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Latest Comments33 Comments
What If Warren Buffett Is Wrong About the Markets?
Well, if this is true, then it is the problem, right? Money invested in the stock market SHOULD be money not needed for at least 5 years, if not even longer. Who in their right mind would invest money in the stock market that they need NEXT MONTH to "feed their family", "pay a utlity bill", or their mortgage payment.
Hedge Fund Tracking: Tontine Partners
A Compelling Energy Ratio
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You are right about where we sit presently relative to the 5-year average, but I think you are way off about it being unlikely to reach there by Nov 1st. At the rate we are going with injections, the 5-year average might be left in the dust in the coming weeks unless producers curtail production.
As far as supply/demand, off the top of my head, I think 2008 supply growth is running around 8-10% annual growth, while demand growth is around 1-2%. I think that is why just in the past day or so you are seeing commercials with Aubrey McClendon pushing CNG for transportation. Right now, it sure looks like an imbalance to me, and new sources of demand need to come on in short order to absorb this increase in supplies. I am still bullish on NG over the next 3-10 years, but the next 6-12 months could be rough unless something changes quick in the supply/demand picture. I hope many of the producers get smart here and start to curtail production. Either that, or some of the smaller, weaker players need to get killed off and that might happen for those companies that are unhedged if NG goes to 4.
A Compelling Energy Ratio
Not sure what you mean or are implying here, but cooler weather is most certainly NOT bullish for NG.
*EXTREME* temperatures, either extreme heat or extreme cold are bullish for NG, because that results in either substantially increased air conditioning which increases usage of NG generated electrictity, or increased NG usage for heating. The *WORST* possible situation is middle of the road temperatures (slightly warm or cool) because then you have NEITHER air conditioning nor heating, and thus NG usage drops off considerably.
I'd be careful with using this ratio at this time, because there may be some strong bearish factors for NG at play. One could be that crude oil prices continue to drop substantially if global demand is weakening, and secondly there is a ton of domestic production presently. Look at the last month or so of actual storage numbers versus estimates. Not bullish.
I'm long some NG producers (CHK and XTO) but definitely concerned about downside at the present. Buying UNG here might be risky. 4-6 might very well be in the cards.
Goodrich Petroleum: Gas in the Ground Doesn't Mean Cash in the Bank
You've got a good point here, but I think you are missing something critical that makes your short position very dangerous if not outright crazy. *Any* of the smaller operators with Haynesville acreage are takeover targets for larger E&P companies that want to establish a presence in Haynesville, and DO HAVE the operational expertise, capital budgets, and scalability to profitably extract the reserves. Either that, or the smaller company like GDP just partners with a bigger company to do the heavy lifting for them:
uk.reuters.com/article...
I'm long CHK and CHK options
Titanium Metals Is Going Down
Good analysis, and nice call. Interesting to go back and read some of the comments in light of the last few months. Maybe a few people learned something?
Headed For a Normal 20-30% Correction
This is certainly within the realm of possibility, but I think this is highly problematic. IMO, the primary tool for making forward-looking decisions and considering possible future scenarios is past historical experience and past quantitative data. If one starts with the premise that the past is meaningless, then where does that leave you? It leaves you at basically making hunches and guesses based on absolutely nothing. My thought is the past represents a combination of both fundamentals and human psychology. I believe human psychology never changes so the cycles of the past are likely to be repeated in the future in a similar (but not exact) way.
Fundamentals And The Market: Review and Expectations
Regarding forward earnings versus backwards looking earnings measures, it does make sense to me that stocks are properly valued using forward earnings. DCF models are built on forward looking projections. At the same time, the dean of value investing, Graham advocated an approach basically looking at the average of the past 10-years earnings in doing valuation. I suppose it just depends on what "margin of safety" one demands before putting money at risk into either the broad market or individual stocks. There is a risk either way. One risk is an opportunity cost of waiting for bargain valuations that may not materialize, and the other risk is capital losses if forward projections turn out to be optimistic.
Difficult choice, and right now I am just trying to strike a balance.
Fundamentals And The Market: Review and Expectations
Shouldn't have been to difficult to find. All the weekly commentaries are archived on the website. In any case, here a few that specifically deal with interest rates and the impact interest rates have on fair valuation multiples. I'm interested in what is valid and not married to any particular viewpoint or model, but I have yet to see anyone do a rigorous quantitative counteranalysis.
David Merkel had what I thought was an excellent analysis, but it was more about determining the ***relative valuation*** between bonds and stocks, and not the absolute valuation of stocks. I think it is important to recognize the possibility that both bonds AND stocks are unattractively valued, and neither is priced for attractive long-term returns (although compelling individual opportunities might exist, I personally think Berkshire Hathaway is undervalued)
www.hussman.net/wmc/wm...
www.hussman.net/wmc/wm...
www.hussman.net/wmc/wm...
"Will's comment suggests that forward earnings estimates are incorrect, given his macro analysis. I read Will's blog regularly and I understand his viewpoint. My own approach is to take advantage of the expertise of others, in this case the hundreds of analysts and macro strategists following companies. If I thought that I could forecast earnings better than they could, then I might use a different approach. We should note that many of those calling the economy weak and predicting lower earnings have been doing so for years. (Not putting Will in this camp -- I haven't checked)."
How many of the hundreds of analysts and macro strategists correctly forecasted the earnings decline in 2001 and 2002? What were consensus earnings forecasts for 2001 and 2002 in late 1999, 2000? When S&P 500 earnings do contract I'll just about guarantee that somewhere between 0 and 1-2 major firms/strategists will correctly anticipate it. At that turning point, valuations based on forward estimates will be way off the mark, and the problem is that by that point it will be too late as the market will probably already have declined because the market anticipates/discounts what is coming, not reacts to what is already obviously known.
Hard To See the Connection Between Country Funds and GDP Growth Rates
John Hussman: We May Be Seeing a Phase Transition
Not sure why I am responding. There is a biblical proverb about not arguing with fools. I guess it is just annoying to see you keep repeating the same erroneous assertion.
I'm not sure if you are just too lazy or too stupid to verify what you are saying above (on the stock-picking). In the annual reports for the fund, Hussman breaks out separately the performance of just the individual stock-picks from overall fund performance. The individual stock-picks have *OUTPERFORMED* the market every single year since inception except 2006. The underperformance of the fund is entirely due to being fully-hedged pretty much 100% of the time over the past 3 years. Therefore, the return of the fund is going to be the difference between the stock-picks and the overall market plus the interest earned on the hedges.
You certainly are an interesting fellow. You seem to be on some sort of mission with your plethora of replies to numerous bloggers. You do seem to be a self-proclaimed expert on the market, with the correct stance on "market action" being obvious to you. So help me out, how would you be positioned here. Are you bullish, neutral, bearish? What is your forecast for the next 12 months? Would you be 100% unhedged here, or fully hedged? I suspect you will not give clear answers to these questions, as you have know idea yourself. I think you know how to throw stones, but have no idea how to build the house yourself.
John Hussman: A Sack O' Potatoes Market
Yes, you have way too much time on your hands, and need to get a hobby or some social activity besides the enormous amount of replies you post on this website. You do realize that with Hussman and Ritholtz they aren't likely reading your responses any way. You are just arguing with yourself in an empty room.
I'd spend the time to discuss some of your points (and I actually think you have a legitimate point on the "market action" issue, I too wonder why he was fully hedged most of the last 3 years even if valuations were high), but my time is too valuable to go back and forth with you on this issue.
Best of luck to you in your investing.
Complacency Runs Deep: Time To Sell
Interesting comment here from this strategist. In behavioral finance, one of the typical mistakes we humans make in investing decisions is the "recency effect". We tend to overweight more recent experience and discount the distant past. I can't help but wonder if after May-July 06 and Feb 07 the market has "trained" many to assume every quick 5% pullback is absolutely a dip to be bought before a march to new highs. It would be ironic if this particular instance turns out to be trap for all those making that assumption. Be careful.
Premature Return of Equity REITs?
A few months have passed, so a quick comment on this comment. I'm just not sure what technical analysis tools you were using to make your determination of going from worst to best. Technical picture has been negative since breaking the 200 day moving average, having the 50 day break below the 200 day, and the head and shoulders top:
worldbeta.blogspot.com...
Properly applied technical analysis would have gotten you out and kept you out during the bulk of the recent decline, and indeed did so for my REIT position. I have no issue with the utility of technical analysis.
John Hussman: A Sack O' Potatoes Market
I'm probably wasting my time even responding to you, but you reveal your ignorance with this statement. It might be a good idea to conduct actual research instead of just random hypothesizing.
The fund does NOT short individual stocks, and is NEVER net short the market. At most, the fund can be market neutral in that it holds a long portfolio of individual stocks that are fully hedged by index options (long puts and short calls).