ERICOPOLY

I believe that artists should be artists. They enrich our lives.

Now if he said that, I think it's a silly comment. He knows that artists are artists, and scientists are scientists. For what it's worth, here's what LC was quoting: http://youtu.be/VdYxVx3PHxk?t=2m39s Artists are artists until it doesn't pay to be an artist. Generally speaking, laborers follow the money. Trust me on this one and ignore Buffett's jibber jabber -- we are not going to lose our talented scientists to art school. Can Bill Gates sketch my child for a trillion dollars? Highly unlikely! More likely to spin straw into gold. But yes, a scientist can run a hedge fund. He cannot, however, be an artist unless he has the talent.

Now if he said that, I think it's a silly comment. He knows that artists are artists, and scientists are scientists.

You can also enjoy your money in another way while helping others. You can employ a housekeeper, a person to rub your wife's feet, a cook and wranglers for a pack horse trip, a guide to take your family whitewater rafting, dog groomer, car detailing, private tennis lessons, private surf lessons, fully crewed charter vacation, commission an artist to sketch your children, five star dining... etc... etc... Even if you "waste" your money in such a manner, you are doing good. People take home a paycheck. You are redistributing your wealth to working people.

Even CNBC is now talking about $20 for BAC: http://video.cnbc.com/gallery/?video=3000221641&__source=yahoo%7cheadline%7cquote%7cvideo%7c&par=yahoo

They threw in "tip of the iceberg" for hype. We're supposed to be imagining ships striking icebergs and thousands of sailors drowning in cold water. It's retarded the way they presented that.

How the hell can you pull the plug on your electric utility when you drive a car with an 85 kWh battery pack? Umm... my electricity demand has gone up since I bought a Tesla Model S, not down. This makes the electric utilities more necessary, not less. It's the gas station that is less necessary. Electric cars are a growth thing for electric utilities.

Okay, got it :)

Here, instead, we are talking about earnings, sales, prices, and subsequent stock market returns… much easier imo! How is it easier when Hussmann says that the earnings will stay high until the deficits are corrected? In what, 20 years? Next year are they balancing the budget? I suppose he doesn't run the risk of being easily proved wrong here. Although with the deficit contracting over the past two years, and with the earnings going higher, he might yet be showing early signs of being wrong? There has been a false dilemma propagated here by you "either the data is wrong or 'this time is different'". You might still be right, but it's a false dilemma.

Were the self controlled ones the people who were buying well capitalized banks at 1/4 book value, tripling their money in two years, or were they the academics hiding scared under their thoroughly backtested charts? It's not always clear who the one with self control is ;) Hussmann is not too modest either -- his paper starts out telling us how he's a credentialed academic, then on to saying how he's got not a bad track record investing either. Was he telling us that he's an authority so we should cast our doubts aside?

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 Okay, how about somebody makes a model that shows that every time the employment level has been this lousy, it has been followed by an economic recovery? Or how economic recoveries have always followed periods when housing construction has been this poor? Or market returns following forward P/E multiples of 15x. There are many things that could be presented, but Hussman is only putting in ones that support his conclusions. There are many value screens that work great when backtesting against data, as Hussmann is doing -- but they aren't necessarily predictive. How did the ECRI guys get it so wrong these past two years?

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 So if the data he shows is not flawed then necessarily "this time is different"? Right, you see there is a problem with that. How about if the data he shows is not flawed, but rather he is just putting up accurate data that doesn't actually support his conclusions? Take a look at twacowfa's comment about the profit margins in the domestic non-financial sector.

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 The point about the hemlines is to show enough contrast that it would clearly be ridiculous and thus discarded, even if it showed a correllation. The trouble with what Hussman is presenting is that nobody can discard it out of hand because it is presented as the evidence that will settle all doubt, and unfortunately it is economic data (so you can't just laugh it off). Instead, you need to present a serious argument as to why "this time is different", as it will be perceived. So he sits within his impenetrable castle walls... Wells Fargo was about $22 two years ago, where was Hussmann?. It is frigging IDIOTIC to sit in cash when so many bargains have been available. He has been a fool.

This is true and I feel like the US promoted an acceleration of the nuclear trend when they hanged Saddam. Guess what kind of message that sent to other regimes? Uh huh, better arm yourself with nukes or the US is coming for you.

I need to have "some of my funds" if I'm buying calls -- I believe the amounts to be the same, could be wrong so you should not take me too seriously. Keep in mind I'm saying "portfolio" margin account, not just "margin account". I would never employ what I'm doing in a "Reg-T" margin account.

I don't have this trouble in my portfolio margin account. That's the only type of account where I would employ the strategy of using margined common+puts.

I'm sorry but I don't understand how you come to the conclusion that buying common+put costs more than buying the call.

The A warrant is now down to about 7% annualized cost of leverage. So the average annualized cost has now come down by approximately 600 bps. The good news is that it can't continue at this pace for much longer without going negative. EDIT: 5 years remaining. 600 bps per remaining year. This has cost you 3,000 basis points.

One thing he takes for granted is that today's profit margins are due to government and private sector deficits. So I have a two-part question: Are government deficits going to shrink in the decades to come? How high are private sector deficits today? I read his paper, and I am left with the impression that he is saying the rising deficits led to the rising profit margins. So what if the government deficit keeps getting bigger? The operating profits of nonfinancial domestic corporations or subsidiaries as a percentage of GDP are about average historically. :) So the distortion comes from non-domestic corporations and/or financials. Why can't Hussmann invest in domestic nonfinancials?

When is Packer going to open a fund?

quote: He also says this downturn appears to be fairly modest and may be over before many people recognize that it even took place. http://money.cnn.com/2013/03/08/news/economy/recession-forecast/index.html So perhaps it's over now, and it holds true that few recognized that it even took place. So he is not wrong!

I could show you a chart of ladies' hemlines and my data would be accurate. It's up to you as an intelligent person to ask if hemlines, even if correlated, can be relied on without further thought.

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 Mr. Hussman makes a claim that corporate profits are high "because of..." . Then he presents only that data (spending levels). Is this approach prone to making a mistake? I think so.

On the positive side, if Iran develops nukes the US won't start a war with Iran. We only bomb/invade the countries that don't have nukes.

"disprove" is an interesting request. Has anything in fact been proved by that graph? One thing it doesn't account for is the supply of labor and presence/absence of wage pressure. Which period in that graph going back to 1950 has a labor market similar to today's?