Global Macro Trading Journal

Discussion in 'Journals' started by Daal, Feb 25, 2011.

  1. Specterx

    Specterx


    This is not really fair; Hussman has devoted much of his weekly column over the past couple of years to analyzing his failures, and re-examining his approach in light of recent experience. I see the relevant question to be whether his appraisal of conditions now - i.e. that market prices are overvalued as the consequence of a QE-induced speculative bubble, and stock indices are likely to decline significantly in the near future - is basically correct or incorrect. If he is correct, the implications for one's portfolio could be significant.
     
    #5031     Aug 14, 2013
  2. The difference is that Klarman made absolute returns whereas Hussman hasn't, and Klarman was following a method which has been theoretically and practically tested across multiple markets, countries, eras, whereas Hussman isn't.

    What's the 5 year return of Hussman's growth fund? Or his 'defensive' total return fund? What did Klarman make from 1995-2000? There is no comparison.

    My question to you is - assuming you think there is a non-zero possibility that Hussman doesn't in fact have any edge, what evidence do you have that his method is sound and will deliver good performance? Remember the default assumption with any market practitioner is that they can't perform well until proven otherwise.

    The timeframe for judging a market strategy is totally different to the timeframe for judging a practitioner - the markets cannot 'choose' to focus on areas of fat edge, or to fit their timescales to investor preferences, whereas a practitioner can. A practitioner's job is to perform on the time horizon of his investors, and 5 years getting to the outer limits. If you lose money for 5 years, you suck.
     
    #5032     Aug 14, 2013
  3. Yes he talks a good game. But he has not altered the flaw with his method. He still makes exactly the same mistake as when he started out - he makes a bold market prediction, relies on it for performance, and if it is wrong, he gets shitty results. After 13 years you'd think he would have worked out that it is necessary to perform even when your main prediction is wrong - you need a plan B so you can at least grind out some respectable returns even if the market doesn't do what you expect.

    And the results show this - he has done badly in the last 1 year as well, even after his previous 12 years of apparent soul-searching and reappraisal.

    Hussman has basically wagered on black for 13 years, and half the time the market has come up red. His response is to keep wagering on black. Sorry but that's not good enough. The default assumption should be that he is nothing but a glorified coin-flipper.
     
    #5033     Aug 14, 2013
  4. Daal

    Daal

    Hussman is underperforming because since he started there were 2 bull markets and 2 bear markets, it just so happen that one of the bull ones were a mini bubble that went far ahead than anyone expected. If there is a bear in the next 12 months he is likely to outperform again
     
    #5034     Aug 14, 2013
  5. No - someone with an edge would outperform in such a balanced cycle as 2 bull markets and 2 bear markets, that is in fact the idea kind of environment in which to judge true skills. Mini-bubbles are part of the market and investment landscape, so not being able to deal with them is a flaw in someone's investment ability.

    If Hussman had edge, he'd have preserved capital in the bear markets and made spectacular investment returns in the bull markets - instead, he's actually lost money during a 5 year bull market, incredible!

    If there's a bear, he will only outperform in a relative sense. He will still be down over 3 and 5 years (unless he has bet the farm on puts). The problem is with his absolute performance, not just his relative performance. It's not like he has been grinding out 7% a year with conservative exposure while the market has been making more than double that. It's that he's *actually down* over 1, 3, and 5 years.

    I have to admit, I'm baffled. None of you have given a *single reason* why you think that Hussman is actually skilled as an investor. All you have done is say what he might do in future, or why he did badly in the past. But none of that is a reason to believe someone is good, it is simply a statement of the (low) possibility that he is not diabolically bad. So come on - where's the concrete evidence that he has genuine investment ability? Even if you don't think he's the next Buffett or Lynch, is there any reason at all to think he can even justify his fees?
     
    #5035     Aug 14, 2013
  6. Daal

    Daal

    His style is not for everyone because it does have a ton of variability but over long periods it has to work. Otherwise you are saying valuation and fading extreme sentiment trends don't matter, which is of course ridiculous. His technical work is what made his result be worse than it should have (I personally think making returns robust to depression data is a complete waste, the governments just won't let that happen anymore). Yes he has been a little too dogmatic but even putting aside Hussman, any well informed trader/investor can tell that intermediate to long-term returns right now are going to be downright dismal
     
    #5036     Aug 15, 2013
  7. Daal

    Daal

    His stock picks have beaten the market by a large margin. He is as great stock picker, its his hedging strategy with falty technicals that have undermined him
    Look at the purple line in his returns, thats his returns without the put buying
     
    #5037     Aug 15, 2013
  8. Specterx

    Specterx

    He delivered considerably higher absolute returns in the 2000-2007 cycle and relative outperformance in the 2007-09 bear. He also successfully predicted major bear markets in 2000 and 2007. So we have eight years of solid absolute returns, a year of negative returns that nonetheless outperformed the market by a wide margin, two flat years, and two years of losses totaling 20-25%. That record won't place him among the greatest traders ever to live, but it's very far from "diabolically bad."
     
    #5038     Aug 16, 2013
  9. toolazy

    toolazy

    sorry guys to pollute this thread (one of the best) but celebrating new high in metals. I think pessimists missed the train and will be victims this time.

    anyway, what I want to say is that sentiment play is true edge. As sentiment negative(if you can identify) it is always good buy.
    Reason is because current price is below true fundamental value.

    It is that simple.
     
    #5039     Aug 16, 2013
  10. Returning to this fading journal (and the markets in general after a lovely summer), inspired by a Bill Gross tweet in which he noted Eurodollar futures are pricing in 4% Fed Funds rate by the end of 2018.

    If - as some believe - the U.S. is truly Japan and cannot handle even marginally higher rates, might there be opportunity is going long Eurodollar futures via options as several of us profitably did years ago?

    A quick check shows ED options trading only as far out as June 2016 and the 99.00 call going for the whopping price of 16.75 (the underlying is at 97.72). Not very attractive pricing. I might have interest if it traded down to $0.05.

    Wondering if a Summers appointment to lead the Fed might cause a nice washout in interest rates as the common wisdom has the dude far more hawkish than Bernanke or Yellen.
     
    #5040     Sep 4, 2013