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January 16, 2017

Cassandra's Song

John P. Hussman, Ph.D.
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One of the attempted barbs tossed my way at various points in the past 20 years is “Cassandra.” Though I was often known as a leveraged “raging bull” before the late-1990’s bubble, and have regularly shifted to a constructive outlook after every bear market decline in more than 30 years as a professional investor, Cassandra’s name was called out at me approaching the bubble peaks of 2000, 2007, and again at the recent market highs. Frankly, I kind of like it.

See, in Greek mythology, Cassandra’s curse was not that her prophesies were incorrect. She understood her responsibility to defend others by sharing the future that she saw clearly. The curse was that nobody believed her until it was too late. When she warned that there were soldiers in the Trojan horse, the only person who believed her was silenced. As Robert E. Bell wrote, “her tragedy was knowing the unhappy truth and revealing it, something highly unwelcome then as now.”

Across three decades as a professional investor, we’ve always come out admirably over complete market cycles (with the clear exception of the speculative half-cycle since 2009). Even with recent challenges, we’ve never taken deeper loss during a complete market cycle than the S&P 500 has experienced. Still, the problem with recognizing the future is that one often seems wholly out-of-touch with the present. That was Cassandra’s problem too.

In March 2000, I wrote “The inconvenient fact is that valuation ultimately matters. That has led to the rather peculiar risk projections that have appeared in this letter in recent months. Trend uniformity helps to postpone that reality, but in the end, there it is... Over time, price/revenue ratios come back into line. Currently, that would require an 83% plunge in tech stocks (recall the 1969-70 tech massacre). The plunge may be muted to about 65% given several years of revenue growth. If you understand values and market history, you know we’re not joking.” The S&P 500 followed by losing half of its value by October 2002, while the tech-heavy Nasdaq 100 lost, well, 83%.

As the next bubble was getting its legs thanks to Fed-induced yield-seeking speculation, I wrote, “why is anybody willing to hold this low interest rate paper if the borrowers issuing it are so vulnerable to default risk? That's the secret. The borrowers don't actually issue it directly. Instead, much of the worst credit risk in the U.S. financial system is actually swapped into instruments that end up being partially backed by the U.S. government. These are held by investors precisely because they piggyback on the good faith and credit of Uncle Sam.” By April 2007 another bubble was fully formed, and I estimated that the market would have to lose 40% of its value simply to reach historical valuation norms. Following that 40% loss, I observed in my late-October 2008 comment that stocks had become undervalued. Neither view was popular at the time.

Despite anticipating the financial crisis, the accompanying economic consequences were “out of sample” from the standpoint of the post-war data that our market return/risk classifications relied upon, and I very admittedly stumbled as a result of my insistence on stress-testing our methods against Depression-era data (see the “Box” in The Next Big Short for the full narrative). Even so, our valuation methods were no part of that difficulty. They correctly identified stocks as undervalued in 2009 (though in the Depression, the same level of valuation was followed by stocks losing another two-thirds of their capitalization), and they’ve been just as tightly correlated with actual subsequent market returns in recent complete cycles as they have been across history.

While valuations are extremely informative about full-cycle returns and potential risks, returns over shorter segments of the market cycle are primarily driven by the inclination of investors toward risk-seeking or risk-aversion, which is best inferred from market action. The challenge in the recent half-cycle had to do with Fed-induced yield-seeking, which disrupted the historical tendency for deteriorating internals to accompany or quickly follow extreme “overvalued, overbought, overbullish” syndromes as they had in other cycles across history. In the face of zero interest rates, one had to wait for market internals to deteriorate explicitly before taking a hard-negative outlook.

Yet the fact that our valuation approach wasn’t the problem in the recent half-cycle is actually a horrible problem for investors here. See, regardless of market internals or even economic outcomes over a shorter horizon, the speculative extremes of recent years imply profound market losses in the coming years. I see these losses as both predictable and inevitable. On the most reliable measures across history, the S&P 500 presently stands between 120% and 150% above historical valuation norms (depending on which measure one chooses), and the correlation between those measures and actual subsequent market returns hasn’t deteriorated a bit in recent market cycles. Moreover, we’ve never observed a market cycle across history, even at the relatively kind 2002 lows, when these measures did not get within 25% of those norms (usually the completion of a market cycle takes valuations moderately to well-below those norms).

Below, I’ve reprinted a chart I presented last week, which features some of the most reliable valuation measures we follow, showing percentage deviations from their pre-bubble norms. S&P 500 forward earnings and revenues are imputed prior to 1980 based on their relationships with available data having a longer history. The measures below have correlations as high as 94% with actual subsequent S&P 500 total returns, particularly on a 10-12 year horizon.

The resulting arithmetic is fairly straightforward. Moving from 120% overvalued to 25% overvalued involves a loss of about (1.25/2.2-1=) -43%, while moving from 150% overvalued to fair value involves a loss of (1.0/2.5-1=) -60%. Feel free to narrow those projected losses by roughly 4% annually (representing nominal growth in GDP, revenues or corporate gross value-added) for every year between now and the completion of the current cycle, and you’ve got a fairly good estimate of where we expect stocks to end up - at best - by the low of this market cycle.

Causes and Conditions

If one understands
the law of cause and condition
one can find spring
in the midst of autumn frost and winter snow

- Buddhist Proverb

While human beings tend to be very eager to extrapolate existing conditions, and even enlarge them in their imagination, they are less apt to envision what isn’t already happening. The problem with the future, quite simply, is that it hasn’t happened yet. To see the future, one has to look deeply at the seeds that are already there in the present, but simply haven’t come to the surface. One has to recognize the interconnectedness of things - the fact that nothing has a separate self, but is instead the manifestation of a whole set of causes and conditions. A “cause” is a seed. A “condition” is a circumstance that allows the seed to grow.

For example, overvaluation can be thought of as the cause of market collapses, but the aversion of investors toward risk is a condition that allows the cause to manifest. Steep market losses are inherent in extreme overvaluation, but historically, a risk-seeking attitude among investors (demonstrated by a combination of uniformly favorable market internals and the absence of overbought market action and overbullish sentiment) has enabled continued speculation.

As I’ve regularly noted, in the face of the Federal Reserve’s zero-interest rate policies, speculation continued even after “overvalued, overbought, overbullish” extremes were reached, something we hadn’t seen in prior market cycles. One had to wait for dispersion across market internals for the market to become vulnerable to losses. Part of the reason we cannot rule out a market collapse here is that both the causes and conditions that have historically enabled market collapses are now present. The conditions may change in a way that defers a collapse for a while, and we’ll monitor market action to gauge that possibility. But given the valuation extremes that are already established, the cause will not go away.

I view steep financial market losses to be inevitable over the completion of this cycle. Still, we know how to deal with that risk. My concerns have frankly become much broader in recent weeks, particularly in the direction our nation is taking. It strikes me that because the U.S. is a relatively young nation, we are less inclined to recognize seeds that can grow into abuse of power, because the worst examples we recall across history have been in other nations. The progression thus far rhymes more than I’d like. I think it would be wrong to abandon vigilance and scrutiny, particularly where various proposals could have the effect of weakening the separation of powers between the legislative, executive, and judicial branches. Already, the inclinations to waive Congressional rules, to deride and offer selective access to the press, and to weaken ethics oversight are of concern. Recalling Thomas Jefferson, “The only security of all is in a free press. The force of public opinion cannot be resisted, when permitted freely to be expressed. The agitation it produces must be submitted to.” Another concern is the embellished focus on external threats. As James Madison wrote, “If tyranny and oppression come to this land, it will be under the guise of fighting a foreign enemy. The means of defense against a foreign danger historically have become the instruments of tyranny at home.”

I woke the other night thinking about the coming years; in the markets, in our country, and in our world. I reached over in the dark to the stack of 3 x 5 cards on the table next to me, composed these words, and went back to sleep:

To recognize the future in the seeds of the present
is to cry before sorrow falls, and to laugh before joy arrives


On Peace

Those of you who know me well know that I’ve had three mentors in my life; two of them, Jimmy Carter and my teacher Thich Nhat Hanh, who I’ve been blessed to call my friends; and Dr. King, who our nation rightly celebrates this week (and who, to close the circle, long ago nominated Thich Nhat Hanh for the Nobel Peace Prize). Among the many things they’ve all taught, and stood for, is that the person we might call our adversary is another human being, suffering in a way that we may not understand - perhaps from hatred, ignorance, fear, or perceptions of injustice - and that the only path to reconciliation is to encourage each to understand and address the suffering of the other. It’s always possible to do that in a way that is consistent with our own security.

My sense is that the peace of our world, and the civility of our nation, is at risk because people don’t really trust that idea. They’ve come to believe that an adversary is someone to be insulted, and attacked, and ultimately destroyed. That’s the behavior that they see modeled for them; encouraged to ignore our interconnectedness - that all of us are empty of a separate self, and full of causes and conditions that are common to our humanity. We become a stronger nation and a better world when each of us feels heard - and I don’t mean just when “we” feel heard and respected, but also when whomever we call “they” also feel heard and respected.

It’s often imagined that peace is the result of sufficiently crushing one’s opponent; of inflicting so much injury and suffering that they surrender. There’s little doubt that conflicts can be ended in this way, but only at terrific cost, and with deep scars that feed later hatreds and conflicts. Others somehow come to imagine that waging peace requires one to lay down defenseless. It’s just not so. Peace doesn’t mean that one doesn’t defend oneself, or refrain from criticism. Peace doesn’t demand the absence of strength. It asks each side to see and understand the suffering of the other, whether that suffering is rooted in reality or misperception. It asks us to refrain from needlessly provoking the adversary, or to insult them in order to boost our pride. It asks us to look to address their suffering in ways that are consistent with our own security. If peace demands anything from us, it is to refrain from being infected by hatred. Dr. King recognized that:

"Darkness cannot drive out darkness; only light can do that. Hate cannot drive out hate; only love can do that. I have decided to stick with love. Hate is too great a burden to bear."

Even in the midst of a fight, one can still remember that the goal is reconciliation. As the revered martial artist Morihei Ueshiba wrote:

“To injure an opponent is to injure yourself. To control aggression without injury is the Art of Peace. In the Art of Peace, we never attack. An attack is proof that one is out of control. Never run away from any kind of challenge, but do not try to suppress or control an opponent unnaturally. When an opponent comes forward, move in and greet him; if he wants to pull back, send him on his way. If your heart is large enough to envelop your adversaries, you can see right through them and their attacks. And once you envelop them, you will be able to guide them along a path indicated by you, by heaven and earth. Enter deeply into an attack and neutralize it as you draw that misdirected force into your own sphere. Even the most powerful human being has a limited sphere of strength. Draw him outside of that sphere and into your own, and his strength will dissipate. The Way of the Warrior, the Art of Politics, is to stop trouble before it starts. It consists of defeating your adversaries by making them realize the folly of their actions. The way of a Warrior is to establish harmony. Aiki is not a technique to fight with or defeat the enemy. It is a way to reconcile the world and make human beings one family.”

Study carefully the moments of peace that came without intolerable violence, and you’ll find that the common denominator was the recognition by each side of their common humanity. That teaching has echoed across centuries; transcending religion, race, and political affiliation:

“I will tell you the moment. Mr. Reagan and I were sitting across from each other, and we were fighting. Suddenly, he stood up and turned away from me, as if he was about to leave. It jolted me. Then, just as quickly, he turned around and looked me in the eye, with a smile on his face, and said ‘Let’s start fresh, shall we? My name is Ron. May I call you Mikhail?’ What ended the Cold War was the end of demonization: when we saw each other as human beings, not as countries fighting one another, not as evil people - when we changed our point of view about one another.”

- Mikhail Gorbachev

In his book, White House Diary, Jimmy Carter recounts the turning point during the Camp David Accords. It was the same moment in a different form; a recognition of common humanity.

“Sadat had abruptly decided that our discussions would never yield an acceptable agreement and asked for a helicopter to take him to the airport in Washington. This was one of the worst moments of my life. I went to my bedroom, knelt down, and prayed, and - for some reason - decided to change from my sport shirt and jeans to a suit and tie.

“Earlier [my secretary] Susan had brought me some photographs of myself, Sadat, and Begin. Sadat had already signed them, and Begin wanted me to sign them to give to his grandchildren. Susan decided to get the actual names of his grandchildren. I personalized all of the photographs and walked over to Begin’s cabin with them. He was sitting on the front porch, very distraught and nervous, because the talks had broken down at the last minute. I handed him the photographs. He took them and thanked me, then looked down and saw that his grandchild’s name was on the top one. He called her name and then looked at every photograph individually, repeating the name of each grandchild that I had written on it. His lips trembled, and tears welled up in his eyes. He told me which was his favorite grandchild. We exchanged a few words in an emotional way about grandchildren and war. This proved to be a turning point in Begin’s attitude toward reaching a peace agreement, from obdurate objections to an obvious desire to be successful.”

- Jimmy Carter

In Honor and Remembrance of Reverend Dr. Martin Luther King

Dr. King noted that he tried to speak on the subject below at least once a year. That still seems an appropriate way to honor his memory. If you've never read Dr. King's writings, this talk is a good place to start. In a world where people - on both sides of the word “enemy” - seem so inclined to carelessly pour their reservoir of suffering onto others without recognizing their shared humanity, our best cause for hope still resides in the wisdom of peacemakers like Dr. King. One can’t read his words without coming away better for it.

Loving Your Enemies
November 17 1957

“I want to use as a subject from which to preach this morning a very familiar subject, and it is familiar to you because I have preached from this subject twice before to my knowing in this pulpit. I try to make it something of a custom or tradition to preach from this passage of Scripture at least once a year, adding new insights that I develop along the way out of new experiences as I give these messages. Although the content is, the basic content is the same, new insights and new experiences naturally make for new illustrations.

“So I want to turn your attention to this subject: "Loving Your Enemies." It's so basic to me because it is a part of my basic philosophical and theological orientation - the whole idea of love, the whole philosophy of love. In the fifth chapter of the gospel as recorded by Saint Matthew, we read these very arresting words flowing from the lips of our Lord and Master: "Ye have heard that it has been said, ‘Thou shall love thy neighbor, and hate thine enemy.' But I say unto you, Love your enemies, bless them that curse you, do good to them that hate you, and pray for them that despitefully use you; that ye may be the children of your Father which is in heaven."

“Over the centuries, many persons have argued that this is an extremely difficult command. Many would go so far as to say that it just isn't possible to move out into the actual practice of this glorious command. But far from being an impractical idealist, Jesus has become the practical realist. The words of this text glitter in our eyes with a new urgency. Far from being the pious injunction of a utopian dreamer, this command is an absolute necessity for the survival of our civilization. Yes, it is love that will save our world and our civilization, love even for enemies.

“Now let me hasten to say that Jesus was very serious when he gave this command; he wasn't playing. He realized that it's hard to love your enemies. He realized that it's difficult to love those persons who seek to defeat you, those persons who say evil things about you. He realized that it was painfully hard, pressingly hard. But he wasn't playing. We have the Christian and moral responsibility to seek to discover the meaning of these words, and to discover how we can live out this command, and why we should live by this command.

“Now first let us deal with this question, which is the practical question: How do you go about loving your enemies? I think the first thing is this: In order to love your enemies, you must begin by analyzing self. And I'm sure that seems strange to you, that I start out telling you this morning that you love your enemies by beginning with a look at self. It seems to me that that is the first and foremost way to come to an adequate discovery to the how of this situation.

“Now, I'm aware of the fact that some people will not like you, not because of something you have done to them, but they just won't like you. But after looking at these things and admitting these things, we must face the fact that an individual might dislike us because of something that we've done deep down in the past, some personality attribute that we possess, something that we've done deep down in the past and we've forgotten about it; but it was that something that aroused the hate response within the individual. That is why I say, begin with yourself. There might be something within you that arouses the tragic hate response in the other individual.

“This is true in our international struggle. Democracy is the greatest form of government to my mind that man has ever conceived, but the weakness is that we have never touched it. We must face the fact that the rhythmic beat of the deep rumblings of discontent from Asia and Africa is at bottom a revolt against the imperialism and colonialism perpetuated by Western civilization all these many years.

“And this is what Jesus means when he said: "How is it that you can see the mote in your brother's eye and not see the beam in your own eye?" And this is one of the tragedies of human nature. So we begin to love our enemies and love those persons that hate us whether in collective life or individual life by looking at ourselves.

“A second thing that an individual must do in seeking to love his enemy is to discover the element of good in his enemy, and every time you begin to hate that person and think of hating that person, realize that there is some good there and look at those good points which will over-balance the bad points.

“Somehow the "isness" of our present nature is out of harmony with the eternal "oughtness" that forever confronts us. And this simply means this: That within the best of us, there is some evil, and within the worst of us, there is some good. When we come to see this, we take a different attitude toward individuals. The person who hates you most has some good in him; even the nation that hates you most has some good in it; even the race that hates you most has some good in it. And when you come to the point that you look in the face of every man and see deep down within him what religion calls "the image of God," you begin to love him in spite of. No matter what he does, you see God's image there. There is an element of goodness that he can never slough off. Discover the element of good in your enemy. And as you seek to hate him, find the center of goodness and place your attention there and you will take a new attitude.

“Another way that you love your enemy is this: When the opportunity presents itself for you to defeat your enemy, that is the time which you must not do it. There will come a time, in many instances, when the person who hates you most, the person who has misused you most, the person who has gossiped about you most, the person who has spread false rumors about you most, there will come a time when you will have an opportunity to defeat that person. It might be in terms of a recommendation for a job; it might be in terms of helping that person to make some move in life. That's the time you must do it. That is the meaning of love. In the final analysis, love is not this sentimental something that we talk about. It's not merely an emotional something. Love is creative, understanding goodwill for all men. It is the refusal to defeat any individual. When you rise to the level of love, of its great beauty and power, you seek only to defeat evil systems. Individuals who happen to be caught up in that system, you love, but you seek to defeat the system.

“The Greek language, as I've said so often before, is very powerful at this point. It comes to our aid beautifully in giving us the real meaning and depth of the whole philosophy of love. And I think it is quite apropos at this point, for you see the Greek language has three words for love, interestingly enough. It talks about love as eros. That's one word for love. Eros is a sort of, aesthetic love. Plato talks about it a great deal in his dialogues, a sort of yearning of the soul for the realm of the gods. And it's come to us to be a sort of romantic love, though it's a beautiful love. Everybody has experienced eros in all of its beauty when you find some individual that is attractive to you and that you pour out all of your like and your love on that individual. That is eros, you see, and it's a powerful, beautiful love that is given to us through all of the beauty of literature; we read about it.

“Then the Greek language talks about philia, and that's another type of love that's also beautiful. It is a sort of intimate affection between personal friends. And this is the type of love that you have for those persons that you're friendly with, your intimate friends, or people that you call on the telephone and you go by to have dinner with, and your roommate in college and that type of thing. It's a sort of reciprocal love. On this level, you like a person because that person likes you. You love on this level, because you are loved. You love on this level, because there's something about the person you love that is likeable to you. This too is a beautiful love. You can communicate with a person; you have certain things in common; you like to do things together. This is philia.

“The Greek language comes out with another word for love. It is the word agape. And agape is more than eros; agape is more than philia; agape is something of the understanding, creative, redemptive goodwill for all men. It is a love that seeks nothing in return. It is an overflowing love; it's what theologians would call the love of God working in the lives of men. And when you rise to love on this level, you begin to love men, not because they are likeable, but because God loves them. You look at every man, and you love him because you know God loves him. And he might be the worst person you've ever seen.

“And this is what Jesus means, I think, in this very passage when he says, "Love your enemy." And it's significant that he does not say, "Like your enemy." Like is a sentimental something, an affectionate something. There are a lot of people that I find it difficult to like. I don't like what they do to me. I don't like what they say about me and other people. I don't like their attitudes. I don't like some of the things they're doing. I don't like them. But Jesus says love them. And love is greater than like. Love is understanding, redemptive goodwill for all men, so that you love everybody, because God loves them. You refuse to do anything that will defeat an individual, because you have agape in your soul. And here you come to the point that you love the individual who does the evil deed, while hating the deed that the person does. This is what Jesus means when he says, "Love your enemy." This is the way to do it. When the opportunity presents itself when you can defeat your enemy, you must not do it.

“Now for the few moments left, let us move from the practical how to the theoretical why. It's not only necessary to know how to go about loving your enemies, but also to go down into the question of why we should love our enemies. I think the first reason that we should love our enemies, and I think this was at the very center of Jesus' thinking, is this: that hate for hate only intensifies the existence of hate and evil in the universe. If I hit you and you hit me and I hit you back and you hit me back and go on, you see, that goes on ad infinitum. It just never ends. Somewhere somebody must have a little sense, and that's the strong person. The strong person is the person who can cut off the chain of hate, the chain of evil. And that is the tragedy of hate - that it doesn't cut it off. It only intensifies the existence of hate and evil in the universe. Somebody must have religion enough and morality enough to cut it off and inject within the very structure of the universe that strong and powerful element of love.

“I think I mentioned before that sometime ago my brother and I were driving one evening to Chattanooga, Tennessee, from Atlanta. He was driving the car. And for some reason the drivers were very discourteous that night. They didn't dim their lights; hardly any driver that passed by dimmed his lights. And I remember very vividly, my brother A. D. looked over and in a tone of anger said: "I know what I'm going to do. The next car that comes along here and refuses to dim the lights, I'm going to fail to dim mine and pour them on in all of their power." And I looked at him right quick and said: "Oh no, don't do that. There'd be too much light on this highway, and it will end up in mutual destruction for all. Somebody got to have some sense on this highway."

“Somebody must have sense enough to dim the lights, and that is the trouble, isn't it? That as all of the civilizations of the world move up the highway of history, so many civilizations, having looked at other civilizations that refused to dim the lights, and they decided to refuse to dim theirs. And Toynbee tells that out of the twenty-two civilizations that have risen up, all but about seven have found themselves in the junk heap of destruction. It is because civilizations fail to have sense enough to dim the lights. And if somebody doesn't have sense enough to turn on the dim and beautiful and powerful lights of love in this world, the whole of our civilization will be plunged into the abyss of destruction. And we will all end up destroyed because nobody had any sense on the highway of history.

"Somewhere somebody must have some sense. Men must see that force begets force, hate begets hate, toughness begets toughness. And it is all a descending spiral, ultimately ending in destruction for all and everybody. Somebody must have sense enough and morality enough to cut off the chain of hate and the chain of evil in the universe. And you do that by love.

“There's another reason why you should love your enemies, and that is because hate distorts the personality of the hater. We usually think of what hate does for the individual hated or the individuals hated or the groups hated. But it is even more tragic, it is even more ruinous and injurious to the individual who hates. You just begin hating somebody, and you will begin to do irrational things. You can't see straight when you hate. You can't walk straight when you hate. You can't stand upright. Your vision is distorted. There is nothing more tragic than to see an individual whose heart is filled with hate. He comes to the point that he becomes a pathological case. For the person who hates, you can stand up and see a person and that person can be beautiful, and you will call them ugly. For the person who hates, the beautiful becomes ugly and the ugly becomes beautiful. For the person who hates, the good becomes bad and the bad becomes good. For the person who hates, the true becomes false and the false becomes true. That's what hate does. You can't see right. The symbol of objectivity is lost. Hate destroys the very structure of the personality of the hater.

“The way to be integrated with yourself is be sure that you meet every situation of life with an abounding love. Never hate, because it ends up in tragic, neurotic responses. Psychologists and psychiatrists are telling us today that the more we hate, the more we develop guilt feelings and we begin to subconsciously repress or consciously suppress certain emotions, and they all stack up in our subconscious selves and make for tragic, neurotic responses. And may this not be the neuroses of many individuals as they confront life that that is an element of hate there. And modern psychology is calling on us now to love. But long before modern psychology came into being, the world's greatest psychologist who walked around the hills of Galilee told us to love. He looked at men and said: "Love your enemies; don't hate anybody." It's not enough - to love your friends - because when you start hating anybody, it destroys the very center of your creative response to life and the universe; so love everybody. Hate at any point is a cancer that gnaws away at the very vital center of your life and your existence. It is like eroding acid that eats away the best and the objective center of your life. So Jesus says love, because hate destroys the hater as well as the hated.

“Now there is a final reason I think that Jesus says, "Love your enemies." It is this: that love has within it a redemptive power. And there is a power there that eventually transforms individuals. That's why Jesus says, "Love your enemies." Because if you hate your enemies, you have no way to redeem and to transform your enemies. But if you love your enemies, you will discover that at the very root of love is the power of redemption. You just keep loving people and keep loving them, even though they're mistreating you. Here's the person who is a neighbor, and this person is doing something wrong to you and all of that. Just keep being friendly to that person. Keep loving them. Don't do anything to embarrass them. Just keep loving them, and they can't stand it too long. Oh, they react in many ways in the beginning. They react with bitterness because they're mad because you love them like that. They react with guilt feelings, and sometimes they'll hate you a little more at that transition period, but just keep loving them. And by the power of your love they will break down under the load. That's love, you see. It is redemptive, and this is why Jesus says love. There's something about love that builds up and is creative. There is something about hate that tears down and is destructive. So love your enemies.

“There is a power in love that our world has not discovered yet. Jesus discovered it centuries ago. Mahatma Gandhi of India discovered it a few years ago, but most men and most women never discover it. For they believe in hitting for hitting; they believe in an eye for an eye and a tooth for a tooth; they believe in hating for hating; but Jesus comes to us and says, "This isn't the way."

“As we look out across the years and across the generations, let us develop and move right here. We must discover the power of love, the power, the redemptive power of love. And when we discover that we will be able to make of this old world a new world. We will be able to make men better. Love is the only way. Jesus discovered that.

“And our civilization must discover that. Individuals must discover that as they deal with other individuals. There is a little tree planted on a little hill and on that tree hangs the most influential character that ever came in this world. But never feel that that tree is a meaningless drama that took place on the stages of history. Oh no, it is a telescope through which we look out into the long vista of eternity, and see the love of God breaking forth into time. It is an eternal reminder to a power-drunk generation that love is the only way. It is an eternal reminder to a generation depending on nuclear and atomic energy, a generation depending on physical violence, that love is the only creative, redemptive, transforming power in the universe.

“So this morning, as I look into your eyes, and into the eyes of all of my brothers in Alabama and all over America and over the world, I say to you, "I love you. I would rather die than hate you." And I'm foolish enough to believe that through the power of this love somewhere, men of the most recalcitrant bent will be transformed. And then we will be in God's kingdom.”

The foregoing comments represent the general investment analysis and economic views of the Advisor, and are provided solely for the purpose of information, instruction and discourse. Please see periodic remarks on the Fund Notes and Commentary page for discussion relating specifically to the Hussman Funds and the investment positions of the Funds.

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Prospectuses for the Hussman Strategic Growth Fund, the Hussman Strategic Total Return Fund, the Hussman Strategic International Fund, and the Hussman Strategic Dividend Value Fund, as well as Fund reports and other information, are available by clicking "The Funds" menu button from any page of this website.

Estimates of prospective return and risk for equities, bonds, and other financial markets are forward-looking statements based the analysis and reasonable beliefs of Hussman Strategic Advisors. They are not a guarantee of future performance, and are not indicative of the prospective returns of any of the Hussman Funds. Actual returns may differ substantially from the estimates provided. Estimates of prospective long-term returns for the S&P 500 reflect our standard valuation methodology, focusing on the relationship between current market prices and earnings, dividends and other fundamentals, adjusted for variability over the economic cycle (see for example Investment, Speculation, Valuation, and Tinker Bell, The Likely Range of Market Returns in the Coming Decade and Valuing the S&P 500 Using Forward Operating Earnings ).


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