Fund Manager Hussman Stands By His “Permabear” Strategy

The mission of the Hussman Strategic Growth Fund is to “outperform the broad stock market over complete market cycles…but seeks to limit its downside risk using derivatives, such as options on broad market indexes,” according to a recent article in The Wall Street Journal. John Hussman, manager of the fund, was successful in insulating investors to some degree earlier in the 2000s, the article says, “but it hasn’t helped through the long bull market.” Still, Hussman is standing his ground, notwithstanding recent lackluster performance and a corresponding investor exodus. Over the past fifteen years, says WSJ, the fund has declined […]

Hussman on High Plateaus and Poor Precedents

John P. Hussman of Hussman Funds examines permanently high plateaus in the market and their poor precedents in  a recent installment of Hussman Funds’ Weekly Market Comment. He predicts a market retreat over the completion of the current market cycle, and estimates small total returns  and possible negative real returns. However, Hussman has some good news. “The most favorable market return/risk profile we identify is associated with a material retreat in market valuations that is then joined by an early improvement in our measures of market action.” Hussman addresses the idea that low interest rates ensure permanently high plateaus, pointing out that the historical correlation between Treasury yields and […]

Why Hussman Remains Bearish

Fund manager John Hussman has remained one of the staunchest bears in the stock market. And in a recent presentation (a tip of the hat to Business Insider for posting the presentation), he lays out his case for why the economy and market are not in as good shape as many believe. Hussman says the Federal Reserve’s policies have created “an ocean of zero-interest monetary base” that “encourages a speculative reach for yield”. It has also created a deficit which must emerge somewhere else as a surplus (as per economic theory). And it has emerged, he says, in the corporate […]

Hussman: Don’t Believe the Valuation Numbers

Fund manager John Hussman remains quite bearish on the market, saying that stocks are showing signs of being in the “exhaustion” part of a bull market. “We presently have an overvalued, overbought (intermediate-term), overbullish market featuring a variety of syndromes that have typically appeared in the ‘exhaustion’ part of the market cycle: elevated valuation multiples on normalized earnings, emerging divergences in market internals, an increasingly tepid economic backdrop, market prices near the upper Bollinger bands at monthly and weekly resolutions, and other factors that — taken in aggregate — have historically been associated with very weak average market outcomes,” Hussman […]

Hussman Talks “Extreme Strains”, and Momentum Investing

Fund manager John Hussman says he sees “extreme strains” ahead that many investors are underestimating. In an excerpt from his most recent market commentary posted on Seeking Alpha, Hussman talks about how he missed some 2009 and 2010 upside “as we worked to make our approach robust to Depression-era outcomes”. Hussman says he thinks that will prove to be a good thing in the long run. “From a fiduciary perspective, I continue to believe that ensuring the ability to withstand extreme strains was necessary,” he says. “From a practical perspective, I continue to believe that the ability to withstand extreme […]

Hussman: Recession Is Here

Fund manager John Hussman, whose funds have struggled in recent years but have good long-term track records, says he thinks the economy has entered recession. “I noted two weeks ago that the leading evidence pointed to a further weakening in employment, with an abrupt dropoff in industrial production and new orders,” Hussman writes in his latest market commentary. He says there has been a “litany of awful figures” since then. “U.S. manufacturing new orders and export orders plunging from expansion to contraction, Eurozone new export orders plunging (only orders from Greece fell at a faster rate than those of Germany), […]

Hussman: Profit Margins Skewing Valuations

John Hussman, whose funds had strong long-term track records before getting hit hard the past few years, says those who contend stocks are cheap are way off base. “I can’t emphasize enough how badly standard P/E metrics are being distorted by record (but reliably cyclical) profit margins, which remain about 50-70% above historical norms,” Hussman writes in his latest market commentary. Hussman says valuations are actually more elevated than they were before the 2008 market plunge when margins are accounted for. Stocks are priced to return just 4.5% annually over the next decade, he says. Hussman also talks about why […]

Hussman: It’s An Awful Time To Invest

Last week, we noted how The Wall Street Journal’s Jason Zweig says that we’re in the best time ever for individual investors, thanks largely to the way fees have declined and the ease of obtaining information has increased over the years. This week, however, John Hussman argues that, in terms of the specifics of the current market conditions, it’s one of the worst times ever to invest. “This is not a runaway bull market,” Hussman, whose funds have solid long-term track records but have stumbled in recent years, writes in his latest market commentary. “Rather, it is a market that […]

Hussman: Short-Term Conditions “Hard-Negative”

Fund manager John Hussman says the current stock market condition “warrants unusual concern,” and is playing defense with his portfolio. “Based on a wide variety of evidence and its typical market implications over an ensemble of dozens of subsets of historical data, the expected return/risk profile of the stock market has shifted to hard-negative,” Hussman writes in his weekly market commentary. “This places us in a tightly defensive position.” Hussman says conditions could change rather quickly, but right now he sees “conditions that have often produced abrupt crash-like plunges. This combination of evidence includes elevated valuations, overbullish sentiment, market internals […]

Hussman: Recession Now “Virtually Certain”

Fund manager John Hussman says a new recession — and a Greek debt default — are now “virtually certain”. In his latest market commentary, Hussman says that the markets seem to be viewing the current situation as a replay of the 2010 correction, and are holding out hope that the Federal Reserve will launch another round of “monetary intervention”, as it did when growth slowed in 2010. That won’t help matters, however, he says. “While we have to allow for the possibility of a knee-jerk speculative response in the event of further Fed intervention, it is also much clearer now […]

Hussman: It’s Still a Secular Bear

Top fund manager John Hussman remains quite bearish on the broader market, saying that investors who try to ride the market’s recent momentum are getting close to “ensur[ing] themselves maximum damage”. “We’ve certainly made our own adaptations to improve our ability to ‘go with the flow’ with a greater frequency, even in markets that appear objectively overvalued from a long-term perspective,” Hussman, who has a strong long-term track record but has missed out on much of the current rally, writes in his latest market commentary. “Still, whatever constructive opportunities there might have been in 2009 and early 2010 are now […]

Broader Outlook Gloomy, but You Can Still Make Money, Hussman Says

Fund manager John Hussman says the broader market is priced to return significantly less than its historical average for the next decade — and says the government’s huge bailout of financial firms was not, as many believe, the reason the U.S. avoided a redux of the Great Depression. In his latest commentary, Hussman lists 12 “Things I Believe”. Among them: “Based on a variety of valuation methods that have a strong historical correlation with subsequent long-term market returns, we estimate that the S&P 500 is presently priced to achieve a total return averaging just 3.6% annually over the coming decade.” […]

Hussman on Why QE2 Misses the Point

Stocks have been on the rise recently, thanks in large part to speculation that the Federal Reserve will engage in more quantitative easing to spur the economy. But fund manager John Hussman says there’s just one problem with “QE2”: It addresses issues that aren’t actually the cause of the economy’s problems. In his latest market commentary, Hussman says further easing is presumably designed to lower long-term interest rates and drive real interest rates into negative territory, which would theoretically stimulate loan demand; and to increase the supply of reserves that banks could lend. But Hussman says the current problem isn’t […]

Economy Isn’t Out of Woods, Hussman Warns

While the National Bureau of Economic Research recently declared that the so-called Great Recession ended in June of 2009, John Hussman says that doesn’t mean the economic pain is over. In his latest market commentary for Hussman Funds, Hussman says that data cited by NBER itself shows that we may already be headed back into another recession. “If we had good reason to expect positive economic tailwinds, we would be less concerned about the present deterioration” in economic indicators, Hussman says. “Unfortunately, my impression is that the bulk of the growth that we did observe coming off of the June […]