Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.
The most likely answer to Ron’s question about the morphing of Marc Faber from Mr. Doom to Mr. Happy is never. He is committed to his own worldview and the present circumstances and data are nearly irrelevant.
In the financial community he exhibits all the characteristics of a Mr. No. I use the term Mr. No to conveniently contrast his behavior with a dedicated Mr. Yes. In many circles, adventurer Richard Branson is fondly called Mr. Yes. His most famous saying is “Screw it. Let’s do it”. That aggressive motto has earned him innumerable successes, and an occasional backslide.
I don’t buy into these pre-judgments, these by-gosh-and-by-golly pre-commitments. I think of them as lazy folly. It sure eases the decision process. Although that’s attractive in many commonplace instances, it can get an investor into deep hot water. Although the markets do reflect a cyclical behavior, each cycle differs from past experience sufficiently to merit a separate review and evaluation.
The marketplace is far too complex to be modeled by overly simplistic correlations. As Albert Einstein cautioned “Everything Should Be Made as Simple as Possible, But Not Simpler”. Oversimplification introduces the possibility of allowing the really significant market drivers to escape detection.
Perhaps this is the logic that InvesTech’s Jim Stack uses in his multidimensional set of market direction criteria. He adjusts his portfolio holdings incrementally as the various signals penetrate their threshold levels. I do buy into that conservative multi-criteria approach.
The last quarter’s GDP growth numbers were dismal. Over the long haul, academic and industry research find zero or nearly zero correlation between market returns and GDP growth values. But more recent and more nuanced studies, that introduced a wider array of independent parameters, suggest otherwise. The more nuanced assessment includes parameters like inflation, policy stance, and interest rates to augment GDP growth rate data.
Here are Links to a sample of the longer-term GDP growth study data, a GDP growth per capita data set, and the more nuanced findings:
All of this is good stuff. They might well serve as partial signals to help guide your portfolio asset allocation decisions. I would never suggest that these are decisive by themselves. The issue is much more complex.
For example, I have always included some measure of the equity markets Price to Earnings ratio (P/E or more recently CAPE) as part of my decision making process. Today, that signal is above its historical average, but it’s been in that dangerous zone for quite some time now. This bit of evidence supports the Faber assertion. At some point he will be proven correct, but who knows the unknowable timetable?
Today, I’m still into equities at my long-term percentage. But I am getting a little queasy, a little antsy. I’m taking no immediate action. I’m waiting for more evidence, one way or the other. As a general rule, I am not a market timer.
Stay loose guys. Don’t prejudge like either Faber or Branson. Let the accumulating data and whatever criteria you deploy be your final guide. Good luck to all of us.
Well, if I had wished to be gloomy or feel doomed, I would have put all my money in the old Steadman Oceanographic fund and watch it sink over the decades. Pun was intended.
The Steadman Funds likely top the list as the nastiest funds ever. That’s a hard distinction given the huge number of accessible bad mutual funds, both in conception and in execution. But Charles Steadman managed to secure that unenviable distinction across a long time horizon.
His funds morphed into the Ameritor Funds, and they continued their miserable performance before expiring after losing over 95% of their value in 2007.
These disasters were called the “Deadman funds” because it was inexplicable why their clients retained their holdings.
One plausible explanation might be that once committed to an inferior product, these loyal (foolish) investors weren’t prepared to acknowledge their faulty judgment which selling would do.
This is surely a sad but true woeful mutual fund tale. Thanks for recalling this misadventure.
Perhaps this is the logic that InvesTech’s Jim Stack uses in his multidimensional set of market direction criteria. He adjusts his portfolio holdings incrementally as the various signals penetrate their threshold levels. I do buy into that conservative multi-criteria approach.
What is Jim Stack's performance record versus an index fund such as a low cost total US Stock Market index fund, or S&P 500 index fund?
How did he do in the bear market from Oct 2007-March 9, 2009? How did he do in the bear market from March 15, 2000-October 2002 (or some say April 2003? How has he done in the bull market from March 9, 2009-the present?
I see from his website that he charges about $175/year to get his newsletter
The post didn't come out quite right......got mixed in with the quote.
What is Jim Stack's performance record versus an index fund such as a low cost total US Stock Market index fund, or S&P 500 index fund?
How did he do in the bear market from Oct 2007-March 9, 2009? How did he do in the bear market from March 15, 2000-October 2002 (or some say April 2003? How has he done in the bull market from March 9, 2009-the present?
I see from his website that he charges about $175/year to get his newsletter
Comments
Glad to know this "prediction" is from the Merrill group and not B of A's accounting group.
Does B of A's "prediction mean they will position their client accounts properly, prior to autumn???
Okay........gotta run; and finished with the tough question.
The most likely answer to Ron’s question about the morphing of Marc Faber from Mr. Doom to Mr. Happy is never. He is committed to his own worldview and the present circumstances and data are nearly irrelevant.
In the financial community he exhibits all the characteristics of a Mr. No. I use the term Mr. No to conveniently contrast his behavior with a dedicated Mr. Yes. In many circles, adventurer Richard Branson is fondly called Mr. Yes. His most famous saying is “Screw it. Let’s do it”. That aggressive motto has earned him innumerable successes, and an occasional backslide.
I don’t buy into these pre-judgments, these by-gosh-and-by-golly pre-commitments. I think of them as lazy folly. It sure eases the decision process. Although that’s attractive in many commonplace instances, it can get an investor into deep hot water. Although the markets do reflect a cyclical behavior, each cycle differs from past experience sufficiently to merit a separate review and evaluation.
The marketplace is far too complex to be modeled by overly simplistic correlations. As Albert Einstein cautioned “Everything Should Be Made as Simple as Possible, But Not Simpler”. Oversimplification introduces the possibility of allowing the really significant market drivers to escape detection.
Perhaps this is the logic that InvesTech’s Jim Stack uses in his multidimensional set of market direction criteria. He adjusts his portfolio holdings incrementally as the various signals penetrate their threshold levels. I do buy into that conservative multi-criteria approach.
The last quarter’s GDP growth numbers were dismal. Over the long haul, academic and industry research find zero or nearly zero correlation between market returns and GDP growth values. But more recent and more nuanced studies, that introduced a wider array of independent parameters, suggest otherwise. The more nuanced assessment includes parameters like inflation, policy stance, and interest rates to augment GDP growth rate data.
Here are Links to a sample of the longer-term GDP growth study data, a GDP growth per capita data set, and the more nuanced findings:
http://www.businessinsider.com/correlation-between-equity-returns-gdp-growth-2013-11
http://www.businessinsider.com/equity-returns-and-gdp-per-capita-2014-2
http://www.schroders.com/staticfiles/schroders/sites/Americas/US Institutional 2011/pdfs/Equity-Returns-and-GDP.pdf
All of this is good stuff. They might well serve as partial signals to help guide your portfolio asset allocation decisions. I would never suggest that these are decisive by themselves. The issue is much more complex.
For example, I have always included some measure of the equity markets Price to Earnings ratio (P/E or more recently CAPE) as part of my decision making process. Today, that signal is above its historical average, but it’s been in that dangerous zone for quite some time now. This bit of evidence supports the Faber assertion. At some point he will be proven correct, but who knows the unknowable timetable?
Today, I’m still into equities at my long-term percentage. But I am getting a little queasy, a little antsy. I’m taking no immediate action. I’m waiting for more evidence, one way or the other. As a general rule, I am not a market timer.
Stay loose guys. Don’t prejudge like either Faber or Branson. Let the accumulating data and whatever criteria you deploy be your final guide. Good luck to all of us.
Best Regards.
The Steadman Funds likely top the list as the nastiest funds ever. That’s a hard distinction given the huge number of accessible bad mutual funds, both in conception and in execution. But Charles Steadman managed to secure that unenviable distinction across a long time horizon.
His funds morphed into the Ameritor Funds, and they continued their miserable performance before expiring after losing over 95% of their value in 2007.
These disasters were called the “Deadman funds” because it was inexplicable why their clients retained their holdings.
One plausible explanation might be that once committed to an inferior product, these loyal (foolish) investors weren’t prepared to acknowledge their faulty judgment which selling would do.
This is surely a sad but true woeful mutual fund tale. Thanks for recalling this misadventure.
Best Wishes.
What is Jim Stack's performance record versus an index fund such as a low cost total US Stock Market index fund, or S&P 500 index fund?
How did he do in the bear market from Oct 2007-March 9, 2009?
How did he do in the bear market from March 15, 2000-October 2002 (or some say April 2003?
How has he done in the bull market from March 9, 2009-the present?
I see from his website that he charges about $175/year to get his newsletter