A few things.A reader comment came in on an old post about John Hussman, the reader was critical of the results Hussman has had.
One unusual thing about Hussman's funds is that you can get a look into his mindset in his weekly commentary.
If you read his commentary you know that the focus is returns, versus the broad market, during an entire stock market cycle.
I take his commentary to mean that he expects to lag during rallies and outperform during declines. Since inception, which appears to be in late 2000, his Strategic Growth fund is up 50% (plus, I imagine some dividends that the Yahoo chart does not pick up). In the same time the S&P 500 is up 20%.
If you pick a lot of shorter time periods then the fund does lag. For three years the fund is up 5% and the SPX is up 40%. I think Hussman tells readers to expect a lag when the market is rallying and that is what happens. He says you need to judge his fund based on the entire cycle.
If a manager spells it out like that and then delivers as advertised, I am not sure it makes sense to be frustrated. I have no opinion nor position in the fund. The point here is to know what you are buying before you buy, really know it.
When we were at the North Rim on Friday night I read most of a book that I was pretty impressed with. It was written by Russell Bailyn and its called Navigating The Financial Blogosphere.
Candidly the title doesn't seem to be a great fit because the book was a lot more comprehensive than a bunch of blog reviews, which is what I thought it would be.
The book ranges from how to find a bank at one end of the spectrum to fairly sophisticated financial planning strategies at the other. I don't know if the book covers everything but its pretty thorough, easy to read and I was able to learn a few things. The title pertains to how to utilize the Internet for each of the topics covered, both the blogosphere and more mainstream websites.
Later today I am participating in two panels at a conference in Scottsdale called the IMN World Series of ETFs-West. One panel is about sector investing and the other is about emerging market with a focus on BRIC. The BRIC panel includes fellow bloggers Tom Lydon and Richard Kang. After the shindig the three of us are going to try to get some dinner-kind of a nerd troika, lol.
The morning after the conference Joellyn and I are headed to Hawaii to try to furnish the house. The only thing in there is a DSL modem, we are starting from scratch. Our strategy for getting the basics includes Walmart, Home Depot, several items on Craig's List and at some point in the next week a drive over to Kona to the Costco. I have done what I can to ensure that the Internet will be waiting for me but you never know.
My TSCM article on BWX was published on Friday if anyone is interested. I am working on one about the PowerShares Emerging Market Bond ETF (PCY) that is now trading.
It appears that the Fox Business Channel is number 359 on Directv. I watched a few minutes of it already and saw Eric Bolling and Charles Payne riffing about individual stocks. We'll see.
The picture is from the North Rim, Friday night at sunset.
19 comments:
Your article on BWX was very helpful, thanks. Bloomberg has an article up today that the U.S. is being pressured by the G7 to strengthen the dollar. I can guarantee that the dollar will reverse course if I invest in BWX and I'll lose money in the near term anyway!
Separately, I hope you can post any highlights from your panel discussions today. Love the nerd troika!
Roger,
Do you like SLX and is it worth the high maintenance cost?
Thanks
Since inception, which appears to be in late 2000, his Strategic Growth fund is up 50%
Regarding Hussman, small correction (maybe not too small :) )
Since inception (late 2000), the fund is actually up about 120%, not 50% which is a pretty sizable relative outperformance to the S&P 500.
http://stockcharts.com/charts/performance/perf.html?HSGFX,$SPX
Now, all of that cumulative outperformance comes from having avoided the bear market as he has lagged badly during the 5-year bull market.
One lesson to be drawn is that long-term strong cumulative performance comes from avoiding any big losses due to the mathematics of compounding (50% loss requires 100% gain to break even)
I agree with your overall point regarding Hussman though. I think I might be able to guess who the commenter might be. There seems to be a few individuals who are on some sort of crusade to prove what an idiot Hussman is.
For disclosure, I own the fund at about a 10% allocation (slightly under). From a practical standpoint, I think as a portfolio manager one could use his fund instead of using a bear fund to get "defensive". He should outperform and provide positive returns in a falling market while the fund does not lose money in a market advance (like a bear fund). The drawback to that implementation though is you have to hold it at least 90 days or there is a redemption fee, so it isn't for traders.
Check out his most recent weekly commentary. He clearly believes risk levels are very high. I'm not sure I agree with the Fed probably starting a rate-cutting cycle that could keep this bull going another 1-2 years, but if it looks to be rolling over, I may boost my allocation to 25%.
Re SLX; I have disclosed countless times owning one of the bigger components in that fund, have owned it for several years. From the top down I believe in the theme.
So then the question becomes the best way to access it.The stock I use here is up way more than SLX but it went down more during the August dip.
It makes sense that SLX would be less volatile and I expect to get more reward for the risk of owning stock. I can't answer whether the fee is worth it for you or not.
Less volatility during a puke down will be worth it for some people.
Re Hussman; I don't understand how the Yahoo chart could miss that much lift--not doubting you, just don't know what to make of it.
Rate cuts didn't do much in 2001. there are plenty of reasons why that comparison is bad but I have been leaning toward a correction that has not really come yet.
Re Hussman; I don't understand how the Yahoo chart could miss that much lift--not doubting you, just don't know what to make of it.
I'm about 99.9% sure that Yahoo charts *for mutual funds* don't capture the capital gains distributions from mutual funds, and only chart the raw price change. It would be like missing stock splits and just charting the raw price change over time. In any case, I would suggest NOT using Yahoo for charting mutual funds and sticking to Stockcharts which does it correctly.
Rate cuts didn't do much in 2001. there are plenty of reasons why that comparison is bad but I have been leaning toward a correction that has not really come yet.
True (about 2001), and I'm not sure I believe it is a good comparison myself. But rate cuts worked pretty good in 1998 in terms of providing the fuel for the last massive upleg before the bear hit. Is the present more like 1998 or 2001? I'm inclined towards 1998, although I'm with you in leaning towards a correction that hasn't happened yet.
Hi Roger,
What stock are you using from SLX?
is it ATI?
roger, are you still game for a new etf port? I wanted to link your last and recent post on this issue but can't find it here. maybe i read it at seeking alpha?
there may be a compliance issue with that idea. While I am still sorting through that I took the other one down. I will know definatively in a couple of days but it does not look good.
Another small correction; Hussman's funds carry a 6 month redemption fee of 1.5%. Not a 90 day fee.
And you can see the performance of the fund (HSGFX) here:
http://hussmanfunds.com/pdf/hsgprosp.pdf
Roger,
If you look at Y! Finance's Historical Prices section they have an "adjusted close" column which adjusts historical prices for the effects of cap gains and dividends.
HSGFX has had significant distributions every year since inception.
if you check out this following link you can compare the adjusted close and also see the size and timing of the distributions for the HSGFX
http://finance.yahoo.com/q/hp?s=HSGFX&a=10&b=21&c=2000&d=09&e=15&f=2007&g=m
Also the poster above should be comparing HSGFX to VFINX (vanguard sp500) since the $SPX index itself ignores dividends
http://stockcharts.com/charts/performance/perf.html?HSGFX,VFINX
thanks everyone for the Hussman info.
i have a very full plate today.
roger...sorry to hear about the compliance issue.
Trust and credibility are rare. fwiw...I regard Roger as good for the etf industry and far from a promoter...i.e. conflict free. Your partnership with the guys in the office has it's strengths but selfishly wish that you were more independent. Your readers may have given you more star power than the office guys know.
Roger has star power? Oh my!
Re: Where does Hussman fund fit in the portfolio?
I have had HSGHX for many years. I have found the best way to place it in a portfolio is putting it into the bond/cash catagory. In riakgrades.com the risk impact of HSGFX in a portfolio is negative! In one of my porfolio I have 19% of HSGFX and 55% FEMKX, the risk impact numbers are: -3% and 13%, repectively.
Sorry, the FEMKX is 5.5% not 55% in last comment
Thank you, Roger, for your writeup on the international bond etf. I looked all over to find the index and couldn't. I will look forward to the PCY (?) etc info.
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=476981#PaperDownload
I saw on another site some goosehead knocking Hussman. I think that Hussman is pretty straightforward that it is returns over a full cycle that matter.
I offer the above paper as a interesting look at our "perceptions" regarding stock returns. I think that it is a useful doc for those who are interested in look at some empiricism regarding real stock market returns.
http://tinyurl.com/2e738f
Here's a Tiny URL--it looks like it truncated.
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