John Hussman

John Hussman

Last Update: 05-12-2016

Number of Stocks: 187
Number of New Stocks: 44

Total Value: $755 Mil
Q/Q Turnover: 41%

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

John Hussman Watch

  • John Hussman Acquires Stake in Nike

    John Hussman (Trades, Portfolio) purchased a 100,000-share stake in Nike Inc. (NYSE:NKE) during the first quarter.


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  • John Hussman: Brexit and the Bubble in Search of a Pin

    First things first. While the full attention of financial market participants is focused on “Brexit” – last week’s British referendum to exit the European Union – the singular factor to recognize here is that the vulnerability of the financial markets to steep losses has very little to do with Brexit per se. Rather, years of yield-seeking speculation, encouraged by central banks, had already brought the financial markets to a precipice prior to last week’s vote.


    It’s not entirely clear whether Brexit is a sufficient catalyst to burst the bubble, as we recall that the failure of Bear Stearns in early 2008 was followed by a period of calm before the crisis, and numerous dot-com stocks had already been obliterated by September 2000 when the tech bubble began its collapse in earnest. We’ll take the evidence as it comes, but we’re certainly defensive at present for reasons that have little to do with Brexit at all.

      


  • John Hussman: Imagine

    Imagine the collapse of an extended speculative tech bubble, resulting in a broad economic recession. Imagine if the Federal Reserve had persistently slashed short-term interest rates during the downturn, to no avail, leaving rates at just 1% by the time the Standard & Poor's 500 had lost half of its value and the Nasdaq 100 collapsed by 83%. Imagine that the Fed kept rates suppressed, in the initially well-meaning hope of encouraging lending, growth and employment. Imagine that the depressed level of interest rates made investors feel starved for yield and drove them to look for safe alternatives to Treasury bills.


    Imagine that investors found the higher yields they sought in mortgage securities, which had historically always been safe, and that Fed policy inadvertently created voracious demand for more of that debt. Imagine Wall Street had weak enough requirements on capital and underwriting standards that financial institutions had an incentive to create more “product” by lending to borrowers with lower and lower creditworthiness. Imagine that by the magic of “financial engineering” and lax oversight of credit ratings, Wall Street could pass these mortgages off to investors either directly by bundling, slicing and dicing them into mortgage-backed securities or by piggy-backing on the good faith and credit of the government by transferring them to Fannie Mae (FNMA) and Freddie Mac (FMCC) in return for funds obtained from investors in these “agency” securities.

      


  • Like Water Out of a Sponge - John Hussman

    Last week, the 10-year Treasury yield dropped to just 1.6%. Technician Walter Murphy noted that his index of global 10-year yields also plunged to an all-time low. The overall structure of global bond yields is undoubtedly the outcome of years of aggressive monetary easing, though the break to fresh lows among European bank stocks may convey some additional information content. Of course, the compression of prospective investment returns isn’t limited to bonds. On the basis of the valuation measures best correlated withactual subsequent S&P 500 total returns across history, prospective 10-12 year S&P 500 nominal total returns have declined to just 0-2% by our estimates, with negative real expected returns on both horizons.


    The compression of long-term expected returns on stocks and bonds is as much a statement about future returns as it is about past ones. What follows is a discussion of valuation measures, profit measures, and the prospects for investment returns from current extremes. Some of this is a refinement of recent comments, but the risk of repetition is far outweighed by the urgency of this discussion. Investors should not get this moment wrong.

      


  • John Hussman: Overadaptation and Market Drawdowns

    The speculative premise here, as well as I can discern, seems to be that low short-term interest rates are “good” for the financial markets and that, in the absence of a material increase in interest rates by the Federal Reserve, speculative assets such as stocks, corporate credit and even junk debt will be naturally driven higher because they represent a desirable alternative to low-yielding, default-free liquidity.


    According to this premise, the fact alone that the Standard & Poor's 500 dividend yield of 2.17% is higher than the 10-year Treasury yield of 1.71% should make it clear to anyone that stocks are still a competitive investment. The expectation of future dividend growth only makes a compelling case more so.

      


  • John Hussman: Choose Your Weapon

    Prevailing market conditions continue to hold the expected stock market return/risk profile in the most negative classification we identify.


    That profile reflects not only extreme valuations on the most reliable measures we’ve tested across history, but market internals and other features of market action that remain unfavorable. A sufficient improvement in market internals here would shift the expected market return/risk profile to a more neutral classification. That, coupled with a broader improvement in economic factors, mirroring conditions that prevailed during much of this half-cycle prior to mid-2014, could support an outlook – even at presently obscene valuations – that we might characterize as “constructive with a safety net.” So while our immediate outlook is quite negative, we’ll take new evidence as it comes.

      


  • The Coming Fed-Induced Pension Bust – John Hussman

    Last week, I observed that, based on the most reliable measures we identify (those having the strongest correlation with actual subsequent 10- to 12-year investment returns across history as well as in recent cycles), “the expected return on a traditional portfolio mix is actually lower at present than at any point in history except the 1929 and 1937 market peaks. QE has effectively front loaded realized past returns while destroying the future return prospects of conventional portfolios, at least as measured from current valuations. As a result, the coming years are likely to see a major pension crisis across both corporations and municipalities because the illusory front loading of returns has encouraged profound underfunding.”


    On Thursday, Chicago’s Municipal Employees Annuity and Benefit Fund reported that its net pension liability soared to $18.6 billion, from $7.1 billion a year earlier, as a result of new accounting rules that prevent governments from using aggressive investment return assumptions (thanks to my friend Mike Shedlock for his post on this news). But here’s the kicker – the rules only apply after pension funds go broke. In Chicago’s case, pension return assumptions had been optimistically set at 7.5%, and the city had vastly underfunded its obligations.

      


  • Blowing Bubbles: QE and the Iron Laws – John Hussman

    Look across the room you’re in, and imagine there’s a $100 bill taped in the far upper corner, where the walls and ceiling meet. Imagine you’re handing over some amount of money today in return for a claim on that $100 bill 12 years from now.


    Drop your hand toward to the floor. If you pay $13.70 today for that future $100 cash flow, you can expect an 18% annual return on your investment over the next 12 years.

      


  • John Hussman Sells Broadcom, Cognizant

    John Hussman is the president and principal shareholder of Hussman Strategic Advisors, the investment advisory firm that manages the Hussman Funds. He is also the president of the Hussman Investment Trust. Hussman manages Hussman Strategic Growth Fund, which invests primarily in U.S. stocks, and Hussman Strategic Total Return Fund, which invests primarily in U.S. Treasury and government agency securities. These were the most heavily weighted sales during the first quarter.


    The guru closed his stake in Broadcom Corp. (BRCM) with an impact of -2.05% on the portfolio.

      


  • Latent Risks and Critical Points – John Hussman

    The Standard & Poor's 500 Index remains just 3.5% below its May 2015 peak yet is also at the same level it set in November 2014, 18 months ago. I continue to view market action as tracing out the arc of a major top formation, completing the third speculative financial bubble in 16 years. Downside risk remains significant, and even our short-term view has shifted back from neutral to hard-negative. Given that the behavior of single indices can be “noisy,” the following chart shows the average behavior of major global equity indices, including the U.S., European, British, Hong Kong and Japanese stock markets. This may provide a broader view of equity market pressures here. The respective level of each index on Dec. 31, 2014 is scaled to 1.0.


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  • John Hussman: 'Justified Consequences'

    Market conditions continue to be characterized by the likelihood of extremely poor long-term and full-cycle outcomes, with expected 10- to 12-year estimated Standard & Poor's 500 nominal total returns in the 0% to 2% range, negative expected real returns on both horizons and the continued likelihood of a 40% to 55% interim market loss over the completion of the current cycle; a decline that would represent only a typical run-of-the-mill cycle completion, based on valuation measures most tightly related with actual subsequent market returns across history.


    The degree of second-guessing regarding historically reliable valuation measures is perplexing, given that there has been no deterioration whatsoever in the correlation between these measures and subsequent market returns on a 10- to 12-year horizon (see the recent comment, "Permanently High Plateaus Have Poor Precedents," and note that these measures have been just as reliable in recent cycles as they have been for the better part of a century).

      


  • John Hussman: Lessons From the Iron Law of Equilibrium

    Last week, the spread between bullish and bearish sentiment widened substantially, pushing market conditions to what I’ve often described as an “overvalued, overbought, overbullish” syndrome.


    While our general outlook has remained rather neutral in recent weeks, this shift pushes our immediate outlook back to hard-negative. However, I should emphasize that this outlook is not particularly robust at present. Indeed, we could soon find ourselves back to a neutral outlook in the event of a moderate further improvement in market internals. As I’ve emphasized regularly since mid-2014, when we adapted our methods to address the key challenges we encountered in the half-cycle since 2009 (see the Box in The Next Big Short for a detailed narrative), the advancing half-cycle since 2009 has been different from market cycles across history, in that aggressive central bank easing has persistently deferred the typical consequences of overvalued, overbought, overbullish conditions. In the face of QE, one had to wait until market internals deteriorated explicitly (indicating a shift toward risk-aversion among investors) before adopting a hard-negative outlook.

      


  • Murray Stahl Buys Exxon, Suncor in 1st Quarter

    Murray Stahl (Trades, Portfolio) is the chairman of Horizon Asset Management Inc. During the first quarter he bought shares in many stocks, and the following are his most heavily weighted trades:


    Stahl raised his stake in Silver Wheaton Corp. (SLW) by 35.19% with an impact of 0.58% on the portfolio.

      


  • John Hussman: Permanently High Plateaus Have Poor Precedents

    “Stock prices have reached what looks like a permanently high plateau.”


    Irving Fisher, October 21, 1929

      


  • John Hussman: Rounding the Bubble's Edge

    The single most important quality that investors can have, at present, is the ability to maintain an historically informed perspective amid countless voices chanting, “This time is different,” and arguing that long-term investment returns have no relationship to the price that one pays.


    From a long-term, historically informed investment perspective, the Standard & Poor's 500 remains obscenely overvalued on valuation measures most closely correlated with actual subsequent market returns (and that have remained tightly correlated with actual market returns even in recent cycles). We estimate that S&P 500 nominal annual total returns will average only about 0% to 2% on a 10- to 12-year horizon with negative expected real returns after inflation.

      


  • John Hussman: Fire Suppression

    In 1988, Yellowstone National Park went up in flames. In the worst catastrophe in the history of U.S. National Parks, nearly 800,000 acres of forest and surrounding areas were scarred by the uncontrollable blaze. The root cause of the inferno, as Mark Spitznagel recounts in his book The Dao of Capital, was fire suppression:


    “The spread of fire-suppression mentality can be linked to the establishment of forest management in the United States, such that by the early 1900s forests became viewed as resources that needed to be protected - in other words, burning was no longer allowed. The danger of this approach became tragically apparent in Yellowstone, which was recognized by the late 1980s as being overdue for fire; yet smaller blazes were not allowed to burn because of what were perceived to be risks that were too high given the dry conditions. And so smaller fires were put out, but in the end could not be controlled and converged into the largest conflagration in the history of Yellowstone. Not only did the fire wipe out more than 30 times the acreage of any previously recorded fire, it also destroyed summer and winter grazing grounds for elk and bison herds, further altering the ecosystem. Because of fire suppression, the trees had no opportunity or reason to ever replace each other, and the forest thus grew feeble and prone to destruction... In 1995, the Federal Wildland Fire Management policy recognized wildfire as a crucial natural process and called for it to be reintroduced into the ecosystem... Central bankers, too, could learn a thing or two from their forestry brethren.”

      


  • John Hussman: Run of the Mill Outcomes Vs. Worst-Case Scenario

    With the Standard & Poor's 500 Index at the same level it set in early November 2014, and the broad NYSE Composite Index unchanged since October 2013, the stock market continues to trace out a massive arc that is likely to be recognized, in hindsight, as the top formation of the third financial bubble in 16 years.


    The chart below shows monthly bars for the S&P 500 since 1995. It's difficult to imagine that the current situation will end well, but it's quite easy to lose a full-cycle perspective when so much focus is placed on day-to-day fluctuations. The repeated speculative episodes since 2000 have taken historically reliable valuation measures to extremes seen previously only at the 1929 peak and to a lesser extent, the 1937 peak (which was also followed by a market loss of 50%). Throughout history, at each valuation extreme – certainly in 2000, 2007 and today – investors have openly embraced rich valuations in the belief that they represent some new, modern and acceptable “norm,” failing to recognize the virtually one-to-one correspondence between elevated valuations and depressed subsequent investment outcomes.

      


  • John Hussman: Extinction Burst

    From a long-term investment standpoint, the stock market remains obscenely overvalued, with the most historically reliable measures we identify presently consistent with zero 10- to 12-year Standard & Poor's 500 nominal total returns and negative expected real returns on both horizons.


    From a cyclical standpoint, I continue to expect that the completion of the current market cycle will likely take the S&P 500 down by 40% to 55% from present levels, an outcome that would not be an outlier or worst-case scenario but instead a rather run-of-the-mill cycle completion from present valuations.

      


  • John Hussman Sells Infosys, Cisco, Aetna

    John Hussman (Trades, Portfolio) is the president and principal shareholder of Hussman Strategic Advisors, the investment advisory firm that manages the Hussman Funds. He is also the president of the Hussman Investment Trust. The following were his largest sales during the fourth quarter.


    He almost closed his stake in Infosys Ltd. (INFY), reducing it by 99.14% and the deal had an impact of –1.94% on the portfolio.

      


  • Bearishness Is Strictly for Informed Optimists

    From a long-term perspective, we believe that investors have a strong opportunity here to reduce equity risk near the peak of a market cycle that has reached the second-greatest overvaluation extreme in U.S. history (second only to the 2000 peak).


    Among the valuation measures we’ve found most strongly correlated with actual subsequent Standard & Poor's 500 10- to 12-year total returns, market valuations have pushed to a level that is more than double their reliable historical norms. From these levels, we fully expect 10- to 12-year S&P 500 nominal total returns near zero, with negative real returns after inflation.

      


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