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Hussman on inflation and the bailout
Old 05-19-2009, 08:26 PM   #1
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Hussman on inflation and the bailout

Hussman Funds - The Destructive Implications of the Bailout - Understanding Equilibrium - May 18, 2009
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Old 05-19-2009, 10:59 PM   #2
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Thanks for the post. Hussman is the $hit.
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Old 05-20-2009, 12:58 AM   #3
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I read the main points of the article, most of which I agree with. The problem arises though, where do we put our money in hyper inflationary times?

Gold? Cash? Stocks?

Tell me that and we can all be rich
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Old 05-20-2009, 01:14 AM   #4
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I read the main points of the article, most of which I agree with. The problem arises though, where do we put our money in hyper inflationary times?

Gold? Cash? Stocks?

Tell me that and we can all be rich
Gold, Silver, forget US cash but maybe some TIPS.
Foreign stocks denominated in currency of issue.
Physical foreign currencies (Canada, Australia, Singapore few others)
Products that can be bartered (cigarettes, scotch, wines, firearms)

And stockpile tons of stuff you use clothes, shoes, toilteries, medications, a good car maybe 2, a motorbike, and food if possible.
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Old 05-20-2009, 07:05 AM   #5
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All of what florida said is correct. Add commodoties and energy to the list as well(those two are some of my favorites). Just be careful, when our federal reserve isn't dumb enough to allow high inflation for to long. They will put an end to it and the one thats going to beat down the most is precious metals(in my opinion).
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Old 05-20-2009, 12:32 PM   #6
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Thanks for the post. I found his explanation of "equilibrium" quite useful.

I ask those more knowledgeable on finance to give us their opinion on the correctness of his explanations and conclusions.
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Old 05-20-2009, 01:04 PM   #7
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Thanks for the post. I found his explanation of "equilibrium" quite useful.

I ask those more knowledgeable on finance to give us their opinion on the correctness of his explanations and conclusions.
I would not place myself as more knowledgable, but I have been reading Hussman for a long time, and IMO he is likely to be correct.

He doesn't just assert something; he supports it with eveidence and reasoning.

This is one reason while you will never see me load up on straight treasuries. At least not until after we get tha t2x jump in the CPI.

Ha
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Old 05-20-2009, 05:47 PM   #8
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Hussman is only one of 3 gurus that I treat as a complete market genius. I can tell you right now everything he said in that commentary is spot on.

Haha, I'd like to get your opinion to this. I'll admit by bias, since I've been professing international securities for a while. But, his market commentaries appear to support international securities more than anything else.
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Old 05-20-2009, 05:53 PM   #9
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But, his market commentaries appear to support international securities more than anything else.
Forgive my dumb question, but would something like Vanguard Total Int'l Stock Index be considered as one of the "international securities" you're talking about?

I'm pretty uneducated when it comes to international investing, even though I hold the above index in my portfolio. Now seems like a good time to get schooled ...
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Old 05-20-2009, 06:26 PM   #10
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Well sure its a fund of international securities.

Im highly recommending large percentages of capital in international securities. If you are going to try to invest in direct stocks, do your research, do your research, do your research. If you were to invest in foreign stocks directly you need to comb out companies that are at risk of collapsing (a common risk of foreign securities). You want foreign companies that are extra strong/resilient.

Foreign securities should return more than domestic in both of the scenarios that Hussman mentioned. First, if inflation occurs you'll bank a lot on the currency differential between the dollar and the foreign curreny + the return in the market. If his other scenario of over a trillion dollars being removed from the markets and it isn't monetized, international stocks will just out perform our domestic ones because of the high valuations in the domestic markets(as investors look elsewhere for higher returns). Also, foreign securities in many places are more undervalued so they stand more ground to gain. So across the board they should return higher in the future.

The good news is that fund managers(like your Vanguard fund) are good at combing through stocks, and probably better for the average investor that doesn't have a lot of time to spend researching this area. Just to give you how much harder it is to research foreign securities. In the US all you really have to do is research the company and the market conditions. Internationally you need to read up on that countries accounting standards before you can get an idea of what their books actually represent. You need to look at their central banks monetary policy. You also need to look at the governments actions(are they acting pro capital investmet/anti capital investment). And then you need to do research about the company itself. Trying to adequately balance all that material can give you a headache. So, relying on a fund manager like in the Vanguard Total Int'l Stock Index, is definitely less time and mind taxing.
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Old 05-21-2009, 09:12 AM   #11
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Thanks.

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Originally Posted by dshibb View Post
First, if inflation occurs you'll bank a lot on the currency differential between the dollar and the foreign curreny + the return in the market.
Yeah, this was the point I was really wondering about. I wasn't sure if these type of funds do some funky currency hedging or whatever, that would basically eliminate (or maybe just reduce) the currency differential component of int'l stocks.

I'm not sure whether the Vanguard Total Int'l Stock Index is really doing much combing through the int'l markets, I'm under the impression they are passive funds that follow various indexes. But yes, I completely agree with your point that int'l investing would be time-consuming if one were to try to pick individual stocks, so something that I'm much more comfortable leaving to a mutual fund.

I have a fairly heavy concentration of int'l stocks in the equities portion of my investments (roughly 1/3 of my equity investments -- enough so that Vanguard's portfolio analysis is always cautioning me that I have a "very large portion" of my assets in int'l marketS). But I'm gradually increasing that proportion and I think I'll aim for a 50/50 spit between U.S. and int'l stocks in my equity holdings.
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Old 05-21-2009, 11:33 AM   #12
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50/50 is what I'm suggesting.
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Old 05-23-2009, 08:45 AM   #13
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Well, I gave up guessing after 20 yrs and just Put my $ into Balanced Funds..
Then When Hussman came out with his ( HSTRX) I added his and to be used as a Safe harbor to go to when Bears start comming out of hibernation..

as a Altnerative For a Conservative Portfolio of managing Index Funds and even instead of Bonds, he has proven his worth so far..
And Watching what he does per his reports can also give you a Heads up on the rest of your Investments on wether or not to be Aggressive , Moderate or Reduce them

He Gave me the Heads up in 07' and Along with a couple of others I follow, I reduced most everything and Increased my $ in HSTRX and My Treasuries..thru 08'..

In Jan. 09', it's been back to my original Portfolio for growth.. I was DCA ing on a 12 mo basis, but I Put the Rest ( 75%) in during the Early March Bottoming.. @ 683..

Since another -5 or -10% more of a Corrrection/drop wasn't going to make much of a difference for my Portfolio..for the longer term..

the S&P might Hit that Low again sometime this Summer..but Don't know..

I am not a Fan of Int'l equties.. they arwe just way to Volatile for B&H for long term for my tummy..vs others that have done just as well or better with alot less volatility..and EMDebt Bond funds have been a much better and safer play for me .

Not a Fan of using Indexes if one wants to "make as much as they can and get more Bang for their Buck" but it does require alot more work and constant Montioring..

My Bal. Port of Active Mge Funds ( AMF's) ave over 115% Accum. Tot Rtns ( ATR) past 10 yrs vs Same Port of Index funds ATR of 31% for the same period.. and I don't see any reason to go back to them yet.. But, who knows what the future holds!

:0)
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Old 05-23-2009, 09:21 AM   #14
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Looking forward, I am concerned about the value of the US$. Right now, 60% of my portfolio is in Equities (30% Canadian, 20% International, 10% US)*. Fixed Income is 20%, Real Estate 10%, and Cash 10%. My next move will be adding some precious metals as hedge against inflation and currency woes.

*I suppose that if I were living in the US, this could be viewed as 10% US, 50% International!
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