Long time Outside of the Box readers are familiar with John Hussman of the eponymous Hussman Funds. And once again he is my selection for this week's OTB.
This week he touches on several topics, all of which I find interesting. As he notes:
"We face two possible states of the world. One is a world in which our economic problems are largely solved, profits are on the mend, and things will soon be back to normal, except for a lot of unemployed people whose fate is, let's face it, of no concern to Wall Street. The other is a world that has enjoyed a brief intermission prior to a terrific second act in which an even larger share of credit losses will be taken, and in which the range of policy choices will be more restricted because we've already issued more government liabilities than a banana republic, and will steeply debase our currency if we do it again. It is not at all clear that the recent data have removed any uncertainty as to which world we are in."
Have a good week.
"Everything, including the market, is ultimately empty of a separate self. One market can only be understood and analyzed in the context of other markets and conditions. Supply and demand, in particular, should not be considered in isolation."
Long time Outside the Box readers are quite familiar with Dr. John Hussman, as he is a frequent choice for this column. But this week I think he has written one of his bests essays ever. He cleverly weaves in quotes from a Zen master who is his friend and gives us a very fresh look at market analysis. This is a thought piece and you should set aside some time to absorb the lessons. You will be well rewarded.
Dr. John Hussman is president of Hussman Investment Trust. You can find out more about the mutual funds he is involved with at http://www.hussmanfunds.com/.
And I recorded three sessions for Yahoo Tech Ticker in New York this morning. You can go to Yahoo and see them. All the best,
Your on the road again analyst,
This week I offer you two short pieces for your Outside the Box Reading Pleasure. The first is from my friends at GaveKal and is part of their daily letter. They address the real difference between those who think we will have a consumer led recovery (Keynesian) and those who think we will have a corporate profit led recovery (classical economics or Schumpeterian). This is actually a very important debate and distinction. I find that GaveKal pushes me to think almost more than any other group, as they constantly challenge my assumptions. (www.gavekal.com)
The second piece comes from Dr. John Hussman of Hussman Funds (www.hussmanfunds.com). He offers us some very insightful analysis on the potential for growth going forward, which goes along with what I have been writing: We are in for a longer period of below trend growth, which does not bode well for corporate profits in the long run. I think you will get a lot out of these two items.
This week we visit some very thoughtful analysis by an old friend of Outside the Box, Dr. John Hussman of the Hussman Funds (http://www.hussmanfunds.com/index.html). Is the new PPIP program and related activities likely to help or hurt the situation? Will this help keep banks for bankruptcy or will it push the FDIC into insolvency requiring massive tax payer cash. This week's Outside the Box is brief, but poignant.
This week we visit some very thoughtful analysis by an old friend of Outside the Box, Dr. John Hussman of the Hussman Funds (http://www.hussmanfunds.com/index.html). Is it 1932? Are we in a Depression? Where is the bottom? John gives us a very balanced view and actually offers some positive insight on the markets. There may be light ahead.
(Note: there is a chart from Ned Davis Research that is, as John notes, not to be distributed further. I did call Ned Davis Research and they graciously gave me permission to use it as well.) Have a great week, and enjoy some positive thoughts below.
This week in Outside the Box John Hussman of The Hussman Funds strives to shed light upon the tumultuous and perplexing state that is the stock market. Having metaphorically, as in the Greek tale, driven by curiosity, opened Pandora's Jar (Box) of financial fantasy and unleashed the evil that has come to pass in the guise of subprime, all that remained was hope. Hussman intertwines hope with caution as we venture into the new year.
The Fed is getting ready to auction of $40 billion in repos this week. The stock market acted is if this was a special gift stuffed into its Christmas stocking last week, rebounding after a serious drop in the market the day before. This week in Outside the Box, Dr. John Hussman tells us why the $40 billion is more smoke and mirrors than actual money. It seems they had $39 billion coming due this week anyway. And in a $12.7 trillion dollar banking system it may not make much difference.
This is not a long article, but it is important. You need to understand how the Fed works and when its actions make a difference. Hussman is very good at writing clear, easy-to-understand material on complex subjects.
Dr. Hussman is the president and principal shareholder of Hussman Econometrics Advisors, the investment advisory firm that manages the Hussman Funds. He is also the President of the Hussman Investment Trust. Prior to managing the Hussman Funds, Dr. Hussman was a professor of economics and international finance at the University of Michigan. He continues to write his "Weekly Market Comment" that provides both excellent insight and analysis into the current market climate. His web site is www.hussmanfunds.com.
I trust that you enjoy Hussman's research and find it to be valuable to thinking "outside the box."
Will the market rebound this week or continue last week's slide? Will the credit markets stop their turmoil? These are all questions that investors are confronted with by the financial press. In today's "Outside the Box," we will focus our attention on a well-thought out piece by John Hussman, Ph.D. John is the President of Hussman Investment Trust where he manages the Hussman Strategic Total Return Fund - HSTRX and the Hussman Strategic Growth Fund - HSGFX.
In his Weekly Market Comment, John addresses the recent market volatility and puts it in historical perspective, comparing it in duration to that of previous market cycles. We have currently gone almost 1200 days without a 10% correction, the second longest such period on record.
So, how does a money manager with these views cope in today's market? I keep John's comments about what he is doing in his fund so you can see what this highly regarded professional to hedge his bets. I think you will find what he is doing to be instructive.
While most investors continue to watch their streaming ticker for new record highs, we are patiently waiting for the raw data to form our investment decisions. I believe you find this commentary to be both valuable and "outside the box."
Today's "Outside the Box" will be a combination of 2 different writings. The 1st is an email that I received from Research Affiliates Chairman Rob Arnott in response to my letter last Friday, "Honey, I Created a Bubble." The 2nd is the latest article by the well-known fund manager, John Hussman. Upon reading both commentaries, I was struck by the similarity between the two. It behooves us to pay attention when two very intelligent gentlemen that both actively (and successfully!) manage billions of dollars are marching to the beat of the same drum.
For those of you who are unfamiliar with Rob and John, let me say that both have stellar credentials. Rob is Chairman of Research Affiliates where he manages a multi-billion fund for PIMCO. In addition, he is editor of the Financial Analysts Journal and creator of a new index fund concept. John is the President of Hussman Investment Trust where he manages the Hussman Strategic Total Return Fund - HSTRX and the Hussman Strategic Growth Fund - HSGFX.
In their commentaries below, both Rob and John take a look at what inflation and bond yields mean for the market. I strongly recommend that you read each piece thoroughly and hope that you will find them to be "outside the box."
Is this the week the Dow will break 12,000? Will we once again see $50 barrel oil? Are we in a Goldilocks economy? These are all questions that investors are confronted with by the financial press. In today's "Outside the Box," we will focus our attention on a well-thought piece by John Hussman, Ph.D. John is the President of Hussman Investment Trust where he manages the Hussman Strategic Total Return Fund - HSTRX and the Hussman Strategic Growth Fund - HSGFX.
In his Weekly Market Comment, John addresses the continued bull market run and compares it in duration to that of previous market cycles. We have currently gone 906 days without a 10% correction. John goes on to further explain the meaning behind this trend by discussing the level of P/E ratios and the climate for bond yields. One particular interesting part of his analysis is when he shows returns over a "full market cycle.
So, how does a money manager with these views cope in today's market? I keep John's comments about what he is doing in his fund so you can see what this highly regarded professional hedges his bets. I think you will find what he is doing to be instructive.
While most investors continue to watch their streaming ticker for new record highs, we are patiently waiting for the raw data to form our investment decisions. I believe you will find this commentary to be both valuable and "outside the box."
Today I am pleased to present to you a very thoughtful piece by John P. Hussman, Ph.D., President of Hussman Investment Trust. John manages the Hussman Strategic Total Return Fund - HSTRX and the Hussman Strategic Growth Fund - HSGFX, where his investment style is more that of a hedge fund than a traditional mutual fund because of his hedging tactics and absolute return philosophy. According to Morningstar, the Hussman Funds have been some of the better performing mutual funds over the past 5 years.
In his weekly market commentary, John explains why he thinks the markets are caught up in the trivial in the midst of a low stakes environment. He further goes on to discuss the current investment climate and its implications for the risk-averse investor. With the current bull market already past the median duration of past advances, I share some similar concerns with John regarding valuations in the marketplace (I touched on these concerns a couple weeks back in my article titled "Fingers of Instability," which can be viewed here).
I trust that you will enjoy this mentally stimulating piece and find it to be another valuable "Outside of the Box" contribution.