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My 3 Favorite Mutual Fund Managers for Navigating the Market Going Forward
Cutting to the chase for you they are...... (in no order) Rob Arnott (Pimco All Asset and Pimco All Asset All Authority) John Hussman (Hussman Strategic Growth) Ben Inker (GMO Benchmark-Free Allocation and Wells Fargo Advantage Absolute Return)
Encourage reading the full details before jumping on me or maybe you agree?
You'll probably be jumped on. Anything alternative (such as something with "absolute return" in the title) is going to be disliked by some on the board. I think just about everyone has given up on Hussman who held the fund (anyone still with Hussman at this point?)
I like Arnott and Inker is good, but I think Hussman's lack of flexibility in terms of adapting to recent years (I don't disagree with a lot of what Hussman's saying, but at some point switch up the playbook a little - also I still don't get holding things like Panera if one has the view Hussman has.)
Marketfield Fund has continued to be short EM, which has taken away from the fund. However, they said this in their March letter, and it kind of applies to Hussman: "In the event that these markets are resilient in the face of weakness in the U.S., Europe or Japan, then it will be time for us to reconsider our hypothesis and move on. Wrong and stubborn is a combination that we earnestly try to avoid."
Any which way, I just think the inflation concern would lead me to wish Hussman would minimize hedges, increase cash and move more into lower/low-key names like Colgate (which he owns.)
Otherwise, I think there are things that are investing opportunities (revolving around mobile) that even I was reluctant and skeptical of, but it's clear that they are going to be an increasing part of society. As I noted in another thread yesterday, I almost think it's not investing in Apple (although it may continue to do well) as much as it is looking at "trickle down" opportunities that come from having a gillion smartphones out in the world now. Even a smaller theme I like is probiotics/enzymes - new trends in health/nutrition. I can be negative on a lot of things, but there are little things (like probiotics/enzymes) and larger things (commodities, EM) that I can still be positive on.
Someone can have a negative/mixed view on a lot of elements of the big picture, but there are certainly a number of small/large long-term themes.
From Hussman's latest quarterly fund report: "The Fund’s holdings of individual stocks as of December 31, 2011 accounted for $5,792,612,946, or 100% of net assets. Against these stock positions, the Fund also held 37,000 option combinations (long put option/short call option) on the S&P 500 Index, 8,000 option combinations on the Russell 2000 Index and 2,000 option combinations on the Nasdaq 100 Index. Each option combination behaves as a short sale on the underlying index, with a notional value of $100 times the index value. On December 31, 2011, the S&P 500 Index closed at 1,257.60, while the Russell 2000 Index and the Nasdaq 100 Index closed at 740.92 and 2,277.83, respectively. The Fund’s total hedge therefore represented a short position of $5,701,422,000, thereby hedging 98.4% of the dollar value of the Fund’s long investment positions in individual stocks."
I dunno, I just think a low-key stock fund (sort of Forester Value style, perhaps?) with a lot of cash (Aston/River Road Independent Value style - maybe as much as 50%) and maybe minimal-to-moderate hedging as need be seems a lot simpler than having a whole options strategy that hedges nearly 100% of the dollar value of the portfolio. Change the fund to a more "go anywhere" blend that could be in value or growth names and be heavily in cash and light hedging.
Scott, I agree with much of what you say. Hussman will undoubtedly be right from time to time, but he seems to be almost a one-trick pony that is unable (or unwilling) to adapt to different situations. Anyone who has held his fund for ver long cannot be very pleased, with YTD of -7%, and negative returns for 3 and 5 years. Heck, the 3-yr numbers are about as bad as any of the nearly 200 funds we regularly track. I sooner use an really short-term muni fund like NEARX than I would Hussman. At least there is SOME positive return over the last 5 years.
I do like PAUDX, mostly because of Arnott's talent. And MFLDX continues to be a core hold in most client accounts, again because of the contrarian ability of Aronstein. If volatility returns big time, FVALX could be a good option. M* is apparently moving this large cap value fund to its long/short equity category soon, reflecting John Forester's investment strategy and practice. And it's hard to ignore TGBAX's long-term record.
HI WSR: HSGFX is the only one you mention I'm familiar with. Recently pulled small (4-5%) allocation out. Hey - I'm all for mixing in a few alternative-type funds. Consider them almost a form of "tribute" paid to the "gods of market destruction" in exchange for investing in more traditional funds which are long stocks, bonds, commodities or real estate. Relatively small investments in these alternative strategy funds serve to remind us that conventional wisdom will sometimes be wrong - markets don't always go up. These products may dampen sharp market downswings while earning better returns than available in money market or short term bond funds. One problem is they are hard to classify. Strategies vary quite a bit. I suspect the other two you put up are tied more to commodity investing and may not resemble HSGFX very much. (BTW I advocate some exposure to hard assets.) Another problem is they are by necessity running "against the grain" of conventional wisdom and so are not easily understood by most. Certainly HSGFX has a bit of a black-box quality to it. You may understand JH's weekly array of charts and graphs - but I dare say 90% of his readers don't.
Funds like HSGFX would appear more suited for investors nearing or in retirement and who like me harbor powerful reservations about the bond market. For early savers-investors (under 40) I question the need, considering they will continue dollar averaging into markets - both good and bad - for many years. Bit of a rush here, but don't think you addressed age & varying risk tolerances in your HSGFX recommendation. Giving up on HSGFX wasn't easy after 10 years. Would just say look at the 10-year record. Compare the 2.6 annual return with his gab about "complete market cycles". Well, we had a complete cycle in there somewhere - stock markets going from boom to bust and back to boom again. And a 2+% annual gain over that time was the best he could muster? Tell me one wouldn't have been better off in a very conservative balanced fund - 40% equity & 60% fixed, or even fully invested in a short term bond fund. So, no idea were that fund will go. Always the possibility markets will make those of us who pulled out look like idiots and HSFGX will have a phenomenal 10 year run. Hummm ... FWIW
I have started to use more ETF index funds from Schwab. When I reallocate I use SCHB the U.S. stock market and this might be the year for the index funds. Also, no charge to buy/sell and lowest ER out there. I like the added investment into mid and small cap it holds.
Reply to @BobC: Yeah, I think it becomes a real issue when something like NEARX would have been preferable in recent years.
If Hussman is hedging nearly 100% of the dollar value of the portfolio (wouldn't it be more "market neutral" than a "long-short" fund - maybe a re-classification of the fund is in order if it is this hedged on a consistent basis?), then it becomes the outperformance of his stock picking (or not.) Well, the fund is down over the last few years.
I just think the strategy (the more I actually read in the recent quarterly reports) seems unnecessarily complicated and the last few years shows it's not flexible, either. Marketfield, while significantly riskier, has shown a greater degree of flexibility (and is global and multi-asset in reach.) I don't agree with all of their views (such as their thoughts on EM), but Marketfield really continues to seem like the closest product in terms of the "hedge funds for the masses" movement, many of which have not lived up to expectations. AQR Risk Parity and Robeco Long/Short (the latter closed) being other successes, among a handful of others. Some strategies, of course, are going to have good years and bad years.
Arnott is a very skilled manager and I agree with a lot of his long-term concerns. I own PAUDX.
If I can convince myself that we are the "least dirty shirt" I will continue to use a GNMA fund, like USGNX or VFIIX, as my cash position. As my other investments tumble through or rise above this fund I will employ strategies of buying and selling. Instead of using a 50 or 200 dma average on each investment I have recently compared other funds I hold against my GNMA fund. I use the performance of the GNMA fund as a trend tool for the other holdings.
So, if I were to employ a three fund approach a GNMA fund would be one. A flexible bond fund would be next on my list. Well managed funds like LSBRX, LSGLX, PONDX, TGBAX, and DLTNX come to mind. The third choice is where I get into trouble...too many ideas...too many possibilities. Maybe have 4 - 6 solid long term ideas (funds) and wait for them to under perform my other two holdings.
For WallStreetRanter, I'm just curious, not critical, because I have no pooch in this search, what in particular you observe about HSGFX that makes you think the future may be better than the past.
Reply to @Old_Joe: You will read and fully understand the prospectus, yes? Do not skip the risk disclosure section. Please sign our form below..............
Hi Scott- I'm interested in Schwab just because they have an office about one block away, so setting up a revocable living trust account (with all of the paperwork necessary) will be a lot easier. We've got a large CD which was getting 2.5% coming due soon, and I'm looking to put at least some of that into some of the MFO folk's favorite funds. Thanks for your help!
You mean like I might actually lose money, and that "past performance is no guarantee of future results?" Actually, the past performance of some of my picks is most likely a guarantee of future results, as well. Very disheartening, for sure.
I was also quite disheartened to find out that you have "the top investment portfolio anywhere on the web". I regard that as a personal challenge, and intend to do my darnedest to rip that crown right off your head. )
PAUDX would be lower risk, but has a history of providing nice dividends/distributions. Marketfield is an interesting and very flexible fund that I like quite a bit - I continue to think flexibility will be of great importance over the next decade.
Yes, I completely agree on flexibility. It's quite something how much one can learn here on MFO. Last week I learned (thanks to Max) that opening a brokerage account is usually preferable to having a bunch of separate accounts. For quite a while I've been wanting to diversify by increasing our exposure to areas not available to us through American Funds, and with the no-win on bank deposits, this looks like the time to do it.
Opening small positions (maybe 5k each to start) in PAUDX, MFLDX, MAPIX, and FRIFX is on my agenda.
@Hank, I see your complaints with the hussman fund, it seems to be a growing view that he "just doesn't get it", "isn't being flexible enough" (i.e. taking on risks he views as unwarrented). This is a common thing that happens to managers when avoiding risk. You point to his record over the last 10 year snapshot and your right at 2.5%/yr and trailing the S&P by about that same amount doesn't say much (as he should beat over a timeframe that long). I'm not defending that, he should have beat. However, I also know that he would have and in strong fashion were it not for his 2009/2010 mis-step -- he should have significantly unhedged at least temporarily. I think people do not realize how much that effects these 1 point in time snapshots of performance (yes even longer term). As a sidenote but not an excuse, it is good to notice this 10yr timeframe is a trough to peak (2002-2012) -- if you go back since inception 8/00 (closer to a peak to peak) - you will notice his perfomance is an annualized return of 5.75%/yr compared to 1.77% for the S&P 500. I am confident his most recent 3 and 5 years would also look quite nice if he only got a very small portion of the snapback in 2009-2010.
@AndyJ "what in particular you observe about HSGFX that makes you think the future may be better than the past."
It's not even about thinking he will perform better than in the past.....if he can outpace the S&P 500 by 4%/yr and reduce volatility to boot as he did over the last almost 12 years I would be quite happy. But I see your point -- after all, look at the most recent 1,3,5 and even 10yr snapshots. But again, it is amazing how much these are affected by 09-10. Yes, that really lost the faith of investors -- and ruined a lot of his numbers but EVEN WITH THAT the average (and median) 5yr holding period has been superior for investors in the fund -- with dramatically less risk measured in both absolute drawdown terms and regular volatility terms. See the below chart showing monthly rolling 5yr period since inception of the fund compared to the S&P 500 (there have been 81 such periods)
As you can see he has still beat by an average of 1.9%/yr over 5yr timeframes (1.2% median). The median 5yr experience for an investor has been 3%/yr compared to 2% for S&P and 5.1% average compared to 3.2% for S&P. Now I would usually want to see my manager beat over a higher % of rolling periods then 58% but analysis can be more then just seeing numbers...it's also about understanding what is behind them and I understand what an effect 09-10 has on them.
However, this is just my take and only time will tell.
I think we agree Hussman made significant missteps in the '08-'09 period. In retrospect, there's been what? Maybe half-dozen such buying opportunities over past century as existed in early 2009? (rhetorical). By definition, these opportunities are not apparent to most investors. Guess I expected better from Hussman. BTW - Just for comparison, HSGFX averaged 2.59% over the 10 years. T Rowe Price's short-term bond fund PRWBX earned 3.7% over same period. Category average was 3.18%. Thanks for the reply WSR & please continue to share your breadth of knowledge on the board.
Reply to @WallStreetRanter: I suppose my view is not a matter of taking on "unwarranted risk", but a matter of viewing issues such as inflation and monetary policy and what effect that was going to have/has. Someone can be negative big picture (and I agree with a lot of what I've read from Hussman in the past - I haven't in a while because I don't and haven't owned the fund), but at a point it becomes rethinking approach in an environment where you have negative interest rates and a Fed chair who has no problem extending easy monetary policy as far as the eye can see - which has created a market that often appears addicted to QE and hints of further QE.
Additionally, I don't follow Hussman's funds that much - is the dollar value of the portfolio nearly 100% hedged that often? If so, wouldn't that be more a market neutral fund than long-short? Additionally, if he's 98% hedged as to the dollar value of the holdings (which would mean performance rests upon the outperformance of the holdings vs index hedges)... the fund is down.
I don't know - I certainly agree with a lot of the big picture views that Hussman has had that I've read off-and-on over the last few years, but at what point does the playbook change? How long does one "avoid risk?"
I can still think there are serious structural issues in this country (some of which have only gotten worse) that haven't been fixed by being papered over and that we haven't learned anything from 2008 (and when there's another crisis, I'm curious as to what's left to use against it.) However, I can find exciting companies around the world that I like or themes that I find interesting.
It's certainly been discussed and it isn't new, but the more I look at what's happening in the point-of-sale terminal space, the more I think that's exciting and going to change a lot over the coming years (with mobile payments, but also other changes like more stores offering check-out in the middle of the store with people walking around with mobile devices.) Five or six years ago, I took a flyer in a little company on the pink sheets called UWink created by Atari creator Nolan Bushnell that was an interactive restaurant chain where ordering happened at the table on an interactive screen and on-screen games could be played against other tables or against others at the table. It never went anywhere (and ran into 2008), but now I look at that and it seems ahead of its time. I'd forgotten about it until looking at some newer, zippier point of sale system presentations.
I'm rambling, but I think there are longer-term stories that will play out over years. I almost think that, even if things turned South, some of these stories are going to continue to play out. I was a skeptic about the Idevices and I still think it's a little concerning about how much of the market Apple is, but I look at all of the products (Iphones, etc) out there and it's difficult to deny the things that are going to come out of having all of those devices out there - including mobile payment and things like using Iphones to transact business - stuff like this product from French company Ingenico - http://www.ingenico.com/en/media_centre/library/videos/ismp-turn-ipod-touch®-and-iphone®-into-emv-chip-_gulhpfd9.html
I watch that video (and look at what they and Verifone are doing) and it's hard to imagine things not going in that direction and the point-of-sale experience looking very different in the next 5-10 years.
Advertising in terms of outdoor ads are also likely going to change substantially. How soon until we have billboards in subways that allow people to order from their mobile devices, like Tesco's mobile groceries in South Korea? In the meantime, I would not be surprised - and again - this comes from someone who was certainly skeptical - if outdoor ads without QR codes are going to be viewed as dated.
As for hedging.... I'm sure that will work at some point, but when you have negative real interest rates that will likely go on as far as the eye can see if things continue to muddle along, what to do?
Reply to @WallStreetRanter: Points well taken. I had a notion that the only time Hsgfx had done anything for investors was 02 & 03, but looking now at the year by year returns on the M* performance pages, JH didn't really underperform outrageously until 09, 10, and this year.
Thanks, appreciate the post and the chat it's generated.
Reply to @hank: Hank, your bond example brings up the main reason I've usually avoided explicit shorting or market neutral approaches in the past: why do it at all when you can own negatively correlated assets in bonds that provide a hedge against stock declines and earn income at the same time?
Reply to @AndyJ: - Hi Andy, If I may answer your rhetorical question ... Because bonds & stocks are not always negatively correlated. Rising interest rates aren't generally good for stocks. (reason for using short-term bond fund for comparison)
Reply to @hank: Sure, bonds come in different flavors, some more correlated, some less, depending on the environment. But there's usually a bond class that will help hedge stock risk, and well-run, actively managed, diversified bond funds never really go out of style.
Reply to @scott: No doubt there will be companies in any environment that will turn out to be quite profitable -- whether they be new companies with new technologies or old companies making new in-roads. However, picking only the successful ones while avoiding the Uwink's is another story.....however, much easier to find profitable investments when the whole universe is generally priced for good returns....which is why paying attention to overall market valuations is important.
Reply to @WallStreetRanter: Certainly valuations are important (want to buy some Amazon with a 165 p/e and an operating margin of 1.5%?) I continue to like the Asian conglomerates (such as Jardine Matheson), which remain very reasonably valued. The conglomerate discount likely plays a part, but collections of compelling businesses at very reasonable valuations.
Anyway, when the intent is to push asset prices higher across the board, staying out of it entirely (or shorting) results in losses and/or being behind inflation. I agree with you on fundamentals and valuation and the importance of such, but I suppose my point becomes what is the playbook when it becomes clear monetary policy is to lift all assets? Avoid it? Hedge almost entirely? One can still find reasonably valued companies or at least low-key ones in an attempt to participate in a manner that matches their desired risk tolerance. Stick with a smaller group of staples and other low volatility names, raise significant cash and light-to-moderate hedging instead of fully hedging the dollar value of the portfolio. The results wouldn't have been spectacular by any means, but a single is a single.
Additionally, I remain curious as to whether Hussman Strategic Growth is better labeled market neutral than long-short.
Finally, according to M*, the Arbitrage fund (ARBFX) has outperformed Hussman over 3-5-10 yr periods.
Reply to @AndyJ: Good points you all are making. I am 78 and have continued increasing fixed income and reducing my equity allocation. I thought about doing it more recently and take advantage of seasonality and strength in the equity market. I started by checking percent of treasuries in the aggregate benchmark and selected funds with less that 10% in treasuries. I already own MWTRX as my core holding and have also increased PIMIX a multi sector bond fund as well as PAUIX a world allocation fund, a fund of funds. All have low correlations to equities and the aggregate fund. My ultimate goal this year is to get to around 25-30% stocks, 70-75% fixed.
I own PAUDX and have for many years, it accounts for about 7% of my holdings. Arnott is a very talented and smart manager. I used to own Hussman HSTRX Strategic Total return but sold it early 2011. I just dug into into Ben Inker and his GMO Benchmark Free Allocation 3 fund, it held up quite nicely (-11.23%) in the downturn of 08 - if the Wells fargo version is the same I would say that is an attractive alternative too. With bonds being most likely at the end of the long bull, I am inclined to reduce bond holdings and add to the "absolute allocations" of my portfolio, PAUDX and maybe the WARAX (Wells Fargo Advantage Absolute Return Load Waived) seem like good choices for me on that front.
Comments
I like Arnott and Inker is good, but I think Hussman's lack of flexibility in terms of adapting to recent years (I don't disagree with a lot of what Hussman's saying, but at some point switch up the playbook a little - also I still don't get holding things like Panera if one has the view Hussman has.)
Marketfield Fund has continued to be short EM, which has taken away from the fund. However, they said this in their March letter, and it kind of applies to Hussman: "In the event that these markets are resilient in the face of weakness in the U.S., Europe or Japan, then it will be time for us to reconsider our hypothesis
and move on. Wrong and stubborn is a combination that we earnestly try to avoid."
Any which way, I just think the inflation concern would lead me to wish Hussman would minimize hedges, increase cash and move more into lower/low-key names like Colgate (which he owns.)
Otherwise, I think there are things that are investing opportunities (revolving around mobile) that even I was reluctant and skeptical of, but it's clear that they are going to be an increasing part of society. As I noted in another thread yesterday, I almost think it's not investing in Apple (although it may continue to do well) as much as it is looking at "trickle down" opportunities that come from having a gillion smartphones out in the world now. Even a smaller theme I like is probiotics/enzymes - new trends in health/nutrition. I can be negative on a lot of things, but there are little things (like probiotics/enzymes) and larger things (commodities, EM) that I can still be positive on.
Someone can have a negative/mixed view on a lot of elements of the big picture, but there are certainly a number of small/large long-term themes.
From Hussman's latest quarterly fund report: "The Fund’s holdings of individual stocks as of December 31, 2011 accounted for $5,792,612,946, or 100% of net assets. Against these stock positions, the Fund also held 37,000 option combinations (long put option/short call option) on the S&P 500 Index, 8,000 option combinations on the Russell 2000 Index and 2,000 option combinations on the Nasdaq 100 Index. Each option combination behaves as a short sale on the underlying index, with a notional value of $100 times the index value. On December 31, 2011, the S&P 500 Index closed at 1,257.60, while the Russell 2000 Index and the Nasdaq 100 Index closed at 740.92 and 2,277.83, respectively. The Fund’s total hedge therefore represented a short position of $5,701,422,000, thereby hedging 98.4% of the dollar value of the Fund’s long investment positions in individual stocks."
I dunno, I just think a low-key stock fund (sort of Forester Value style, perhaps?) with a lot of cash (Aston/River Road Independent Value style - maybe as much as 50%) and maybe minimal-to-moderate hedging as need be seems a lot simpler than having a whole options strategy that hedges nearly 100% of the dollar value of the portfolio. Change the fund to a more "go anywhere" blend that could be in value or growth names and be heavily in cash and light hedging.
But, who knows.
I do like PAUDX, mostly because of Arnott's talent. And MFLDX continues to be a core hold in most client accounts, again because of the contrarian ability of Aronstein. If volatility returns big time, FVALX could be a good option. M* is apparently moving this large cap value fund to its long/short equity category soon, reflecting John Forester's investment strategy and practice. And it's hard to ignore TGBAX's long-term record.
Funds like HSGFX would appear more suited for investors nearing or in retirement and who like me harbor powerful reservations about the bond market. For early savers-investors (under 40) I question the need, considering they will continue dollar averaging into markets - both good and bad - for many years. Bit of a rush here, but don't think you addressed age & varying risk tolerances in your HSGFX recommendation. Giving up on HSGFX wasn't easy after 10 years. Would just say look at the 10-year record. Compare the 2.6 annual return with his gab about "complete market cycles". Well, we had a complete cycle in there somewhere - stock markets going from boom to bust and back to boom again. And a 2+% annual gain over that time was the best he could muster? Tell me one wouldn't have been better off in a very conservative balanced fund - 40% equity & 60% fixed, or even fully invested in a short term bond fund. So, no idea were that fund will go. Always the possibility markets will make those of us who pulled out look like idiots and HSFGX will have a phenomenal 10 year run. Hummm ... FWIW
If Hussman is hedging nearly 100% of the dollar value of the portfolio (wouldn't it be more "market neutral" than a "long-short" fund - maybe a re-classification of the fund is in order if it is this hedged on a consistent basis?), then it becomes the outperformance of his stock picking (or not.) Well, the fund is down over the last few years.
I just think the strategy (the more I actually read in the recent quarterly reports) seems unnecessarily complicated and the last few years shows it's not flexible, either. Marketfield, while significantly riskier, has shown a greater degree of flexibility (and is global and multi-asset in reach.) I don't agree with all of their views (such as their thoughts on EM), but Marketfield really continues to seem like the closest product in terms of the "hedge funds for the masses" movement, many of which have not lived up to expectations. AQR Risk Parity and Robeco Long/Short (the latter closed) being other successes, among a handful of others. Some strategies, of course, are going to have good years and bad years.
Arnott is a very skilled manager and I agree with a lot of his long-term concerns. I own PAUDX.
As my other investments tumble through or rise above this fund I will employ strategies of buying and selling. Instead of using a 50 or 200 dma average on each investment I have recently compared other funds I hold against my GNMA fund. I use the performance of the GNMA fund as a trend tool for the other holdings.
So, if I were to employ a three fund approach a GNMA fund would be one. A flexible bond fund would be next on my list. Well managed funds like LSBRX, LSGLX, PONDX, TGBAX, and DLTNX come to mind. The third choice is where I get into trouble...too many ideas...too many possibilities. Maybe have 4 - 6 solid long term ideas (funds) and wait for them to under perform my other two holdings.
TIA - AJ
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Do not skip the risk disclosure section.
Please sign our form below..............
I was also quite disheartened to find out that you have "the top investment portfolio anywhere on the web". I regard that as a personal challenge, and intend to do my darnedest to rip that crown right off your head.
Opening small positions (maybe 5k each to start) in PAUDX, MFLDX, MAPIX, and FRIFX is on my agenda.
@AndyJ "what in particular you observe about HSGFX that makes you think the future may be better than the past."
It's not even about thinking he will perform better than in the past.....if he can outpace the S&P 500 by 4%/yr and reduce volatility to boot as he did over the last almost 12 years I would be quite happy. But I see your point -- after all, look at the most recent 1,3,5 and even 10yr snapshots. But again, it is amazing how much these are affected by 09-10. Yes, that really lost the faith of investors -- and ruined a lot of his numbers but EVEN WITH THAT the average (and median) 5yr holding period has been superior for investors in the fund -- with dramatically less risk measured in both absolute drawdown terms and regular volatility terms. See the below chart showing monthly rolling 5yr period since inception of the fund compared to the S&P 500 (there have been 81 such periods)
As you can see he has still beat by an average of 1.9%/yr over 5yr timeframes (1.2% median). The median 5yr experience for an investor has been 3%/yr compared to 2% for S&P and 5.1% average compared to 3.2% for S&P. Now I would usually want to see my manager beat over a higher % of rolling periods then 58% but analysis can be more then just seeing numbers...it's also about understanding what is behind them and I understand what an effect 09-10 has on them.
However, this is just my take and only time will tell.
The Wall Street Ranter
Additionally, I don't follow Hussman's funds that much - is the dollar value of the portfolio nearly 100% hedged that often? If so, wouldn't that be more a market neutral fund than long-short? Additionally, if he's 98% hedged as to the dollar value of the holdings (which would mean performance rests upon the outperformance of the holdings vs index hedges)... the fund is down.
I don't know - I certainly agree with a lot of the big picture views that Hussman has had that I've read off-and-on over the last few years, but at what point does the playbook change? How long does one "avoid risk?"
I can still think there are serious structural issues in this country (some of which have only gotten worse) that haven't been fixed by being papered over and that we haven't learned anything from 2008 (and when there's another crisis, I'm curious as to what's left to use against it.) However, I can find exciting companies around the world that I like or themes that I find interesting.
It's certainly been discussed and it isn't new, but the more I look at what's happening in the point-of-sale terminal space, the more I think that's exciting and going to change a lot over the coming years (with mobile payments, but also other changes like more stores offering check-out in the middle of the store with people walking around with mobile devices.) Five or six years ago, I took a flyer in a little company on the pink sheets called UWink created by Atari creator Nolan Bushnell that was an interactive restaurant chain where ordering happened at the table on an interactive screen and on-screen games could be played against other tables or against others at the table. It never went anywhere (and ran into 2008), but now I look at that and it seems ahead of its time. I'd forgotten about it until looking at some newer, zippier point of sale system presentations.
I'm rambling, but I think there are longer-term stories that will play out over years. I almost think that, even if things turned South, some of these stories are going to continue to play out. I was a skeptic about the Idevices and I still think it's a little concerning about how much of the market Apple is, but I look at all of the products (Iphones, etc) out there and it's difficult to deny the things that are going to come out of having all of those devices out there - including mobile payment and things like using Iphones to transact business - stuff like this product from French company Ingenico - http://www.ingenico.com/en/media_centre/library/videos/ismp-turn-ipod-touch®-and-iphone®-into-emv-chip-_gulhpfd9.html
I watch that video (and look at what they and Verifone are doing) and it's hard to imagine things not going in that direction and the point-of-sale experience looking very different in the next 5-10 years.
Advertising in terms of outdoor ads are also likely going to change substantially. How soon until we have billboards in subways that allow people to order from their mobile devices, like Tesco's mobile groceries in South Korea? In the meantime, I would not be surprised - and again - this comes from someone who was certainly skeptical - if outdoor ads without QR codes are going to be viewed as dated.
As for hedging.... I'm sure that will work at some point, but when you have negative real interest rates that will likely go on as far as the eye can see if things continue to muddle along, what to do?
Thanks, appreciate the post and the chat it's generated.
Anyway, when the intent is to push asset prices higher across the board, staying out of it entirely (or shorting) results in losses and/or being behind inflation. I agree with you on fundamentals and valuation and the importance of such, but I suppose my point becomes what is the playbook when it becomes clear monetary policy is to lift all assets? Avoid it? Hedge almost entirely? One can still find reasonably valued companies or at least low-key ones in an attempt to participate in a manner that matches their desired risk tolerance. Stick with a smaller group of staples and other low volatility names, raise significant cash and light-to-moderate hedging instead of fully hedging the dollar value of the portfolio. The results wouldn't have been spectacular by any means, but a single is a single.
Additionally, I remain curious as to whether Hussman Strategic Growth is better labeled market neutral than long-short.
Finally, according to M*, the Arbitrage fund (ARBFX) has outperformed Hussman over 3-5-10 yr periods.