February 9th, 2010
Buy-and-hold has not been kind to U.S. equity investors over the past decade. The S&P 500 index remains below its level at the beginning of 2000 and it is difficult to predict when this strategy will prevail again. As a result, we have built an investment model to help our subscribers determine when it’s safe to own U.S. stocks vs. when to sell and hold cash. The model is based on an in-depth historical analysis dating back to the early 1930s. Essentially, we have uncovered certain market conditions that have historically been associated with positive gains, and we only recommend investing during these periods in order to protect your capital and avoid large losses. Since the early 1930s, only investing when the conditions are ripe according to our model would have led to substantially better returns than that of the S&P 500 and more importantly it avoided bear markets and corrections.
Our Market Timing Long-Term Performance Graph
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Tags: market timing, S&P 500
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November 30th, 2009
This week’s article marks the conclusion of series of pieces on trends in the global economic landscape. In this edition, we outline the main investment themes and opportunities that have been created by what might be the biggest bubble in recent memory: The financial crisis of 2008.
Please, click the following link for part I of our piece on asset bubbles.
Please, click the following link for part II of our piece on asset bubbles.
Please, click the following link for part III of our piece on asset bubbles.
What goes up must come down
– Sir Isaac Newton (1642-1727)
It is likely that we are transitioning from a period of declining inflation to a period of rising inflation, similar to what happened in the mid- to late 1970s. While this may take some time to play out, the thesis is built on the following:
1) Governments and central banks have “solved” a crisis created by excess liquidity (the credit crunch) by spending and borrowing even more. History has shown that the only outcome of reckless fiscal and monetary policy is higher prices. In other words, printing money to boost growth at any cost will trigger rises in inflation.
2) The credit crunch will limit capital investment, meaning that capacity constraints will become more of a threat, and thus raise the likelihood of rising inflation.
3) The “easy money” from globalization has already been made, and we have run out of countries with declining unit wage costs to outsource to, which is also inherently inflationary.
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Tags: asset bubbles, bonds, gold, US Dollar
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November 16th, 2009
Over the next few weeks, I will be writing a series of pieces on trends in the global economic landscape, and what the implications of these trends are for investors. In this edition, we take a look at what might be the biggest bubble in recent memory: The financial crisis of 2008.
Please, click the following link for part I of our piece on asset bubbles.
Please, click the following link for part II of our piece on asset bubbles.
What goes up must come down
– Sir Isaac Newton (1642-1727)
Because the global financial system is heavily levered and dependent on debt, a prolonged downturn in growth can have devastating consequences for the economy. Policymakers are cognisant of this, which is why they attempt to buoy the real economy via expansionary monetary policy (i.e. more debt). The result of this is that the economy begins each cycle from a higher level of leverage and the lack of purging of prior excesses leads to even greater vulnerability and thus a greater necessity to continuously limit the downside of the economy. This phenomenon is commonly referred to as the debt “supercycle”.
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Tags: 2008 financial crisis, asset bubbles, housing bubble
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