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I think some things are a bit obscene (some of the Tesla-ish momentum stuff), the majority of the market is probably within some realm of fairly valued and, like always, there are some bargains. Those with a global view can likely find more values in EM and elsewhere.
Beyond that, I really do not get Hussman's approach whatsoever - if you're that upset about valuations, why not sell the longs like Urban Outfitters (the top long holding of HSGFX; I do not understand how one can be that bearish and have the largest holding in something that discretionary) and go to some defensives and light hedges rather than having a huge set of longs (some of which are, again, just bizarre for someone so negative) and being fully hedged via options.
Strange. No email on the Hussman website or I'd write him.
A word about the long run: While conditions, confidence and asset prices all seem moderate today, meaning there's ’nothing brilliant to say about the short-term outlook, the long term remains worrisome. Because the U.S. is still able to attract capital from abroad and print money, our financial problems aren't pressing at the moment. But the combination of intractable deficit spending, unsustainable entitlement promises and a total dearth of responsible action in Washington certainly raises alarms regarding the future
If the economy continues to recover and the Fed's bond buying eases off, interest rates are likely to go further on the upside. But given the modest level of confidence at play, the markets should not turn out to be perilous. Most assets are neither dangerously elevated (with the possible exception of long-term Treasury bonds and high grades) nor compellingly cheap.
It's easier to know what to do at the extremes than it is in the middle ground, where I believe we are today. As I wrote in my book, when there's nothing clever to do, the mistake lies in trying to be clever. Today it seems the best we can do is invest prudently in the coming months, avoiding aggressiveness and remembering to apply caution.
CAUTION: Attempting to time markets can be hazardous to your financial health. --- This guy's writings make me think of the old SNL Chris Farley skit about the "motivational speaker" who lived in a van down by the river:-)
Reply to @hank: Good one Hank. I might have to steal that one from you sometime in the future. Not sure about the timing aspect being hazardous as much as simply being a perma-bear is what is toxic.
Ding dong, ding dong, ding dong. I used to think this fellow was very smart. I am not so sure any more. There is a big difference between academic research/theories/numbers and successfully managing money. I realize that even the best managers have 2-3 year periods when they underperform their benchmarks, but this fellow has been in the pits for years. He has made some simply awful sector timing bets, and the drum he has been beating in his writings has simply turned investors off. His Strategic Growth fund is almost at the very bottom of funds we track that have 5-year numbers. The fund's assets are down more than 70%. Will the last shareholder turn our the lights?
Whatever valuation method or metric he is using to decide that the market is "obscenely overvalued" is clearly not working and it has been ineffective for over five years. Ever portfolio manager can have an off year or two but when the market tells you that you are wrong for a period of time this long, one should rethink whatever one is doing. And, if not, his investors certainly need to rethink what Dr. Hussman is doing.
No, not an investing genius, but a marketing genius.
In spite of terrible long term investing results, he still has several billion in assets under management. It goes to show how much inertia there is in most investors. Reminds me of some mutual funds that went on year after year with super high management fees because most of the remaining shareholders had either died or forgot about their account due to senility.
I think you are overrating Hussman's marketing genius. Investors have been remarkably patient with Hussman. I am fairly recent buyer as everyone knows I think by now.
The one problem with Hussman is that his unhedged portfolio has done better than S&P 500, but while he claims to be never net short, somehow he has managed to lose a lot of money. Hedges don't work perfectly, and given unhedged outperformance and margin of error, you would expect him to be down 2% YTD, not 7%.
Me thinks he has one more year, or he will get "Millered". Hopefully that does not happen since I DCA into HSGFX.
Reply to @VintageFreak: Fill me in if I am missing something here, but HSGFX as of this evening is negative YTD, one month, one year, three year, five year, and ten year. Did Miller ever come close to that type of dismal performance? ( OK, he did lose 55% in 2008) Plus, before Miller began underperforming the S&P, he was a star (versus the S&P) for what, something like 15 years in row. Hussman was a star for what, two or three consecutive years? Or maybe you are just speaking about the decline in assets under management or something I am oblivious about when you refer to being "Millered".
Edit: Not being facetious, just curious what I am missing.
Reply to @VintageFreak: Miller was on CNBC yesterday and they were fawning all over him. The best Miller-time moment remains his speech praising Bear Stearns while the stock elsewhere was on its way to 2 (discussed in the book, "The Big Short".) In The Big Short, author Michael Lewis recounts a similar episode. On a Friday morning in March 2008, Miller was invited to present the bullish case for investment bank Bear Stearns, which had traded at $53 the previous day. During a Q&A session after his presentation, an audience member asked Miller a question: "Mr. Miller, from the time you started talking, Bear Stearns stock has fallen more than 20 points. Would you buy more now?" Miller's answer: "Yeah, sure, I'd buy more."
By the following Monday, Bear Stearns had been sold to J.P. Morgan for $2 a share.
----------------
I agree with the discussion above that at some point, if the market is not going your way, you have to reevaluate, which Hussman refuses to do. What's remarkable is that Hussman appears to take so much into account in terms of research and discusses QE but doesn't seem to have ever come to the conclusion that QE = asset prices up.
Scott, I'm not comparing Hussman with Miller. Two different people get assassinated does not mean the both were same/similar. Besides, surely you jest about Miller's performance ever being as dismal as Hussman's. Now I for one think comparing their investment "styles" or their funds is waste of time, but just specifically to address your comment, Miller turned $14K into $5K. Just look at charts on M*. Hussman may or may not be a genius, but I think it is safe to say he does not have Miller's kind of "talent" and is certainly not buying yachts.
"Millered" is a word I hope to get credited for when it finally gets into the dictionary. We make celebrities of managers, then we bring them down. Then, as you were indicating, over a period of years, we forget, and we start drooling over them, again.
Again, Hussman's problem is not that his thesis is "wrong". The problem - which is excacerbated by M* classifying his fund as L/S - is he makes it a point to state his fund is never net short. If your unhedged portfolio is doing better than the market, and then you hedge it, the expectation is that your fund will return 0%, not a -ve%. That's why I said investors have been incredibly patient with him. Remember, Yacktman and the old OAKMX manager? In the bubble years they didn't have investors' patience. I think maybe people are thinking "this time it is different" with Hussman. Time will tell if they are right.
Finally, you are not missing anything regarding Hussman performance. It sucks. I'm not giving up yet, but I admit I'm re-evaluating whether it is a "forever hold" fund for me. I've opined ad nauseum regarding WHEN you buy something being incredibly more important than WHAT you buy. Otherwise known as market timing, which is supposed to be bad, Bad, BAD, except when M* wants to publish article lamenting investors doing worse than their funds. The real issue right now, is those sticking with Hussman may almost be thinking HSGFX is an "inverse" fund. If market tanks 20%, they will expect HSGFX to go up 20%. And IF that happens, and when HSGFX goes up only 2%, THEN I think you will see investor exodus. Some people time it right. Some people don't. I haven't timed it right with HSGFX. I did with FAIRX. There are those who didn't sell HSGFX in 2008. Should people who timed FAIRX right sell NOW? How will you ever know?
I don't think Hussman is a genius. I know a lot of PhDs who are not. He has of course failed, but so have so many managers. Maybe assets in HSGFX are "old money" for most part, i.e. those that bought in really, really early, and which is why that money still sticks. WHEN vs WHY. THAT is all it is about. People need to stop wondering why his fund still has $1.8 B. People who buy a fund based on short term performance will bail quickly (LMVTX). People who did for other reasons hold on for longer than they should (HSGFX). People like me sometimes look at a fund manager who sends 60% of his profits to charity, and buy his fund. If at all we want to compare Hussman with Miller, THAT is it for me. Miller bought $70M (or was it $700M) yacht. I would never invest with him.
Reply to @VintageFreak: "Besides, surely you jest about Miller's performance ever being as dismal as Hussman's"
I'm not saying Miller's performance is as bad as Hussman's or even comparing the two, but it's also an apples-and-oranges comparison in some ways.
It's also interestingly opposite in others - perma-bull runs into an iceberg and doesn't help shareholders by remaining perma-bullish the whole time. Perma-bearish investor largely avoids said iceberg, but then doesn't help shareholders by believing the next iceberg is around the corner.
Reply to @scott: (Waiting for rest of your comments Scott.) --- Meantime, here's a question: IS THERE ANYONE on this board who hasn't done better than John Hussman over the past decade??? HSGFX returned +0.15% over that period. A $10,000 investment in this fund compounded annually would be worth $10,151.02 today. By contrast, at only a modest 7% compounded rate, the same $10,000 would be worth $19,071.51 today.
There are many widely differing approaches on display at MFO that should have achieved a 7% return over the decade with plenty of diversification and only moderate risk to principal. But how on earth can anyone crank out that kind of decade-long return and still consider themselves a financial genius? Your child would have gone from third grade to their first year of college over that time. ... And you'd have earned just $151.02 to help pay their first year's expenses?
I understand he's selling safety and peace of mind. That's very appealing. But if that's all you want for your investments, a good TIPS fund or GNMA fund will provide much more of that at less expense - and without all the accompanying verbage.
Reply to @hank: There's not much else, but I think
1:) I still cannot comprehend Hussman's strategy. I'm Hussman: I'm bearish, don't like valuations, think the market is going down, but: I have a ton of names long, some of which do not reflect my own sentiment. I pair that with an options strategy to hedge that is complex and possibly prone to error. Additionally, if Hussman is fully hedged, either the options strategy is not working very well or his long picks aren't (or a bit o' both.) If Hussman feels as he does, I don't get why he doesn't go heavily to cash, defensive names and, if needed, some light hedges on indexes.
If one is that bearish, what would make sense to me, at least - is simplification. If you think there's going to be deflation and assets are going down, simplification of exposure and strategy only makes sense. Would probably be more cost effective as well, I'd think?
I continue to wonder if the next crisis is going to be one where you WANT to be holding assets (opposite of the last one), but clearly Hussman doesn't believe that to be the case.
Either way, I think people have to hold assets for some time to come. There will be inflation and it may not be higher prices, but quality. Years ago, if you bought a pair of pants or shirt, you expected it to last and it did. Now if you buy something for a similar price at an Old Navy or any sort of broad retailer, the quality often sucks. Or "Less toilet paper, now stronger!"
2.) This is not like someone making an asymmetric bet where it sucks and it sucks and the shareholders are screaming (although maybe they are in this case) but if it pays off, it pays off big (bet against housing, for example, in 2008.) If the market tanks, there is no guarantee Hussman will do well in a down market, either, with the strategy as is.
3.) Um, Merger (MERFX) has done better than HSGFX now over 1,3,5,10 (and with less risk and volatility.)
Lastly, Marketfield is a fund that makes some very specific sector/macro bets. In one of the letters to shareholders earlier this year, after discussing some of the bets (such as against EM), the letter more or less noted that "If we are wrong, we will not be stubborn." I don't think Hussman is unintelligent, but I do think that he clearly appears to be stubborn.
Reply to @scott: Thanks for your insights into his specific weightings. I'm afraid I long ago ceased paying attention to anything he says. Since he is very smart, I can only guess he's encumbered by some rigid preconceived notions about macro economics. But - really don't know.
Another thing --- What's the underlying size, scope, & quality of his in-house research? He's playing with a lot of big fish out there.
Reply to @VintageFreak: VF, you do have a unique approach to investing
Couple comments:
I can agree with getting a bigger short-term bang on your investments based on when you invest with a fund - timing. But I know, at least I can't forecast that over the long haul. BUT, you can forecast or weed out good and bad fund management teams by their return versus risk performance history. Past prformance, yes, but what else is there. Most people wouldn't invest in a manager who's history for investing has been poor, no, extraordinarily poor over such a long time, even if one thought this might be the time for him to turn things around. You implied you bought HSGFX as a "forever hold" fund. Why? History says Hussman wasn't a very good option or at least there are better options for tactical or alternative funds. Maybe, just maybe a short term bet on a big market pullback - but a fund forever?
"...WHEN you buy something being incredibly more important than WHAT you buy."
When is only more important in the short term. The FAIRX example you gave is probably a perfect comparison for investing in a good manager if you intend to "forever hold" rather than the "when you invest" being the more important criteria. Berkowitz had a horrible 2011 by all standards. But 2 years later the fund is again at it's highs. So the answer to whether those that "timed" FAIRX well should sell now? I think - of course not. Berkowitz has proven to be a very good money manager so stick with him 'till he's not (or if you no longer are comfortable with the highly focused approach). If Berkowitz pulls a "Hussman" and has 10 years of sub par returns I would change my mind.
Anyway, a 100% transfer from HSGFX into a better managed, better performing neutral, long/short, alternative or conservative vehicle may be something to think about now versus later. Of course, this opinion comes with a warning: listeneing to me could be hazardous to your investment health
Reply to @MikeM: "Of course, this opinion comes with a warning: listeneing to me could be hazardous to your investment health " ... LOL - The warning goes double for me. More importantly, only VF (or a similar investor) can make the final call. It's their hard earned cash. They pay the price if something goes south. Not the advice-givers. For that reason, I try hard not to give advice - but it's hard. ... BTW Mike, I've always found your advice right on-target. Regards
Reply to @Investor: Yes, but his unhedged portfolio is returning MORE than the market and you would expect his excess hedging cost to be offset by it. I did allow for 2% -ve return. 7% -ve I cannot explain.
Reply to @Investor: Yeah, that goes along with what I was saying above - if you're that negative, why not run a simplified portfolio (cash, defensives and maybe some light hedging) and that would be less prone to error than a complex (and as you note, costly) options hedging strategy. The whole thing seems inefficient.
Last I looked, the fund was hedged for the full value of the long holdings (it's been a while, that may certainly have changed.) If that is still the case, either the options strategy is not working, the long holdings are not outperforming or some combination of both.
I'm not bashing the fund or Hussman - I'm just genuinely curious what the reasoning for his approach is. If he had an email on the website (if there is I'm not finding it) I'd write him and ask - politely, as I'm genuinely curious. Maybe I'd learn something.
Reply to @hank: Thanks Hank. I remember it took you a while to give up on HSGFX too... but I bet you are glad you did. We all try and hang on to our convictions. Heck, I still own ARIVX
Reply to @scott: You are right scott. Rational people would do that...
The issue is being stubbornness, his "I know this and everyone else is wrong attitude" which is apparent from his writings is costing his investors dearly .
He will be right at some point eventually but will he be able to redeem all the losses then? I don't think so. Since stock market has a long term positive up-ramp, perma-bulls are more likely to recover from losses than perma-bears.
I am very glad that I have never invested in his funds. He is not worth a penny.
Reply to @scott: Added a tad Monday. No you're NOT nuts. On the other issue, should you succeed in getting a letter or email off to Hussman, kindly share the contents. I suspect any response he might send back would be so full of his analytical gibbligook as to be of dubious value. Always appreciate your thoughtful comments on this and a variety of other topics Scott. Thanks
I'm looking for an email, but not finding it. Still looking though. Again, I'd be polite, but I'm genuinely curious why - given his views - his approach wouldn't be more like, say Forester Value in 2008?
"Always appreciate your thoughtful comments on this and a variety of other topics Scott."
You are making a fundamental error in equating a smart, high IQ to a successful investor. Once an average IQ threshold has been penetrated, an investor is in a comfortable investment zone. There is some evidence that having an extra high IQ can do damage.
Even if John Hussman is the smartest person in the room, it is not necessarily likely that he will be the most successful investor. The first attribute simply does not automatically translate into the second outcome. Successful investing depends on multiple attributes that include intelligent money management skills. I suspect that common sense street smarts swamps high IQ smarts when making investment decisions. Here’s some evidence using the IQ dimension.
Super smart guys have been making lousy investment decisions throughout history. Sir Isaac Newton is a notorious example. He lost a fortune investing in the tragic 1720 South Sea Bubble.
Albert Einstein was certainly a brilliant scientist. He also was a social rebel. He made some very bad investments throughout his lifetime. He lost much of his Noble prize money in the 1929 stock market crash. High IQ alone does not guarantee success in the investment world.
One of the qualifications to be a member of the illustrious Mensa cohort is that your IQ must be in the top 2 % of the entire population. Long term investment studies of this elite group have discovered that these fortunate folks have significantly underperformed average investors who, by the way, typically underperform simple Indices. Apparently, the Mensa members sky-high IQs operate as a hindrance instead of an asset when making investment choices.
Why is that the case? Perhaps these smart folks over-think or are too nuanced when making their decisions.
Allow me to speculate that the smartest investing might well be the simplest investing. An army of ultra-smart people would reject that hypothesis immediately, especially those who concentrate on individual stock picking. The data suggests that these smart folks are often wrong.
On the positive side of that same coin, according to recent academic studies, moderately above average IQ individuals do seem to be more judicious and more profitable in stock selections over their low-IQ brethren. Also, they are more likely to resist wealth destroying herding pressures.
There appears to be an intermediate IQ happy hunting ground for the slightly well endowed IQ class of investors. This class is best characterized by possessing above average IQ, but not in the upper rarified stratosphere of IQ. A final resolution remains hidden in the future since study findings are a little choppy and somewhat provocative.
Just consider for how long financial institutions like CALpers used active sleeve management to achieve their long-term goals. As MFOer Ted recently posted, that agency is reevaluating their policy. They are now trending towards a more passively managed percentage for their massive portfolio. CALpers is learning the marketplace’s lessons slowly. Their decision is likely to be a watershed marker since other retirement institutions may well adopt a follow the leader approach.
I would guesstimate that most MFO participants are in the happy hunting grounds territory from an IQ measurement. I doubt John Hussman is in the Mensa range. Regardless, successful investing is more likely determined by reliable common sense and sound money management policies than by an exceptional IQ rating.
Being a committed slave to a set policy could compromise common sense and money handling acumen. There's an obvious lesson here too.
Comments
http://brooklyninvestor.blogspot.com/
Beyond that, I really do not get Hussman's approach whatsoever - if you're that upset about valuations, why not sell the longs like Urban Outfitters (the top long holding of HSGFX; I do not understand how one can be that bearish and have the largest holding in something that discretionary) and go to some defensives and light hedges rather than having a huge set of longs (some of which are, again, just bizarre for someone so negative) and being fully hedged via options.
Strange. No email on the Hussman website or I'd write him.
Excerpted from http://www.oaktreecapital.com/MemoTree/The Role of Confidence_08_05_13.pdf
A word about the long run: While conditions, confidence and asset prices all seem
moderate today, meaning there's
’nothing brilliant to say about the short-term outlook, the
long term remains worrisome.
Because the U.S. is still able to attract capital from abroad and
print money, our financial problems aren't pressing
at the moment. But the combination of
intractable deficit spending, unsustainable entitlement promises and a total dearth of responsible
action in Washington certainly raises alarms regarding the future
If the economy continues to recover and the Fed's
bond buying eases off, interest rates are likely to go
further on the upside. But given the modest level of confidence at play, the markets should
not turn out to be perilous. Most assets are neither dangerously elevated (with the possible
exception of long-term Treasury bonds
and high grades) nor compellingly cheap.
It's easier to
know what to do at the extremes than it is in the middle ground, where I believe we are
today. As I wrote in my book, when there's nothing
clever to do, the mistake lies in trying
to be clever. Today it seems the best we can do is invest prudently in the coming months,
avoiding
aggressiveness and remembering to apply caution.
No, not an investing genius, but a marketing genius.
In spite of terrible long term investing results, he still has several billion in assets under management. It goes to show how much inertia there is in most investors. Reminds me of some mutual funds that went on year after year with super high management fees because most of the remaining shareholders had either died or forgot about their account due to senility.
The one problem with Hussman is that his unhedged portfolio has done better than S&P 500, but while he claims to be never net short, somehow he has managed to lose a lot of money. Hedges don't work perfectly, and given unhedged outperformance and margin of error, you would expect him to be down 2% YTD, not 7%.
Me thinks he has one more year, or he will get "Millered". Hopefully that does not happen since I DCA into HSGFX.
Edit: Not being facetious, just curious what I am missing.
By the following Monday, Bear Stearns had been sold to J.P. Morgan for $2 a share.
----------------
I agree with the discussion above that at some point, if the market is not going your way, you have to reevaluate, which Hussman refuses to do. What's remarkable is that Hussman appears to take so much into account in terms of research and discusses QE but doesn't seem to have ever come to the conclusion that QE = asset prices up.
"Millered" is a word I hope to get credited for when it finally gets into the dictionary. We make celebrities of managers, then we bring them down. Then, as you were indicating, over a period of years, we forget, and we start drooling over them, again.
Again, Hussman's problem is not that his thesis is "wrong". The problem - which is excacerbated by M* classifying his fund as L/S - is he makes it a point to state his fund is never net short. If your unhedged portfolio is doing better than the market, and then you hedge it, the expectation is that your fund will return 0%, not a -ve%. That's why I said investors have been incredibly patient with him. Remember, Yacktman and the old OAKMX manager? In the bubble years they didn't have investors' patience. I think maybe people are thinking "this time it is different" with Hussman. Time will tell if they are right.
Finally, you are not missing anything regarding Hussman performance. It sucks. I'm not giving up yet, but I admit I'm re-evaluating whether it is a "forever hold" fund for me. I've opined ad nauseum regarding WHEN you buy something being incredibly more important than WHAT you buy. Otherwise known as market timing, which is supposed to be bad, Bad, BAD, except when M* wants to publish article lamenting investors doing worse than their funds. The real issue right now, is those sticking with Hussman may almost be thinking HSGFX is an "inverse" fund. If market tanks 20%, they will expect HSGFX to go up 20%. And IF that happens, and when HSGFX goes up only 2%, THEN I think you will see investor exodus. Some people time it right. Some people don't. I haven't timed it right with HSGFX. I did with FAIRX. There are those who didn't sell HSGFX in 2008. Should people who timed FAIRX right sell NOW? How will you ever know?
I don't think Hussman is a genius. I know a lot of PhDs who are not. He has of course failed, but so have so many managers. Maybe assets in HSGFX are "old money" for most part, i.e. those that bought in really, really early, and which is why that money still sticks. WHEN vs WHY. THAT is all it is about. People need to stop wondering why his fund still has $1.8 B. People who buy a fund based on short term performance will bail quickly (LMVTX). People who did for other reasons hold on for longer than they should (HSGFX). People like me sometimes look at a fund manager who sends 60% of his profits to charity, and buy his fund. If at all we want to compare Hussman with Miller, THAT is it for me. Miller bought $70M (or was it $700M) yacht. I would never invest with him.
I'm not saying Miller's performance is as bad as Hussman's or even comparing the two, but it's also an apples-and-oranges comparison in some ways.
It's also interestingly opposite in others - perma-bull runs into an iceberg and doesn't help shareholders by remaining perma-bullish the whole time. Perma-bearish investor largely avoids said iceberg, but then doesn't help shareholders by believing the next iceberg is around the corner.
I'll add more to this later.
There are many widely differing approaches on display at MFO that should have achieved a 7% return over the decade with plenty of diversification and only moderate risk to principal. But how on earth can anyone crank out that kind of decade-long return and still consider themselves a financial genius? Your child would have gone from third grade to their first year of college over that time. ... And you'd have earned just $151.02 to help pay their first year's expenses?
I understand he's selling safety and peace of mind. That's very appealing. But if that's all you want for your investments, a good TIPS fund or GNMA fund will provide much more of that at less expense - and without all the accompanying verbage.
1:) I still cannot comprehend Hussman's strategy. I'm Hussman: I'm bearish, don't like valuations, think the market is going down, but: I have a ton of names long, some of which do not reflect my own sentiment. I pair that with an options strategy to hedge that is complex and possibly prone to error. Additionally, if Hussman is fully hedged, either the options strategy is not working very well or his long picks aren't (or a bit o' both.) If Hussman feels as he does, I don't get why he doesn't go heavily to cash, defensive names and, if needed, some light hedges on indexes.
If one is that bearish, what would make sense to me, at least - is simplification. If you think there's going to be deflation and assets are going down, simplification of exposure and strategy only makes sense. Would probably be more cost effective as well, I'd think?
I continue to wonder if the next crisis is going to be one where you WANT to be holding assets (opposite of the last one), but clearly Hussman doesn't believe that to be the case.
Either way, I think people have to hold assets for some time to come. There will be inflation and it may not be higher prices, but quality. Years ago, if you bought a pair of pants or shirt, you expected it to last and it did. Now if you buy something for a similar price at an Old Navy or any sort of broad retailer, the quality often sucks. Or "Less toilet paper, now stronger!"
Fewer buttons, lower thread count? Retailers skimp to boost profits:
http://www.cnbc.com/id/101055392
2.) This is not like someone making an asymmetric bet where it sucks and it sucks and the shareholders are screaming (although maybe they are in this case) but if it pays off, it pays off big (bet against housing, for example, in 2008.) If the market tanks, there is no guarantee Hussman will do well in a down market, either, with the strategy as is.
3.) Um, Merger (MERFX) has done better than HSGFX now over 1,3,5,10 (and with less risk and volatility.)
Lastly, Marketfield is a fund that makes some very specific sector/macro bets. In one of the letters to shareholders earlier this year, after discussing some of the bets (such as against EM), the letter more or less noted that "If we are wrong, we will not be stubborn." I don't think Hussman is unintelligent, but I do think that he clearly appears to be stubborn.
Another thing --- What's the underlying size, scope, & quality of his in-house research? He's playing with a lot of big fish out there.
Couple comments:
I can agree with getting a bigger short-term bang on your investments based on when you invest with a fund - timing. But I know, at least I can't forecast that over the long haul. BUT, you can forecast or weed out good and bad fund management teams by their return versus risk performance history. Past prformance, yes, but what else is there. Most people wouldn't invest in a manager who's history for investing has been poor, no, extraordinarily poor over such a long time, even if one thought this might be the time for him to turn things around. You implied you bought HSGFX as a "forever hold" fund. Why? History says Hussman wasn't a very good option or at least there are better options for tactical or alternative funds. Maybe, just maybe a short term bet on a big market pullback - but a fund forever?
"...WHEN you buy something being incredibly more important than WHAT you buy."
When is only more important in the short term. The FAIRX example you gave is probably a perfect comparison for investing in a good manager if you intend to "forever hold" rather than the "when you invest" being the more important criteria. Berkowitz had a horrible 2011 by all standards. But 2 years later the fund is again at it's highs. So the answer to whether those that "timed" FAIRX well should sell now? I think - of course not. Berkowitz has proven to be a very good money manager so stick with him 'till he's not (or if you no longer are comfortable with the highly focused approach). If Berkowitz pulls a "Hussman" and has 10 years of sub par returns I would change my mind.
Anyway, a 100% transfer from HSGFX into a better managed, better performing neutral, long/short, alternative or conservative vehicle may be something to think about now versus later. Of course, this opinion comes with a warning: listeneing to me could be hazardous to your investment health
Last I looked, the fund was hedged for the full value of the long holdings (it's been a while, that may certainly have changed.) If that is still the case, either the options strategy is not working, the long holdings are not outperforming or some combination of both.
I'm not bashing the fund or Hussman - I'm just genuinely curious what the reasoning for his approach is. If he had an email on the website (if there is I'm not finding it) I'd write him and ask - politely, as I'm genuinely curious. Maybe I'd learn something.
The issue is being stubbornness, his "I know this and everyone else is wrong attitude" which is apparent from his writings is costing his investors dearly .
He will be right at some point eventually but will he be able to redeem all the losses then? I don't think so. Since stock market has a long term positive up-ramp, perma-bulls are more likely to recover from losses than perma-bears.
I am very glad that I have never invested in his funds. He is not worth a penny.
https://twitter.com/hussmanjp
I'm looking for an email, but not finding it. Still looking though. Again, I'd be polite, but I'm genuinely curious why - given his views - his approach wouldn't be more like, say Forester Value in 2008?
"Always appreciate your thoughtful comments on this and a variety of other topics Scott."
Thanks!
You are making a fundamental error in equating a smart, high IQ to a successful investor. Once an average IQ threshold has been penetrated, an investor is in a comfortable investment zone. There is some evidence that having an extra high IQ can do damage.
Even if John Hussman is the smartest person in the room, it is not necessarily likely that he will be the most successful investor. The first attribute simply does not automatically translate into the second outcome. Successful investing depends on multiple attributes that include intelligent money management skills. I suspect that common sense street smarts swamps high IQ smarts when making investment decisions. Here’s some evidence using the IQ dimension.
Super smart guys have been making lousy investment decisions throughout history. Sir Isaac Newton is a notorious example. He lost a fortune investing in the tragic 1720 South Sea Bubble.
Albert Einstein was certainly a brilliant scientist. He also was a social rebel. He made some very bad investments throughout his lifetime. He lost much of his Noble prize money in the 1929 stock market crash. High IQ alone does not guarantee success in the investment world.
One of the qualifications to be a member of the illustrious Mensa cohort is that your IQ must be in the top 2 % of the entire population. Long term investment studies of this elite group have discovered that these fortunate folks have significantly underperformed average investors who, by the way, typically underperform simple Indices. Apparently, the Mensa members sky-high IQs operate as a hindrance instead of an asset when making investment choices.
Why is that the case? Perhaps these smart folks over-think or are too nuanced when making their decisions.
Allow me to speculate that the smartest investing might well be the simplest investing. An army of ultra-smart people would reject that hypothesis immediately, especially those who concentrate on individual stock picking. The data suggests that these smart folks are often wrong.
On the positive side of that same coin, according to recent academic studies, moderately above average IQ individuals do seem to be more judicious and more profitable in stock selections over their low-IQ brethren. Also, they are more likely to resist wealth destroying herding pressures.
There appears to be an intermediate IQ happy hunting ground for the slightly well endowed IQ class of investors. This class is best characterized by possessing above average IQ, but not in the upper rarified stratosphere of IQ. A final resolution remains hidden in the future since study findings are a little choppy and somewhat provocative.
Just consider for how long financial institutions like CALpers used active sleeve management to achieve their long-term goals. As MFOer Ted recently posted, that agency is reevaluating their policy. They are now trending towards a more passively managed percentage for their massive portfolio. CALpers is learning the marketplace’s lessons slowly. Their decision is likely to be a watershed marker since other retirement institutions may well adopt a follow the leader approach.
I would guesstimate that most MFO participants are in the happy hunting grounds territory from an IQ measurement. I doubt John Hussman is in the Mensa range. Regardless, successful investing is more likely determined by reliable common sense and sound money management policies than by an exceptional IQ rating.
Being a committed slave to a set policy could compromise common sense and money handling acumen. There's an obvious lesson here too.
Best Wishes.