giofranchi

Thank you for the link AJC. Kinesis is the potential "killer app" for Lancashire. It's not a commoditized retro product , but customized to meet the needs of a Bermuda - Lloyd's type (re)insurer to lay off a company's specific peak risk profile. It's a unique product that has a profit percentage potential many times higher than cheap ILW's that are deeply flawed because they have basis risk for the buyers. It's good to see that they are staying with it because it has compelling value to the buyer that no one else is able to copy. Elaine is rather modest in her projection of how much it could goose their ROE if it starts to gain traction. Thank you for the link, ajc! And thank you for the comment, twacowfca! :) Gio

Eric, I didn’t want to “propagate any false dilemma”… ;D ;D ;D I simply don't care, believe me! ;) I have already said what I mean by “this time is different”: if Price / Sales and Market Cap / GDP have predicted quite reliably subsequent market returns for the last 50 years (1948-2003), and now they suddenly cease to, well, that’s what I mean by “this time is different”. And I am perfectly aware my meaning of “this time is different” is not what usually that expression is used for… Otherwise, if they haven’t predicted subsequent market returns reliably, then I would be very interested if someone might give me good evidence of the fact that Mr. Hussman has “massaged” the data. That’s all! :) Gio

Eric, Maybe I didn’t express my thought properly… I am sure that you are a much better investor than Mr. Hussman! There is no doubt about that! And I am also sure that for such an outstanding investor like you are, what the general market is likely to do in the next 10 years is completely meaningless! Mine was just a curiosity to understand exactly why and how 53 out of 108 people have voted for a new secular bull under way… An utterly useless curiosity!! ;) Gio

The ECRI guys are talking about the economy… about expansions and recessions… Very difficult to get it right! Here, instead, we are talking about earnings, sales, prices, and subsequent stock market returns… much easier imo! Or let’s put it this way: the S&P500 is a portfolio of 500 companies; Kraven’s portfolio, if I am right, sometimes gets to be composed by around 200 companies… Yet, I am sure Kraven’s has a very clear idea what his portfolio might return next year and for some years after that. (Kraven, please correct me, if I am wrong). Gio

Well, the fact that those models have stopped working is exactly what I mean by saying that this time is different… But my question is another one. When I ask if the historical data are correct, I mean: have those models truly worked from 1948 until 2003, or is Mr. Hussman manipulating the data? If they have worked for 50 years (and Mr. Hussman in other charts shows they have worked for 100 years), and now they have stopped working, well then this time is different. If they have not truly worked, I would like to see the evidence of their flaws. At least 51 people must have plenty of that evidence! ;) As an aside, I don’t think behavioral psychologists are charlatans… Far from me! I have read much of their work and I find it very useful… Yet, great wealth builders of the past have achieved extraordinary goals simply being more sensible and self-controlled than other people… And they have done so, well before the terminology “behavioral psychology” was invented or even dreamt of! The younger we are, the more we tend to overestimate the true importance of almost anything that grabs our attention… Temperament is paramount in business, no doubt about that! But the usefulness of those books, that at least try to teach us about our temperament and its potential pitfalls, should not be overestimated! In other words: The Mentalist is and will remain a TV Series!! ;D ;D ;D Gio

This I don’t understand… If you know better valuation models, I mean models that from 1948 until 2003 have a track record of predicting stock market returns better than the ones on page 8 and 9, very well then I would like to see them… But I don’t understand how they could lead to different conclusions… Once again, either the data are flawed, or this time is different. Gio

Well, first of all I hope he invested in WFC, while shorting the general market… That is much different than sitting in cash! The real problem with Mr. Hussman maybe is that he is not a very good stock picker! But that is a completely different story… Anyway, I am not interested in how good Mr. Hussman is as an investor… Who cares?! Instead, I wanted to understand if 51 people think the historical data he shows are flawed, or if 51 people think “this time is different”. Gio

tombgrt, no prediction about the future here. I just would like to understand if Mr. Hussman’s historical data are correct or not. I think it is relevant to the discussion on this thread, because we are really left with only two possibilities: 1) Those historical data (chart on page 8 and chart on page 9) are flawed, 2) 51 out of 103 people have voted for “this time is different”. Possibility n.2 gets me very nervous… Not because the future is bound to repeat the past… Once again, no prediction about the future! But because, in the rare instances when this time really is different, only very few people get it right… Viceversa, when 50% of the people think that this time is different, usually it coincides precisely with the situations in which the future repeats the past… Gio

Eric, of course the charts I am trying to disprove have some relevance with the discussion on this thread!! Leave profit margins alone for a second, and just look at the chart on page 8 (Price / Revenue) and the one on page 9 (Market Cap / GDP). I am only interested in the past… no prediction about the future! My question is: are the data on those charts accurate? And, if not, can anyone show me better data, please? Gio

Eric, You mean mistakes in reasoning or in data collecting? I don’t question Mr. Hussman’s reasoning might be wrong… But I am curious to know if his data collecting is also wrong. In other words, are the charts he shows flawed? If they are, does anyone know how they would look like, once corrected? Gio

Yes! But this is a “this time is different” argument. Instead, I wanted to know: does Mr. Hussman make mistakes in putting together historical data? Gio

Ok! I have used the wrong word… I mean: does someone have a different chart about the same subject? Gio

I think Mr. Hussman answers your question right beneath the chart on page 5. I am not looking for the answer… I believe nobody knows… I am just curious to know if those historical data presented by Mr. Hussman are right, or flawed. That’s all. Then, I guess you have not answered if we are in a new secular bull! ;) Gio

Thank you! This is a good argument! (Although the author himself doesn’t seem to be so convinced of the fact profit margins will stay this high…) What about the Price / Revenue ratio, and the Market Cap / nominal GDP ratio? Gio

When I say, does someone have better data?, I mean: can someone post a graph that goes back to 1950 and disprove the one on page 5 of 14? Because I have never seen one! Same with the Price / Revenue ratio, and with the Market Cap / nominal GDP ratio. Gio

This is a very good question and the answer is: profit margins will keep getting higher! ;) But this doesn't invalidate Mr. Hussman's historical data. Which is what I am trying to do! Gio

My problem with that is you must be a very rational judge of business value, not to make mistakes in an overvalued market… That’s why I think you are right… provided you are as good as Eric or Packer! And you might certainly be! I surely don’t know... Given your age, you have invested through 2008, and given you confidence, you most probably have done really well! I know I am not as good as that. Even my conviction in the true worth of my own companies is… well, a bit shaky!! ;D ;D Let alone my conviction about listed companies, that I will never know everything about. Therefore, I want Mr. Marks’ pendulum to help me a little bit: I want to pay attention to what other people are doing. And when they seem to be overly optimistic, I want to be a bit more cautious. Gio

Also this is not fair! He has repeatedly admitted he missed the bottom! Yet, he has also explained why he missed it, and why that has nothing to do with what historical data are suggesting right now. I am not asking for further evidence that Mr. Hussman is the worst investor in the whole wide universe… ;D ;D There is already plenty of that!! ;) Instead, I am asking of some evidence that the historical data he keeps on displaying are flawed! Gio

Joel, I agree with all you have said. Once again, though, I don’t think it answers the question which is the title of this thread. Let’s put it this way: ok, I agree it is not a really useful question (sorry bmichaud! ;D ;D), yet a lot of people have provided an answer… If you had to answer only to useful question, life would be somewhat boring, wouldn’t it?! ;D Therefore, I simply want to know on which basis, or on which historical evidence, people came to a different conclusion, than the one Mr. Hussman, the worst investor in the whole wide universe! ;), keeps providing us. Because, I just cannot find better historical data! For instance, Mr. Hussman shows the correlation between 3-yr chg in govt + personal savings as % of GDP and 3-yr annual growth in corporate profits. And he says from 1950 until 2013 this is what has happened. Period. Instead, you reason on why the future might be different… And this is what I’d like to know: those 50 people have based their vote on more accurate and more reliable historical data than Mr. Hussman’s, or have they based their vote on some reasoning that justifies why the future might be different from the past? Gio

Well, I agree. But that is not what I think the subject of this thread is all about. I haven’t started this thread, therefore I might be wrong. Maybe bmichaud could clarify what the question he has asked is truly about. What I know is that to read and comment historical data correctly, and to devise an effective investment strategy are two very different things. Therefore, you cannot judge the content of Mr. Hussman’s latest letter, simply by saying: “He is not a good investor.” Gio

50 to 51… Ok, I would like 50 people to read the latest letter by Mr. Hussman, and counterargument with historical data that are as precise as the ones presented by Mr. Hussman. This thread is not a discussion about the “usefulness” of what Mr. Hussman does. In other words, it is not a discussion about the usefulness of general market action. Instead, it is a discussion about whether we are in a new secular bull, or the last half cycle of the secular bear is still to be concluded. To date I have seen no argument pertaining the subject of this thread, which is more rigorous, steeped in data, and therefore convincing, than Mr. Hussman’s. Anyway, if one of those 50 people thinks he/she knows how to be more convincing than Mr. Hussman, I would very gladly listen to him/her! :) Cheers, Gio An-Open-Letter-to-the-FOMC-Rcognizing-the-Valuation-Bubble-In-Equities.pdf

--Cettie Rockefeller Gio Good one to remember especially on Mondays… ;D ;D ;D Gio

--John D. Rockefeller, Sr. Gio

--Cettie Rockefeller Gio

Well, this is a good question, to which I ignore the answer. Where did the capital flow from 1964 until 1981? Where did it flow from 1999 until 2009? Into bonds? Maybe from 1999 until 2009, but certainly not from 1964 until 1981! I don’t know the answer… but I do know that earnings must very much surprise on the upside, for the general market to deliver other than dismal results during the 10 years ahead… And I just don’t see how… If you are not a fan of profit margins reverse to the mean, think about sales: profits have soared since 2009, while sales have stagnated… In my businesses I have experienced many times that is not sustainable. If it is not sustainable for me, I don’t see why it should be sustainable for others. Gio