Sunday, January 2, 2011

This Week's Weekly Market Comment From Hussman

Hussman has posted his Weekly Market Comment. He comments on how his Fund had a slight loss, which

"resulted from our defense against an overvalued, overbought, overbullish, rising-yields condition and a runup in risk assets that was still unresolved as the year came to a close. While it was small from a long-term perspective, the decline felt excruciating in the final weeks of the year as stocks characterized by low-quality, low yield and high risk persistently outperformed those ranked higher in quality, yield and stability."
I concur wholeheartedly. His tone is very apologetic, and you can tell that he is really exasperated with the rally and the manic sentiment.

His bearishness is nothing to be apologizing for. In his fund, he has consistently created or preserved value for investors. If anything, he was not bearish enough during 2007-2008, basically treading water during a period when Credit Bubble Stocks was finding companies that were zeroes, like Bank United or Countrywide. [But, he vastly outperformed mainstream investors.]

Keep in mind that some of the managers who are most bullish now never sold their junk holdings, like New Century Financial or Downey Financial, even at the bitter end.

Recently, Hussman has climbed aboard my theory that the Treasury will not be able to "inflate its way out" of its very short maturity debt.


Taylor Conant said...


What do you attribute to Hussman's success, given that he isn't exactly an Austrian and seems to do a lot of "trend-following" by analyzing historical data and statistics?

What sets him apart from the mainstream crowd which he is largely a part of, paradigmatically?

CP said...

He is very disciplined. I think the vast majority of people, regardless of what they claim, just are not very disciplined.

Here's a test: how often are you in psychological pain from doing something that your strategy tells you to do, even though it is against the grain or currently not working?

I use some of the same methods he does, like looking at profit margins and sentiment data.

Put it this way: anyone bullish right now is betting against me, Hussman, Prechter, Hendry, and corporate insiders; and with Ken Fisher, Bill Miller, and retail investors! Does that sound like a good idea?

Taylor Conant said...


Good points. I guess on top of that it's always comforting when someone with a different methodology than you arrives at the same "answer" or solution to the given problem.

CP said...

Absolutely. That indicates a level of "robustness" to what you are doing.

It's almost as good when someone with a methodology you dislike (or no methodology! just madness) arrives at a different "answer" or solution to the given problem.