John Hussman

John Hussman

Last Update: 05-01-2015

Number of Stocks: 185
Number of New Stocks: 28

Total Value: $953 Mil
Q/Q Turnover: 24%

Countries: USA
Details: Top Buys | Top Sales | Top Holdings  Embed:

John Hussman Watch

  • Memorize This, Earn A Dollar – John Hussman

    As a kid growing up in the 1960s, I earned my allowance the usual way; cutting grass and raking leaves. When there was no grass to cut or other work to do, my parents – who deeply valued education – would give us things to commit to memory. I figure I squeezed more than 30 bucks out of memorizing the multiplication tables up to 12. My brothers were better at memorizing poetry, but I was pretty good at song lyrics, which put me in good position to learn the words to countless '70s songs (e.g. "This really blew my mind. The fact that me, an over-faired, long-haired, leaping gnome, should be the star of a Hollywood movie. But, there I was"). I was not paid for this.


    Still, I got three bucks for memorizing “If” by Rudyard Kipling. Along with “Desiderata” and Robert Frost’s “The Road Not Taken,” it’s served me well at various points in life.

      


  • John Hussman: Two Tiered Markets, Full Cycle Investing and The Benefits and Costs of Defense

    “The Nifty Fifty appeared to rise up from the ocean; it was as though all of the U.S. but Nebraska had sunk into the sea. The two-tier market really consisted of one tier and a lot of rubble down below. What held the Nifty Fifty up? The same thing that held up tulip-bulb prices long ago in Holland - popular delusions and the madness of crowds. The delusion was that these companies were so good that it didn't matter what you paid for them; their inexorable growth would bail you out.”


    Forbes Magazine during the 50% market collapse of 1973-74

      


  • John Hussman: The One Lesson To Learn Before A Market Crash

    Last week, the price of Greek government debt soared on hopes of an 11th hour stick-save bailout by the European Union. Unfortunately, that price jump still left Greek bonds priced to reflect a default probability of 100% at every maturity. The jump only reflected an increase in the amount that bondholders evidently expect to recover in default, raising the implied recovery rate from the recent low near 30% to something closer to 50%. Put another way, the bond market has fully priced in the likelihood of a default coupled with a major haircut on Greek debt. What prices may not reflect is that the style of the haircut Greece wants may be modeled after former finance minister Yanis Varoufakis.


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  • Judging The Future At A Speculative Peak – John Hussman

    “I know of no way of judging the future but by the past.” – Patrick Henry


    With valuations still extreme and deterioration in market action continuing to indicate a shift toward risk-aversion among investors, we are less concerned about specific factors such as Greece than about much more general pressures that threaten to force an upward spike in compressed risk-premiums. We’ve often noted that a market collapse is nothing other than that phenomenon: razor-thin risk premiums that are then pressed abruptly to higher levels. Undoubtedly, any worsening of Greek credit strains could contribute to the timing of such a spike. But until we observe a firming of market internals coupled with a fresh narrowing of credit spreads, it’s important to recognize that downside risks are much more general, and are not confined to any particular news item.

      


  • Durable Returns, Transient Returns – John Hussman

    Over the course of three speculative bubbles in the past 15 years, I’ve often made the distinction between “durable” investment returns and transient ones. At any point in time, the cumulative long-term return of the stock market equals the gain that investors can reasonably assume will be durable (in that it is unlikely to be surrendered in the future), plus whatever market gain investors should assume will be entirely wiped out over the course of the present or future market cycles. As it turns out, those two components can be identified with surprising accuracy.


    We can understand the distinction between durable gains and transient gains by inspecting market history and asking this question: was the prevailing level of the stock market (or its cumulative total return) observed again at a later date? We define that level as “durable” only if it was not observed again in the future. By contrast, a market gain that is subsequently wiped out over the completion of the market cycle is clearly transient in hindsight.

      


  • All Their Eggs In Janet's Basket – John Hussman

    The financial markets are establishing an extreme that we expect investors will remember for the remainder of history, joining other memorable peers that include 1906, 1929, 1937, 1966, 1972, 2000 and 2007. The failure to recognize this moment as historic is largely because investors have been urged to believe things that aren’t true, have never been true and can be demonstrated to be untrue across a century of history. The broad market has been in an extended distribution process for nearly a year (during which the NYSE Composite has gone nowhere) yet every marginal high or brief market burst seems infinitely important from a short-sighted perspective. Like other major peaks throughout history, we expect that these minor details will be forgotten within the sheer scope of what follows. And like other historical extremes, the beliefs that enable them are widely embraced as common knowledge, though there is always, always, some wrinkle that makes “this time” seem different. That is why history only rhymes. But in its broad refrain, this time is not different.


    The central fallacy operating here is the notion that monetary easing provides a kind of mechanical and concrete support to the financial markets, when in fact the primary driver of financial markets in recent years has been pure speculative risk-seeking. While risk-seeking is encouraged by monetary easing, it is not a reliable outcome. Once speculative valuation extremes have been in place, persistent monetary easing has certainly not prevented severe market losses in prior cycles. Investor preferences toward risk distinguish the expanding phase of a bubble from its inevitable crash, and these are most directly measured through the behavior of market internals, not through the behavior of monetary authorities.

      


  • John Hussman: When You Look Back On This Moment In History

    There are moments in time when durable history is made; history that others observe much later, shaking their heads, at a loss to understand how the events that followed could not have been obvious at the time. When you look back on this moment in history, remember these things.


    When you look back on this moment in history, remember that spectacular extremes in reliable valuation measures already told you how the story would end. Among the measures best correlated with actual subsequent S&P 500 total returns, capitalization-weighted market indices such as the S&P 500 were more richly valued in only 54 weeks of history, 21 of which represented the final advance to the 2000 market peak, with the remaining 33 representing the retreat from that high to present valuation levels, on the way to a 50% loss in the S&P 500 Index and an 83% loss in the Nasdaq 100 Index. Presently, the market has already lost the momentum and favorable market internals that were evident during that final run, so we doubt that the 2000 extreme should be viewed as an objective.

      


  • John Hussman: Why Stocks Are Not Cheap Relative To Bonds

    One of the constant refrains we hear at present is that while stocks may be richly valued on an absolute basis, they are “cheap relative to bonds.” At least one professor recently told students that valuations are meaningless because the P/E on cash is 100. Technically, with T-bill yields at just 0.01%, the P/E on cash is more like 10,000, but let’s not quibble. Using simple P/E ratios or inverted interest rates as a standard of value only makes sense if you have no appreciation for how securities are valued. By this kind of standard, I would advise these students to propose that their professor give them each $100 in return for a promise of a single payment of $2 next year, on the argument that the P/E of 50 is a fraction of the "P/E on cash."


    I’ll repeat what I’ve called the Iron Law of Valuation: every security is a claim on a very long-term stream of future cash flows that will be delivered into the hands of investors over time. Given that expected stream of future cash flows, the current price of the security moves opposite to the expected future return on that security. The value of a share of stock is determined by far more than current earnings, and one's estimate of value will be ill-formed if current earnings aren't a sufficient statistic for the long-term earnings trajectory.

      


  • John Hussman: When Paper Wealth Vanishes

    Present market conditions join the second most extreme valuations in U.S. history (on measures most reliably correlated with actual subsequent 10-year S&P 500 total returns) with increasing divergences and dispersion in market internals. Despite current extremes, valuations say very little about near term market direction. Valuations are enormously informative about likely market returns over horizons of 7-15 years. In contrast, market internals convey a great deal of information about the prevailing risk preferences of investors, and that's what amplifies our concerns here. Uniformly favorable internals across a wide variety of sectors and security types typically convey a signal that investors have a robust willingness to seek and accept risk, and it’s that feature that can allow overvalued markets to become persistently more overvalued. But remove that feature, and overvalued markets have often become vulnerable to vertical air pockets, panics, and crashes.


    I’ll say this again – valuations alone are not the concern. It’s the additional feature of deteriorating market internals that introduces a critical element of risk here. That feature helped us to correctly warn of the 2000-2002 and 2007-2009 collapses, and shift to a constructive outlook in-between. The recent half-cycle since 2009 has been more challenging as the inadvertent result of my 2009 insistence on stress-testing our methods of classifying market return/risk profiles against Depression-era data. The resulting ensemble methods outperformed every approach we had ever tested against post-war data, Depression-era data, and holdout validation data, but they also encouraged an immediate defensive stance when overvalued, overbought, overbullish syndromes emerged. Throughout history, those syndromes had regularly been accompanied or closely followed by breakdowns in market internals. The one truly “different” aspect of the half-cycle since 2009 is that quantitative easing disrupted that regularity. Nearly a year ago, weimposed overlays on our methods that require hard-defensive investment stances to be accompanieddirectly by deterioration in market internals or other risk-sensitive measures (e.g. credit spreads).

      


  • Market Valuations and Expected Returns – May 19, 2015

    The market was up more than 30% in 2013, the best year since the go-go years of 1990s. 2014 was another strong year for the market. The S&P 500 index was up more than 13%. Since the market recovery in 2009, the stock market has been up for 6 consecutive years. Yet in January 2015, the stock market benchmark S&P 500 lost 3.10%. In February, the market regained its strength by increasing 5.49%. Throughout March, the market went down by 1.74%. In April, the market was up by 0.85%. Can the market continue to grow in 2015?


    Bernard Baruch once said “A market without bears would be like a nation without a free press. There would be no one to criticize and restrain the false optimism that always leads to disaster.”

      


  • The New Era Is An Old Story – John Hussman

    Since its 2014 high on December 29, the S&P 500 Index has gained 1.5% (not including a fraction of a percent in dividends), the Dow Industrial Average has gained 1.3%, the Dow Transportation Average is down -5.8%, the Dow Utilities Average is down -8.9%, market breadth has churned sideways, and investment grade corporate spreads are flat (though junk spreads have come in about two-tenths of a percent). The Nasdaq has been the star performer, with a 5% gain driven by glamor tech and internet stocks. The last week of December, the NYSE registered 478 new highs and 72 new lows. Last week, with the S&P 500 registering a marginal record high, the NYSE registered only 198 new highs, with 118 new lows. Since December, in weeks when the S&P 500 has declined, NYSE trading volume has increased from the prior week by an average of 351 million shares. In weeks that the S&P 500 has advanced, NYSE trading volume has contracted by an average of 565 million shares. On broad indices, the general pattern resembles a narrowing wedge with a relatively flat overhead resistance area and increasingly shallow dips. What we observe here is a market that continues to struggle internally and shows persistent signs of distribution, but is still keeping its best foot forward, for now.


    While we don’t follow Dow Theory directly, we do find that its central principle of divergence and uniformity has enormous importance historically. In our view, the divergence and uniformity of observable market internals and credit spreads provides essential information about the risk-preferences of investors. Risk-seeking investor preferences allow markets to be tolerant of rich valuations and even bubbles, while a subtle shift to risk-averse investor preferences often signals an impending and catastrophic end to those valuation extremes. Indeed, if you ask what was the single most important factor in our own difficult narrative in recent years, it was that the methods that resulted from our 2009 stress-testing against Depression-era data, while including these measures, didn’t capture them strongly enough to tolerate QE-induced speculation. We ultimately had to impose those bubble-tolerant features as an overlay (see A Better Lesson than “This Time is Different”).

      


  • John Hussman's Top Five New Buys in the First Quarter

    Guru John Hussman (Trades, Portfolio), president and principal shareholder of Hussman Strategic Advisors, has been critical of U.S. Treasury and Federal Reserve policies in the past – and reportedly predicted the 2008 recession.

    A former economics professor, Hussman added 28 new buys to his portfolio in the first quarter. Four had sector weightings exceeding 1.00%, and a fifth is weighted 0.98%.  


  • Pzena´s Strong Bet in the First Quarter Has Announced a Dividend Hike

    In this article, let's take a look at Assurant Inc. (NYSE:AIZ), a $4.41 billion market cap company, which provides specialized insurance products and related services in North America, Latin America, Europe, and internationally.


    Top Change in Shares

      


  • Two Point Three Sigmas Above The Norm

    “If you want to say that valuation measures are higher now, and that should be the norm, or that low interest rates now justify higher valuation measures, what you’re really saying is that long-term prospective returns should be lower, and they should be in the 2-3% annual range looking out a decade.”


    John Hussman (Trades, Portfolio), Very Mean Reversion, April 2014

      


  • John Hussman Increases Portfolio in 1Q2015

    John Hussman (Trades, Portfolio) is known for his negative thoughts on the Federal Reserve and the U.S. Treasury. He has been named the "Prophet of Doom" because he predicted the financial crisis of 2008 and says there is another to come that will be much worse.


    Stocks and bonds are as overvalued as ever right now, he says, and investing in bonds within the next 10 years will lead to financial loss.

      


  • Three of Hussman's First-Quarter Acquisitions Jump Into His Top 20 Holdings

    Guru John Hussman (Trades, Portfolio), the president and principal shareholder of Hussman Strategic Advisors, added three stakes to his portfolio in the first quarter that were large enough to qualify for spots in his top 20 holdings by volume.


    Two of those stakes are in the Retail – Apparel and Specialty sector, and one – Staples (NASDAQ:SPLS) – was big enough to land in Hussman’s top 10.

      


  • Market Valuations and Expected Returns – April 2, 2015

    The market was up more than 30% in 2013, the best year since the go-go years of 1990s. 2014 was another strong year for the market. The S&P 500 index was up more than 13%. Since the market recovery in 2009, the stock market has been up for 6 consecutive years. Yet in January 2015, the stock market benchmark S&P 500 lost 3.10%. In February, the market regained its strength by increasing 5.49%. Throughout March, the market went down by 1.74%. Can the market continue to grow in 2015?


    Bernard Baruch once said, “A market without bears would be like a nation without a free press. There would be no one to criticize and restrain the false optimism that always leads to disaster.”

      


  • Eating Our Seed Corn: The Causes Of U.S. Economic Stagnation and the Way Forward – John Hussman

    Executive summary




  • Estimate for Patterson Companies' Intrinsic Value Equals the Market Price

    In this article, let's take a look at Patterson Companies, Inc. (NASDAQ:PDCO), a $5.16 billion market cap company, which distributes dental, veterinary, and rehabilitation supplies.


    Decreasing Rate

      


  • What Does That Difference Mean – John Hussman

    We continue to observe one of the most overvalued, overbought, overbullish syndromes in the historical record, combined – and this feature is central – with deterioration in market internals suggestive of a shift toward risk-averse preferences among investors. The resulting combination places current conditions among instances that we identify as a “Who’s Who of Awful times to Invest” (see last week’s comment:Plan to Exit Stocks in the Next 8 Years? Exit Now). Based on historical outcomes associated with those prior instances (which prior to the current market cycle, include only 1929, 1972, 1987, 2000 and 2007), we continue to view the stock market as vulnerable to significant downside risk both in the near-term and over the completion of the present market cycle.


    There is a critical element to these concerns, however, that forms the central distinction between episodes in history where overvalued markets continued higher, and episodes that quickly became vulnerable to free-falls and crashes. That element is the condition of investor preferences toward risk, which we infer from the uniformity or divergence of market internals, credit spreads and other risk-sensitive factors. A broad improvement in market internals on our measures would not relieve the obscene overvaluation of the equity market, but it would suggest a return to speculative investor preferences and would reduce the immediacy of our downside concerns.

      


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