A Positive Market Outlook Hi Guys,
“Bull markets are born of pessimism, grow on skepticism, mature on optimism, and die on euphoria.” Sir John Templeton assembled these wise words to crystallize market cycles.
I’ve just invested the last 4 days attending the 2014 edition of the Las Vegas MoneyShow. I have been doing this annual event now for over 15 years. It never disappoints. The consensus expert opinion from the 2014 event is that the Bull market is presently in the optimistic phase of Templeton’s model. It has a way to go.
Here’s my field report.
The MoneyShow features one-half to one hour presentations delivered at 10 simultaneous lectures starting at 7:30 each morning and ending after 7 each evening. It’s a well organized, full schedule with attendance numbers approaching 10 thousand millionaires.
Yes, I said millionaires. According to economist Mark Skousen, each attendee is a guaranteed millionaire, especially if the unit of measure is the Mexican Peso. Lesson One: Measurement units must be specified.
The overarching theme of this year’s conference was the stability and continuity of the current Bull market; especially, what are the prospects for the remainder of the year?
In one form or another, all the speakers have skin in the game so some skepticism is a cautionary watchword. One pertinent story tells of a man meeting with the Devil and with God in his last days on Earth. The man has the option to choose, so he asks both about the afterlife.
The Devil surprisingly describes the Underworld as being an equivalent Las Vegas; God describes Heaven as an idyllic, sunny, no pressure environment. The man elects the Las Vegas option. When he arrives, the pit is hot with dense choking smoke; it’s a miserable abyss that earns it reputation. The man challenges the Devil about the deception. The Devil explains that at the earlier meeting, the man was a prospect; today he is a client. Lesson Two: Buyer beware.
In the opening session, a distinguished panel that included Peter Schiff, Ken Fisher, Jim Stack, Gary Shilling, and Steve Forbes hotly debated the market direction issue. Peter Schiff was the sole Bear (his usual position), and the others brutally attacked his arguments. At a minimum, these eminent panel members are guardedly optimistic and did not hesitate to pile-on the outgunned Schiff. He handled it well.
In keeping with his tradition for the last few years, Jim Stack reviewed the status of the numerous signals that he deploys to gauge the Market’s near term prospects. A few of these signals have been penetrated, but most remain positive for near term returns.
So Stack is still heavy into equities, but he has made a marginal shift to increase a modest cash position. Earlier, an MFO member asked how Stack performed in the 2008 meltdown. Including reinvested dividend, Stack claims that while the S&P 500 lost 37%, his overall portfolios lost 17%, about half as volatile on the downside swing.
Many of the presentations focused on market crash protection strategies. These strategies varied across a broad spectrum that greatly reflected the personalities and policies of each individual professional investor and advisor.
For example, Louie Navellier advised that it is not an issue if you are a careful and prudent investor or hire one, namely Navellier himself. He concludes that solid profit generating companies exist under any market environments, and research can discover these gems at attractive prices. He recommends being fully invested under all circumstances. Lesson Three: Wall Street arrogance knows no boundaries.
S&P’s Sam Stovall endorsed a rules-based sector strategy that provides portfolio protection under all conditions. Stovall’s strategy is the end output from examining sector performance separately under both Bull and Bear market scenarios.
Stovall examined historical performance statistics. He concluded that the equity allocation of a portfolio benefits from an overweighting of Consumer Staple and Healthcare segments. His studies demonstrated that an extra 20% weighting in each of these two sectors yielded a net gain over a pure S&P portfolio across many past market cycles. Lesson Four: The statistical data sets contain actionable secrets when sliced and diced carefully.
BMO’s (Bank of Montreal) Jack Albin is a mega-macroeconomist who uses a dashboard of 5 generic metrics to inform his investment dynamics. He believes that extremely broad market investment category decisions are far more decisive than specific stock or sector selection. The 5 signal areas are: Valuation, Economy, Momentum, Liquidity, and Psychology. His presentation material is accessible on MoneyShow.com. You will need to register. The title of his talk is “Five Factors for Evaluating the Market”.
Please give it a test ride. Albin is easy to follow and crystal clear in his explanations. I like his macro-perspective and the fact that he emphasizes process rather than specific findings. He currently is neutral on equities so he recommends that you should hold present equity positions, but don’t increase them. Longer term, he favors European and Emerging markets. Lesson Five: Process is more influential than specific outcome.
Mark Hulbert is always the fly in the ointment at these sessions given that all of the expert participants, and most of the conference attendees, advocate an active investment philosophy. Hulbert monitors newsletter performance. He does identify a few newsletters and advisors who outperform relevant benchmarks. But even these superior professionals suffer dry periods. Warren Buffett has underperformed his equity benchmark over the last 5 years. ValueLine seems to have lost its edge.
Hulbert has an easy-going, Southern personality, but does manage to quietly agitate his audience at times. At one session, Hulbert told his audience that if they all invested an equal amount today, and then returned 15 years later, he would outperform 90% of them by simply investing in Index products.
He further speculated that he would only outdistance 80% of the professionals. The amateurs are such poor market timers and herd followers that the final count would reach the dismal 90% level. Lesson Six: Folks only want to hear confirmatory statements; his attendees hated this projection.
Hulbert’s goal is to identify the longer-term, persistently successful newsletters. Currently, his 15-year mutual fund leader list includes: No Load Mutual Fund Set & Timing, Sector Navigator, InvesTech Research Portfolio Strategy, and Fidelity Navigator. The absolute standings are very timeframe and investment environment dependent.
The bottom-line takeaway from the just concluded Las Vegas conference is to stay the equity course for the next 6 to 9 months. Most experts project a modestly upward sloping US equity marketplace.
This summary only captures a small fraction of the Las Vegas happenings, but it is far, far too long at this juncture.
As usual, Las Vegas is always a stimulating and pleasant stopover. Most of the folks staying in Sin City these days are foreigners. It’s good that they are returning wealth to the USA. It’s a good deal for both them and us.
Best Regards.
Miller: Gundlach's Bearish Housing Position Is Wrong
The Case For Momentum Investing
Take The Long View And Side-Step Investing In China
10-Year Treasury Yield Drops To New 2014 Low 2.532%
10-Year Treasury Yield Drops To New 2014 Low 2.532% STB6
5 Ted will probably post this and maybe it should be in its own separate thread but here's Gundlach latest musings.
http://finance.yahoo.com/news/gundlach-could-verge-one-biggest-190053082.htmlAs an aside, he's not the manager but his Doubleline Emerging Markets Income fund (DLENX) has been an impressive and consistent low volatility performer. If I get stopped out of NHMRX would consider going there assuming its bull trend continues.
10-Year Treasury Yield Drops To New 2014 Low 2.532% I admit this comment is pretty far down in the thread, but:
Gundlach's argument that retirees will be buying bonds yielding under 3% because they need stable income must apply to a more successful class than mine. I had assumed that foreign governments or rich people (of any nationality) bought US treasuries because the bonds' security was more important than their yield.
If you can afford to buy $1M in bonds to earn $25K before taxes and inflation, you must either be a multimillionaire or have a very frugal life style (which may be forced upon some of us).
The argument that we should intentionally use up our principal for retirement income is partially valid, but most of us do not plan for our funds and our existence to expire simultaneously, because we hope to insure our progeny against an uncertain future.
Gundlach is obviously a smart guy, and I invest in his funds, but it seems one would need to have significant retirement savings for this view to prevail. I think that higher return on US bonds vs other developed countries is a more valid reason.
For US Bond haters to consider 12.84% of portf. in US Treasuries: DLFNX. Up +4.33 ytd.
5.97% of portf. in UST: DLTNX. Up +3.87 ytd.
I own DLFNX. I just thought to compare them.
MAINX is SHORTING USA 10-year notes. (labeled "CBT." What's that? Dated June, 2014. Callable Boot Trash? CBT?) But it's near the bottom of its holdings list. I asked about this earlier, and David got an answer from Fund Manager Teresa Kong which seemed to make sense.
MAINX ytd: up +3.52%.
For US Bond haters to consider Please don't enlighten the bond haters. They are needed to keep propelling yields lower, prices higher. What we don't need is a major shift in consensus that bond yields can only continue to go lower from here and for the bears to go into hibernation. Remember how entering January bond bearishness was rampant and near record levels. Every Tom, Dick, and Harry was calling for an inevitable and immediate rise in yields to 3.
50% and then later in the year to 4.0%. We've seen how that has played out YTD so far. Conversely, entering January stock market optimism was by many measures at historic highs. And the result is that market hasn't exactly set the world on fire YTD.
Below is a link to a hater of bonds.
http://blogs.barrons.com/incomeinvesting/2014/05/15/deutsche-bank-sees-swift-and-violent-treasury-yield-rise/?mod=BOL_hp_blog_ii
For US Bond haters to consider
Take The Long View And Side-Step Investing In China
10-Year Treasury Yield Drops To New 2014 Low 2.532%
Time anomolies Gary: Timeline:
Article: (WSJ) 5/15/14: 11:43 AM EST
Posted: (Ted) 5/15/14 3:15 PM CST
Read: (Gary) 5/15/14 4:20 PM CST
Time anomolies At 4:05 PM I viewed a WSJ article Russell 200 Tumble that cleared the wire this morning at 11:43AM. Ted posted it at 8:11 PM and I read it at 4:03 PM what's the deal???
The Closing Bell: U.S. Stocks Fall Sharply
Art Cashin: "We're Living In A 5-Year Paradox"
10-Year Treasury Yield Drops To New 2014 Low 2.532% more:
"The Consumer Price Index (CPI) posted another relatively firm increase in April, with the headline number increasing 0.26% and the core number rising 0.24%. By no means does the US have an inflation problem in the traditional sense, but with the three-month annualized run rate on core CPI sitting at 2.26%, it doesn't feel as though "lowflation" is dogging the economy either. Based on today's number and yesterday's PPI, we project that the core PCE price index will advance 0.15% in April, which would take the year-ago increase to 1.41% -- this would be low relative the Fed's 2% objective, but noticeably above the 1.10% figure registered as recently as February. It is hard to say with precision if this drift higher is in line with the Fed's latest forecast released in March (which has a 4Q14 mid-point of 1.55% on year-ago core PCE), but at the least their outlook for a directional move higher in inflation is being confirmed. "
