Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : MARKET INDEX TECHNICAL ANALYSIS - MITA -- Ignore unavailable to you. Want to Upgrade?

To: bobby beara who wrote (14708)	10/7/2002 7:00:19 AM
From: High-Tech East	Respond to of 19219

FYI ... John Hussman last night ... Sunday October 6, 2002 : Hotline Update Copyright 2002, John P. Hussman, Ph.D., All rights reserved and actively enforced. As of last week, the Market Climate for stocks remained on a Warning condition, with valuations and trend uniformity still unfavorable. Our holdings remained fully hedged. Since we do not carry net short positions, our hedge should not be interpreted as a "bet" that the market will fall. Rather, we hedge in order to remove the impact of overall market fluctuations from our widely diversified portfolio of favored stocks. I have no short-term forecast regarding market action. I would not be surprised by an explosive rally to clear the deeply oversold condition of this market. And I would not be surprised by a crash. A fully hedged position is not associated with a forecast either way. On the favorable side, stocks are deeply oversold, and with the major indices down for six consecutive weeks, there is a significant compression that could be explosive. On the unfavorable side, the sheer relentlessness of the recent decline is a negative in itself. Moreover, most mutual fund shareholders will be receiving quarterly statements this week. Given the brutality of the past quarter, these statements may trigger a sort of revulsion when investors actually get a look at actual numbers. So anything is possible here. In the bond market, the Market Climate remained characterized by unfavorable valuations, but favorable trend uniformity. However, since fixed income markets are not as susceptible to "bubbles" as equity markets are (if only because a low yield to maturity is properly interpreted as a low yield to maturity), favorable trend uniformity is not nearly as positive as favorable valuation. So while we are taking a certain amount of exposure to intermediate term Treasuries, part of the risk we've chosen here is in alternative assets, with about 30% of our funds diversified across foreign goverment bonds, precious metals shares, and utilities. An essential goal of the Hussman Funds is to take those risks that we believe are associated with a reasonable expectation of returns, and to avoid, hedge, and diversify away those risks that are not. We follow a very strict, theoretically rigorous and extensively tested approach in choosing these risks. Indeed, we've written various aspects of our approach directly into the Prospectus of each Fund. We occasionally receive well-intentioned notes urging us to purchase a particular security that does not satisfy our criteria, or to deviate in one way or another from our approach. Very simply, we don't do that (I would not, could not, in a box; I would not, could not, with a fox...). The risks that we take are taken intentionally and adhere to a very specific discipline. Not every security that satisfies our quantitative requirements is purchased - that's where additional research and due diligence enters - but we don't purchase securities that don't satisfy our quantitative requirements. The fact that our approach is flexible does not mean that it is discretionary. We follow our discipline strictly. With respect to the economy, it is important to recognize that the rate of unemployment fell in Friday's report strictly because workers are actually exiting the labor force. During the late 1990's, I frequently noted that the low rate of unemployment had not resulted in much wage inflation because labor force entry was permitting job growth even at very low unemployment rates. Indeed, labor force participation reached the highest level in history in recent years. We are now seeing the reverse effect, with workers actually leaving the labor force. This means that lower rates of unemployment should not be interpreted as strength in the labor market without looking directly to the job creation and hours-worked figures. It also means that wage inflation will probably respond much more quickly to any incipient strength in the economy, leading to a slower recovery in profits than might be expected when the economy eventually recovers. Not that there's much evidence for that yet. http://hsgfx:reciprocal@www.hussman.com/hussman/members/updates/latest.htm