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John Hussman: Baby Steps
Posted by: GuruFocus (IP Logged)
Date: September 16, 2013 08:15AM

“The events of the past decade demonstrate the enormous human costs of asset price bubbles and crashes.” – San Francisco Fed President John Williams, September 2013

And yet, here we are again. The Federal Reserve has now enabled the creation of a third equity bubble in hardly more than a decade. It has enabled this, in part, by intentionally targeting equity prices in a vain attempt to create a “wealth effect” that economists have known for decades does not exist – as consumers spend based on their view of lifetime “permanent income” and not based on fluctuations in volatile assets. The Fed has also enabled this, in part, by ignoring the inverse relationship between government/household deficits and corporate profit margins (which make equity valuations seem only modestly elevated on the basis of temporarily bloated earnings, even while stocks remain steeply overvalued on cyclically normalized measures). This week, the Federal Reserve is likely to make a small step toward addressing this mistake.

The breaking news is that Larry Summers has removed himself from the running for Fed Chairman, and while the choice between Summers and Yellen was largely a choice between Scylla and Charybdis, I did prefer Summers, as Yellen is a more conventional Phillips Curve thinker. We now face the prospect of Janet Yellen, who in October 2005, at the height of the housing bubble, delivered a speech effectively proposing that monetary policy could mitigate any negative economic consequences of a housing collapse, and arguing that the Fed had no role in preventing further housing distortions:

“First, if the bubble were to deflate on its own, would the effect on the economy be exceedingly large? Second, is it unlikely that the Fed could mitigate the consequences? Third, is monetary policy the best tool to use to deflate a house-price bubble? My answers to these questions in the shortest possible form are, ‘no,’ ‘no,’ and ‘no.’”

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John Hussman Baby Steps
Posted by: sww (IP Logged)
Date: September 16, 2013 12:29PM

If I have missed the tremendous cheap market produce in 2009 springs/2010/2011/2012 for my client. I'll be so ashamed to charge the "management fees" and will just return all my client money instead of writing hundreds of articles to explain the market is wrong.

Buffett famously op-ed on NY Times fall 2008, - "Invest America, I am." and you do not need a phd in finance/economics to understand the stuff is too cheap while the doomsayer continue to hold the card - "The worst is yet to come."



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John Hussman Baby Steps
Posted by: LwC (IP Logged)
Date: September 16, 2013 02:23PM

Hussman: real name
Education: known
Professional experience: known
Current occupation: known
Investment philosophy: known
Investment record: known

Sww: fake name
Education: unknown
Professional experience: unknown
Current occupation: unknown
Investment philosophy: unknown
Investment record: unknown



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John Hussman Baby Steps
Posted by: vgm (IP Logged)
Date: September 16, 2013 03:24PM

"instead of writing hundreds of articles to explain the market is wrong."

Sww -- this is a brilliant description of our John's activities. And not only was Buffett telling him WHEN to buy, but also WHAT to buy (WFC and AXP are "a helluva buy" Warren proclaimed at the time. They're up about 5x and 7x respectively.) But, no, our John knew better than Warren and had his head stuck in his graphs. Still does, based on all the evidence.

LwC -- A courageous attempt, but you obviously struggled. Lemme help:

Hussman: fake name (orginally Hussmann)
Education: too much and wrong track
Professional experience: hoping to have one, one of these decades (clients in violent agreement)
Current occupation: fiction writer; money mismanager (perfect combo, he combines them admirably)
Investment philosophy: 'I drive looking firmly in the rearview mirror. Everything's so clear.'
Investment record: none to speak of (but I did buy 50 new stocks in Q2, protests John, indignantly)



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John Hussman Baby Steps
Posted by: LwC (IP Logged)
Date: September 16, 2013 03:45PM

vgm: fake name
Education: unknown
Professional experience: unknown
Current occupation: acting as Mr. Knowitall in internet forums
Investment philosophy: unknown
Investment record: unknown



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John Hussman Baby Steps
Posted by: AshishGupta (IP Logged)
Date: September 16, 2013 03:49PM

In investing, common sense is much more valuable than a Phd. Some people over analyze for ever and some analyze and act.



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John Hussman Baby Steps
Posted by: vgm (IP Logged)
Date: September 16, 2013 04:16PM

Ashish -- good point. Reminds me of Buffett's "I'd rather be approximately right than precisely wrong." Hussman has been precisely wrong - and very publicly - for many years, as Sww correctly said above.

A PhD per se is inherently neither good nor bad (I have one). What matters is how you use the training it provides. Hussman has the mistaken idea that economics and the financial world are hard sciences, subject to precise analysis and prediction. But in the real world, there are too many - and changing - forces and influences in operation for precision to be possible. As Howard Marks puts it "There are many layers to investing...It is so non-intuitive."



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John Hussman Baby Steps
Posted by: JUDS1234567 (IP Logged)
Date: September 16, 2013 04:54PM

All depends on your timeframe it could be a year later and the SP500 is down 30-40% and you would all be completely wrong. Let’s not forget that Hussman did outperform before 2009 and even before he had the strategic growth fund he was doing well. (he had a subscriber letter or something of that nature)

In addition many great investors had periods where they underperformed the indexes. I believe Keynes at one point was underperforming for 5 consecutive years.

Heck Jeremy Grantham was underperforming the index for 3 consecutive years leading up to tech wreck and 2 years to early in 1989 Japan. We should at least wait until this cycle plays out.





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John Hussman Baby Steps
Posted by: JUDS1234567 (IP Logged)
Date: September 16, 2013 04:56PM

It’s real easy to point out all the faults and why this strategy wrong for this or that reason. Good thing you all are not shareholders, you would be the ones to sell now at the bottom of this funds bear market. Thus it was ever so.




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John Hussman Baby Steps
Posted by: vgm (IP Logged)
Date: September 16, 2013 05:04PM

"Good thing you all are not shareholders, you would be the ones to sell now at the bottom of this funds bear market. Thus it was ever so."

Wrong JUDS. Your whole premise is ridiculous. I can only speak for myself, but no way would I ever have given this joker a dime. You sound like you could be an aggrieved shareholder, however, holding out for a miracle. That's a pity.



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