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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

• JohnJamesRambo 9y ago
  This is why I come to Hacker News.
  • misiti3780 9y ago
    because of the comment or the article ?
    • JohnJamesRambo 9y ago
      The comment showing me whether this guy knows what he is talking about or not.
      • chickenfries 9y ago
        How the hell do you know OP knows what they're talking about? They admit that they don't know finance in the post.
      • jhowell 9y ago
        What if he's wrong?
      • rz2k 9y ago
        The comment didn't include a good metric of whether the author knows what he is talking about. 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.
• junkscience2017 9y ago
  right, lots of fund managers accept that crashes happen periodically...the permabears like Hussman assume they STAY low over a long period of time yet society retains enough order to let them fulfill their thesis 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
  • f00_ 9y ago
    actually, the corporate nanny state will just bail them out. See: Long Term Captial Management, S&L crisis/Continental Illinois under Reagan/Bush Sr, 2008 crisis 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
    • stevenmays 9y ago
      The corporate nanny state is more then willing to let individual firms collapse (bear stearns). Your examples were a systemic risk, if those organizations collapsed there was going to be a lot of collateral damage.
      • f00_ 9y ago
        they could of nationalized the banks, but no instead they just give them handouts 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
    • junkscience2017 9y ago
      Hussmans scenario is far worse than 2008...more like the Great Depression x2 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
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• runako 9y ago
  This company has ~$750mm under management, and has several funds that manage to have both a) high expense ratios and b) horrible performance over the short and long terms. 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.
  • vasilipupkin 9y ago
    He may have raised funds 20 years ago and over 20 years delivered good returns. Also, underperforming S&P is not necessarily the right metric - as part of an overall portfolio that includes S&P, his funds may provide diversification benefits. To answer the question as to why can't random joe raise that money - the answer is, raising money is harder than you think.
    • Luc 9y ago
      It's not my area of expertise, but I believe it's perhaps easier to raise money now than at any time in the past. Somewhere in this video, David Einhorn talks about this in response to a question from the public: https://www.youtube.com/watch?v=Qvz5LS9pIjs https://www.youtube.com/watch?v=Qvz5LS9pIjs Apparantly there's match making events set up by banks, to introduce money managers to investors.
      • aaavl2821 9y ago
        It's a really hard time for long short hedge funds actually. There was a Bloomberg article a few months ago saying that the number of new l/s funds is the lowest it's been in years
  • junkscience2017 9y ago
    with 5% fees, Hussman himself is making money! 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
• rbcgerard 9y ago
  that funds performance is abysmal. but comparing it to a long only fund is not the right benchmark, Long/Short or Market Neutral would be more apt, making the relevant returns less egregious (as they've had a tough run as well). 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 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.
• dumbfounder 9y ago
  Predicting that a downturn will happen is easy. A downturn will probably happen if stocks are significantly inflated (by some reasonable measure). Predicting WHEN is the hard part. He's just 10 or so years off the mark :)
  • wiredfool 9y ago
    I've predicted 8 of the last 3 downturns. Dooooooom I tell you.
    • whatshisface 9y ago
      >I've predicted 8 of the last 3 downturns. 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.
• deleted 9y ago
  [deleted]
• unknown_apostle 9y ago
  What's interesting about Hussman these days is that he always claims that he started using a revised method for market timing since 2014. (Yes it somehow took him ~5 or 6 years to "revise his method", all the while his customers were paying. Must have been some spectacular calculations...) 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. http://stockcharts.com/h-sc/ui?s=hsgfx http://stockcharts.com/h-sc/ui?s=hsgfx
• csomar 9y ago
  The market can stay irrational more than you can stay solvent. That doesn’t mean he is right. He is in the business of making money with money but not figuring out if the market is sane or crazy.
• FabHK 9y ago
  His own metric is performance vis-a-vis the market over full cycles (top to top). In the past, he did well on that, but during this cycle he's so deep down the hole that it'll be difficult to catch up. Nevertheless, it'll be worth revisiting his performance after the next crash.
• jk2323 9y ago
  "This guy expects a market loss of about -65%" 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.
• mayukh 9y ago
  Absolute return funds aim to generate returns that are uncorrelated with the broader market. You look like a fool when markets are ripping (buy any passive etf) and a hero when you generate outsized returns. 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.