Hussman Funds

Don't use P/E as an estimate of a bubble... profits often mean revert. Use something closer to market value to GDP (with some adjustments). That is a much better estimate. John Hussman has imo the best of such metrics. Here's his thoughts from August: https://www.hussmanfunds.com/comment/mc250814/ And this image says a lot: https://www.hussmanfunds.com/wp-content/uploads/comment/mc250814a.png Yes. A lot now depends on when "growth" stops. But GDP is very hard to grow at an sustained high rate justifying higher valuations. Even through industrial revolutions, assembly lines, transistors, and the internet.

There are much, much better ones: 1) Philosophical Economics' stock/bond/cash preference model: http://www.philosophicaleconomics.com/2013/12/the-single-greatest-pred… https://financial-charts.effingapp.com/ 2) John Hussmann's non-financial market cap to gross value added: https://www.hussmanfunds.com/category/comment/ https://www.hussmanfunds.com/comment/mc210715/ But as the sibling comment and all the sources above say, those do not predict the path, only the destination (which is a decade or more in the future). It would be completely consistent with such macro valuation models if, for example, the general prices doubled or even quadrupled over the next year or two, why not. Stay safe out there :)

Suppose that I create a valuation measure by taking the yield on my bond, and “correcting it by for interest rates” by subtracting out bond yields. Now, that seems ridiculous, but it’s very close to what’s going on when people try to “adjust” stock market valuations for the level of interest rates and use phrases like “fairly valued” and “attractive.” When both assets are at extreme valuations, this comparison, at best, says only that the dismal expected return on one asset is expected to exceed the really dismal expected return on the other asset. https://www.hussmanfunds.com/comment/mc201220/

A few years seems reasonable. However, they seem to underperform for most years out of 10. This is their best performing fund: https://www.hussmanfunds.com/strategic-total-return-fund/ On the other hand, this is their "growth" fund: https://www.hussmanfunds.com/strategic-growth-fund/ Its performance is absolutely abysmal. What is Hussman's "PhD" in? Losing money?

Ah, the Phillips curve. I recommend you make some charts for yourself comparing US unemployment figures with CPI inflation and see if you can spot the curve. hint: https://www.hussmanfunds.com/wmc/wmc110404.htm spoiler: " there is in fact no strong "tradeoff" between unemployment and general price inflation, and almost certainly not an exploitable one. The Phillips Curve is essentially a statement that lower unemployment is associated with higher inflation in real wages. The strategy of accepting higher inflation in hopes of achieving lower unemployment (which is the basis of Bernanke's policy efforts) not only drops the phrase "real wages" but reverses the direction of cause and effect. " Also, it has clearly not been transitory for most of 2021. The "transitory" claim was backed partly by the pandemic, but relied on a 1-year lag. If, however, you used a 2-year lag (thus eliminating pandemic effects...

I think it may be fair? This guy[1] explains how surplus of corporate profits are a mirror image of household/govt debt. Which is a direct transfer of wealth from everyone to the super-super-rich (not the 1%, but the 0.1 - 0.01%) [1] The chart below shows how this works. The blue line at the top shows the “surplus” of corporations: corporate income minus expenses and net investment. We know this as corporate “free cash flow.” The red line shows combined “surplus” of other sectors: government, households, and foreign trading partners – in excess of their consumption and net investment. It’s negative, so in aggregate, they’re running a deficit. That deficit is the mirror image of the corporate surplus. This isn’t an accident. It’s just accounting (I’ve excluded a few tiny items for clarity): https://www.hussmanfunds.com/comment/mc251028/

> nobody seems to care about high equity levels? By "high equity levels" do you mean high levels of government ownership of corporations? Or do you mean high equity valuations? If the latter, there are certainly some who voice concerns. For example John Hussman: https://www.hussmanfunds.com/category/comment/

You are incorrect. Deposits in banks are securities, I suggest you read this section titled "Every security that is issued must be held by someone until it is retired" here: https://www.hussmanfunds.com/comment/mc210614/ Copyright doesn't cover the computer reference machine code number, it covers actual intellectual content. Just like it is not settled whether Ethereum or Bitcoin is a security- thoughts on this can and will change, new regulators get elected... neither is settled whether you can actually say that you own a number. The community has misplaced confidence imo.

https://www.hussmanfunds.com/comment/mc180604/ This was recently posted on HN and gives a good overview of indicators to look at though it's pretty blatantly alarmist.

Lots of permabears will go long when it's obvious markets are headed up, not Hussman. https://www.hussmanfunds.com/strategic-growth-fund/ As always, Hussman manages the near impossible feat of reliably losing money in virtually any market environment The Dow has risen 5k in a year and Hussman still manages to be in the red....I'm sure his clients are thrilled on top of the how-is-that-possible string of losses in every fund he manages across any time frame...his expense ratio is insane! 5% fee ratio to lose money in a bull market...sign me up? his clients would be better off maxing out a string of savings accounts to earn 0.1% interest but get FDIC coverage most permabears since the 80s realized you can't fight the Fed, even if the whole system is based on BS

This guy expects a market loss of about -65%, which would send the S&P 500 back down to 900. He also expects negative total returns over the next 12 years. Of course, his Strategic Growth Fund has not only underperformed its benchmark (the S&P 500 index), the fund actually has negative returns over the past 1, 3, 5, and 10 year periods[1]. Losing money in this market is a truly remarkable feat. [1]: https://www.hussmanfunds.com/strategic-growth-fund/

not sure where the 5% fees number is coming from, it looks like its <1.4%. If you're adding the redemption and exchange fees those are only applicable if you hold the fund for <60 days... https://www.hussmanfunds.com/pdf/hsgprosp.pdf

Be careful with "raw" PE ratio. It peaks when earnings have already collapsed due to the denominator effect. Median of S&P500 price/sales (not quite the same as median of price/earnings of course): http://mebfaber.com/2015/03/13/stocks-are-the-most-expensive-since-the… Median of price/earnings for the broad NYSE universe: http://www.hussmanfunds.com/wmc/wmc150112.htm I don't think it's controversial to state that high valuations in equities are more broadly carried. (Hussman's weekly column is an interesting source of opinions on where these broad valuation measures stand at any given time.) Obviously, that doesn't automatically imply that any sort of deep loss is imminent. I believe it does say something about what you can reasonably expect in terms of long term total returns.

bond yields rise with inflation http://www.hussmanfunds.com/rsi/yieldsinflation.htm

John Hussman: https://www.hussmanfunds.com/comment/mc230319/

Yes, that's why it has far more to go to revert to the mean of earnings and price. Earnings are also artificially inflated, and will drift down, and stock prices with them, we're just seeing the beginning of that process. Here's someone else who called it over a year ago with some charts with counterpoint those you link: https://www.hussmanfunds.com/comment/mc220925/ OR CAPE: https://www.multpl.com/shiller-pe Note he's in good company, with Jeremy Grantham for example also warning of the same thing: https://www.livewiremarkets.com/wires/grantham-this-is-a-bubble-this-i… Just to be clear, the argument is not 'everything is shit now because inflation', it is that the era of easy money has ended, significant inflation and war means a regime change in central bank intervention, and central banks will now tighten till things break. They haven't even managed to unwind QE yet and stop buying their own debt, will they ever? If they do, watch out. This isn't doom and gloom, it's simple realism about the regime change in interest rates - the era of 0% money is gone, in its place we have a normalisation, which means a normalisation of frothy asset prices and a reversion to the mean of earnings and prices in many domains. Usually these things take a year or two to work out, it won't be a fast process.

Couple things here. First, corporate profits are aberrantly high for a number of reasons, none of which are likely to be permanent. John Hussman, an analyst whom I respect deeply, has a good discussion of this from the perspective of stock valuations, but the basic point is relevant here. [http://www.hussmanfunds.com/wmc/wmc130408.htm] Second, while I agree that this is "the story" in a purely journalistic sense, it's important not to get too carried in discussions about relative income distributions and miss the forest for the trees, as it were. Income inequality is not an informationally useful statistic on its own. Income inequality can be thought of as a measure of the strength of incentives in a system. Those incentives can be good or bad on their own. In 3rd world nations, income inequality is a reflection of the strong incentive to be corrupt and steal. In the closed system of Goldman Sachs, income inequality (among employees) is a measure of the incentive to achieve annual performance targets. In the context of the public education system, it is a measure of the incentive to achieve seniority and bureaucratic promotions. In startups it reflects the incentive to get acquired or IPO. Et cetera. In the United States, when people say that income inequality is too high, what they're usually thinking is that the wrong things are being incentivized and rewarded. That's a fine discussion to have, and I would agree that certain industries [health care jumps immediately to…