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Hussman Strategic Growth Message Board

  • njswingtrader njswingtrader Jul 8, 2014 12:42 PM Flag

    Is there a Martngale Betting System buried in Dr. H's strategy?

    The Martingale betting system is very famous among gamblers and many variants have been devised. Almost all of them lead to ruin over the long run.

    Basically you keep betting the same thing after each loss and vary the amount of the bet (the most notorious strategy is to double the bet-size after each loss) based on any number fo strategies. the idea is that the law of large numbers would eventually catch up with you and enough wins would show up to make all your losses good as long as you stick with the same strategy throughout.

    Dr. H has been caught in a quasi-perma-bear stance in the face of a relentlessly rising market and he seems to be undergoing the front-end of a Martingale bettor. For all his acumen, his and his shareholders' fate now hangs on just how long this "irrational" market behavior can go on FOR WHICH HE HAS NO THEORY.

    At some point he must have realized HE CAN"T LOSE when his thesis is not being followed by the market - he must have devised a strategy not to lose more than any uderperformance by his picks against the broad market. If instead of a 33 plus pct drawdown from the peak he is even or down no more than 5 pct, he would have perfect credibility. The NAV trajectory is clearly alarming - 50-6-70 pct drawdowns are perfectly possible.

    The more the market goes up and the more he repeats himself whiel losing money, the more he sounds like Baghdad Bob.

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