Quote of the Day

Today’s quote of the day comes to us via John Hussman:

"If the parents or the children of Wall Street
analysts were to ask for wise investment advice, would the first
thought of these analysts really be to encourage stock purchases at a
multi-year market high, in a long-uncorrected and strenuously
overbought advance, at a multiple of over 18 times earnings on
unusually wide profit margins, with wages and unit labor costs rising
faster than inflation, while interest rates are rising, bullish
sentiment is unusually high, and corporate insiders are selling
heavily? Would the potential for further gains in that environment
exceed next inevitable correction by an amount that would make the net
gains worth the risk? Would they encourage using trend-following
systems in an overbought market, even though a decline to simple moving
averages already implies substantial losses?"

’nuff said.

UPDATE Februray 16, 2007 12:36

As per a request made in comments, here is John Hussman’s track record for his Hussman Strategic Growth fund (found via Welling@Weedon)


Not too shabby . . .


It’s All Fun and Games Until Someone Gets Hurt
John P. Hussman, Ph.D.
February 5, 2007

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What's been said:

Discussions found on the web:
  1. brion commented on Feb 16

    Would they?

  2. Garuda commented on Feb 16

    Barry, would you be kind enough to post Dr. Hussman’s 5-year and 1-year investment records?

  3. worth commented on Feb 16

    Probably depends on if it would get them a bigger bonus or not. And with the hours they work, would they even recognize that it’s their own kid asking them for the advice? I’ve never been a Wall St. analyst, and I’m sure they are quite intelligent and knowledgeable in their subject matter, but I always get the feeling that they know something I don’t (obviously) and are purposely redirecting the outside masses (as opposed to the insiders who pay the salaries and bonuses) so that the real money hoarders are never left holding the bag at the end of the run. Which we are very near, if you ask me.

  4. Ollie commented on Feb 16

    My advice would be to sell now before it’s too late! You really should slash and burn your equity portfolio, because “the market” is probably going to crash soon. I recommend indiscriminate selling, like we saw in 1987.
    It’s not too late to buy a balanced portfolio of TIPs, gold, gold miners, gold ETFs, oil futures, and don’t forget STRIPs (zero-coupons). This way you will be protected from the rapidly approaching inflationary depression. You’ll also be fully hedged against a deflationary growth boom.
    Aggressive investors may wish to rip out and sell the copper from their worthless homes; use the proceeds to buy a little more gold, or perhaps bottled water and canned goods. The end is nigh!

  5. Bruce commented on Feb 16

    I am not an expert so I may be missing something, but if you check the record of the Hussman funds, they don’t seem to be doing very well.

  6. Rusty commented on Feb 16

    There’s been increasing chatter on the mainstream financial pages of Yahoo and others about the signals that Distribution Days provide. There were two last week, one on Jan 25th, and a close call on Jan. 18th. Supposedly a group of 4-6 of these over a couple-three weeks is supposed to indicate that big money is leaving the market. Barry, is this something you could chime in on in a future post?

  7. Bob A commented on Feb 16

    Interesting comments. It’s different this time isn’t it folks.

  8. Mike M commented on Feb 16

    The Hussman Strategic Growth fund: 5 year 8.81%, since inception 7/2000 12.14% (actually made money in the bear market). One year period 2.01%. This should tell you all you need to know about the last year=junk is king or the last leg of a bear market.

    Hussman manages as well as anyone.

  9. Mike M commented on Feb 16

    correction=last leg of a bull market

  10. alexd commented on Feb 16

    I believe James Cramer said “There is always a bull market somewhere”. Yes things absoloutly can sneak up on us out of the blue, but I do not recall chicken little being a great investor.

    Watch the things that are showing strength and watch the things that have cratered.

    Right to my right on this page is the book by Ken Fisher (which you should order via this webpage!) He suggests we ask ourselves “What is my brain doing to blindside me?” and “What do I know that other people do not?”

    The danger is when the man on the street starts telling you that you cannot loose money in ……. fill in the blanks. This is usually the last guy to the party. Make sure you are not that guy!

    I recall a story that senior Rockefeller right before the stock market crash, that preceded the great depression getting a stock tip from the person who was shining his shoes. Then he went to his office and sold all his positions. I should be so smart and observant!

    How many of us bought Chrysler bonds when they were near bankruptcy? Somebody did and they laughed all the way to the bank. What disipline did they apply to their decision to buy?

    If any of you did that I bow and say” I am not worthy!”

  11. jmf commented on Feb 16


    i think hussman performance will look much much better in the future.. when you invest with hussman you know what you get.

    here is another quote (related to private equity )

    As the manager of a traditional fund puts it:

    “I fail to understand why it’s a good idea for clients to take money away from me and give it to private-equity groups who charge higher fees for buying quoted shares at a 20% premium.

  12. Ross commented on Feb 16

    As an aside, there ain’t no inflation!!! My Marlboros are up 40% since January and my Becks dark are up 20% a six pack. Two VERY important food groups, for me anyway. We are changing our name from Texas to Taxes. I went to GO FIGURE but there’s a tax on it.

  13. Barry Ritholtz commented on Feb 16

    I don’t understand why the Hussman bashers say his performance is bad — I’d say 2X the SPX is pretty damned good . . .

  14. LAWMAN commented on Feb 16

    Hussman…who has correctly pegged 11 of the last 3 recessions…and for that performance, he only charges an annual fee of 1.12%.

  15. Bill a.k.a. NO DooDahs! commented on Feb 16

    From May 2006 intraday to June 2006 intraday low was -8.1% in the S&P 500. The May high was not exceeded until September 2006, over four months later. Is –8.1% from high to low and four months to make a new high a “correction” or not? I’d say that was a correction, and the buying opportunity of the year.

    From Dec 15 2006 to Jan 30 2007 there was basically no gain in the S&P 500 index. Does a six-week consolidation period make an advance “strenuously overbought?” I’d say that was a healthy consolidation and another buying opportunity.

    Note that the drag on Hussy’s performance since 2003, oddly enough, the beginning of the bull market we’re now in, has been the result of his buying puts on the indices. His “wrong-way” bearish stance on the general market has cost him and his clients money for four years.

    Hussy’s a good stock-picker. If he’d either ignore the general market direction, or learn to discern it accurately, his performance would be even better than it already is.

  16. Max commented on Feb 16

    Indians would hunt buffalo by driving them over a cliff. To that thundering herd of buffalo, everything looked just fine until it didn’t.

  17. Jdamon commented on Feb 16


    I enjoy your rationale and factual posts about what is really going on in the market. Being too positive or too negative is not what I am looking for in a Financial Advisor. I want it straight down the middle.

    Hussmann is also a perma-bear. He may be smart (lot’s of bears are), but he has really missed a good four year period for stocks.

  18. BDG123 commented on Feb 16

    That’s quite a sentence to open up with. My kind of writing. There must be one hundred words in it.

    Please, don’t try to be rational Barry. I think you should just give in and start posting day trader hype. Give the crowd what they want.

    As far as Hussman’s returns, if anyone understood anything about investing or his fund’s objectives, you’d say his returns were quite impressive. It’s a hedged fund. It’s not a day trading, dart throwing, momentum chasing, gambler’s anonymous fund where you piss money into the wind. Those are sometimes good too. But, Hussman’s returns are pretty goddamn great returns for extremely minimal downside risk.

    But, of course, why would anyone care about risk? Isn’t investing all about water cooler talk, hot stock tips, momentum and picking the next Google regardless of valuations, macro events or any other forms of risk?

    For chrissakes take this post down!

  19. ARISTOTLE commented on Feb 16

    I like Hussman’s analysis and read it periodically at his website. He probably has pretty decent risk adjusted returns. OTOH he’s been bearish for a while and missed a pretty good move in the market over the past several years. A number of the timer’s have been bearish for a while and have been burned. BR, I bet your returns are significantly better than his over the last 5-6 years.

  20. Whammer commented on Feb 16

    BDG123, right on.

    People forget that the point of this investing stuff is to generate above-average risk-adjusted returns.

    Obviously, I’m an old fart.

    But, pissing in the wind can actually work. And all the wind-pissers take incredible joy in their death-defying returns.

    These things, too, will pass.

    I’ve got about $40K in Hussman funds, thinking I should start to step it up pretty dramatically……

  21. lurker commented on Feb 17

    I am quite impressed that Hussman can be so bearish, hedged, and keep his returns positive in a straight up market…he has not had a down year and that kind of compounding is impressive. I bet he does something silly like invest his own money in the fund. What a nut! He should just take big management fees and keep all his money in the bank or insured municipals. I will never forget reading about two famous mutual fund managers who took big positions in risky microcaps and let their fund bloat to enormous size and profitability (to them) and who straight up told the interviewer they had NO money of their own invested in their fund!!!!! Wow. And I am sure they are not alone in this. Caveat Emptor and make sure they eat their own cooking. Just one more reason why I like Warren Buffett so much.

  22. MarkM commented on Feb 19

    Why do so few understand the concept of risk-adjusted returns? Of fund styles, benchmarks and objectives? These people who want to counsel Husssman on “how to do it right” crack me up! Do they think Hussman is trying to S/T track or beat an index? Or that he cares one whit? Or that he is trying to forecast the economy as one poster intimated? Once they have “straightened out” Hussman, are they going to tell Grantham how to run his billions next? His 7 Year Asset Class Forecasts aren’t exactly wine and roses folks and I doubt anyone with him is going to dump his investments there because some blogger says he beat the SP500 the last two years.

  23. bsupnik commented on Apr 16

    I was going to ask if anyone had a long-term sharpe ratio for the Hussman growth fund, but I’m not sure how useful it is – volatiliy can be used as a measure of risk, but is it risk?

    Dr. Hussman’s returns are more even than a market index due to hedging, but I am not sure whether this really decreases risk or volatility. Do his proprietary analytics really allow him to remove equity market risk, in the way that having a T-bill removes equity market risk?

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