John Hussman: Avoid Being the Greatest Fool Posted on May 7th, 2007 with stocks: IVV, SPY Excerpt from fund manager John Hussman's weekly essay on the U.S. market: It's fascinating to watch the increasingly carnival-like atmosphere on CNBC on any given day (I generally catch about half an hour with breakfast before the market opens, to hear the prevailing arguments and get the tone of investor sentiment). One quickly finds that the cheerleading tone of the late 90s is back, and the greater fool theory is in full bloom, with investors regularly encouraged to "buy high and sell higher." Lately, the bullish arguments are running so fast and loose that it is apparently no longer a requirement that they have any relationship to fact. Take for example a remark last week that "mutual funds are sitting on piles of cash that these managers are going to have to get invested." Wow. That's just a bald-faced fib. It could not be further from the truth. Cash as a proportion of mutual fund assets has never been lower. Never... ] The greater fool theory relies on one thing -- the assumption that there is somebody else out there who is willing to pay an even more reckless premium for stocks. That's what the market is thriving on at this point: the hope that there is an ocean of unsatisfied demand out there by short sellers or mutual fund managers who will be "forced" to buy. Unfortunately, the facts do not support that assertion. As noted last week, we may see additional buyout activity, but that is driven primarily by credit spreads and does not have a strong relationship to subsequent market returns. In any event, mutual fund cash is at a historic low, and higher short interest is more than offset by rising margin debt. There may not be many greater fools out there after all. As they say, if you're sitting at the poker table and you can't spot the pigeon... you're probably the pigeon.
The one I heard came from the guy at the CME, not the guy Rick the other guy whos also a regular on cnbc, He said last week the money managers are BEING FORCED to put money to work. F O R C E D And yes, its not buy low and sell high anymore, its buy high, SELL HIGHER, heard that from Eric on Fast Money last week.
I've sometimes been suckered, by myself only really, into watching CNBC on tv at the gym because it's almost as bad as MTV anyway and I tuned in a few weeks ago and watched 2 people mention that Howard Stern's move to XM for a minute or two. I understand that not everyone needs to know that Howard Stern went to Sirius satellite radio, and not everyone even needs to know who Howard Stern is. But the significance of the fact that two daytime "stock" program hosts couldn't remember which satellite radio company paid $500M for a contract seems insane. How complaisant must those idiots be? That is simply one of the biggest celebrity contracts of all time and Sirius was a hugely popular trading stock and so you think a show/channel that does nothing but cover these two very stupid but related topics could get it right. I've seen a million other lies, I'd prefer to think they just make up random facts and don't intentionally lie, on that channel and will never trust something I hear there.
Regardless of CNBC or greater fools, the market is going higher. I don't like CNBC too much either but there is nothing wrong with bullishness.
Well, all TV financial reporting is wall papering sound. The endlessly smiling, artificially enthusiastic presenters, very fluent cue readers that they always are, have one all embracing mode in common: being utterly utterly shallow. Apart from their scripts and preparation they don't know sh*t about sh*t and it shows. They just love the little old television bubble in which they live. And there are so many attractive women TV presenters, all prettily done up with layers of make up, such beauty out of a box. So many of these women have such wide mouths. What the hell is it they are trying to stretch their mouths around when they are off duty?
I like Hussman and I am thinking of putting some money with him as he plays it safe but looks to be able to make a good return over the whole business cycle. My own trading is not doing so well the last few weeks as the EEM just keeps going higher and the NQ turned out to be a poor choice as a hedge, should have been YM. Seriously thought about throwing in the towel on the trade today but sucked it up and will persevere at least until the end of the week. All signs point to this latest rise being due primarily to the new PM rules as the fund flows to domestic funds have been negative for a few weeks now and seeing the level of cash that MF are deaing with that is really the only explanation. The real question is do they have the powder to drive the market up enough to sucker the unwashed masses back in or not?
Hussman Strategic Growth Fund Annualized 3 year return = 4.11% S&P 500 Annualized 3 year return = 10.06% What's wrong with this picture? John Hussman is a smart guy. The "smart" analysis is not always the best analysis.
When watching CNBC, don't forget to take it with a bag of salt. (sorry, but a grain just isn't enough)
cnbc and the american people deserve each other the REAL question is.... who's the bigger fool ! cheers , jake