You probably made some money from the ads in your site. Multiply that by 2000x, every single day. Its well known that media/information sites do better in bear markets(CNBC ratings soared in 2008). He WANTS things to be bad so he can make more money off the ads, he will even lie and mislead others if he has to. Dude has no integrity(no surprise given his history)
You are using an out of date browser. It may not display this or other websites correctly.
You should upgrade or use an alternative browser.
You should upgrade or use an alternative browser.
Global Macro Trading Journal
- Thread starter Daal
- Start date
You probably made some money from the ads in your site. Multiply that by 2000x, every single day. Its well known that media/information sites do better in bear markets(CNBC ratings soared in 2008). He WANTS things to be bad so he can make more money off the ads, he will even lie and mislead others if he has to. Dude has no integrity(no surprise given his history)
I disagree that a mutual fund like Hussman should be benchmarked against a stock/bond portfolio. I find this suggestion bizzare given all the regulations in terms of what he can do are(If he was a hedge fund it would be a different story)
Plus his bond fund has also beat its benchmark(7% compounded since inception)
So he beat BOTH benchmarks in terms of stock picking and bond picking
Plus his bond fund has also beat its benchmark(7% compounded since inception)
So he beat BOTH benchmarks in terms of stock picking and bond picking
Quote from Ghost of Cutten:
Yes, I am aware that stocks can fall or rise despite valuation. That is why I mentioned the price action, and why market action is always a critical component (basically, THE most important component) of any trading analysis. And if we take a look at what the market action is - it's bullish. Higher highs and higher lows. A clear breakout beyond the prior trading range from the autumn jitters. Small short-lived pullbacks that are quickly recovered from. That is how price acts in bull markets. It is a bear case when stocks are cheap but trade like crap - it is not a bear case when stocks are cheap and trade like a bull market!
The only real potential bear point is that we are near the 2011 highs (1370) after a large run, and have not yet broken through decisively. For that reason it's probably not a good idea to be maximum long right here, and some hedging with index futures or puts would be sensible until a clear breakout occurs. If the market momentum peters out, and/or breaks down significantly from current prices, then the technical picture would weaken. If a meaningful pullback is going to happen anytime soon, then here is pretty much the level it is likely to occur from - something like a move from 1375 back to the breakout level of 1290-1300, a 5-6% pullback, would be typical (and it would be a great buying opportunity at those prices). But IMO the risk isn't much more than that, at the moment there are no signs in the market action of any further problems other than a somewhat overbought condition.
I think you are rather too sanguine about the macro picture - in particular I view the market environment since 2000 as a secular bear implying a different skew of average outcomes than the 80s-90s bull. The evolution of valuations (Shiller PE) over the period supports this conclusion, as does the price action. Federal Reserve actions have clearly gone beyond the 'normal' easing/tightening cycles, etc.
Nevertheless from a short-term trading perspective I agree that the thing to do here is BTFD.
Quote from Ghost of Cutten:
But he is not a 100% long stock fund, nor is he a large cap manager, so comparing to the S&P (especially when the S&P had a decade long bear market) is not valid. His performance should be compared to a typical rebalancing diversified stock/bond fund (e.g. 60/40), with the stocks mixed between large cap and small cap, growth and value - and there he doesn't outperform. He has made less than 7% a year - that's worse than US Treasuries made over the same period.
Secondly, how can we attribute any of this performance to his ability to call recessions? So far he got 2000 right, 2007 right, 2010 wrong, and looks like he is getting 2011 wrong too - a 50% hit rate.
Finally, he has made no money for over 5 years! Almost all the outperformance over the S&P came from avoiding tech/big cap during the 2000-2003 bear market. Since then he has shown no alpha at all, under performing even the lame S&P results from 2004 on.
Hussman's performance shows he is clearly a perma-bear with no superior fund management ability. Turning 19k into 20k from 2004 to 2012 is appalling performance!
In the main Hussman's mistake was to badly underestimate both the effects of Fed intervention and the determination of the Fed to support stock prices.
Quite honestly it's hard to fault him for this; the post-2008 interventions are after all unprecedented. Every rally since 2009 has correlated with QE or some type of money-printing, significant declines in 2010 and 2011 began almost immediately once this support was withdrawn. Hussman was always straightforward about his investment methodology and what risks he would and would not take, anyone who wished to embrace risk during these periods (or indeed in early 09) could have moved their money elsewhere.
My main problem with Hussman is not actually that he missed the 2009 bottom, but rather that he lost a fair amount in 2008 despite predicting it, and has since been unable to find a way to avoid drawdowns during 'risk on' phases.
Quote from darkhorse:
This doesn't seem fair, given Hussman's unique emphasis on risk control (unique in the world of mutual funds at least).
A "typical rebalancing diversified stock/bond fund," for example, is in danger of being absolutely crushed in the event of a rising inflation, rising interest rate, falling profit margin environment -- a combination we could easily see at some point -- whereas Hussman's whole ethos is built around avoiding the kinds of severe declines that such "typical" funds can't.
Also, re, performance over 5 years: In comparing to other funds one has to take 2008 into account -- as again, one of Hussman's prime features is risk control. I mean who cares how, say, Bill Miller did post 2008, given what he did to clients in that period?
I'm not carrying any torch for Hussman, but your characterizations seem straw man. His products have a risk mitigation profile, valuable to some and certainly bearing less downside risk than the average fund, that line up with his macro view (which you obviously disagree with).
As a final note, one could also chastise many of the global macro greats (Jones, Kovner, Bacon etc) for turning in single digit performances these past few years. It's no small point that risk has been elevated by unprecedented intervention measures.
Sorry that's not exactly true - a diversified stocks/bonds portfolio will not get crushed in a high inflation environment, due to huge outperformance by the foreign stock portion as the local currency gets hit. Also, all you have to do is throw in 10-20% gold and you will actually perform very nicely in the scenario you described, albeit at cost of somewhat lower returns during low inflation periods. The salient fact is that a properly constructed passive ETF portfolio, without any hindsight benefit, totally crushed Hussman's performance (both total performance, and risk-adjusted) whilst not charging a 1% annual management fee. One can also easily postulate all kinds of scenarios where Hussman's relative performance is terrible (which it already has been for the better part of a decade) e.g. a decade like the 1980s or 1990s where stocks just keeping going up and Hussman stays fully hedged.
Since 2004 Hussman has under-performed cash. His biggest drawdown was about 13% from that graph. You would have done better on a risk-adjusted basis in T-bills or Notes, or something conservative like 30% stocks 30% T-Notes 30% TIPS 10% gold, or Harry Browne's Permanent Portfolio.
Look at his performance - 5 year negative return. Underperforming the S&P since 2004. Underperforming US treasuries since inception. And charging 1% per annum for the privilege. How does this prove his model is any good at forecasting recessions? If it was, he would have been up massively in 2007 and 2008, and would have loaded the boat in 2009, and both dips in 2010 and 2011. Fact is, his recession-predicting record is a coin flip, as shown by his track record of calls (2 out of 4) and his performance (3 good years then 8 years of nothing). Hussman is just another guy with a naive, unproven, simplistic quant theory of the markets which doesn't work. Check out Hulbert's Report on his performance if you think I am being biased.
Quote from Specterx:
In the main Hussman's mistake was to badly underestimate both the effects of Fed intervention and the determination of the Fed to support stock prices.
Quite honestly it's hard to fault him for this; the post-2008 interventions are after all unprecedented. Every rally since 2009 has correlated with QE or some type of money-printing, significant declines in 2010 and 2011 began almost immediately once this support was withdrawn. Hussman was always straightforward about his investment methodology and what risks he would and would not take, anyone who wished to embrace risk during these periods (or indeed in early 09) could have moved their money elsewhere.
My main problem with Hussman is not actually that he missed the 2009 bottom, but rather that he lost a fair amount in 2008 despite predicting it, and has since been unable to find a way to avoid drawdowns during 'risk on' phases.
Ok firstly this came from a contention that he has some kind of predictive model for recessions. There's no evidence of that at all, from his performance. So, case closed.
Second, his whole model is based on combining valuations with market climate. Thus even if he thinks valuations are poor, if the market climate is supportive then he should have on a decent amount of exposure. Yet in the bull market phases since 2004 he has had minimal exposure. So, either his market climate assessment doesn't work (highly likely), or it works and he doesn't use it.
If half his model doesn't work, then what are you paying for? His ability to judge valuations? Which led him to have on minimal exposure in late 2008 and early 2009 when there were corporate BONDS yielding 30% per annum, and numerous stocks selling below their net cash liquidation value? Please.
Hussman is at best average at valuing stocks, and has no demonstrable market timing ability. There's no evidence he is likely to outperform a passive indexed portfolio constructed to a similar risk profile. That is not worth 1% per annum in fees.
Quote from Ghost of Cutten:
Sorry that's not exactly true - a diversified stocks/bonds portfolio will not get crushed in a high inflation environment, due to huge outperformance by the foreign stock portion as the local currency gets hit. Also, all you have to do is throw in 10-20% gold and you will actually perform very nicely in the scenario you described, albeit at cost of somewhat lower returns during low inflation periods. The salient fact is that a properly constructed passive ETF portfolio, without any hindsight benefit, totally crushed Hussman's performance (both total performance, and risk-adjusted) whilst not charging a 1% annual management fee. One can also easily postulate all kinds of scenarios where Hussman's relative performance is terrible (which it already has been for the better part of a decade) e.g. a decade like the 1980s or 1990s where stocks just keeping going up and Hussman stays fully hedged.
Okay fair enough, though there are also a number of assumptions in there.
In a global stagflation environment -- imagine China decelerating to 5% growth, or even 0% if their infrastructure shenanigans are backed out, even as US interest rates rise -- there may be no foreign boltholes in which to hide, and gold stocks are hardly a blanket panacea (with question as to whether a "typical" fund would even be allowed to heavily overweight gold stocks or GLD).
Overall I'm happy to concede Hussman skews mediocre -- I'm just not convinced his stuff is worthless.
Quote from Ghost of Cutten:
Ok firstly this came from a contention that he has some kind of predictive model for recessions. There's no evidence of that at all, from his performance. So, case closed.
Second, his whole model is based on combining valuations with market climate. Thus even if he thinks valuations are poor, if the market climate is supportive then he should have on a decent amount of exposure. Yet in the bull market phases since 2004 he has had minimal exposure. So, either his market climate assessment doesn't work (highly likely), or it works and he doesn't use it.
If half his model doesn't work, then what are you paying for? His ability to judge valuations? Which led him to have on minimal exposure in late 2008 and early 2009 when there were corporate BONDS yielding 30% per annum, and numerous stocks selling below their net cash liquidation value? Please.
Hussman is at best average at valuing stocks, and has no demonstrable market timing ability. There's no evidence he is likely to outperform a passive indexed portfolio constructed to a similar risk profile. That is not worth 1% per annum in fees.
Indeed and this is why I don't invest in Hussman's stock fund, although I respect his analysis. You don't need to pay somebody 1% to tell you valuations suck, and I can almost certainly do better during the interim periods.
At the same time I find value in understanding why Hussman has underperformed. It tells us that the current market is a historical aberration, marked by speculative 'risk on' phases that are so far correlated entirely with historically-unprecedented Fed stimulus measures. It's important to accept this if one wants to realize gains during these periods (or at the very least avoid losses due to shorting, etc.), but the risk side of Hussman's analysis - that the gains during these phases will prove ephemeral - has so far been pretty spot on. His 'crash calls' have to my knowledge always panned out - they did so in 2000, 2007, 2010 and 2011.
Remains to be seen whether 2012 will turn out the same way, but note that not only have the CB money-supply expansion measures been temporarily halted with the last LTRO, S&P earnings also appear to be under pressure. Risk is high by my reckoning.