From this week:
"Suffice it to say that we don’t approach our hedges as day-trading positions,"
That removes my corrosive doubt about his approach - there has to be some science behind how he varies his hedges. I have a suspicion that he is about to receive a colossal vindication.
Remember folks that you read it here on 8/2/14.
Only one thing works - search. You could add chasing cookies - but thats much smaller.
“long term investments to drive deeper member engagement as well as broaden our business through initiatives like Sales Navigator."
"engagement" is the new dotcom talk that means #$%$. And then of course there is the Gold Rush for mobile.
half from his picks outperforming and half from his puts.
he has probably stregthened his puts during they day - he and his long-suffering clients are due for a two-day rout.
I loathe the whole concept of Amazon (shipping onesies and twosies to the retail buyer instead of having the buyer drive to the local brick-and-mortar merchant - its so wasteful of packaging, gas, wear and tear etc.).
Ultimately there is going to be a massive backlash in favor of local stores with real salespersons who know the merchandize that would totally destroy AMZN in its present form.
But it doesn't matter - AMZN's bubble-valuation is meta-stable for now - it always makes up losses after earnings statements and I'm going long for quick scalping opportunities.
From last week:
"I expect the full range of investment opportunities from aggressive to defensive as the present cycle completes and those ahead unfold, even if the median valuation level of the market will be forever higher than in the past (which again, I don’t believe, but have no need to rule out either)."
Here he is conceding what he thinks the past is telling him may be out of the window. I believe he sees a long-run historical average growth rate of 6 pct in stocks - but that 6 pct is totally meaningless - given +100 pct in some years and -50 pct in others. The numbers he uses to judge over/undervaluation are both noise: Because "earnings" are nebulous, subject to accounting tricks and therefore current and historical P/E multiples are both noise and alleged meaningful relationships between them are an illusion.
I guess the sum total of all financial instruments cannot grow faster than the GDP over long periods of time - but the relative sizes of different sectors may change over time and perhaps publicly traded stocks are now a smaller segment of total risk investments and can sustain "bubble" valuations (just look at AMZN) far longer than they ever have.
For the past 4 years - week after week after week, he has been writing, "I don't forecast a drop THIS week, but am buying put options nevertheless". Like Lucy pulling the football away before Charlie Brown can kick it - the market has been reaming him week after week after week.
If the market is a random walk - it is indeed true that eventually P/E multiples will come down to his "norms" - at least for a while. Therefore if the market falls after 900 million years, thats no vindication of his theories.
How long will his intellectual honesty allow him to buy put options into a rising market and claim that all is well and what he is doing is the right thing?
You nailed it Floyd.
I remember him showing close to 10 pct delta (both positive and negative) with respect to the market on SINGLE DAYS after the 2008 crisis ended but before the "depression era" crud kicked in.
He totally froze up and curled up into foetal position (fully hedged) when he saw the whipsawing he took and the "depression era" was only a rationalizing afterthought.
Why am I still wiith HSGFX?
To me his put options are a lottery ticket - they may hit it big for reasons that have nothing to with his mumbojumbo.
Its really funny HOW MANY TIMES in the last four years the has trotted out charts that show how humpty-dumpty is about to fall - but there sits humpty getting fatter every day. He must have said a couple of hundred times the past four-five years that markets are "overbought,overbullish,with bad "internals" " - and apart from the occasional hiccup the market melt-up has been relentless.
Hussman uses past prices to predict future prices. Its a pure numbers game using ultimately meaningless entities like PE multiples and "overbought" markets and so forth. Numbers are fed into his model which then spits out more numbers that are the basis of his investment strategy. How did he come a cropper on his "fiduciay duty"? he fed depression era numbers into his model. There might have been 137 underlying variables that were different back then - but they mean nothing to Dr. H. His model said to hedge again and he did. Apparently he now has more tweaks in place to handle markets that keep zigging when his numbers are telling him they ought to zag. This wholly sollipsistic model "worked" till 2008 because evenst in the real world were not sufficiently disruptive to make his numbers totally useless.
The world is at a singularity now - renewable energy and robotics on an unimaginbly massive scale. EVERYTHING his numbers are telling him from the past is nonsense. There are unprecendented disruptions both positive and negative waiting to happen but I think the postive will win out within a few years. These "overbought" markets may stay "overbought" for another 15 years.
I was just reading the Nov 2013 prospectus - and the following "performance" is given without any comment whatsoever (i.e., the endless bleat he produces in the weekly commentaries) for the period ending dec 31, 2012:
one year five years 10 years
before taxes -12.62 % -4.01% 1.69 %
after taxes on distributions -12.80 % -4.49 % 1.08 %
after taxes on distributions -7.96 % -3.35 % 1.38 %
and sale of fund shares
S & P 16.00 % 1.66 % 7.10 %
I can't find ANY typical hand-wringing you would expect to see after such failure ("challenging environment", "unusual market behavior" etc. etc.).
He is now more than 5 pct behind the S&P from inception.
The market is like ballon filled with air in water - no matter howm much you push it down, it comes up. relentlessly.
He is either insane - pretending that his thesis is still intact - or is a huckster trying to keep the remaining faithful. None other than Jeremy Grantham is saying that the S& P iis headed for 2250 in two years - but H is a like a deer frozen in headlights and keeps trotting out the same #$%$ in his commentaries, not to speak of buying those put options like a zombie and getting his teeth kicked in every week..
Is he saying that being nakedly long the market is the only risky position?
Surely the evidence points to appalling risks attached to owning his fund.
He says that he cannot accept "market risk" at these valuations - but is blithely buying put options as if they do not entail risk.
The problem is that the market is largely owned by people with the intelligence of dentists - and what historical data shows is what dentists did in the past. Rocket scientists like Dr. H analyze the past behavior of dentists and project what they "ought to do" in the future based on rationality, except that they continue to be dentists under all circumstances. Especially now, with the "Yellen put option" they think they have been given for free - they can confound Dr. H indefinitely.
I wasn't counting HSTRX as an equity fund.
That and the unhedged performance of HSGFX are the bright spots in his investment history that have kept me from pulling the trigger. If he is reporting the unhedged performance truthfully, that would be an unprecedented phenomenon, considering the length of time over which he has outperformed "buy and hold".
From this week's comment:
"Despite the challenges of the recent half-cycle, we very much view HSGFX as a growth fund, albeit with a much greater ability to deviate from a passive investment stance than other funds."
What a Fricking WEASEL !!
Who cares if it deviates to the upside?
At any rate - he is behind a "passive investment stance" from inception and has around a 40 pct drawdown from his peak. I am astounded that everybody hasn't voted with their feet or that the board hasn't asked for his ouster.
And here he is more or less admitting "this time IS different"
"I’ll note again that our own challenges in the recent market cycle related first to my insistence on stress-testing against Depression era data even though we got the credit crisis quite right, and later, to the unusual persistence of extremely overvalued, overbought, overbullish conditions that have remained uncorrected longer than has historically been the case (see Setting the Record Straight and This Time is Different, Yet with the Same Ending for a review of that narrative, and the adaptations that resulted). It’s quite possible that these conditions will remain uncorrected even longer"
There it is. He has been betting black for the past 5 years and it keeps coming up red. History tells him that red has never come up this often in the past - except that it now has. And it can keep doing it - note that for him "black" means a pullback - it it keeps melting up by a few per-cent every year he would have "achieved" a 50 pct drawdown from the peak in 3-5 years..
He claims that his fund should gain the risk-free interest rate when he is fully hedged if his picks exactly match his hedges (risk free interest rate = long the security + short call + long put (finance 101)). The 5 pct annual drawdown in the past 5 years is due to completely unscientific varying of his put strike prices - equivalent to day/short-term trading with 1 pct of his fund.
Can he be sued?
His picks are not under-performing - and he says by charter he cannot be net short - surely he is day/swing trading with put options and getting is keister handed to him.
If he is violating the fund's charter - he belongs in jail.
"Can you predict which way the market is headed by looking at the average price/earnings level? Some investors think that you can--or at least, that you are likely to do well buying when the ratio is low and selling when it is high. I have evidence to the contrary. The P/E level is useless for market timing.
And all those charts that he produces regularly - showing 6 or 7 explanatory variables that unanimously show an "overbought" market - but if they all move together then there are no 6 or 7 indicators - there is only one.
This may be morbid - but is it possible that he'll commit suicide when he can't keep up the charade any more? NOT because he is a bad person but BECAUSE he thinks he is a good person.