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John Hussman: Baby Steps

September 16, 2013

“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.’”

Read the complete commentary

Rating: 3.0/5 (9 votes)


Sww - 4 years ago    Report SPAM
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."
LwC - 4 years ago    Report SPAM
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
Vgm - 4 years ago    Report SPAM
"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)
LwC - 4 years ago    Report SPAM
vgm: fake name

Education: unknown

Professional experience: unknown

Current occupation: acting as Mr. Knowitall in internet forums

Investment philosophy: unknown

Investment record: unknown
Superguru1 - 4 years ago    Report SPAM
In investing, common sense is much more valuable than a Phd. Some people over analyze for ever and some analyze and act.
Vgm - 4 years ago    Report SPAM
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."
JUDS1234567 - 4 years ago    Report SPAM
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.

JUDS1234567 - 4 years ago    Report SPAM
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.

Vgm - 4 years ago    Report SPAM
"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.
JUDS1234567 - 4 years ago    Report SPAM
Not a shareholder, but a spectator who has seen you write endlessly on Hussmann. In fact I find it amusing someone on who complains about Hussman writing weekly commentary provides his own on every Hussman/gurufocus posting.

Vgm - 4 years ago    Report SPAM
"a spectator who has seen you write endlessly on Hussmann"

So you are likewise guilty, since, based on this confession, you read not only the all GF Hussman articles, but also the commentaries, if you feel qualified to make this judgement. A lurker. Very brave.

But you're again very wrong. The truth is that I've only recently begun to read or comment on Hussman. And I've almost always responded to someone else's comments. Best get your facts straight before accusing - or else just stay put in the bushes. In fact I wouldn't have commented today if LwC had not attacked Sww with his meaningless and lowbrow profiles post.
Sww - 4 years ago    Report SPAM
Good maan @Vgm. I just can't stand these bonkers loosing his client money while charging crazy fees.
Vgm - 4 years ago    Report SPAM
Sure thing Sww. You were dead center. The rest is noise.
Sww - 4 years ago    Report SPAM
@Lcw, @JUDS1234567 Please check out David Tepper performance before you defend for "fake" hussman record. You can read the book Alpha Master by Maneet Ahuja about him and may be "may be" from there you can differentiate what is the real Master (or Guru) from the false prophet. [b][/b]
LwC - 4 years ago    Report SPAM
@Sww: "...you defend for "fake" hussman record."

What "record" are you referring to?
JUDS1234567 - 4 years ago    Report SPAM

@vgm yes I do read his commentaries, better a lurker than a troll like you right? I have seen your past commentates and frankly they are stale. This is issue over 6 months already was thoroughly discussed: http://www.gurufocus.com/news/210239/how-should-we-look-at-john-hussmans-performance-numbers

and like you I wouldn't have commented if not for Sww -which i still don't know why he posts if the moderator for guru focus decided to write an entire article to settle it. In fact you need to get your facts strait, 6 months ago and counting with all sorts of posts on other weekly commentaries.

JUDS1234567 - 4 years ago    Report SPAM

@Sww David tepper record is impressive and no doubt probably better than Hussmann. The issue is of course how should we measure Hussman's performance- we should at least wait until the end of the current cycle.

SeaBud premium member - 4 years ago
For some reason I open Hussman articles even though I invariably find the content to be overbroad, repetitive and largely meaningless. This leads to a couple of conclusions about him:

- He is compelled to reiterate, incessantly, his broadly bearish call, presumably so that when a correction occurs (as it always will), he will nail it like a broken clock nails the time, and

- Alone among value investors, he is compelled to write a weakly column because value changes weekly? Or perhaps so he can point to a specific dated column when the clock strikes correctly?

Here are some questions:

- Guy owns 200+ stocks, with 50 new buys last quarter,

- Guy buys consumer cyclicals last quarter (JNJ/Clorox) that are overvalued by many traditional metrics (P/E 20), yet warns of the market being "steeply overpriced",

- Guy ignores many stocks underpriced based on long term metrics (INTC, CVX).

I think there is a correct undercurrent to some of his writing - many stocks are overpriced - yet he is buying them! It also is inane that a so called value investor needs to write an article a week. Checking your stocks once a week should be enough, much less writing an article.

Someone who makes a killing on one trade, or one cycle, can be dumb as a post, but lucky. Doing it over time is what matters. Which gets to my conclusion on Hussman - I don't see rationale thinking with corresponding behavior. This is topped off with my general view that those who know, don't tell and those who talk a lot, don't know. Time will be the evaluator but I place my bet on underperformance.
Vgm - 4 years ago    Report SPAM
JUDS -- glad you mention that article. In fact if you were to check, though it's clear rigor is not within your capability, you'd find that it was me who suggested that GF did the study - to try to get something quantitative. So, thanks for the compliment. But it was incomplete. Real investors publicly advertise their records - go look at Berkshire, Fairholme, Oakmark, Southeastern documents, and many others.

Like your unimaginative name, which seems to shout out LOOK EVERYONE, I CAN COUNT!, it's you who's stale; you're wrong, you're lacking, out of touch - every time you pluck up enough courage to come out in the open. Your affiliation to JH is clear, and further emphasizes your poor judgement. As Buffett says, "You either get value investing in five minutes, or not at all."
JUDS1234567 - 4 years ago    Report SPAM
All good points, he does use technical indicators and because he is in a mutual fund he might have constraints on what type and how many stocks he has to own. Still that is a valid point non the less he did out perform before and he is even with the SP500 now.

JUDS1234567 - 4 years ago    Report SPAM

Lol seems I touched a nerve didn't I? Quite an adamant attack on the writer. Still VGM simplicity is best so thanks for the shout out on the name. Non the less your little rant or tantrum still doesn't address anything worthy.

Ill break it down for you, since you seem unable to.

1. The writer does not mention YOU ANYWHERE in the article or comments so unless it was a private message show evidence.

2. Of course my "affiliation" to John Husman is clear i like his writing and i find them informative- and people should hear the other side. But what gave it away?

Obviously I wouldn't be spending half my day arguing with a child otherwise.

3. So then lets do baby steps like his commentary says- baby steps breaking it down for you:

"Economist and fund manager Dr. John Hussman is drawing a lot of criticism these days for the poor performance of his funds. It seems to be fair and the reason is simple and straightforward: He is having some rough years and his performance numbers look bad. "

For the first decade of the 2000s, Hussman Strategic Growth Fund outperformed the market by 8.5% a year. He successfully avoided deep loss in 2009. His fund lost 9% while the market lost 37%. To put this into a better perspective, a 9% loss needs just a gain of 10% to break even, but a 37% loss will need a gain of more than 58% to break even. Isn’t he a hero?

certainly missed a lot of gains over the last three years. But he has been investing the same way over these years. The investing philosophy that made him a hero for the first decade of 2000s is exactly what makes him a bad investor for the last 10 years.

Good record right? Next the author uses Yacktman and Munger as comparable examples:

Aren’t the performance numbers great? No wonder investors are pouring money into his funds. But how many people still remember that in the end of 1990s Don Yacktman was almost ousted from his own fund because he missed all the gains by not investing in technology stocks? His fund lost 90% of its assets under management due to redemptions. Who knew that it is the best time to get into his fund rather than exactly the opposite?

(Hussman i think has lost almost 75 AUM as of now- tough here I did not verify this)

The MODERATOR for Gurufocus then adds:

" Aren’t the performance numbers great? No wonder investors are pouring money into his funds. But how many people still remember that in the end of 1990s Don Yacktman was almost ousted from his own fund because he missed all the gains by not investing in technology stocks? His fund lost 90% of its assets under management due to redemptions. Who knew that it is the best time to get into his fund rather than exactly the opposite?"

Charlie Munger

The examples can go on and on. This is the annual performance of a great (really) investor’s performance for the years from 1960 to 1974. The investor lost 31% consecutively for two years during the market decline of 1973 and 1974:

1970 -0.1% 8.7%

1971 20.6% 9.8%

1972 7.3% 18.2%

1973 -31.9% -13.1%

1974 -31.5% -23.1%

F or the three-year period ended Dec. 31, 1974, the investor lost 20% a year in average while Dow Jones index lost 7.6% a year. For the five-year period, he lost almost 10% a year while the Down Jones index lost only 1.2% a year. Guess who this investor is?


So what is wrong? Is it because 3-year, 5-year, or even 10-year periods are not long enough? Even if we look at 10-year periods, John Hussman did look good for the first 10 years of 2000s. How can he suddenly become a bad investor in three short years?

The answer, we believe, is that when you look at the performance of an investor, fixed time periods such as 3-year, 5-year, or even 10-year can mislead investors badly. Even one good (or bad) year can make the 10-year performance numbers look good (or bad). No investing style can outperform market all the time. As one of our users said very well, every investing style has its own bear market.

Therefore, the best way to check an investor’s performance is not looking at his returns over fixed time periods. Rather, it is to check the performance numbers over complete market cycles. We should look at his returns in good years and bad. We should look at the numbers from market peak to peak, and from trough to trough.

Therefore, Hussman did well for the 2002 through 2008 market trough to trough. He also did well for the long term peak-to-peak years from 2000 to 2012. He did underperform from 2007 to 2012. But this might not be a complete cycle.

As usual, many fund investors focus on short-term performance or the lack of it. The best time to invest with a good investor is usually the time when he is having his own bear market."

There if you did indeed recommend this to the moderator, he seems to have reached a different conclusion than you did. So if this isn't "clear" enough for you-message me back and i cant break it down line by line and we can BOTH stop making spectacles of ourselves.

" You either get value investing in five minutes, or not at all."

I am having trouble finding value in this conversation, but then again it was your cheap talk that cigar butted me into it.
Vgm - 4 years ago    Report SPAM
Now who touched the nerve JUDS? LOL!

By the way, simple is not the same as unimaginative and lacking. Again, no thought or substance behind your comment. We can at least agree simple is good.

You can rant away, I'll lurk and enjoy the fun of your discomfort and need to prove yourself. Go ahead, make my day. And don't forget to use the spellcheck ;-)
Superguru1 - 4 years ago    Report SPAM
Markets will definately fall some day. As markets always do. And hopefully that day will be soon. And Hussman will be correct then like a broken clock.

Hussman's position has been "precisely wrong" for so long that it is hard to really take him seriously anymore.

Watsa and Seth Klarman have also been bearish for long but I take them seriously though. I wonder why?
JUDS1234567 - 4 years ago    Report SPAM

"You can rant away, I'll lurk and enjoy the fun of your discomfort and need to prove yourself. Go ahead, make my day."

Is that it? I spend an entire paragraph and this is your response no facts, numbers,valid information just some insults?

Very well, "terminator" ille make your day- and I thought I was the lurker or did you mix that up too?

Ille be having a little fun in a few months or however it takes for this current market cycle to complete-so we can see Hussman performance numbers. And we can compare notes then. Oh and one more thing as another writer pointed out on Bruce Berkiwitz and Bill Miller:

"Just over a year ago I was trying to defend Berkowitz too. He'd had a period of below market returns and people were turning on him. Market players that really don't see stocks as pieces of real world businesses, have such a short term time horizon driven by market pricing, that they abandon ship as soon as the waves get choppy, saying that the captain has lost his way.

Bill Miller is another one worthy of consideration. Have the gains from his 15 or so years of out-performance now been all erased and even if they have, were he able to run money as long as he desired, would his methodology over the long term lead to a final score well above, equal to or below the market? The problem is that guys like Miller often aren't allowed to have any years of below market performance... They aren't allowed to build a portfolio of under valued securities."

Vgm - 4 years ago    Report SPAM
JUDS -- I've been a most staunch defender of Berkowitz regularly on GF. If you're following me so closely, you'll know it. He never lost his way. He was confident in his valuations and knowledge. And none of it was based on the macro. He made big bets on a handful of stocks. He preached his rationale. He knew it would all bounce back. It was value investing at its very very best.

Contrast that with Hussman. As Sww mentioned at the top, when Buffett was shouting Buy American. I am, in 2008/9, Hussman was crying No! The End of The World Is Nigh. This is the precise opposite of Berkowitz's philosophy. Hussman missed out on one of the greatest bull runs in history due to his chartism. It cost him and his clients fortunes, and reputation too. And he's been naysaying again since 2010 - and been totally wrong. His ridiculously frequent weekly missives are a pure waste of time, as the good folks at Tweedy Browne would tell him.

But then, hilariously, he buys 50 new stocks in Q2! And his portfolio is a quasi-index. I've said it before and I'll say it again: Hussman should sit quietly in a corner somewhere for a few years and learn basic value investing.

There's a difference of day and night between Berkowitz and Hussman. Glad you brought it up. It's highly illustrative.

I admire Bill Miller - and Bill Nygren too. Outstanding value investors. They're also light years away from Hussman in philosophy, approach and understanding.

(Your "paragraph" is old hat. Nothing new.)

JUDS1234567 - 4 years ago    Report SPAM
Well at least now you're making sense and presenting facts and we can have a debate about it.

First off, I wouldn't say Hussman is a " macro" guy his game is very similar to Jeremy Grantham's and Rob Arnott , Cliff Asness. Namely they are not stock pickers, but more like asset allocators, they tend to look at the markets overall valuation. His comments always align his equity exposure to expected returns to the overall market, I assume you know this. And he uses a number of valuation models to do this, and they are quite effective at that.

" He made big bets on a handful of stocks. He preached his rationale. He knew it would all bounce back. It was value investing at its very very best. "

I don't see any difference to Berkowitz except in their concentration

What has Hussman done in his commentaries , time and time again , is inform us that by his opinion markets are not attractive to him because of current valuation. He stresses in his comments that it is not recession concern or Europe implosion or china bubble non of that-its valuation.

But he lets us know why he is defensive and its most assuredly not a "macro" thing. Its' valuation. He has repeated that valuation trumps chart or technical concerns and the one fault I will give him is that while he did sidestep the 09 implosion he did not take advantage of the recovery.

And this was not because of " No! The End of The World Is Nigh" but because extreme bear markets like the 1929 event means markets can go on to loose more than half even after fair value. By the way this was not limited to him-other great investors were not fully invested at the bottom either.

Perhaps what I find most disingenuous and why I cant take you seriously in your argument is that there is no rational and if you do read his comments you would know why and what Hussman did in those dark days of 2008. He told his readers that there WERE acceptable and attractive returns for investors. He made it quite clear valuations were attractive and told them they could expect returns in 10-15% range from the overall market.

"That's not to say that I believe stocks have “hit their lows.” We always have to allow for the market to move significantly and unexpectedly, and there is plausible downside risk from here. Our activity as investors is not to try to identify tops and bottoms – it is to constantly align our exposure to risk in proportion to the return that we can expect from that risk, given prevailing evidence."

" _October 20, 2008[b][i]Why Warren Buffett is Right (and Why Nobody Cares) [/i][/b][/i][i]John P. Hussman, Ph.D.

All rights reserved and actively enforced.

Reprint Policy

"The best way to begin this comment is to reiterate that U.S. stocks are now undervalued. I realize how unusual that might sound, given my persistent assertions during the past decade that stocks were strenuously overvalued (with a brief exception in 2003). Still, it is important to understand that a price decline of over 40% (and even more in some indices) completely changes the game. Last week, we also observed early indications of an improvement in the quality of market action, and an easing of the upward pressure on risk premiums.

In 2000, we could confidently assert that stocks would most probably deliver negative total returns over the following 10-year period. Today, we can comfortably expect 8-10% total returns even without assuming any material increase in price-to-normalized-earnings multiples. Given a modest expansion in multiples, a passive investment in the S&P 500 can be expected to achieve total returns well in excess of 10% annually."

Finally, if you really would read his comments-he very well knows that bear market usual surrender most of the bull market gain as such the next one which he predicts at 35-50% drawdown would put us back to 2010 levels. A mistake of missing the " greatest bull runs in history" which would ultimately be corrected.

Read his comments instead of posting troll comments, and present facts and actual quotes from him not others opinions.


He has barely outperformed the SP500 since inception 13 years and counting 10K grew as such:

SP500 - $14,061

His fund- $17,632

Now think about that he outperformed while missing a 150% rally and is defensive now, you seem to forget that one of the great traits of money managers IS to know when to sit out and not take risk.

Traderatwork - 4 years ago    Report SPAM
@JUDS1234567 Just check out the link you post annrep13.pdf, it's a big joke right? I was wonder how can anybody portfolio that try to mimic S&P is down 7% when the S&P is up 18%+.

Scroll down to the page 81 to find out the reason. This joker bought a lot of SPY put options exp at August 2013, sell A LOT of call options by rough calculation his "unrealized" loss is probably close to 1.0+ billion. As we all knew when August expiration date the SP500 is still higher than June 30 - that means he just realized his unrealized loss.

JUDS1234567 - 4 years ago    Report SPAM
Are you sure you took a look at it? I understand if we are expecting losses but at the time of the annual report he does address the issues of hedging losses:

"For the fiscal year ended June 30, 2013, Strategic Growth Fund lost -7 .41%,

attributable to a modest shortfall in performance between the stocks held by the Fund

and the performance of the indices used by the Fund to hedge, coupled with decay in

the time-value of index put options held by the Fund . Strategic Total Return Fund lost

-7 .71%, attributable to a general decline in the value of precious metals shares and

U .S . Treasury securities . Strategic International Fund achieved a total return of 0 .62%,

reflecting a generally hedged investment stance in the international equity market .

Strategic Dividend Value Fund achieved a total return of 5 .42%, reflecting a partially

hedged investment stance in dividend-paying stocks"

I wont argue with you if we are comparing a multi year cycle but if this is just year to date its just noise( at least for now).

"Every investment strategy experiences its own “bear markets” of varying depth,

and periods of difficulty for hedged investment strategies often do not overlap periods

of difficulty for passive investment approaches . From a full-cycle perspective, the

recent interim loss has been frustrating, but we do not consider it to be intolerable or

particularly difficult to recover over the course of a complete market cycle .

From the inception of Strategic Growth Fund on July 24, 2000 through June 30,

2013, the Fund achieved an average annual total return of 4 .48%, compared with

an average annual total return of 2 .67% for the S&P 500 Index . An initial $10,000

investment in the Fund on July 24, 2000 would have grown to $17,632, compared

with $14,061 for the same investment in the S&P 500 Index . The deepest loss

experienced by the Fund since inception was -26 .65%, compared with a maximum

loss of -55 .25% for the S&P 500 Index"

I don't think Hussman tries to mimic the SP500 but achieve superior returns with less volatility. Which he has done as noted the largest loss 27%.

AlbertaSunwapta - 4 years ago    Report SPAM
Folks, I recently sank myself into a back and forth with vgm. In his criticism of me, or more specifically my writing, he/she made some valid points but like here, the discussion fails to add anything of value related to the subject matter contained within Hussman's article itself.

So to sink this discussion further, I don't invest in Hussman's funds but I do recognize his past ability to see through the fog and market psychology and provide substantial out performance. Additionally, I can't fault him for taking a defensive stance through hedging in order to protect his unit holders. (He clearly doesn't have faith that centralized command and control regulatory and financial bodies can control the economy. I don't either, possibly due to an inherent faith in the free-market on my part I suppose.)

Moreover, in terms of driving down performance through maintaing a hedge, isn't Fairfax Financial essentially doing the same thing with 100% equity portfolio hedging? FFH performance over the last few years isn't great either. Still, having owned FFH on and off since the mid 1990s I have 'faith' that Watsa has a desire to protect my investment from downside risk.

That said, i'd love it if these thread discussions would instead look at the content and pull it apart and find the strengths and weaknesses of Hussman's positions and evidence. Instead, these threads are manager bashing/praising exercises just like we saw with Berkowitz a couple years ago as his fund was getting crushed. In Berkowitz's case he appears to have been right - so far.

Curiously, Hussman himself takes a decidedly negative view of the market despite believing the the great subsidy will not or can not effectively raise rates for two years.
Vgm - 4 years ago    Report SPAM
"I don't see any difference between Berkowitz except in their concentration."

JUDS -- yes, I can believe you have that superficial view. But what you fail to see is that the implications are enormous in practice. JH's results already betray that. You like simple, so let me keep it simple for you: "Diversification is a surrogate for ignorance for the know-nothing investor" Buffett tells us. All your talk is puting lipstick on a pig.

Vgm - 4 years ago    Report SPAM
"i'd love it if these thread discussions would instead look at the content and pull it apart and find the strengths and weaknesses of Hussman's positions"

AS -- you're joking right? 50 new positions alone in Q2 and several hundred in total? Seems you typically did not stop to ponder. It's clear that Hussmann himself has little conviction in his picks, or likely even knowledge of them all. This is dart throwing pure and simple. Contrast that with Berkowitz. Buffett would remind him that "Diversification is a surrogate for ignorance for the know-nothing investor" and advise him and his clients to buy a cheap index fund.
AlbertaSunwapta - 4 years ago    Report SPAM
When I said positions, I was thinking of the analytical and other arguments he makes in his weekly commentaries (the content).

I too think the number of holdings and turnover pushes him towards market returns. Whether its closet indexing or some sort of assets allocation model he's using, his transaction costs and tax efficiency hurt his fund (unless he's harvesting losses). :-) That said, so called value investors don't need to hold concentrated portfolios to be successful. I've searched for concentrated portfolios to monitor and they are fairly rare.
Vgm - 4 years ago    Report SPAM
"I've searched for concentrated portfolios to monitor and they are fairly rare."

AS -- yes they are rare. But they are worth discovering in my opinion. A concentrated portfolio in the hands of a true guru is a powerhouse. Two of my favorites are Lou Simpson (SQ Advisors) and Glenn Greenberg (Brave Warrior Advisors, formerly Chieftain). Each has about ten holdings. Greenberg currently has about 25% in a single stock, VRX. Both have fabulous records. They're indispensable to me for idea generation. (Remember that Munger gave Pabrai three ways to find good investments. One was to examine the filings of the great investors.)
JUDS1234567 - 4 years ago    Report SPAM
Concentration helps but is not a prerequisite for great returns Walter schloss, and Benjamin graham being notable examples of having hundred of stocks at one time. Still this hasnt hurt him before he had positions like these even before. Like I said its the asset allocation and the funds overall exposure to the market that matters.

Traderatwork - 4 years ago    Report SPAM
You can be concentrate and make money like Buffett or you can buy 2 of everything like Walter Schloss. The key is you always pay less for the what the good company worth - either for the asset or the earning growing potential. .

And you should make money say in a worst case scenario - 5 years cycle and should beat S&P by a huge margin. If you are not - like this hussman guy. Then he should like the Vgm said: find a corner and read The Intelligent Investor, Security Analysis (my guess - for his first time)

JUDS1234567 - 4 years ago    Report SPAM
Again I have read your comments before specifically on Hussman, but I still emphasize like the guru focus article stresses---- that he should be judged peak to peak and trough to trough as a better measure of performance. For example John Maynard Keynes performance was as such:

Achieved an average annual return of 13.2 percent compared to the U.K. market return, which remained basically flat. Considering that the time period included both the Great Depression and World War II, we would have to say that Keynes's performance was extraordinary.

Even so, the Chest Fund endured some painful periods. In three separate years (1930, 1938, and 1940), its value dropped significantly more than the overall U.K. market. From the large­­ swings in the Fund's fortune, it is obvious that the Fund must have been more volatile than the market.

Indeed, if we measure the standard deviation of the Chest Fund, we find it was almost two and a half times more volatile than the general market. Without a doubt, investors in the Fund received a "bumpy ride" but, in the end, outscored the market by a significantly large margin

With the exception of Buffett himself, many of the people Buffett described as

"Superinvestors"—undeniably skilled, undeniably successful—faced periods of short-term underperformance.

In today's mutual fund performance derby, many of the Superinvestors of Graham-and-Doddsville would have been overlooked.

For example

Keynes Total years: 18 # of years of Underperformance: 6 underperformance as%: 33%

Buffett Total years: 13 # Years of Underperformance: 0 underperformance as%: 0%

Munger Total years: 14 # of years of Underperformance: 5 underperformance as%: 36%

Ruane(Sequoia Fund) Total years: 27 # of years of Underperformance: 10 underperformance as%: 37%

Lou Simpson Total years: 17 # of years of Underperformance: 4 underperformance as%: 24%

John Maynard Keynes, who managed the Chest Fund for eighteen years, underperformed the market one-third of the time. Indeed, his underperformance of the market during the first three years he managed the Fund put him behind the market by eighteen percentage points

The story is similar at Sequoia Fund. Over the marking period, Sequoia underperformed 37 percent of the time

Number of Consecutive Years Underperformed the S&P 500/FTSE

Keynes had 3 years

Buffett had 0 years

Munger had 3 years

Ruane had 4 years

Simpson had 1 year

Worst Relative Performance During the Period of Underperformance (%)

Keynes -18%

Buffett N/A he never trailed the market

Munger -37%

Ruane -36%

Simpson -15%

Like Keynes, Ruane had difficulty coming of age. "Over the years, we have periodically qualified to be the Kings of Underperformance. We had the blurred vision to start the Sequoia Fund in mid-1970 and suffered the Chinese water-torture of underperforming the S&P four straight years."

I would not be defending Hussman unless I was sure of his methods, and thus far they are solid. There is more than one way to investment heaven.

*The chest fund by keynes was in operation from 1927 to 1945
Jk815 - 4 years ago    Report SPAM
Juds1234567 are you John Hussman?
Traderatwork - 4 years ago    Report SPAM
Compare John Hussman "performance" to The Greats is definitely an insult. ALL investors of the great investors made A LOT of money long term and above market performance; they might have some so so years but they all came back because their investment philosophy are correct. Graham lost more than 70% of his client money in Graham-Newman, he spent 4 years and made it all back.

You want the proof of how bad this guy run his fund

John Hussman underperformance 10+ years according to his website


Average Annual Total Returns

for periods ended 8/31/13

1 year -5.25%

3 years - 7.54%

5 years - 5.40%

10 years - 0.06%

S&P 10 Years Total +64.8%

HFfund 10 years -5.27%

If you start investing in his fund 5 years ago, your $1 is $0.80

If you start investing in his fund 3 years ago, your $1 is $0.854

If you start investing in his fund 1 year ago, your $1 is $0.9475

Go figure how S&P perform in the 1, 3, 5 years yourself. S&P beat his "performance" in every single measurable time frame.

There is only one word to explain: Incompetent

And for the people that like his 'investment philosophy' there is another word for that: Stupidity

JUDS1234567 - 4 years ago    Report SPAM
When your comments turn into attacks, VGM must be rubbing off on you. Very well, first of all I am not Husmann( @Jk815).

I don't know how many times I have to repeat myself but I will do so again. Measure from peak to peak and trough to trough. However it was convenient of you to post the results but not the last one eh? Why did you leave out since inception?

Average Annual Total Returns

for periods ended

1 Year -5.25%
3 Year -7.54%
5 Year -5.40%
10 Year -0.06%



I could take any of the great investors returns at the bottom and produce dismal 1-5 bad year returns. At this point you are just cherry picking.

I could have easily grabbed Grahams record at bottom of the market and produced atrocious numbers. I will give you credit for the 10 year which shows just about flat.

By the way taking a look at the graph on yahoo finance would indicate to any novice that his underperformance just began in August 2012. A year ago or so. He had been out performing before then, however its pretty bad to cherry pick dates and not list the inception as posted on the website. The Gurus I listed had points that were much worse.

AlbertaSunwapta - 3 years ago    Report SPAM
Even market cycle investing performance can be wrong if the portfolio is out of sync with the market.

Take the investor that in the 1990s saw that certain oil stocks were wrongly valued. Building a continued concentrated portfolio of those, with the investor continually accumulating within that concentrated portfolio would have been judged poorly against market returns in the late 1990s and early 2000s however over the span of a cycle and a half, oil moved from $5-10/bbl to $140+ and the accumulated returns could have been quite spectacular, if not guru'esc.

Basically one can say that whatever necessarily simplistic guru selection performance timespan methodology is chosen, some great investors performance cycles won't fit the methodology.

In the near ideal world you'd pick a fund or investment that would grow intrinsically but price so poorly that it would allow you to continuously average down until the day before you needed to sell it, at which time it would spike up to well over any long-term compounded market return or any other safer guru return. Of course the reality is that, for most savers, they never really know when they for some unforeseen reason, may be forced to liquidate their portfolio and so they desire continuous positive growth and any averaging down takes a hugely stressful leap of faith.

Hence fund managers like Hussman, and even Buffett (who's been labelled a has-been a few times) get denigrated during good markets like today's and then praised during bad markets.

It will be interesting to see where Hussman comes out in "the end." I will continue to read his writings looking for perspectives that make sense to me and highlight potential risks and opportunities.

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