Hussman: Expect 10 More Lean Years

John Hussman isn’t just pessimistic about the short-term.  He’s also pessimistic about the long-term.  His latest note added some color to his useful projected returns indicator which currently sits at 4.6%.  Hussman’s recession call has been running wrong for about a year now, but his secular calls and bearish leanings have served him well over the course of the last 10 years.  Here are some details from his latest:

“We presently estimate a projected 10-year total (nominal) return for the S&P 500 of less than 4.6% annually. Nothing in recent years, much less the past decade, indicates any material change in the relationship between actual market returns and expected market returns as we estimate them using a range of fundamentals including normalized earnings. Indeed, the 5.1% total return of the S&P 500 over the most recent 10-year period has been right on target (see also my July 7, 2002 comment). It’s notable that even without compelling valuations a decade ago, we lifted 70% of our hedges several months later in early 2003, at what turned out to be the start of the next bull market – something to remember for those who misunderstand our two-data sets issue of 2009-early 2010 and assume that we’ll never lift our hedges until the market is deeply undervalued.

I anticipate that a decade from now, the S&P 500 will have achieved a total return that is very weak from a long-term perspective. Remember also that you don’t “lock in” a 10-year return. You ride it out. I continue to expect that investors will have numerous opportunities to accept risk in the coming years in expectation of much better prospective returns than are presently likely.”


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Cullen Roche

Mr. Roche is the Founder of Orcam Financial Group, LLC. Orcam is a financial services firm offering research, private advisory, institutional consulting and educational services.

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  • Gordon

    Now Everyone Thinks The Market’s Going To Crash
    Henry Blodget | May 30, 2010, 10:23 AM | 14,368 | 38
    … Seth Klarman at Baupost Group is worried. John Hussman of the Hussman Funds says all sorts of warning lights have lit up across his screen. …

    80% Chance Of A Market Crash In The Next Year
    John P. Hussman, PhD | Dec. 7, 2009, 6:12 AM | 2,932 | 9
    Email. Zip. 80% Chance Of A Market Crash In The Next Year. John P. Hussman, PhD | Dec. … The following is an excerpt from fund manager John Hussman’s weekly letter …

    Hussman: The Market Is More Overbought Than Any Time In History
    Henry Blodget | Oct. 20, 2009, 6:49 AM | 3,720 | 19
    … Hussman: The Market Is More Overbought Than Any Time In History. Henry Blodget | Oct. … You have successfully emailed the post. John Hussman rains on the parade: …

    Hussman On Stocks: “Abrupt Downside Risk”
    Henry Blodget | May 28, 2009, 7:05 AM | 4,788 | 10
    Enter you email address and zip code to set up customized email alerts. Email. Zip. Hussman On Stocks: “Abrupt Downside Risk”. Henry …

    John Hussman: Volume Warns Of A Sharp Pullback
    Vincent Fernando | Oct. 12, 2009, 4:23 PM | 1,889 | 9
    Enter you email address and zip code to set up customized email alerts. Email. Zip. John Hussman: Volume Warns Of A Sharp Pullback. Vincent Fernando | Oct. …

    A Great New Bull Market? Why?
    Henry Blodget | May 14, 2009, 11:53 AM | 4,554 | 19
    … In the meantime, here’s fund manager John Hussman, who comes to the same conclusion that we have: … Read John Hussman’s whole column here >. …

    Enjoying The Suckers’ Rally?
    Henry Blodget | Apr. 15, 2009, 1:41 PM | 13,297 | 44
    … Fund manager John Hussman lays out a persuasive bear case in this week’s letter. Here’s an excerpt: … Read John Hussman’s full note here >. …

    Deseret News, The (Salt Lake City, UT) – June 12, 1994


    Hussman Econometrics (34119 W. Twelve Mile Road, Farmington Hills, Mich. 48331), which The Hulbert Financial Digest has called “the most promising newcomer among investment newsletters” after its first three-year performance doubled the market’s return, has turned bearish on stocks. “The market is beginning to display the classic traits generally associated with bull-market tops. The time to buy stocks is in the middle of a recession, not when an expansion…


    A Coupla Bears Tell Why They’re Still Growling
    Pay-Per-View – Los Angeles Times – ProQuest Archiver – Mar 3, 1995
    It’s not the end of civilization, Hussman says: “Stocks are just due for a natural, normal, run-of-the-mill bear market.” …


    Analyst unimpressed by Pyxis rival
    Pay-Per-View – San Diego Union – Tribune – ProQuest Archiver – Jul 30, 1995
    John P. Hussman of the Michigan-based newsletter Hussman Econometrics is not bullish on the stock market now,


    BusinessWeek: May 15, 1995
    Adds John P. Hussman, a money manager and investment newsletter writer based in Farmington Hills, Mich.: “There’s a likelihood of slipping into a bear market at any time.”


    $2.95 – Deseret News – NewsBank – Jun 18, 1995
    “The stock market has left itself no room for error,” observes Hussman Econometrics (34119 W. Twelve Mile Road, Farmington Hills, MI 48331). …


    May 5, 1996

    The latest argument for higher stock prices is that Baby Boomers are saving more and investing it in stocks, notes Hussman Econometrics (34405 W. Twelve Mile Road, Farmington Hills, Mich. 48334). “In fact, there’s been no evidence of any significant increase in the U.S. savings rate. The money-flow argument ignores the fact that every buyer’s dollar that enters the market leaves it moments later with a seller. Stocks currently offer the lowest risk-premium in…


    Published on March 26, 1996, The Washington Times{PUBLICATION2}

    Market’s total value points to bad times

    There have been five times this century when the size of the stock market (total capitalization) relative to the size of the economy (nominal gross domestic product) exceeded 75 percent, as it does today, observes Hussman Econometrics (34119 W. Twelve Mile Road, Farmington Hills, Mich. 48331)

    “Each instance coincided with a Standard & Poor’s 500 dividend yield of only 3 percent or less, as is also the case now. Each marked the peak of a major bull market


    Mr. Bear and Mr. Bull
    By Mark Hulbert, 02.10.97

    The bear is John Hussman, editor of Hussman Econometrics, and adjunct professor of economics at the University of Michigan. What sets Hussman apart from the other bears isn’t his focus on the market’s fundamental extreme overvaluation. That’s something he shares with virtually every other bear. What makes Hussman’s bearishness noteworthy is his compelling explanation of the mistakes he made several years ago when he and the others turned prematurely bearish. ;


    Published on July 1, 1997, The Washington Times{PUBLICATION2}

    Sky-high prices may warn of stocks’ fall

    Historically, when the price-earnings ratio on the Standard & Poor’s 500 has been above 20-to-1, as it has been recently, it has always been because earnings are depressed, observes Hussman Econometrics (34405 W. Twelve Mile Road, Farmington Hills, Mich. 48334).

    “This is the first time in history that we’ve seen a P/E over 20-to-1 on record earnings. The only two times the P/E exceeded even 19-to-1 on record earnings was in 1964 and 1972. In


    Published on June 3, 1997, The Washington Times{PUBLICATION2}

    As dividend yields sink, how far can stocks rise?

    “The extremely high returns on stocks over the past 14 years have been the result of a decline from the highest dividend yield in two generations, 6.7 percent in August 1982, to the lowest dividend yield in history, now well below 2 percent,” notes Hussman Econometrics (34405 W. Twelve Mile Road, Farmington Hills, Mich. 48334).

    “It seems unlikely that the dividend yield can fall much from current levels. So it seems equally unlikely that stocks can rise


    Nov 7, 1997

    Stocks have never been this highly valued when earnings were at record levels, notes Hussman Econometrics (34405 W. Twelve Mile Road, Farmington Hills, …


    Economist: U.S. might already be in recession

    The San Diego Union – Tribune – San Diego, Calif.
    Author: DON BAUDER
    Date: Oct 30, 1998

    He’s John P. Hussman of Sunrise, Fla.-based Hussman Econometric Advisors, and he says the markets are already giving off clear recessionary signals: The interest rate spread between corporate debt and Treasury debt has widened, indicating growing fear of credit risk, while the spread between long- and short-term Treasury instrument interest rates has narrowed considerably, suggesting the market expects a very sharp growth slowdown.

    Combine these so-called “forward-looking” indicators with other similar ones, such as the stock market decline, the drop in consumer confidence and the National Association of Purchasing Managers Index suggesting that manufacturing is contracting, and “the signal says, `Hey, we’re expecting very slow growth, probably recession,’” Hussman says

  • j8sun

    The excerpts you have chosen are open to interpretation. For instance, it appears you could be making a comparison between the market valuations during the late 90’s and current valuations. If you were, then I’d ask, do you really think that the current valuations are that bad? Do you think we are in for another year 2000-like 50% drop in the market? How will we know the perfect time to get out?

    But of course you are probably making the perma-bear argument, in which case I would ask you the same questions.

  • BHB

    The only thing making me bullish are all the bearish posts on investment websites.

  • Bond Vigilante

    We’ll reach a stockmarket bottom when dividend yields are (about) equal to bond yields. There’re a number of other metrics that don’t signal that we’re at a stockmarket bottom.

  • Bond Vigilante

    I think “lean” is an understatement.

  • LVG

    Hussman is a stopped clock. I know you respect his analysis, but his approach is obviously flawed.

  • Andrew P

    If Hussman is right, we are Japan.

  • Edmund

    lol. All right, let’s stay long bonds.

  • David

    Hussman is right to call for a low-growth decade but the reason is partly about rising debt but he also forgets something most economists do(and most of whom don’t even know the basic facts on this issue) and that’s the energy situation.

    Net oil exports from every single exporting country in the world has fallen from it’s 2005 peak.

    The share to OECD(Mostly U.S., Europe and Japan) has declined by almost 6 mb/d(the overall oil production has been stagnant at about 87-89 mb/d for the past 6 years). That much have been absorbed by China, India and South America/Africa etc.

    Total oil exports(not total oil production) has however as I said, declined from it’s 2005 peak and it shows no signs of rising. Thereby the West is getting an increasingly smaller piece of a shrinking pie.

    This should be obvious to everyone but it’s rarely understood or swept under the carpet because of the massive implications it means understanding it.