Posts Tagged ‘John P. Hussman’

Zen Lessons in Market Analysis

Definitely one to pin on the fridge with a magnet: "Inquiry means not using the mental creation, but allowing yourself to get in touch, and to try to see how things truly are. We practice not to be influenced by the name, because when we are caught in the name we can’t see reality.” – Ilene 

Zen Lessons in Market Analysis

Courtesy of John P. Hussman, Ph.D.
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“The best way of preparing for the future is to take good care of the present, because we know that if the present is made up of the past, then the future will be made up of the present. All we need to be responsible for is the present moment. Only the present is within our reach. To care for the present is to care for the future.”

Thich Nhat Hanh

Thich Nhat Hanh

This week’s comment is dedicated to my dear friend Thich Nhat Hanh, a Vietnamese Buddhist monk who was born on October 11, 1926, having been born previously in January of that same year, and twice again about 25 years earlier, not to mention countless other times through his ancestors, teachers, and other non-Thich Nhat Hanh elements. Thay (the Vietnamese word for “teacher”) would simplify this by saying that today is his eighty-third “continuation day,” because to say it is his birthday is not very accurate.

If the quote at the top of this page looks somewhat familiar to our long-term shareholders, it may be because the practice of tending to the present moment – responding to prevailing conditions rather than relying on forecasts – is central to our investment discipline.

Focusing on the present moment doesn’t imply ignoring the past or failing to consider the future. It’s clear, for example, that we put a great deal of attention on estimating future cash flows and discounting them appropriately in order to evaluate whether various investments are priced to deliver satisfactory long-term returns. We certainly devote our attention to macroeconomic pressures and latent risks that threaten to become full-blown crises later. Still, we rarely make near term forecasts. Nor do we answer surveys like “where do you think the S&P 500 will be at year-end?” – a question that falls entirely outside of our way of thinking – like asking Columbus what…
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Post-Crash Dynamics

Post-Crash Dynamics

post-crash dynamics, half full or half emptyCourtesy of John P. Hussman, Ph.D.

The U.S. economy lost a quarter of a million jobs in July. Meanwhile, over 400,000 workers abandoned the labor force (and are therefore no longer counted among the unemployed), which prompted a slight decline in the unemployment rate despite the job losses. In the context of an economy still strained by high levels of consumer debt and still record delinquency and foreclosure rates, labor market conditions are still troublesome. Still, the pace of job losses and new unemployment claims has clearly softened from the pace we observed early in the year.

If we knew that this was a standard economic downturn, we might conclude that the recent improvements are durable. However, nothing convinces us that this is a standard economic downturn. As for market action, the major indices have generally been strong, as has breadth (as measured by advances versus declines), but the “investor sponsorship” evident from trading volume has been uncharacteristically dismal compared with initial advances of past bull markets. So here too, we have very strong concerns that the recent advance may not be as durable as investors appear to believe.

All of that said, we aren’t inclined to fight even what we view as errant analysis, and the Strategic Growth Fund has about 1% of assets allocated to near-the-money index call options – about enough to gradually close down about 40% of our hedge in the event that the market advances markedly higher from here, but without putting us at risk of much loss in the event of failure. With investors now anticipating and pricing in a sustained economic recovery, as well as a spectacular earnings rebound (see Bill Hester’s piece – Earnings Growth Forecasts May Require a Robust Economic Recovery – additional link below), a lot of things will have to go right from here in order to sustain higher prices than we currently observe.

Frankly, our call option allocation here is something of a paean to a notion – a sustained economic recovery and new bull market – that I have no belief in whatsoever. But at this point, the broad strength in the major indices, even lacking volume sponsorship or favorable valuation, requires that we allow for the possibility of additional investor speculation. Even if we do observe such an outcome, it’s difficult to envision that the S&P 500…
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The Outlook is Not Up, But Very Widely Sideways

Courtesy of John P. Hussman, Ph.D.

Introduction, by my friend Tom Burger

A good Hussman commentary. Hussman’s valuation metrics are very solid, in my opinion — sort of a variation on Benjamin Graham’s technique of using a multi-year earnings average. But forget the mathematics: his valuation metric told us that stocks were wildly overvalued immediately preceding the recent market crash, and modestly undervalued at the low. That ought to be worth something. I remember the so-called "Fed Model" said that stocks were significantly undervalued at the market peak, and wildly undervalued at the last market bottom. Doesn’t take a whole lot of thought to evaluate those two options based on recent experience. Hussman has also published some good reports that show how his valuation metric would have performed during the Great Depression — quite well.
Hussman provides an excellent discussion on what the recent Treasury and Fed moves mean in terms of balance sheet changes for banks, Treasury, and Fed. In general, he tries to clear up some oft-repeated fallacies about cash flows, liquidity, and what not. The air-waves are apparently full of utter nonsense. (I don’t listen to the chatter). I think Hussman is an unusually clear thinker and an extremely knowledgeable guy.
Tom, at Applying the Lessons of Free Market Economics

The Outlook is Not Up, But Very Widely Sideways

John P. Hussman, Ph.D.
All rights reserved and actively enforced.

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Valuation Update: We estimate that the S&P 500 is currently priced to deliver total returns over the next decade in the range of 6.5-9.0%, centered at an expected total return of about 7.8% annually. Stocks are modestly overvalued here, except on metrics that assume a permanent recovery to 2007′s record profit margins (which were about 50% above the historical norm).

On normalized profit margins, sustainable S&P 500 earnings are slightly above $60 on the index. That’s certainly higher than the 7 bucks of net earnings that companies in the index have reported over the past 52 weeks, but unfortunately, even at current prices, the S&P 500 is near 16 times normalized earnings.

You can get that basic figure a lot of ways. Currently, book value on the S&P 500 is slightly above $500. Outside of the past 15 years, when the economy was building up to…
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Phil's Favorites

QOTD: The Uphill Battle


QOTD: The Uphill Battle

Courtesy of 

The New York Times:

One central tension at Facebook has been that of the legal and policy teams versus the security team. The security team generally pushed for more disclosure about how nation states had misused the site, but the legal and policy teams have prioritized business imperatives, said the people briefed on the matter.

“The people whose job is to protect the user always are fighting an uphill battle against the people whose job is to make money for...

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Zero Hedge

Tempe Police Say "No Fault By Uber" In Fatal Crash

Courtesy of ZeroHedge. View original post here.

Following yesterday's market-moving report of a fatal accident involving a self-driving Uber car on the roads of Tempe, Arizona, legal experts immediately chimed in, saying this case presents many thorny legal issues - chief among which is the issue of who could be at fault.

Since it was the first recorded fatality involving a self-driving car, would investigators point the finger at the car's human driver? Uber? The car's manufacturer? Some combination of the three (or none of the above).


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Peter Thiel: Need To Rethink Tariffs In Light Of Trade Deficit With China; SF Sucks, Bitcoin Rocks

By VW Staff. Originally published at ValueWalk.

PayPal cofounder Peter Thiel in a wide-ranging interview on President Trump’s trade tariffs, China’s economy, technology regulations and his outlook for bitcoin.


Check out our H2 hedge fund letters here.

Peter Thiel: Need To Rethink Tariffs In Light Of Trade Deficit With China

Peter Thiel On Leaving Silicon Valley For Los Angeles

Billionaire investor Peter Thiel argues Silicon Valley is is a ‘totalitarian place’ where people are not allowed to have dissenting views.


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Chart School

Weekly Market Recap Mar 18, 2017

Courtesy of Blain.

Indexes were coming off a massive week and entered this past week somewhat overbought, so certainly were due for some sort of rest.   For the week, the S&P lost 1.2%, and the NASDAQ 1%.  While most of this political mumbo jumbo stuff is not really market moving for more than a hot minute while the algorithms scramble to react, it is worth noting the movement in key economic positions.  To that end:

Lawrence Kudlow of CNBC fame has been officially named as director of the National Economic Council to replace Gary Cohn, who resigned earlier this month. Kudlow has supported Trump’s tax cuts but opposes tariffs.

Trump said ...

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Insider Scoop

The Market In 5 Minutes: AT&T, Facebook Data, Apple Screens, Google Shopping And More

Courtesy of Benzinga.

Related SPY What You Need To Know About Larry Kudlow, Trump's New Economic Advisor Appeals Court Overturns Fiduciar... more from Insider

Digital Currencies

Bitcoin Soars $1000 Off The Lows After G-20 Rejects Crypto Crackdown

Courtesy of ZeroHedge. View original post here.

While advertising bans and Mt.Gox Trustee overhangs remain, the FUD of a possible global regulatory crackdown in the G-20 Communique was a major driver of this weekend's weakness... until Les Echos confirms FSB has rejected calls for regulation.

After headlines suggesting a global crackdown on cryptocurrencies spooked the markets on Friday, ...

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Members' Corner

Cambridge Analytica and the 2016 Election: What you need to know (updated)


"If you want to fundamentally reshape society, you first have to break it." ~ Christopher Wylie

[Interview: Cambridge Analytica whistleblower: 'We spent $1m harvesting millions of Facebook profiles' – video]

"You’ve probably heard by now that Cambridge Analytica, which is backed by the borderline-psychotic Mercer family and was formerly chaired by Steve Bannon, had a decisive role in manipulating voters on a one-by-one basis – using their own personal data to push them toward voting ...

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How your brain is wired to just say 'yes' to opioids

Reminder: Pharmboy and Ilene are available to chat with Members, comments are found below each post.


How your brain is wired to just say ‘yes’ to opioids

A Philadelphia man, who struggles with opioid addiction, in 2017. AP Photo/Matt Rourke

Courtesy of Paul R. Sanberg, University of South Florida and Samantha Portis, University of South Florida


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Mapping The Market

The tricks propagandists use to beat science

Via Jean-Luc

How propagandist beat science – they did it for the tobacco industry and now it's in favor of the energy companies:

The tricks propagandists use to beat science

The original tobacco strategy involved several lines of attack. One of these was to fund research that supported the industry and then publish only the results that fit the required narrative. “For instance, in 1954 the TIRC distributed a pamphlet entitled ‘A Scientific Perspective on the Cigarette Controversy’ to nearly 200,000 doctors, journalists, and policy-makers, in which they emphasized favorable research and questioned results supporting the contrary view,” say Weatherall and co, who call this approach biased production.

A second approach promoted independent research that happened to support ...

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Swing trading portfolio - week of September 11th, 2017

Reminder: OpTrader is available to chat with Members, comments are found below each post.


This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current  trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).

We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options. 

Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.

To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here ...

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NewsWare: Watch Today's Webinar!


We have a great guest at today's webinar!

Bill Olsen from NewsWare will be giving us a fun and lively demonstration of the advantages that real-time news provides. NewsWare is a market intelligence tool for news. In today's data driven markets, it is truly beneficial to have a tool that delivers access to the professional sources where you can obtain the facts in real time.

Join our webinar, free, it's open to all. 

Just click here at 1 pm est and join in!

[For more information on NewsWare, click here. For a list of prices: NewsWar...

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Kimble Charting Solutions

Brazil; Waterfall in prices starting? Impact U.S.?

Courtesy of Chris Kimble.

Below looks at the Brazil ETF (EWZ) over the last decade. The rally over the past year has it facing a critical level, from a Power of the Pattern perspective.


EWZ is facing dual resistance at (1), while in a 9-year down trend of lower highs and lower lows. The counter trend rally over the past 17-months has it testing key falling resistance. Did the counter trend reflation rally just end at dual resistance???

If EWZ b...

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All About Trends

Mid-Day Update

Reminder: Harlan is available to chat with Members, comments are found below each post.

Click here for the full report.

To learn more, sign up for David's free newsletter and receive the free report from All About Trends - "How To Outperform 90% Of Wall Street With Just $500 A Week." Tell David PSW sent you. - Ilene...

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About Phil:

Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

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About Ilene:

Ilene is editor and affiliate program coordinator for PSW. She manages the site market shadows, archives, more. Contact Ilene to learn about our affiliate and content sharing programs.

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