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Weighing the Week Ahead: More "Experts" Predicting a Market Top
Most potential stock investors have been bruised by events over the last decade. They are receptive to a message of fear, and many pundits are happy to satisfy their urges. Calling for a major market turn can be very profitable for the pundit. This is true even if the prediction is very early and the pundit never signals when to shift back.
Albert Edwards and Dylan Grice: Bearish Forecasts from Two Top Strategists
by Robert Huebscher,
Its been nearly 18 years since Albert Edwards forecast an "ice age" in which bonds would outperform equities. Hes been right until just recently, when cumulative returns on the two classes converged. But Edwards insists that his thesis is still accurate - deflation will be the force to propel bonds over stocks, he says. Dylan Grice, meanwhile, warns that the markets operate on an unstable equilibrium that could devolve into apocalyptic conditions.
Dialing Down the Drama
We remain optimistic on stocks for 2014, but there will likely be bumps in the road. Investor sentiment is elevated, complacency seems to be building, and the valuation story is less compelling. But waiting for a correction can be quite detrimental to portfolio performance, evidenced by last year. QE tapering will likely continue at a very modest pace and U.S. interest rates will likely drift higher throughout the year. We remain positive on Europe and our outlook toward China is improving, while we are in at wait-and-see sort of mode with Japan.
Getting Lucky
Sometimes these memos are inspired by a single event or just one thing I read. This one - like my first memo 24 years ago - grew out of the juxtaposition of two observations. Ill introduce one here and the other later on. Contrary to my wife Nancys observation that my memos are "all the same," the subject here is one Ive rarely touched on.
Home (Finance) Repairs
Five years after the 2008 financial panic, there are still no concrete plans for what to do with the twin mortgage finance giants, Fannie Mae and Freddie Mac. The only consensus among Congress, the Obama administration, regulators and the banking industry is that no one knows what to do. No clear compelling vision for the federal governments role in residential mortgage finance has yet to be offered by a party to the debate.
ProVise Bullets
In late December just before Christmas, the Postal Regulatory Commission delivered an unwanted present in the form of a "temporary" three cent rate hike for first class mail effective January 26th. It seems that the Post Office decided it lost $2.8 billion as a result of the Great Recession and convinced the Commission that it needed to make this loss go away. Well, in reality, the Post Office asked for a permanent hike, but was only given the opportunity to make up the loss and then have the rate go back down. We shall see.
Merk 2014 Dollar, Currency & Gold Outlook
by Axel Merk of Merk Investments,
Rarely has the future been so clear. Really?? A lot of money has been lost jumping on the bandwagon. Lets do a common sense check on the greenback to gauge where risks might be lurking and where there might be profit opportunities for investors.
2014 Economic and Investment Outlook
Although the December 2013 U.S. budget pact between House and Senate negotiators was a welcome development, partisan battles over government spending still are possible in 2014. The agreement ends a three-year budget fight and sets government spending through fall 2015, but it does not eliminate the need to raise the nations borrowing limit - the "debt ceiling."
The U.S. Begins an (Un)employment Experiment
by Sam Wardwell of Pioneer Investments,
Extended unemployment benefits stopped for 1.3 million people at year-end. This doesnt change their employment status...they just stop getting unemployment compensation. Extended benefits (of up to 99 weeks) was part of the recession-fighting fiscal stimulus package. A question was: did this create a dis-incentive to find a job (aka "funemployment").
The Price Action of Stocks Trumps Fundamentals
Perhaps the best argument that one can make for stocks is that many hold doubts about the continuing bull market. The reasons for these doubts are understandable, as the economic recovery has been anemic and growth has slowed significantly - likely leading to lower profits in the future. As a result, corporations have aggressively cut costs, increased productivity and preserved cash - pushing profit margins to historically high levels.
How to Use Bond Ladders in Retirement Portfolios
by Wade Pfau,
Should bonds be kept in mutual funds or purchased as individual securities and held to their maturity dates? The former option receives much far more attention, as managers compete in a performance-driven marketplace. But investing, especially for retirement, shouldnt be driven by maximizing risk-adjusted returns. Advisors must focus on securing a clients future spending needs. I will investigate the role of bond ladders in retirement and which ladder length is best for clients.
And That's The Week That Was
by Ron Brounes of Brounes & Associates,
To say that 2013 was an interesting year would be a bit of an understatement. We learned a long time ago not to make predictions about the stock market because no matter what is predicted, it is likely to be wrong. Even if we get lucky one year, we are not likely to even get close the following year. We do try to give guidance, however. Last year we suggested that, given the late run in the market in 2012 and its 15% return, investors should be happy with a return of 8 to 10% in 2013. Obviously, investors enjoyed much better returns.
2013 in Review: Best of the "Silver Bullet" Awards
Regular readers of my "Weighing the Week Ahead" series know that I occasionally give the Silver Bullet Award. This recognizes writers who take it upon themselves to debunk dangerously misleading financial analysis. Their often thankless work reminds me of the Lone Ranger, whose adventures often upheld the notion that "...that all things change but truth, and that truth alone, lives on forever."
The Long and The Short of Gold Investing
There are two types of gold investors: those trying to make money on short-term market timing and those looking for long-term asset preservation. It was the fear-driven trading of the former that helped gold break $1900 in 2011, and for good reason - stormy markets steer investors to safe havens.
2014?
by Jeffrey Saut of Raymond James,
Year-end letters are difficult to write because there is always a tendency to discuss the year gone by or, worse, attempt to forecast the coming year. Typically, when the media asks where the S&P 500 (SPX/1841.40) will be at the end of the new year, I tell them you might as well flip a lucky penny.
Predictions for the 2014 U.S. Financial Markets
Ive had so many phenomenal and diverse guests on my syndicated radio show, Financial Myth Busting, this year: Steve Forbes, Mort Zuckerman, David Stockman, Michael Belkin, David Walker, Dr. Ben Carson, Marc Faber, and even Ted Nugent. This is a very eclectic group, but they all have certain opinions in common. They all share the same concerns that the U.S. economic growth remains anemic and the continued economic instability and political deadlock along with business communitys mistrust of the U.S. government will continue to destroy Americas bottom line in the future.
2013: Looking Back at the Year of the Bull
Will stocks continue to climb in 2014? Odds are "very good," finds BCA Research. According to historical data going back to 1870, there were 30 times when annual returns in domestic stocks climbed more than 25 percent. Of these, 23 experienced an additional increase, resulting in a mean of 12 percent, says BCA. Thinking back to January 2013, investors had a very different frame of mind. While we recently talked about the year?s biggest stories in U.S. energy and gold, today, we recap our popular commentaries focused on the domestic market.
The Price America Pays for Global Leadership
by Bob Veres,
Americas political debates inevitably default to finding ways to contain our federal deficits, and our investment debates focus on whether were facing a secular bear or bull market - and how to maneuver within that environment. I had never imagined that these two debates could be related until I heard a presentation by Bill OGrady, of Confluence Investment Management in St. Louis, MO at the Insiders Forum conference in Dallas.
PIMCO Cyclical Outlook for the Americas: Riding the Cross-Currents of Higher U.S. Growth and the Fed
In the U.S., lower fiscal drag and the possibility of higher consumer and corporate spending should drive growth higher in 2014. Supported by higher U.S. growth and stabilization in Europe and China, Latin America is set to grow 3%-4% on average, but with a large dispersion across countries. Canada should benefit from the U.S. recovery but will likely lag U.S. growth due to lower consumption and residential investment.
A Surprising Way to Participate in Today's Tech Boom
China has become one of the best consumption stories out there, and looking over the next few years, local technology companies are almost certain to benefit. So while many U.S. investors are getting excited about the growing number of initial public offerings in the tech sector, they would be remiss if they didnt look beyond Silicon Valley.
Coal in the Fed's Stock-ing
Forward guidance has become an increasingly common practice among global central banks. Communicating a possible change in the policy rate could have a large effect on long-term interest rates. Capital has moved literally around the globe as a result of central bank activism in developed countries. Looking ahead, we expect 2014 to be a year of increased differentiation across emerging markets in terms of economic fundamentals, policy reactions and market outcomes.
Fed May Have An Unexpected Surprise In Mind
My readers know that the global financial world is waiting with bated breath for tomorrows Fed decision on whether to start to "taper" QE purchases now or wait until next year. The Feds Open Market Committee (FOMC) is holding its last policy meeting of the year today and tomorrow, and Chairman Bernanke will hold a press conference afterward.
Will 2014 Bring an End to Central Bank Intervention?
by Chris Maxey, Ryan Davis of Fortigent,
Nearing the final two weeks of the year, it is customary to look forward to the trends and events that will shape the coming year. A theme that may come to the fore in 2014 revolves around central bankers, specifically the diverging fates in various economies of the world.
The Monster That Is Europe
This week, Geert Wilders and his Party for Freedom in the Netherlands and Marine Le Pen of the Front National (FN) of France held a press conference in The Hague to announce that they will be cooperating in the elections for the European Parliament next spring and hope to form a new eurosceptic bloc.
The One Percent
by Jeffrey Saut of Raymond James,
I read the Popes words about inequality following a meeting of our newly formed Consumer Analysts Panel. The panel consists of our consumer analysts, our lodging/housing analysts, our economist, senior management of our institutional sales team, and me. Interestingly, the recurring theme over the course of said meeting was that the top 20% of wage earners are doing fine, but the bottom 20% are not.
Five Strategies for a Rising-Rate Environment Revisited
In June 2010, we recommended five strategies for a rising-rate environment, acknowledging that we had no idea when or how abruptly rates would rise. Indeed, rates fell since we wrote that article. But they are on the rise again. After reviewing how our original five strategies performed, we’ll now present our revised recommendations for investing as rates increase.
Taper Time?
by Scott Brown of Raymond James,
There are many arguments for and against an initial reduction in the Feds monthly rate of asset purchases, but the balance has shifted toward a December taper. It appears to be a very close call, but even if the Fed decides to delay again, we all know (or should know) that QE3 is going to wind down in 2014.
The Coming Retreat in Corporate Earnings
by John Hussman of Hussman Funds,
The problem is not simply that earnings are likely to retreat deeply over the next few years. Rather, the problem is that investors have embedded the assumption of permanently elevated profit margins into stock prices, leaving the market about 80-100% above levels that would provide investors with historically adequate long-term returns. An equivalent way to say this is that stocks are currently at levels that we estimate will provide roughly zero nominal total returns over the next 7-10 years, with historically adequate long-term returns thereafter.
One of the Most Notable Stories of the Year: Energy Renaissance in the U.S.A.
Only a few years ago, we were contemplating the supply constraints facing the petroleum industry, as many major oil fields around the world were facing a decline in production. Now, with the disruptive technology in shale oil and gas, we may be looking forward to decades of drilling.
The Fed, Inflation, and the Perfect Storm in Gold Miners
Neither hopes of job creation nor fears of inflation (based on the massive expansion of the monetary base since late 2008) have thus far materialized. Total credit creation (i.e. money supply) during most of the last five years either shrank or barely grew despite massive growth in the monetary base. Nominal GDP (growth plus inflation) grows in response to total expansion of credit (both from the Fed and the banking system), not just the monetary base.
What Will 2014 Bring for The Equity Markets?
As the year draws to a close, investors are searching for clues as to what may be in store for the economy and markets in 2014. What have we learned from the markets in the month of November? Honestly, not very much. The scenario has not changed much in the last 30 days.
Improving Economic Data Imply Further Global Recovery
by Bob Doll of Nuveen Asset Management,
U.S. equities finished last week in barely negative territory, ending the positive streak for the market. Economic data concerning the post-government shutdown climate has improved. Employment data beat estimates and increased by 203,000 jobs in November, and the unemployment rate fell to 7.0%, also surpassing expectations.
Did the Government Shutdown Help the Economy?
Take the government shutdown in October, when the House and Senate fought over the debt ceiling. Economic data wasn?t released, services were halted, national parks were closed, and "non-essential government workers were told to stay home. As a result, GDP was expected to collapse. Yet, data released this week reveal a different, stronger image of the U.S. economy. I think Shakespeare would deem the media?s fear mongering tactics as Much Ado About Nothing.
Going Against the Grain, Again
Going against the grain is never easy, particularly when it comes to investing. But if you dont take the risk of moving out of the crowd and taking a different path, you cant really stand out. Templeton has focused on bottom-up value investing, which often puts it at odds with the broader market consensus. We go back in history to describe how the strategy has persevered through different market cycles, and why the Templeton team has been going against the grain by investing in Europe at a time when other investors had lost faith.
U.S. Economy Slowly Gaining Traction - What's Ahead for Year-End?
by Sam Wardwell of Pioneer Investments,
As we enter the final month of 2013, my themes of the last several weeks continue - the capital markets, in general, remain quiet and U.S. economic data, while mixed, shows signs of steady improvement. This week, Ill start by looking forward to some news well be watching as the year closes out...
Equities Extend Gains for the Seventh Consecutive Week
by Bob Doll of Nuveen Asset Management,
U.S. equities finished higher again last week as the S&P 500 increased 0.4%. The Fed continued to dominate headlines, with heightened emphasis on the distinction between tapering and tightening. Bubble speculation continued to receive attention in the press, while many articles refuted such concerns. The financial sector performed well, led by banks.
Results 3,201–3,250
of 3,702 found.
