John Hussman ( Hussman Funds)

[winston]

Hussman Sees “Abrupt Collapse” Coming for Dollar

In his latest market commentary, top fund manager John Hussman continues to express a bearish view, and says that more quantitative easing by the Federal Reserve is likely to trigger “an abrupt collapse in the foreign exchange value of the U.S. dollar”.

Hussman offers something of a primer on exchange rates, and concludes by saying this: “The policy of quantitative easing is likely to force a large adjustment on the U.S. dollar because the Federal Reserve is choosing to lay a heavier hand on the Treasury bond market than would result from economic conditions alone,” he says.

“The resulting shift in interest rates and long-term inflation prospects combine to dramatically reduce the attractiveness of the U.S. dollar. A significant and relatively abrupt devaluation is then required, in an amount sufficient to set up expectations of a U.S. dollar appreciation over time.”

As for the market, Hussman says he continues to see unfavorable valuations, unfavorable market action, and unfavorable economic pressures. The Fed’s new go at quantitative easing may well limit deflationary fears, he says, which has led him to increase exposure to precious metals and foreign currencies.

Hussman also says the U.S. should focus on restructuring debt, and offers his take on how it should do so.

http://theguruinvestor.com/2010/08/23/h ... or-dollar/

[winston]

Hussman: Current Market Is a Ponzi Scheme By: Julie Crawshaw

Economist John Hussman says the current market is a Ponzi scheme.

"To some extent, I view current market conditions as something of a 'Ponzi game' in that valuations appear neither sustainable nor likely to produce acceptably high long-term returns, and speculators increasingly rely on finding a greater fool," Hussman writes in a weekly note to investors.

“Undoubtedly, we have periodically missed returns due to our aversion to risks that rely on the ability to find a ‘greater fool’ in order to get out safely,” Hussman notes, but it is important to recognize that speculative risks aren't a source of durable long-term returns.

"As the mathematician John Allen Paulos has observed, "people generally worry only about what happens one or two steps ahead and anticipate being able to get out before a collapse... In countless situations people prepare exclusively for near-term outcomes and don't look very far ahead.

They myopically discount the future at an absurdly steep rate."

Meanwhile, Hussman says, “the U.S. financial system appears to be a nicely painted dam, behind which a massive pool of delinquent debt is obscured.”

“A significant correction in valuations and resolution of the growing backlog of delinquent debt may finally restore strong ‘investment merit’ to the U.S. stock market, but only after a greater amount of pain and adjustment than most investors seem to anticipate.”

Large corporations continue to borrow huge sums of money, but most appear to be sitting on their cash instead of spending it, which may benefit shareholders in the long run.

“They are still holding on to more cash in the same way that Noah built the ark,” David Rosenberg, chief economist at Gluskin Sheff told The New York Times. “It is very telling.”

Source: Moneynews

[winston]

Hussman: Markets Poised for Plunge By Dan Weil

Money-manager extraordinaire John Hussman, says financial markets, which had soared for months until last week, are set for a major correction.

“Last week, the return-risk profiles that we estimate for stocks, bonds and even gold declined abruptly,” he writes in a commentary obtained by the Business Insider.

“We don't know how long this shift will persist, but at present, investment risk appears to have spiked considerably, and our estimates of prospective market returns have deteriorated.”

The plunge in U.S. municipal bonds, Irish bonds, Greek bonds and Spanish bonds wiped out a year’s gains in just three days, he notes.

“Our bond-market measures shifted to an unfavorable status for yield pressures, putting the stock market in an overvalued, overbought, overbullish, rising-yields conformation despite QE2, which as anticipated, has been met with fairly eager offers from bondholders,” Hussman writes.

Even gold is at risk, though less so, he says. “In precious metals, conditions are mixed, so the negative overall conditions in that market at present are somewhat more subtle and may be short-lived.”

As for bonds, Hussman isn’t the only bear. “We’ve had stronger economic data and a pushback on QE2 with the idea that the Fed may not buy the $600 billion,” Charles Comiskey, head of Treasury trading at Bank of Nova Scotia, tells Bloomberg.

“People who were uncomfortably long sold out of their positions.”

http://www.moneynews.com/StreetTalk/Joh ... /id/377073

[winston]

HUSSMAN: AN AWFUL TIME TO INVEST by TPC

In this week’s letter John Hussman described the very unusual set of circumstance that comprise the current investment environment. Mr. Hussman describes the market as overvalued, overbought and overbullish.

He says 5 characteristics make this market environment a particularly “awful time to invest”. History has not been kind to investors who have invested in the market given the current unusual set of circumstances as the average decline has been greater than 24%:

1) S&P 500 more than 8% above its 52 week (exponential) average
2) S&P 500 more than 50% above its 4-year low
3) Shiller P/E greater than 18
4) 10-year Treasury yield higher than 6 months earlier
5) Advisory bullishness > 47%, with bearishness < 27%

http://pragcap.com/hussman-an-awful-time-to-invest

[winston]

EXTREME MARKET CONDITIONS AND THE FED’S DISEQUILIBRIUM by Cullen Roche

John Hussman’s weekly letter has some excellent insights into the unusual market conditions we are currently confronted with. Clearly, the Bernanke Put has exacerbated moves in just about every market. The result is an ever increasing disequilibrium.

This, after all, is what the Greenspan/Bernanke Put has been doing to the market for the last 25 years. Rather than allowing markets to be markets, the Fed has felt the need to coddle and “talk up” markets at every chance possible.

They see this as some sort of positive contributing force. I see it as a highly destabilizing market force that significantly contributes to the volatility of the business cycle.

The market is not the real economy. Therefore, focusing government policy on nominal wealth creation is just another way of putting the cart before the horse.

So, just how extreme are the current conditions? Mr. Hussman notes:

“It’s clear that present conditions are among the most extreme in history. In fact, to capture instances other than today, 1987 and 2007, we have to broaden the criteria. The following are sufficient for purposes of discussion:

1) Overvalued: Shiller P/E over 18 (presently, the multiple is over 24)

2) Overbought: S&P 500 within 1% of its upper Bollinger band on a daily, weekly and monthly resolution (20 periods, upper band 2 standard deviations above the moving average), and S&P 500 at least 20% above its 52-week low.

3) Overbullish: Investors Intelligence bullish sentiment at least 45% and bearish sentiment less than 25% (presently, we have 54.3% bulls and 18.5% bears).

4) Rising yields: Yields on the 10-year Treasury and the Dow 30 Corporate Bond Average above their levels of 6 months earlier.

http://pragcap.com/extreme-market-condi ... quilibrium

[winston]

Hussman: It’s Still a Secular Bear

Top fund manager John Hussman remains quite bearish on the broader market, saying that investors who try to ride the market’s recent momentum are getting close to “ensur[ing] themselves maximum damage”.

“We’ve certainly made our own adaptations to improve our ability to ‘go with the flow’ with a greater frequency, even in markets that appear objectively overvalued from a long-term perspective,” Hussman, who has a strong long-term track record but has missed out on much of the current rally, writes in his latest market commentary.

“Still, whatever constructive opportunities there might have been in 2009 and early 2010 are now well behind us. We are close to the point where investors can ensure themselves maximum damage by shifting away from a defensive stance and buying the market, in hopes of reaching for return in an already richly valued and overextended advance.”

Hussman says he’s expecting the broader market to return 3.5% to 4% per year in the coming decade, but adds that those average returns could be the result of big short-term swings, “so a poor long-term expectation doesn’t rule out the likelihood of significant investment opportunities in the interim. The real difficulty at present is that at already elevated valuations, it’s less likely that those opportunities will be front-loaded.”

Hussman says it’s critical for investors to base their value judgments on “historically reliable methods”, which he says many investors fail to do. He says his projections are based on based on reliable methodologies that look at “earnings, forward earnings, dividends and other fundamentals, all which have a fairly tight relationship with subsequent 7-10 year total returns”.

The rebound off the March 2009 low, Hussman adds, was not the start of a secular bull market. “There’s no chance that the 2009 low was the beginning of a secular bull, both because valuations weren’t nearly low enough (prospective 10-year returns briefly exceeded 10% annually, but were nowhere close to those accompanying the beginning of previous secular bulls), and also because at present, valuations are already about the point where one would look for a secular bear to start,” he says. He provides data showing that the average cyclical bull market within a secular bear market has lasted 26 months over the past 100 or so years — right where the current bull is right now.

http://theguruinvestor.com/2011/05/16/h ... ular-bear/

[winston]

Hussman: Under Extreme Secular Undervaluation S&P Hits 400

John Hussman, of Hussman Funds, thinks there's a possiblity that the S&P could revert back its secular valuation lows, with the potential of overshooting.

He's not alone, Felix Zulauf sees the S&P reverting back to book value.

In this case, Hussman values the S&P 500 between 600 and 1000 based on the historical prospective returns listed below; but under extreme secular undervaluation and/or macroeconomic conditions, he thinks the S&P could hit 400 !

http://www.distressedvolatility.com/201 ... cular.html

[winston]

Hussman: Recession Now “Virtually Certain”

Fund manager John Hussman says a new recession — and a Greek debt default — are now “virtually certain”.

http://theguruinvestor.com/2011/09/13/h ... y-certain/

[winston]

The world is going to end. The world is going to end...

HUSSMAN: STOCKS AREN’T PRICING IN THE COMING RECESSION by Cullen Roche

In this week’s investment update John Hussman discussed the ongoing Euro crisis and the ensuing bank crisis.

More interestingly though, he touched on the fact that equities have become so enticed by the Euro crisis that they’re ignoring the other risks in the market.

Most notably, Hussman believes leading indicators continue to point to recession:

http://pragcap.com/hussman-stocks-arent ... -recession

[winston]

HUSSMAN: PREPARE FOR RECESSION AND A “WHIPSAW TRAP” IN THE MARKET by Cullen Roche

John Hussman is still building the case for recession. His latest letter is another convincing case for economic decline. This time, however, he’s adding the caveat of a “whipsaw trap” in the equity market.

The latter I can get on board with as the market appears somewhat complacent in the near-term (whipsaw trap might be a bit dramatic though!), but I still don’t see the case for recession. His latest, as always, is a good read:

“As of last week, the combination of evidence we observe continues to be associated with strong recession risk and the likelihood of a “whipsaw trap” in the stock market. We’ll respond to new data as it changes, but I expect that the primary window of interest here is about 6-8 weeks.

In the event that economic data can produce fairly upbeat readings over that horizon, and the S&P 500 can remain at or about present levels, our estimate of oncoming recession risk would back off fairly quickly.

Presently, that outcome would be outside of the norm based on the leading economic measures we track, as well as the overvalued, overbought, overbullish condition of the stock market.

I want to emphasize again that I am neither a cheerleader for recession, nor a table-pounder for recession. It’s just that given the data that we presently observe, an oncoming recession remains the most probable outcome. When unseen states of the world have to be inferred from imperfect and noisy observable data, there are a few choices when the evidence isn’t 100%.

You can either choose a side and pound the table, or you can become comfortable dwelling in uncertainty, and take a position in proportion to the evidence, and the extent to which each possible outcome would affect you.

With most analysts dismissing the likelihood of recession, I have been vocal about ongoing recession concerns not because I want to align myself with one side, but because the investment implications are very asymmetric.

A slow but steady stream of modestly good economic news is largely priced in by investors, but a recession and the accompanying earnings disappointments would destroy some critical pillars of hope that investors are relying on to support already rich valuations.

We’re always open to shifting our investment stance and outlook in response to new evidence, but the “optimistic” evidence that many observers are using to discard recession concerns is generally based on coincident or lagging data.”

Source: Hussman Funds
.
http://pragcap.com/hussman-prepare-for- ... the-market