John Hussman

John Hussman

Last Update: 2014-08-01

Number of Stocks: 189
Number of New Stocks: 31

Total Value: $1,302 Mil
Q/Q Turnover: 30%

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

John Hussman Watch

  • John Hussman – The Two Pillars of Full-Cycle Investing

    Despite my reputation in recent years as a “permabear,” I’ve actually had quite a variable relationship with equity risk across three decades in the financial markets, and that relationship has always depended on market and economic conditions. It’s difficult to judge stocks as “good” or “bad” investments without reference to valuations and other factors. For example, after the 1990 bear market, I had a reputation as a “lonely raging bull” and advocated a leveraged stance in equities for years, based on a combination of reasonable valuation and strong market internals. While investors worried about weak consumer confidence, I frequently noted that weak confidence is correlated with strong subsequent market returns. It’s the combination of high confidence, lopsided bullishness, overvaluation and overbought multi-year advances that opens a chasm into which the market ultimately plunges. History is remarkably consistent on this point, and it requires discipline to avoid that damage. Reducing exposure to risk in these conditions is the first pillar of full-cycle investing.

    Accordingly, I was no fun at all by the 2000 market peak. It was impossible to justify equity valuations except on assumptions that were wholly outside of historical experience. We keep a talking sock puppet in the office as a reminder of that bubble. A little squeeze and he says things like “Hey, you’re a good-lookin’ fella. I like your shorts.” 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.


  • John Hussman’s Second Quarter 2014 Letter to Shareholders

    Dear Shareholder,

    The Hussman Funds continue to pursue a historically-informed, value-conscious, risk-managed investment discipline focused on the complete market cycle. From the standpoint of a full-cycle discipline, it is essential to understand the current position of the market within that cycle.


  • Dimes On Black and Dynamite On Red - John Hussman

    The stock market is presently a roulette wheel with dimes on black and dynamite on red. We continue to have extreme concerns about the extent of potential market losses over the completion of the present market cycle. At the same time, we have very little view with regard to short-term market action. If one reviews market action surrounding major pre-crash peaks such as 1929, 1972, 1987, 2000 and 2007, you’ll observe a sort of “resilience” in the major indices on a day-to-day and week-to-week basis even after market internals had already corroded. In 1987, for example, the break following the August bull market peak was largely recovered over the course of several weeks before failing rapidly in October. In 2000, the market actually experienced a series of 10-12% corrections and recoveries before a final high in September that was followed by a loss of half the market’s value. In 2007, the initial break in mid-summer was fully recovered, with the market registering a fresh nominal high in early October that marked the end of the bull market and the start of a 55% market collapse.

    As economic historian J.K. Galbraith wrote about the advance leading up to the 1929 crash, the market’s gains “had an aspect of great reliability… Indeed the temporary breaks in the market which preceded the crash were a serious trial for those who had declined fantasy. Early in 1928, in June, in December, and in February and March of 1929 it seemed that the end had come. On various of these occasions the Times happily reported the return to reality. And then the market took flight again. Only a durable sense of doom could survive such discouragement. The time was coming when the optimists would reap a rich harvest of discredit. But it has long since been forgotten that for many months those who resisted reassurance were similarly, if less permanently, discredited.”


  • Market Peaks Are a Process - John Hussman

    “Regardless of very short-term market direction, it is urgent for investors to understand where the equity markets are positioned in the context of the full market cycle. While the most extreme overvalued, overbought, overbullish, rising-yield syndrome we define has generally appeared only at the most wicked market peaks in history, investors have ignored those conditions over the past year. We can’t be certain when the deferred consequences will emerge. But a century of market history provides strong reason to believe that any intervening gains will be wiped out in spades.

    “It’s instructive that the 2000-2002 decline wiped out the entire total return of the S&P 500 – in excess of Treasury bills – all the way back to May 1996, while the 2007-2009 decline wiped out the entire excess return of the S&P 500 all the way back to June 1995. Overconfidence and overvaluation always extract a terrible payback.


  • John Hussman's Wine Country Conference 2014 Presentation and Q&A

    John Hussman (Trades, Portfolio)'s Wine Country Conference 2014 Presentation and Q&A


  • John Hussman's Full Presentation from the Wine Country Conference

    Hussman doesn't do many conferences; the ones that he does do are usually related to charity.

    Therefore the video below is a rare chance to see a presentation from this respected investor and strategist.


  • Q&A with John Hussman - Wine Country Conference

    In the video below Mebane Faber leads a question and answer session with John Hussman (Trades, Portfolio).

    Interestingly while Hussman is very bearish he notes that it is impossible to know what will eventually drive a shift in risk aversion.


  • Exit Strategy - John Hussman

    The S&P 500 set a marginal new high on Friday, in the context of a broad rollover in momentum thus far this year that we view as likely – though of course not certain – to represent a broad cyclical peak of the sort that we observed in 2000 and 2007, as distinct from spike-peaks like 1987. Valuation measures remain extreme, with the market capitalization of nonfinancial stocks pushing 130% of GDP (relative to a pre-bubble norm of about 55%), the S&P 500 price/revenue ratio at 1.7, versus a pre-bubble norm of 0.8, and the Shiller P/E near 26 – which while lower than the 2000 extreme, exceeds every pre-bubble observation except for a few months approaching the 1929 peak. We presently estimate 10-year nominal total returns for the S&P 500 Index averaging just 2.3% annually, with zero or negative total returns on every horizon shorter than about 7 years.

    A side note about valuations and profit margins – my concern about record profit margins here is emphatically not centered on what profit margins may do over the next few quarters or years. The relationship between cyclical movements in earnings and stock prices is simply not very strong. Rather, as I noted in The Coming Retreat in Corporate Earnings, “my present concern is much more secular in nature. It can be expressed very simply: investors are taking current earnings at face value, as if they are representative of long-term flows, at a time when current earnings are more unrepresentative of those flows than at any time in history. The problem is not simply that earnings are likely to retreat deeply over the next few years. Rather, the problem is that investors have embedded the assumption of permanently elevated profit margins into stock prices, leaving the market about 80-100% above levels that would provide investors with historically adequate long-term returns.”


  • John Hussman - Setting the Record Straight

    With advisory sentiment running at 56% bulls and fewer than 20% bears, with most historically reliablevaluation metrics about twice their pre-bubble norms (and presently associated with negative expected S&P 500 nominal total returns on every horizon of 7 years and less), with capitalization-weighted indices near record highs but smaller stocks and speculative momentum stocks diverging badly, and with a Federal Reserve clearly intent on winding down the policy of quantitative easing that has brought these distortions about, we continue to view the present market environment as among the most dangerous instances in history.

    Major market peaks, even those like 2000 and 2007 that were followed by 50% losses, have never felt dangerous at the time. That’s why they were associated with exuberant price extremes. Sure, investors had a sense that prices had advanced a great deal, but endless reasons could be found to justify the advance. Avoiding major losses required an intimate familiarity with market history, and enough discipline and patience to maintain what Galbraith called a “durable sense of doom” about observable conditions. The general rule is that you don’t observe the “catalyst” in advance, only the stack of dynamite.


  • Cahm Viss Me Eef You Vahn to Live - John Hussman Weekly

    “Observation over many years has taught us that the chief losses to investors come from the purchase of low-quality securities at times of good business conditions. The purchasers view the good current earnings as equivalent to ‘earning power’ and assume that prosperity is equivalent to safety.”

    Benjamin Graham


  • Bearish Investor John Hussman's 5 Top New Stock Buys

    John Hussman (Trades, Portfolio), a market analyst and founder of the Hussman Funds, has a dire outlook for the markets, largely owing to Fed interference in them. He warned in his most recent weekly commentary:

    “The Federal Reserve has stomped on the gas pedal for years, inadvertently taking price/earnings ratios at face value, while attending to “equity risk premium” models that have a demonstrably poor relationship with subsequent market returns. As a result, the Fed has produced what is now the most generalized equity valuation bubble that investors are likely to observe in their lifetimes... The median price/revenue multiple for S&P 500 constituents is now higher than at the 2000 market peak. The average price/revenue multiple across S&P 500 constituents is now above every point in that bubble except the first and third quarters of 2000. The central message to investors with unhedged equity positions and investment horizons shorter than about 7 years: Prospective returns have reached zero. The value you seek from selling in the future is already on the table today. The future is now.”  

  • The Future Is Now - John Hussman

    “Even a return to median bull market valuations would be brutal for the most popular tech stocks. We’re not even talking about bear market valuations, and we’re making the leap of faith, contrary to the evidence, that the quality of current revenues is as high as those generated during the past decade. To illustrate the probable epilogue to the current bubble, we’ve calculated price targets for some of the glamour techs, based on current revenues per share, multiplied by the median price/revenue ratio over the bull market period 1991-1999.

    Cisco Systems: $18 ¾ (52-week high: $82)

  • Hasbro Continues its Profitable Streak

    Hasbro, Inc. (HAS) has been on the radar of many investment gurus like Paul Tudor Jones (Trades, Portfolio) and John Hussman (Trades, Portfolio) for some time now, given its position as the second largest toy manufacturer in the industry, only outranked by Mattel, Inc. (MAT). But the company’s first quarter earnings report showed that it could possibly outperform industry giant and rival Mattel in terms of growth, as Europe and Latin America registered 8% and 17% growth respectively, while Mattel saw declines in the same regions. Furthermore, quarterly earnings were driven mainly by the girls’ category, which sported a 20% increase in demand for My Little Pony, Equestria Girls, and Nerf Rebelle products. So, with profitability on the right track, what can investors expect from this industry player in the long term?

    Licensing agreements and emerging market growth  

  • The Federal Reserve's Two Legged Stool - John Hussman

    Nice article this week from someone who knows our work well - Jonathan Laing, the senior editor at Barron’s Magazine. He emphasizes our concerns about valuation and the need to account for the effect of profit margin variation, which can "make stocks seem beguilingly cheap at market peaks," duly observes our miss in this half-cycle (though stress-testing wasn't discussed), “after deftly side-stepping the dotcom- and housing bubble-crashes," and adds "We expect some vindication of his obduracy may lie ahead.” No argument here.

    One of the things that some forget is that we shifted to a constructive stance between those two crashes in early 2003, and initially moved toward a constructive stance after the market collapsed in late-2008 (see Why Warren Buffett is Right and Why Nobody Cares) until a parade of policy errors forced us to entertain Depression-era outcomes. My 2009 stress-testing miss and the awkward transition that resulted certainly injured my reputation during this uncompleted half-cycle. Still, having addressed that “two data sets” problem, I expect no similar stress-testing response in future market cycles. Meanwhile, I have every expectation that the current speculative extremes will end in tears for those inclined to dismiss hard, historically reliable evidence by mumbling “permabear.” On the bright side, the conclusion of the present cycle and the course of those that follow are likely to provide strong, extended opportunities to take aggressive investment exposure. Now would just be a particularly inopportune moment to do so.


  • After a Spate of Acquisitions, It’s Time for Profits

    Over the past few years, the leading media and marketing company in the U.S., Meredith Corporation (MDP), has made a point of purchasing company’s and brands that would enhance its interest in publishing, broadcasting, marketing, and interactive media. And although talks about acquiring Time Warner Inc. (TWX)’s Time magazine were unsuccessful, Meredith’s financial results and future outlook are still looking promising. While the current EPS growth rate of 6.3% is not stellar, management reiterated that the company’s acquisition load will contribute to the quarterly $302.1 million saved in operating expenses, due to a 1.4% decrease in production, distribution, and editorial costs.

    A Long Trail of Acquisitions to Boost Growth


  • Reed Elsevier’s Profitable Portfolio Shift

    Reed Elsevier PLC (RUK) is one of the oldest publishers and information providers in the market, and with time has grown to be a diverse and solid business. The firm’s essential operating segments are Scientific, Technical, and Medical (35% of sales), Risk Solutions (15%), Legal (26%), and Exhibitions (14%), with most of annual revenue generated in North America and Europe. Last quarter, investment gurus John Hussman (Trades, Portfolio) and Sarah Ketterer (Trades, Portfolio) bought the company’s shares, and given the positive developments of fiscal 2013, I’m not surprised. So, let’s see where this publisher is heading in the long run.

    Some Better Than Others


  • Fed-Induced Speculation Does Not Create Wealth - John Hussman

    In recent years, by starving investors of all sources of safe return, the Federal Reserve has successfully engineered an enormous upward shift in the short-run tolerance of investors to accept risk. Unfortunately, there is no reason to believe that human nature has changed as a result, nor is there reason to believe that the long-run, full-cycle tolerance of investors to accept risk has changed. In the short run – the advancing half of the full cycle – the tolerance for financial risk can be effectively rewarded, regardless of valuation, so long as prices are advancing and valuations are becoming progressively more extreme. These episodes typically end when historically identifiablesyndromes of excessive speculation appear (the most extreme version we identify emerged as early as February 2013, and again in May, December, and today). Over the complete market cycle, the tolerance for risk can be rewarded only by the delivery of cash flows that are reasonable in comparison to price paid for the investment, coupled with the absence of significant downward adjustments in valuations over time.

    The same speculative pressures that have rewarded short-run risk tolerance in recent years have done so only by removing the potential rewards available for maintaining investment positions and risk-tolerance over the longer-run. The arithmetic is simple – the higher the price one pays for a claim to some stream of future cash flows, the lower the long-run return that an investor will achieve. For a review of current valuations and prospective market returns, see the March 10 comment: It is Informed Optimism to Wait For the Rain.


  • Restoring the Virtuous Cycle of Economic Growth - John Hussman

    During the past 14-year period, the S&P 500 has achieved a total return, including dividends, of just 3.3% annually. Even this outcome has been achieved only because market valuations have now been driven more than 100% above pre-bubble historical norms, based on reliable measures that are highly correlated with subsequent market returns (for a review, see It is Informed Optimism to Wait for the Rain). We emphasize reliabilitybecause there are countless measures that Wall Street analysts prefer to use, particularly those that make stocks seem reasonably valued. The problem is that most have very little relationship with actual subsequentmarket returns. When evaluating anyone’s valuation claim, you should always ask – how does this measure actually relate to subsequent market returns when it is evaluated over decades of market history?

    Over the same 14-year period, real U.S. GDP has grown by just 1.8% annually, while real gross private investment has crawled at just 1% annually. The primary growth area of the economy has been total public debt, which has surged at 8% annually, driving the outstanding amount of total public debt to 99% of GDP.


  • What Is Going on with STAPLES?

    There has been quite a buzz on the news about Staples Inc. (SPLS) and their decision to close up 225 stores. We all wonder if this means. Is the company is on a downhill? Or is simply healthy reshaping?

    Staples is certainly aiming to change its market strategy. They are closing 12 percent of its North American shops to shorten costs and focus on online sales. But they also announced that they would refresh about 20 percent of their products, adding new categories beyond office supplies. This comes as no surprise when we consider that the company’s biggest competitors are no longer OfficeMax (OMX) and Office Depot (ODP). Staples always had a scale advantage over these two. Bigger problems aroused with the growth of mass-market stores and online retailers. Buyers no longer need to go to actual physical shops, and if they do, they rather get everything they want from a single place. Firms such as Wal-Mart (WMT) and (AMZN) have lower cost structure and are likely to capture share in the office supply market.


  • It Is Informed Optimism to Wait for the Rain - John Hussman

    Based on valuation metrics that have demonstrated a near-90% correlation with subsequent 10-year S&P 500 total returns, not only historically but also in recent decades, we estimate that U.S. equities are more than 100% above the level that would be associated with historically normal future returns. We presently estimate 10-year nominal total returns for the S&P 500 averaging just 2.2% annually over the coming decade, with zero or negative nominal total returns on every horizon of less than 7 years. Regardless of very short-term market direction, it is urgent for investors to understand where the equity markets are positioned in the context of the full cycle.

    Importantly, this expectation fully embeds projected nominal GDP growth averaging over 6% annually over the coming decade. To the extent that nominal economic growth persistently falls short of that level, we would expect U.S. stock market returns to fall short of 2.2% nominal total returns (including dividends) over this period. These are not welcome views, but they are evidence-based, and the associated metrics have dramatically higher historical correlation with actual subsequent returns than a variety of alternative approaches such as the “Fed Model” or various “equity risk premium” models. We implore investors (as well as FOMC officials) to examine and compare these historical relationships. It is not difficult – only uncomfortable.


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User Comments

ReplyWal - 4 months ago
How can you follow the investment methodology of Dr.John Hussman (Trades, Portfolio), when his fund has been loosing money for the past 5 years, and is rated 1 star only by Morningstar rating?
Am I missing something in here?
ReplyTraderatwork - 6 months ago
S&P went up 100%+ in last 6 years,

Hussman fund last 5 years annual return is -3.5% EVERY YEAR!!!

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