!

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Re: S&P 2/3 'correction' - Hussman makes his case.

Post by TN_Boy » Thu Jan 16, 2020 4:32 pm

marcopolo wrote:
Thu Jan 16, 2020 3:00 pm
TN_Boy wrote:
Thu Jan 16, 2020 2:32 pm
ukbogler wrote:
Thu Jan 16, 2020 12:04 pm
He does indeed seem to be a bit on the 'permabear' side of things, doesn't he? No idea what his valuation methodology is - I expect he explains it elsewhere on the site. It's curious though in that it agrees with a lot of other posts about expected long run performance to be expected after the present crazy bull run. Like this one from last spring....

https://michaelritger.com/2019/05/20/us ... nd-beyond/
Earnings and dividends are real, multiple growth is ephemeral

Reasonable investors look to actual, sustainable cash flows as a touchstone, because over the history of the world’s stock markets the real long-term rate of return has ranged from 4-7%, as delivered by earnings growth and dividends. Anything in excess of that is a temporary consequence of the crowd paying more for each dollar generated by the underlying businesses. Long stretches of high returns must be followed by low or negative returns to bring the indices back to their sustainable long-term trendlines. For the S&P to return to the mid-range of historical valuation right now would require a decline of 40% or more (taking today’s historically high profit margins into account, this might be 60%)
There's a pretty chart towards the bottom, BTW, showing CAPE vs forward 15 year returns.
There have been other threads on Hussman; you might find them interesting.

Your remark "He does indeed seem to be a bit on the 'permabear' side of things" is a major understatement.

The great part is, he, unlike most other people who talk about the stock market, puts his money where his mouth is; see his Strategic Growth [sic] fund.

And the performance of that fund, as nisprius shows, has been almost unbelievably bad.

Hussman stands as a shining example of how people predicting market behavior should generally be ignored.
Do we know if he is putting his money where his mouth is, or just other people's money, while collecting the huge fees?
At one point he did have significant assets invested in his own funds. Morningstar used to follow Strategic Growth (until some combination of shrinking size and dismal performance led them to drop coverage) and they noted he did, in fact, "eat his own cooking." He may have had significant other money in something else, but he put real dollars in his own funds.

His fees are not huge, I thought they are (or were) below average for actively managed funds.

Some of this is from memory .... for a while there back in the mid 2000s I had a slice of my portfolio (10 or 15 percent maybe) devoted to "alternative investments" one of which was Strategic Growth (which did nicely from 2000 to 2003). However, I realized at some point that Strategic Growth (and the "hedge fund like" stuff I was messing with) were poor choices and went back on the path of indexed righteousness before such silliness cost me much money. (Forgetting total disasters like Hussman's fund, the question I started asking about alternative investments was "is this thing better than bonds?" and kept getting no for an answer).

lifeisinmirrors
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Re: S&P 2/3 'correction' - Hussman makes his case.

Post by lifeisinmirrors » Thu Jan 16, 2020 5:23 pm

marcopolo wrote:
Thu Jan 16, 2020 4:04 pm
rascott wrote:
Thu Jan 16, 2020 2:57 pm
What's hilarious about this guy, he made a big "admission" in 2017 that his models were quite wrong from 2010 and onward regarding impact of QE, etc.... and they were making serious adjustments to his fund. He's managed to lose another 25%+ or so since then, it looks like. So much for the adjustment.

Can't imagine how he still has any assets in that fund.
no accounting for behavior. People invested in the Steadman funds for a long time! You may want to sit down before you look those up.
That fund once had over $6 billion in AUM, it's under $250 million now. I'm surprised it still exists.

MichCPA
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Re: S&P 2/3 'correction' - Hussman makes his case.

Post by MichCPA » Thu Jan 16, 2020 5:30 pm

watchnerd wrote:
Thu Jan 16, 2020 12:12 pm
jeffyscott wrote:
Thu Jan 16, 2020 11:30 am
I think US stock prices are high and have been for some time, but not the the extent that our investment results resemble this over the past 15 years:

Image
:shock:
It's trading at all-time low!

Surely a buying signal!

:P
To be honest, it really took a ton of talent to lose money in 2019 like Hussman did. I know Bogleheads are normally passive, but I kind of wish I was smart enough to set up a trading algo to do the opposite of whatever he is doing.

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Re: S&P 2/3 'correction' - Hussman makes his case.

Post by Grt2bOutdoors » Thu Jan 16, 2020 5:39 pm

Chicken Little wrote:
Thu Jan 16, 2020 3:11 pm
Fed was recently lowering rates and balance sheet is currently increasing as new record highs stack up in the markets.

I don’t mind these guys grousing. Rules of the game were changed.

WSJ had an article about how FED is considering loaning directly to hedge funds as a new “tool” (didn’t read - paywall).

I don’t know what will happen. I just know I don’t have to sit here and pretend things are “normal“.
If they do lend, it will be secured financing in the form of repurchase agreements. The collateral will be high quality investment grade fixed income securities (think US Treasuries, Agencies and Corporates (maybe on the Corps) with appropriate haircuts or margining in place. It'd be no different than what commercial banks and money market funds are doing today. They are lending to hedge funds.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

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Re: S&P 2/3 'correction' - Hussman makes his case.

Post by Grt2bOutdoors » Thu Jan 16, 2020 5:41 pm

MichCPA wrote:
Thu Jan 16, 2020 5:30 pm
watchnerd wrote:
Thu Jan 16, 2020 12:12 pm
jeffyscott wrote:
Thu Jan 16, 2020 11:30 am
I think US stock prices are high and have been for some time, but not the the extent that our investment results resemble this over the past 15 years:

Image
:shock:
It's trading at all-time low!

Surely a buying signal!

:P
To be honest, it really took a ton of talent to lose money in 2019 like Hussman did. I know Bogleheads are normally passive, but I kind of wish I was smart enough to set up a trading algo to do the opposite of whatever he is doing.
The graph likely includes asset outflows not due to trading losses, customers are dialing in and saying "send me my money now"!
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

koala2
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Re: S&P 2/3 'correction' - Hussman makes his case.

Post by koala2 » Thu Jan 16, 2020 5:42 pm

deleted
Last edited by koala2 on Fri Jan 24, 2020 12:45 pm, edited 1 time in total.

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firebirdparts
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Re: S&P 2/3 'correction' - Hussman makes his case.

Post by firebirdparts » Thu Jan 16, 2020 5:45 pm

Looks like he knows a thing or two about losing 2/3 of the money.

I guess there's no mean reversion for hedge funds.
A fool and your money are soon partners

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Re: S&P 2/3 'correction' - Hussman makes his case.

Post by jeffyscott » Thu Jan 16, 2020 5:47 pm

Grt2bOutdoors wrote:
Thu Jan 16, 2020 5:41 pm
MichCPA wrote:
Thu Jan 16, 2020 5:30 pm
watchnerd wrote:
Thu Jan 16, 2020 12:12 pm
jeffyscott wrote:
Thu Jan 16, 2020 11:30 am
I think US stock prices are high and have been for some time, but not the the extent that our investment results resemble this over the past 15 years:

Image
:shock:
It's trading at all-time low!

Surely a buying signal!

:P
To be honest, it really took a ton of talent to lose money in 2019 like Hussman did. I know Bogleheads are normally passive, but I kind of wish I was smart enough to set up a trading algo to do the opposite of whatever he is doing.
The graph likely includes asset outflows not due to trading losses, customers are dialing in and saying "send me my money now"!
No, it is just a growth of $10,000 chart. If you put $10,000 in that fund 15 years ago, that investment is now worth about $5000.
Time is your friend; impulse is your enemy. - John C. Bogle

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Re: S&P 2/3 'correction' - Hussman makes his case.

Post by Grt2bOutdoors » Thu Jan 16, 2020 5:47 pm

koala2 wrote:
Thu Jan 16, 2020 5:42 pm
Anyone have experience w/ a "market neutral" fund? First time I heard about it. Clicked around on Schwab just now... those expense ratios... yikes!
Don't waste your time. Those funds are using derivatives to offset the long/short positions but the constant turnover in those instruments drive up the costs of running it. Their performance hasn't been too stellar either. You'd do better to design an asset allocation that let's you sleep at night using just plain vanilla broad index equity and fixed income funds.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

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Re: S&P 2/3 'correction' - Hussman makes his case.

Post by Grt2bOutdoors » Thu Jan 16, 2020 5:48 pm

jeffyscott wrote:
Thu Jan 16, 2020 5:47 pm
Grt2bOutdoors wrote:
Thu Jan 16, 2020 5:41 pm
MichCPA wrote:
Thu Jan 16, 2020 5:30 pm
watchnerd wrote:
Thu Jan 16, 2020 12:12 pm
jeffyscott wrote:
Thu Jan 16, 2020 11:30 am
I think US stock prices are high and have been for some time, but not the the extent that our investment results resemble this over the past 15 years:

Image
:shock:
It's trading at all-time low!

Surely a buying signal!

:P
To be honest, it really took a ton of talent to lose money in 2019 like Hussman did. I know Bogleheads are normally passive, but I kind of wish I was smart enough to set up a trading algo to do the opposite of whatever he is doing.
The graph likely includes asset outflows not due to trading losses, customers are dialing in and saying "send me my money now"!
No, it is just a growth of $10,000 chart. If you put $10,000 in that fund 15 years ago, that investment is now worth about $5000.
Then, you could have put your money in the bank and still come out ahead of his fund. That's terrible.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

koala2
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Re: S&P 2/3 'correction' - Hussman makes his case.

Post by koala2 » Thu Jan 16, 2020 5:51 pm

deleted
Last edited by koala2 on Fri Jan 24, 2020 12:46 pm, edited 1 time in total.

james22
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Re: S&P 2/3 'correction' - Hussman makes his case.

Post by james22 » Thu Jan 16, 2020 5:57 pm

SovereignInvestor wrote:
Thu Jan 16, 2020 4:31 pm
Don't see how he is considered smart.
That should probably give you pause.

coacher
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Re: S&P 2/3 'correction' - Hussman makes his case.

Post by coacher » Thu Jan 16, 2020 6:00 pm

viewtopic.php?f=10&t=214722

He lost me 3 years ago for good

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Re: S&P 2/3 'correction' - Hussman makes his case.

Post by jeffyscott » Thu Jan 16, 2020 6:02 pm

jeffyscott wrote:
Thu Jan 16, 2020 12:42 pm
nisiprius wrote:
Thu Jan 16, 2020 12:02 pm
(Continuing) Looking at the portfolio for the Hussman Strategic Growth Fund, I see a seemingly unremarkable set of stock investments in all eleven stock sectors...
I don't understand the details regarding the portfolio, but it is a market neutral fund, or at classified as such. So the losses are due to shorting, I presume, via the options.
Just to add a comparison to something with, perhaps :?: , a similar objective, the Vanguard market neutral fund has a 15 year annualized return of 1.22% vs. -4.57 for the Hussman fund. Also cumulative is about +41% for VMNFX vs. about -5% for HSGFX, since inception date of HSFGX.
Time is your friend; impulse is your enemy. - John C. Bogle

TropikThunder
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Re: S&P 2/3 'correction' - Hussman makes his case.

Post by TropikThunder » Thu Jan 16, 2020 6:02 pm

james22 wrote:
Thu Jan 16, 2020 5:57 pm
SovereignInvestor wrote:
Thu Jan 16, 2020 4:31 pm
Don't see how he is considered smart.
That should probably give you pause.
Right? Because clearly the problem, Sovereign, is your inability to “get” his smartness, not that he’s wrong (or that those who think he’s smart are wrong). Pithy quotes like that really settle a debate, don't you think?

SovereignInvestor
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Re: S&P 2/3 'correction' - Hussman makes his case.

Post by SovereignInvestor » Thu Jan 16, 2020 6:05 pm

TropikThunder wrote:
Thu Jan 16, 2020 6:02 pm
james22 wrote:
Thu Jan 16, 2020 5:57 pm
SovereignInvestor wrote:
Thu Jan 16, 2020 4:31 pm
Don't see how he is considered smart.
That should probably give you pause.
Right? Because clearly the problem, Sovereign, is your inability to “get” his smartness, not that he’s wrong (or that those who think he’s smart are wrong). Pithy quotes like that really settle a debate, don't you think?
I mentioned that bit in a paragraph showing how unreasonable his forecast is.

Didn't expect it to be quoted in isolation...thought the litany of reasons I provided were much more robust than that tidbit.

Northern Flicker
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Re: S&P 2/3 'correction' - Hussman makes his case.

Post by Northern Flicker » Thu Jan 16, 2020 6:15 pm

I believe that a good approximation is that HSGFX is long value stocks and short the S&P500. It thus has had the double whammy of value underperforming but the market going up.
Index fund investor since 1987.

TN_Boy
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Re: S&P 2/3 'correction' - Hussman makes his case.

Post by TN_Boy » Thu Jan 16, 2020 6:23 pm

jeffyscott wrote:
Thu Jan 16, 2020 6:02 pm
jeffyscott wrote:
Thu Jan 16, 2020 12:42 pm
nisiprius wrote:
Thu Jan 16, 2020 12:02 pm
(Continuing) Looking at the portfolio for the Hussman Strategic Growth Fund, I see a seemingly unremarkable set of stock investments in all eleven stock sectors...
I don't understand the details regarding the portfolio, but it is a market neutral fund, or at classified as such. So the losses are due to shorting, I presume, via the options.
Just to add a comparison to something with, perhaps :?: , a similar objective, the Vanguard market neutral fund has a 15 year annualized return of 1.22% vs. -4.57 for the Hussman fund. Also cumulative is about +41% for VMNFX vs. about -5% for HSGFX, since inception date of HSFGX.
Actually, Hussman does not consider his fund to be a "market neutral" fund. At least, he didn't use to. It was ... a GROWTH fund, just like the name implies. This is the fund's stated objective:
Hussman Strategic Growth Fund seeks to achieve long-term capital appreciation, with added emphasis on the protection of capital during unfavorable market conditions.
Here is what he says about hedging:
Specific strategies for reducing or “hedging” market exposure may include buying put options on individual stocks or stock indices, writing covered call options on stocks which the Fund owns or call options on stock indices, or establishing short futures positions or option combinations (such as simultaneously writing call options and purchasing put options) on one or more stock indices considered by the investment manager to be correlated with the Fund’s portfolio. In addition, the Fund may seek to hedge by effecting short sales of ETFs. The Fund may use these strategies to hedge up to 100% of the value of the stocks that it owns. However, the Fund may experience a loss even when the entire value of its stock portfolio is hedged if the returns of the stocks held by the Fund do not exceed the returns of the securities and financial instruments used to hedge, or if the exercise prices of the Fund’s call and put options differ, so that the combined loss on these options during a market advance exceeds the gain on the underlying stock index.
So he would hedge against possible losses when he felt market valuations (or whatever technical indicators he felt were interesting) meant things were very risky.

Alas, the hedges cost you when the market moves the wrong way. It keeps moving the wrong way on him. Over and over again .....

I'm sure he is a fine human being, but the track record of his fund is a train wreck. It's unbelievable how bad that fund has performed.

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Re: S&P 2/3 'correction' - Hussman makes his case.

Post by nisiprius » Thu Jan 16, 2020 6:53 pm

wrongfunds wrote:
Thu Jan 16, 2020 1:59 pm
nisiprius wrote:
Thu Jan 16, 2020 11:38 am

Source

Image
If you do 50/50, do you get nice monotonically increasing graph avoiding all of those S&P corrections??
No. You do not. In order to for that to happen, it's not enough for HSGFX to avoid the crash of 2008-2009, it would need to have had a hekkuva nice kick upward during 2008-2009, and it didn't do anything of the sort. Here's a 50/50 portfolio of HSGFX and the Vanguard 500 Index Fund.

Image
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

Chicken Little
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Re: S&P 2/3 'correction' - Hussman makes his case.

Post by Chicken Little » Thu Jan 16, 2020 7:43 pm

unclescrooge wrote:
Thu Jan 16, 2020 4:02 pm
There is a reason for the saying "don't fight the Fed".
There certainly is. It’s just not a balance sheet ballooning over $4 Trillion with the Fed Funds rate at 1.50-1.75 (Used to just be a number, right? You know why it’s a target range now, right?) all during the longest bull market in history.

Who is for helicopter money? If this has got us here, why not let that take us there?

I’m right where I need to be. Not convinced everybody else is.

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Re: S&P 2/3 'correction' - Hussman makes his case.

Post by SovereignInvestor » Thu Jan 16, 2020 8:09 pm

Chicken Little wrote:
Thu Jan 16, 2020 7:43 pm
unclescrooge wrote:
Thu Jan 16, 2020 4:02 pm
There is a reason for the saying "don't fight the Fed".
There certainly is. It’s just not a balance sheet ballooning over $4 Trillion with the Fed Funds rate at 1.50-1.75 (Used to just be a number, right? You know why it’s a target range now, right?) all during the longest bull market in history.

Who is for helicopter money? If this has got us here, why not let that take us there?

I’m right where I need to be. Not convinced everybody else is.
Stocks are discounted against long term interest rates and the Fed doesn't set those.
In fact the fed doesn't even set the short term ones really...they follow the market.

Every Fed decision since 1994 has been what majority of market participants believed would happen.

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