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Yup. Volatility is not risk. Permanent loss of capital is list. Case in point (while I hope not) - HSGFX. It keeps bleeding with low volatility.
However, I'm wondering if we are making things too complicated.
Long/Short = Bet on stocks that expected to rise. Short stocks expected to fall. Prospectus decides how much of portfolio is long and how much is short
Market Neutral = Half long, Half Short. Expect differential to provide return
Hedged = Decide on portfolio % to hedge against remaining long portfolio.
I don't think HSGFX is Long/Short fund. It is Hedge. I don'g think FVALX is Long/Short fund. It is Hedge. I think M* sucks. It does.
Reply to @Investor: So did Hussman with his. Whoever said fund managers were not businessmen. My wife has a different impression of me than my boss. I will leave you to wonder what is more flattering.
Prospectus for FVALX and HSGFX says it is a long/short fund? No. Regulators need to wake up as well. This is not about "innovation" or "freedom". If your fund is supposed to be market neutral, long/short, whatever, then put it in the name and invest that way.
Had you put $100 in HSGFX one year ago, you'd have $83 left today. Only is it positive for 10 years out. (That 1.74% return is probably closer to 1.25% on a compound basis.) Have followed fund close to 10 years. As a one-time shareholder, dutifully read the weekly self-promotions - roughly translated: "I'm smarter than you are." ... Given the two (sales pitch & performance), at what point do terms like "poor judgment" and "underperformance" cease to be appropriate - and classifications like "snake oil salesman" begin to apply?
Reply to @hank: A few reports ago, Marketfield was discussing its view on EM, and I am too lazy to go back and get the quote, but it effectively was, "If we are wrong, we will admit it and move on, we will not be stubborn."
I don't think Hussman's a snake-oil salesman as much as he truly believes in his research and his views and he's willing to go down swinging and either you're going to follow him or get out. I think his options method is rather bizarre and opaque and it's difficult to really get a sense of how that aspect of the fund is faring and how the options hedging strategy is an improvement over using more simple methods (futures, short etfs, etc)
I think the issue with Hussman and "snake oil salesman" is that - at some point - AUM fleeing likely starts to become a real concern if it hasn't already. If it's not working, it's eventually not sustainable and the issue on top of that is that once you lose a shareholder, they're not going to come back.
From his latest: (http://www.hussmanfunds.com/wmc/wmc121001.htm) "I remain convinced that we will observe numerous points in the market cycle ahead where the evidence will support a significant and even aggressive exposure to market fluctuations. Now is not one of those points."
Um...what about the last few years? Again, I don't doubt that Hussman does a great deal of research, but we live in times where his playbook isn't working. I've not really defended Hussman - I've never owned the funds - but I've offered "constructive criticism", I guess. At this point, it starts to become a matter of being overly stubborn. Maybe he's right in theory with all the research, but it isn't playing out in practice.
I think one issue with Hussman is that, with all the wealth of data he seems to take into account, he doesn't seem to take into account the effects of inflation. There's nothing that I've read that seems to take into account inflation and nominal/real.
I've actually been buying a bit in the last couple of weeks - adding to a couple of stocks and a bit to a couple of funds.
Reply to @scott: Fair enough - and this is not sour grapes. Doubtful I ever had anywhere near 10% in HSGFX - closer to 5% on average. It played a role as a "hedge" in the same sense that BEARX, or gold for that matter, may provide useful hedges. In other words: owning HSGFX allowed me to take more risks in other areas than otherwise would have.
WHERE I HAVE A PROBLEM: This isn't the way he presents the fund to the public. Perhaps his song has changed, but when I bought-in during the 2000-2005 period, HSGFX was depicted as a fund for widows, grandmothers and orphans - a "set it & forget it" fund that never needed re-balancing. No need to own other growth funds - or to time your buying and selling of this one. HSGFX was your ticket to "risk adjusted returns" that would approximate or surpass the S&P over the complete boom & bust market cycle. Just sit back and relax.
Well, we've had a complete market cycle - a more complete one than any of us could have anticipated or hoped for. During that time (10 years) the fund generated effectively 1.74% AAR. This isn't sour grapes so much as sadness for the vulnerable among us who bought the hype and swallowed the kool-aid hook line and sinker (excuse the mixed metaphors). I can't find any other fund so depicted (moderate risk, moderate growth) that approximates the dismal performance of this one. Not GATEX, not TRRIX, not RPSIX, not OAKBX, not PRPFX, not CVSIX. (Admittedly a few like JAMNX were jettisoned.)
Reply to @hank: Yeah - I totally agree with you (and I didn't think it was sour grapes) - I think at some point people have to throw up their hands in terms of understandable disappointment with the fund and at some point it really seems to have veered away from how it was marketed, largely thanks - seemingly - to Hussman's stubborn views.
I think the weird thing that I can't get over is that Hussman doesn't seem unintelligent, he simply seems unwilling to give up his views, despite the fact that they aren't working and haven't been for a number of years. He should realize in this day and age, a YEAR of underperformance is unacceptable to many - people don't have long time horizons and they aren't going to wait around.
While I haven't read tons of his letters, I don't get the feeling that there's a lot of realization, either; there's been a moment or two of acting like "Yeah, the performance hasn't been so great and we're making changes to models", then - nothing, there's no real visible change in performance or (seemingly) strategy.
I'd be curious what the AUM is now vs five years ago. Yeah, I definitely didn't think sour grapes and agree with you on the performance disappointment. I still find his inability to change rather fascinating, though (even moreso now, 4 years after 2008, but I'm sure AUM has dwindled considerably.
Maybe I'll write Hussman this week (he should provide a deeper discussion of the options hedging strategy and its benefits vs other methods of hedging) and see if he responds. (edited to add: well, site has no contact email.)
Reply to @scott: Hedging requires shorting, doesn't mean it's long/short. If we keep definitions simple instead of getting lawyers involved we will all have a better time.
Long/Short implies manager buys companies whose stocks she expects to do well and short stocks she expects to do bad.
When Schwab got sued for its "money market" fund tanking in the 2008 crisis, why didn't anyone first ask WTF its name said "money market"? So what are we waiting for? A fund that has "Large Cap" in its name investing in micro caps, stinking up the place and then investor suing saying manager misled him, while he doesn't say one word as long as the fund was doing well in the micro caps?
Too much financial pron is the problem. Do what you say, say what you do. That's how it should be. Life is simple. We complicate it. Rather we let OTHERs complicate it for us. IMO we are having the wrong debate.
Sorry to say, the only reason I invested with Hussman was he was actually telling one each and every week what he was doing and why he was doing it. If he's wrong, he's wrong. Time will tell. I never knew he marketed it as "widows and orphans" fund or "buy it or forget it fund" (there is no such thing).
HSGFX is an actively managed fund. Manager hedges when he thinks risk of investing is too high. He backs himself up to make sure his long position do better than others. In fact, unless I'm mistaken the "unhedged" version of HSGFX would have done darn well. Hardly trying to defend HSGFX, since I haven't made money with it even on paper, while at the same time don't sympathise with anyone using it as trading vehicle buying at wrong time.
When HSGFX will no longer be able to prove his "trough to trough" and "peak to peak" performance has not been able to beat the market, I'm sure people will leave en masse. The fact is they haven't done so far. Only time will tell.
Let's not forget FAIRX. Everyone knows what happened there. I'm just waiting for M* to turn "Negative" on it and say something like "Genius fails again" and I think I'll buy some FAIRX - assuming at THAT time I "understand" how Berkowitz is investing.
Reply to @VintageFreak: I don't get the Hussman comparison to FAIRX. Berkowitz had 1 bad year. He was way to early on his financial sector bets. 2011 was a horrible year for FAIRX, but in 9 of the last 10 years FAIRX has beaten it's benchmark and category handily. This year his fund has rebounded to the top 1% of it's category. Hussman's weighty ego wont let him jump high enough for a rebound.
A lot of people, even many here at MFO, jumped ship on Berkowitz because of one very bad year out of the last 10. But so many people are willing to hang on to a fund like HSGFX that looses to it's benchmark year in and year out. I don't own FAIRX, but I bought FAAFX soon after it came out because I believe Berkowitz is a very good investor. I did own HSGFX but would never buy again because, though he may be an educated economist, Hussman is a very poor investor/market timer.
Reply to @VintageFreak: Hi VF - Agree "markets" is too strong a term - probably one the SEC would frown on. In second paragraph, changed the term to (1) "presents" and (2) "depicted".
A communications professor nearly half-century ago always began and ended her lessons with the phrase: "Remember - A percept is a product." I think that applies to the manner in which Hussman has consistently portrayed the fund in both its prospectus and his more than 1000 weekly commentaries, all of which I've linked. While nothing specific mentions widows, grandmothers, and orphans, the underlying perception is that HSGFX will attain over market cycles returns similar to equity funds without the incumbent volatility.
From HSGFX Prospectus Nov. 2011 (p.2): "The fund is designed for investors who want to participate in the stock market, and also want to reduce their exposure to general market fluctuations in conditions that have historically been unfavorable to stocks." http://www.hussmanfunds.com/pdf/hsgprosp.pdf
From Weekly Commentary Nov. 2, 2003 "The Hussman Funds are designed for long-term investors following a disciplined saving and investing program. As I note in The Two Essential Elements of Wealth Accumulation, I strongly believe that investments – even small ones – should be the first checks you write, as if you were paying a bill. With the exception of a tiny percentage in money market funds, all of my own liquid assets are invested in the Hussman Funds. I make no attempt to “time” these investments (they are made automatically at the beginning of each month) or to trade in-and-out of the Funds." http://www.hussmanfunds.com/wmc/wmc031102.htm
In summation: A percept is a product. The "perception" (I think the intended product) of how this fund has been portrayed by Hussman has been to create an illusion. A comfortable one - but an illusion nonetheless: That one can in effect "set it and forget it" - the fund will smooth out those nasty market surprises along the way while still delivering long term growth similar to traditional equity funds. If you believe it, buy it.
Reply to @VintageFreak: I would tend to agree. Hussman, and people like him, profits at the expense of his shareholders, and by always claiming the market is going to collapse, he sets him self up to make money by selling his product.
I'm not accusing him of being intentionally dishonest, but there is a strong conflict of interest given the nature of his product.
Reply to @NickF & Scott: No I don't think he's trying to screw anyone either. As Scott says, he's a poor investor. I'd add, also a poor market timer. Unfortunately, the only way the concept he's selling could work would be if he were a good market timer - which he isn't.
I'll go further and say he's a brilliant strategist and salesman - from this standpoint: If selling a traditional long-only or balanced fund, he'd have to prove he's better than all the others he competes against. The numbers don't lie. Instead, he's selling a product that claims to be so radically different from those competitors that the numbers don't much matter. As long as he can keep people swallowing this "complete cycle" **##!%#, than they'e willing to accept the lackluster returns. Only after a full market cycle - which I argue we've witnessed - do the deficiencies become fully apparent.
Comments
However, I'm wondering if we are making things too complicated.
Long/Short = Bet on stocks that expected to rise. Short stocks expected to fall. Prospectus decides how much of portfolio is long and how much is short
Market Neutral = Half long, Half Short. Expect differential to provide return
Hedged = Decide on portfolio % to hedge against remaining long portfolio.
I don't think HSGFX is Long/Short fund. It is Hedge.
I don'g think FVALX is Long/Short fund. It is Hedge.
I think M* sucks. It does.
Meaning absolutely no disrespect to the mentally handicapped, classifying FVALX as Long/Short is retarded. Charging people for such wisdom is robbery.
Prospectus for FVALX and HSGFX says it is a long/short fund? No. Regulators need to wake up as well. This is not about "innovation" or "freedom". If your fund is supposed to be market neutral, long/short, whatever, then put it in the name and invest that way.
"Hedged = Decide on portfolio % to hedge against remaining long portfolio."
Um, wouldn't that be long/short?
I don't think Hussman's a snake-oil salesman as much as he truly believes in his research and his views and he's willing to go down swinging and either you're going to follow him or get out. I think his options method is rather bizarre and opaque and it's difficult to really get a sense of how that aspect of the fund is faring and how the options hedging strategy is an improvement over using more simple methods (futures, short etfs, etc)
I think the issue with Hussman and "snake oil salesman" is that - at some point - AUM fleeing likely starts to become a real concern if it hasn't already. If it's not working, it's eventually not sustainable and the issue on top of that is that once you lose a shareholder, they're not going to come back.
From his latest: (http://www.hussmanfunds.com/wmc/wmc121001.htm) "I remain convinced that we will observe numerous points in the market cycle ahead where the evidence will support a significant and even aggressive exposure to market fluctuations. Now is not one of those points."
Um...what about the last few years? Again, I don't doubt that Hussman does a great deal of research, but we live in times where his playbook isn't working. I've not really defended Hussman - I've never owned the funds - but I've offered "constructive criticism", I guess. At this point, it starts to become a matter of being overly stubborn. Maybe he's right in theory with all the research, but it isn't playing out in practice.
I think one issue with Hussman is that, with all the wealth of data he seems to take into account, he doesn't seem to take into account the effects of inflation. There's nothing that I've read that seems to take into account inflation and nominal/real.
I've actually been buying a bit in the last couple of weeks - adding to a couple of stocks and a bit to a couple of funds.
WHERE I HAVE A PROBLEM: This isn't the way he presents the fund to the public. Perhaps his song has changed, but when I bought-in during the 2000-2005 period, HSGFX was depicted as a fund for widows, grandmothers and orphans - a "set it & forget it" fund that never needed re-balancing. No need to own other growth funds - or to time your buying and selling of this one. HSGFX was your ticket to "risk adjusted returns" that would approximate or surpass the S&P over the complete boom & bust market cycle. Just sit back and relax.
Well, we've had a complete market cycle - a more complete one than any of us could have anticipated or hoped for. During that time (10 years) the fund generated effectively 1.74% AAR. This isn't sour grapes so much as sadness for the vulnerable among us who bought the hype and swallowed the kool-aid hook line and sinker (excuse the mixed metaphors). I can't find any other fund so depicted (moderate risk, moderate growth) that approximates the dismal performance of this one. Not GATEX, not TRRIX, not RPSIX, not OAKBX, not PRPFX, not CVSIX. (Admittedly a few like JAMNX were jettisoned.)
I think the weird thing that I can't get over is that Hussman doesn't seem unintelligent, he simply seems unwilling to give up his views, despite the fact that they aren't working and haven't been for a number of years. He should realize in this day and age, a YEAR of underperformance is unacceptable to many - people don't have long time horizons and they aren't going to wait around.
While I haven't read tons of his letters, I don't get the feeling that there's a lot of realization, either; there's been a moment or two of acting like "Yeah, the performance hasn't been so great and we're making changes to models", then - nothing, there's no real visible change in performance or (seemingly) strategy.
I'd be curious what the AUM is now vs five years ago. Yeah, I definitely didn't think sour grapes and agree with you on the performance disappointment. I still find his inability to change rather fascinating, though (even moreso now, 4 years after 2008, but I'm sure AUM has dwindled considerably.
Maybe I'll write Hussman this week (he should provide a deeper discussion of the options hedging strategy and its benefits vs other methods of hedging) and see if he responds. (edited to add: well, site has no contact email.)
Long/Short implies manager buys companies whose stocks she expects to do well and short stocks she expects to do bad.
When Schwab got sued for its "money market" fund tanking in the 2008 crisis, why didn't anyone first ask WTF its name said "money market"? So what are we waiting for? A fund that has "Large Cap" in its name investing in micro caps, stinking up the place and then investor suing saying manager misled him, while he doesn't say one word as long as the fund was doing well in the micro caps?
Too much financial pron is the problem. Do what you say, say what you do. That's how it should be. Life is simple. We complicate it. Rather we let OTHERs complicate it for us. IMO we are having the wrong debate.
HSGFX is an actively managed fund. Manager hedges when he thinks risk of investing is too high. He backs himself up to make sure his long position do better than others. In fact, unless I'm mistaken the "unhedged" version of HSGFX would have done darn well. Hardly trying to defend HSGFX, since I haven't made money with it even on paper, while at the same time don't sympathise with anyone using it as trading vehicle buying at wrong time.
When HSGFX will no longer be able to prove his "trough to trough" and "peak to peak" performance has not been able to beat the market, I'm sure people will leave en masse. The fact is they haven't done so far. Only time will tell.
Let's not forget FAIRX. Everyone knows what happened there. I'm just waiting for M* to turn "Negative" on it and say something like "Genius fails again" and I think I'll buy some FAIRX - assuming at THAT time I "understand" how Berkowitz is investing.
A lot of people, even many here at MFO, jumped ship on Berkowitz because of one very bad year out of the last 10. But so many people are willing to hang on to a fund like HSGFX that looses to it's benchmark year in and year out. I don't own FAIRX, but I bought FAAFX soon after it came out because I believe Berkowitz is a very good investor. I did own HSGFX but would never buy again because, though he may be an educated economist, Hussman is a very poor investor/market timer.
A communications professor nearly half-century ago always began and ended her lessons with the phrase: "Remember - A percept is a product." I think that applies to the manner in which Hussman has consistently portrayed the fund in both its prospectus and his more than 1000 weekly commentaries, all of which I've linked. While nothing specific mentions widows, grandmothers, and orphans, the underlying perception is that HSGFX will attain over market cycles returns similar to equity funds without the incumbent volatility.
From HSGFX Prospectus Nov. 2011 (p.2): "The fund is designed for investors who want to participate in the stock market, and also want to reduce their exposure to general market fluctuations in conditions that have historically been unfavorable to stocks."
http://www.hussmanfunds.com/pdf/hsgprosp.pdf
From Weekly Commentary Nov. 2, 2003
"The Hussman Funds are designed for long-term investors following a disciplined saving and investing program. As I note in The Two Essential Elements of Wealth Accumulation, I strongly believe that investments – even small ones – should be the first checks you write, as if you were paying a bill. With the exception of a tiny percentage in money market funds, all of my own liquid assets are invested in the Hussman Funds. I make no attempt to “time” these investments (they are made automatically at the beginning of each month) or to trade in-and-out of the Funds."
http://www.hussmanfunds.com/wmc/wmc031102.htm
What often leaps out is the "folksy" air these "commentaries" employ.
Here's a classic titled "Bait & Tackle" from December 23, 2003
http://www.hussmanfunds.com/wmc/wmc031222.htm
Link to ALL Weekly Commentaries
http://www.hussmanfunds.com/weeklyMarketComment.html
In summation: A percept is a product. The "perception" (I think the intended product) of how this fund has been portrayed by Hussman has been to create an illusion. A comfortable one - but an illusion nonetheless: That one can in effect "set it and forget it" - the fund will smooth out those nasty market surprises along the way while still delivering long term growth similar to traditional equity funds. If you believe it, buy it.
I'm not accusing him of being intentionally dishonest, but there is a strong conflict of interest given the nature of his product.
I'll go further and say he's a brilliant strategist and salesman - from this standpoint: If selling a traditional long-only or balanced fund, he'd have to prove he's better than all the others he competes against. The numbers don't lie. Instead, he's selling a product that claims to be so radically different from those competitors that the numbers don't much matter. As long as he can keep people swallowing this "complete cycle" **##!%#, than they'e willing to accept the lackluster returns. Only after a full market cycle - which I argue we've witnessed - do the deficiencies become fully apparent.