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.
Serious question, for those who work in finance: how do companies like this stay in business? Shouldn't the transparency of their poor performance have long since driven them out of business?
Semi-serious question, also for those who work in finance: what are the barriers to entry to starting funds for those of us who could do better than this guy?
Edit: I'm also stunned that anyone running any kind of "growth" fund could manage to lose money the last few years.
Somewhere in this video, David Einhorn talks about this in response to a question from the public: https://www.youtube.com/watch?v=Qvz5LS9pIjs
Apparantly there's match making events set up by banks, to introduce money managers to investors.
it's only the clients that are losing money
he just has to produce doomsayer screeds that are convincing enough to fool the clients. he's basically being paid to write dystopian fiction
http://quotes.morningstar.com/chart/fund/chart?t=HSGFX®io...
The pitch of funds like this is that for a few years out of 10, they'll underperform, and then massively outperform when everyone else is sucking. People invest in funds like this (note I don't know too much about his fund in particular but know many funds with similar styles) because when all the people who think they are expert investors bc they rode a bull market crash, these funds will be making lots of money
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?
Well, he's bearish, so he's only moderately long, if at all, and spends money on downside protection. That bleeds.
Dooooooom I tell you.
This is a great phrase. However, ideally a good portfolio has hedges and hedging against a big downturn is something you'd want to do. You don't have to give all of your money to the doomsayer portfolio, but I imagine that it'd be wise to have just a little there.
Now we're 3 years into the new period, and he's still loosing money hand over fist. Not even breakeven due to being early and putting on costly hedges. But really loosing money.
I know how hard timing is. And I agree that we're in uncharted waters wrt to central banks buying bonds and the ridiculous complexity of modern finance.
But it's hard to imagine exactly who his customers are. Just staying in cash would have performed much better than going with Hussman.
As of 9/30 the fund had a gross exposure of 149% and was 32% net long [1], so he's employing leverage as well.
[1]http://www.morningstar.com/funds/XNAS/HSGFX/quote.html
Edit: looks like some of that leverage is on the form of options so maybe the actual math is different.
Which is very possible. Or how did Mandelbrot say? "speculating on the stock market is riskier than you think"
The current highs are only possible because interest is so low and people leverage. A 2% return is no problem. Leverage times 3 and you have a decent 6%. But what happens, if interest rates rise and you get margin calls? Your have to sell. Wait, the others have to sell too....
"He also expects negative total returns over the next 12 years."
Past performances are no guarantee for future performances works both ways.
"Losing money in this market is a truly remarkable feat."
Not necessarily. Timing is tricky. The market can stay longer irrational as you can stay liquid.
How do his funds perform in bad markets? That is an important part of diversifying a portfolio. Funds that outperform the market in good markets are likely to fall even more than the rest of the market in downturns.
It doesn't matter if you make out like a bandit during a boom if you aren't able to preserve much of that accumulated wealth.
One way to generate uncorrelated returns is by being long (making money when stocks go up) and short (making money when stocks go down) -- you are effectively trying to make money on the spread between your buys and sells.
In bullish markets, being short can hurt -- a lot. Hence you end up with negative returns (Your shorts did a lot worse, than your longs did good).
Hussman's funds satisfy a need in the marketplace for uncorrelated funds -- he did really well in the dot com bust and the years after that, but has really lagged behind not just the market but other peer market neutral funds which should be the true yardstick to measure his success.
if the market crashed that low for a decade, you would see massive regime change in every democratic nation and the rich would be stripped bare
They have an implicit subsidy, Too Big To Fail: access to cheap credit because creditors know the nanny state will bail them out.
Why don't we call it welfare when we give money to the rich? Capitalism for the poor, socialism for the rich. We don't need market discipline, but YOU do
but yeah, I wonder why they didn't decide to save bear stearns, maybe it collapsed and that was the reason they decided to save the rest
best source about the 2008 crisis? I really like noam chomsky and michael lewis' work
we basically don't know what would happen, but it's safe to say the rich might not be assured of a safe bearish trading market in a civil society
That wouldn't happen at all in fact. We've already recently seen that kind of economic pain on a protracted time frame. See: 1967 to 1982, a time in which inflation adjusted the S&P 500 lost 2/3 of its value. Stagflation, high unemployment, high inflation, economic chaos, price controls, war in vietnam, societal upheaval, smashed real estate values - that era saw it all. The rich were not stripped bare at all.
Spain just went through an extraordinarily painful depression, the likes of which the US hasn't seen in 80 years. The rich were not stripped bare, Amancio Ortega is worth $76 billion. Portugal went through something similar. Greece arguably had it even worse. The rich were not stripped bare.
Russia is a klepto-state that freely takes whatever it wants from the private economy. They just went through a severe recession that set their economic standing back ten years, the oligarchs were not stripped bare.
Japan saw net negative economic growth over 20 years, while the median standard of living in Japan dropped by more than 1/3 thanks to currency debasement and high taxes vs no growth. The rich were not stripped bare.
You'll of course notice the common theme across all these different cultures.