For the last couple of weeks the tone to many of the blog posts has been more constructive on the market than I've been in quite a while. I've even responded to the last two TickerSense Blogger Polls as bullish.I am far from all in as discussed at length in this week's video but down 40% is a good time to start looking here and abroad.
As I try to look forward it seems that, repeat idea coming here, the US is closer to a secular event while many countries, ex-Western Europe and Japan, have more cyclical issues.
The implication of this theory is that the countries that are only in cyclical downturns will begin to comeback faster than countries dealing with more secular issues. A couple of places that might be in the club are Norway, Chile and Israel. Not quite making the theoretical cut include the US and maybe Korea. I wrote negatively about Korea on Friday at Greenfaucet and they made more news this weekend.
I've never owned Korea and I'm not sure how popular it has been as an investment destination.
Another repeat point is that I'm not focused on trying to correctly buy a bottom just trying to recognize the panic that has been created and lean a little against that panic.
Another segment to possible favor could be stocks with must own long term themes. This gets to be fairly subjective but to get the dialog moving a little this list might include infrastructure (projects that can get funding), alternative energy and aging baby boomers. None of these are new, they have all had fits and starts but the money is going to be spent eventually.
One last idea for this post is absolute return. There are plenty of products to research. Some have done well during this bear market and some have not. I have had good luck with the Rydex Managed Futures Fund (RYMFX). It had a rough stretch for a short while when crude oil started to roll over but the methodology took oil out and the fund is a couple of percentage points from its all time high.
Unfortunately for some folks these types of ideas do not lend themselves to broad based index funds. While broad based has never been my first choice the scenario I am laying out means slower average growth for US equities (something I have been theorizing for a while now)--this can't be shocking as we're down on the decade.
So if the US averages 5% for some extended period you could either double your savings rate or seek out "normal" returns elsewhere.
Tough loss for the Sox. I thought they would win game 7 but they could not get on track offensively. Congrats to the Rays and their fans.
9 comments:
Hussman's outlook has brightened considerably. Favorable valuations and the beginning of favorable market action. It is interesting how he values the expected return of stocks relative to bonds.
Roger, why is your outlook 5% when Bogle, Buffett, Grantham and many of the other respected names who have said for some time that stocks were seriously overvalued are saying the expected returns are higher now 10%+ than they have seen in more than a decade? Is your outlook 5% real return, 5% expected U.S. stock return or 5% earning growth?
Roger,
Are third quarter earnings expectations lowered enough to move the market positively?
That was a tough called strike 3 on Drew when the replay shows outside.
J.E.C.
I would expect that coming off the bottom there will be another 2003 (up a lot) in there somewhere.
that said we have more debt by a mile than ever and the debt must go up. this points to a weaker dollar and higher rates. further I have been laying out a case for less demand for US dollars as the US becomes a little less important globally.
i think the path for slower average growth over time is very plausible, we'll see if that is right or not.
JEC, i simply don't believe earnings or earnings expectations can be a meaningful catalyst to a turn around in the broad market.
I've added about 15% more exposure to US and select global equity markets in the past week but even though I think a rally is in the cards -- and possibly a strong one too -- I'm not going to open up further because I continue to believe there is still some very bad news out there that the market has not fully discounted. If I'm wrong I'll only lag but if I'm right I won't lose my shirt (I hope).
Frankly I consider it preferable to lose an opportunity than to lose money and, in an unstable situation with a fat tail where the loss could become very large, that sentiment goes double.
RW, the opportunity lost versus money lost is a great point for people to hone in on, it is the essence of behavioral finance and understanding our own vulnerabilities to it should make us better investors.
Hi Roger,
I am the girl who asked your advice about some brazilian stocks. They did very well today. Particularly, names like pbr, rio (Vale) and ggb (10% on average) We know that commodities driven stocks got a nice boost today from fiscal policies annoucements and also from Opep signals. Do you think it was just another bear market rallye or a more constructive bias is on the table?
the best answer is probably who knows.
My hunch is that the current move up, even if it goes 20% which is routine, would be a bear market event.
I don;t focus on retest the lows too much but I do believe there will be more ups and downs as the bear concludes.
Are you familiar with the investment strategies of this group?
THE SOVEREIGN SOCIETY Ltd., 98 SE Federal Highway, Suite 2 Delray Beach, FL 33483
I can't seem to find objective material for this group except their lawsuit to the Federal Income Tax system.
no i am not familiar
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