“Bull markets do not die of old age; they are assassinated – usually by central banks”

Thursday, November 12th, 2009

One of the most incisive thinkers in the investment field is David Fuller who runs the Fullermoney service from London and provides daily written and podcast commentary. I have been subscribing to the service for more than 20 years and consider it part of my staple investment diet, particularly also for its truly global approach. I am not an agent for David, but please visit by his site to get a feel for his excellent commentary.

The paragraphs below from Monday’s Fullermoney report are particularly topical at this juncture in stock markets.

Veteran subscribers will recall a remark often used on this site: Bull markets do not die of old age - to which I will add, or warnings by Roubiniesque economists. Instead, they are assassinated - usually by central banks.

“So how many rate bullets does it take to fell a bull?

“You may not be surprised to hear that there is no precise answer, because it depends mainly on sentiment and liquidity. We know when central banks start to reduce liquidity, or at least increase its price, but we do not know precisely when that will affect sentiment adversely.

“We know that a few central banks have commenced an incremental tightening of rates. However, we cannot know how aggressively they will act or when other central banks will follow their lead, because they do not know themselves.

“Recently, some big guns from the investment management and hedge fund industry concluded that stock markets were ripe for a correction. I was of a similar view. However, markets seldom dance to countertrend tunes for long, and with but a few exceptions we have seen little more than slightly larger reactions and more sideways ranging recently.

“The DJIA’s new recovery high today [Monday] is not exactly the stuff of corrections, unless it is instantly and dramatically reversed. Meanwhile, I would back the bull trend. After all, we have seen some mean reversion recently, narrowing overextensions relative to 200-day moving averages. There is also the not insignificant matter of the biggest monetary reflation in human history, and there is no hyperbole in that description.

“Stock market indices would have to break beneath their most recent reaction lows to question further the overall outlook for sideways to higher ranging.

“Meanwhile, note also the still widening spread between US 10-year yields over 2-year yields, otherwise known as the Yield Curve, on this historical chart. It is still rising, indicating to me that quantitative easing continues. The time to start thinking about closing long portfolios in anticipation of the next bear market, I suggest, will be when the Yield Curve next inverts by moving below zero. However the lead was so early last time (early 2006) that some of us became complacent about it.”

Source: Fullermoney.com, November 10, 2009.

Tags: Big Guns, Bull Markets, Bullets, Central Banks, David Fuller, DJIA, Economists, Fullermoney, Global Approach, Hedge Fund, Investment Field, Investment Management, Juncture, liquidity, Mean Reversion, Paragraphs, Precise Answer, Sentiment, Stock Markets, Thinkers
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WealthTrack: Dennis Stattman’s Outlook (BlackRock)

Thursday, November 12th, 2009

This week on WealthTrack Consuelo Mack sits down with global investor Dennis Stattman, founding manager of the BlackRock Global Allocation Fund. Now in its 20^th year, this Morningstar favorite has consistently delivered market and peer beating returns with less risk. In a wide ranging discussion, Stattman discusses the investment perils and opportunities he is tracking around the world.

Note: The transcript of this interview is not available yet, but will be posted here as soon as it arrives.

Source: Wealthtrack, November 6, 2009.

Tags: Advertisement, Blackrock Global Allocation, Blackrock Global Allocation Fund, Consuelo Mack, Global Investor, Investment, Morningstar, Outlook, Perils, risk, Wealthtrack, Wide Ranging Discussion
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Gold Bullion - Eight Day Streak - What’s next?

Thursday, November 12th, 2009

I have just arrived in Geneva after an exhausting but hugely successful few days in Ljubljana, quaint capital of Slovenia. It is rather difficult to write proper posts while on the road, but I will do my best to feed interesting snippets through - that is when not investigating how the gnomes see the future of Swiss banking.

Gold hit a new peak after a drop in the US dollar to a 15-month trough, resulting in the precious metal recording an eight-day winning streak. According to Bespoke, the current run represents the seventh time since 1980 that gold has had a streak of eight or more consecutive days with a gain. The report said: “As shown below, the only time one of these streaks went for more than eight days was back in 1982 when the ninth day was also positive (on the tenth day it fell 5.7%, or $63 in today’s prices). Looking out over the next week, there has been little consistency in the results as periods of negative and positive returns have been evenly split.”

Source: Bespoke, November 11, 2009.

Meanwhile, if you are looking for an explanation for gold’s strength that goes beyond the weak dollar argument routinely offered, spend a few minutes to read Mish’s recent post entitled “Budget deficits soar out of control in Eurozone, Germany, US, UK, Japan; yen’s last hurrah“. Then consider as an investment option “something that has no budget deficit” (in Mish’s words).

Fellow-bull Adam Hewison of INO.com expects a possible consolidation or correction before gold advances further. He explains his thinking in a short technical analysis presentation you can access here. As said a few days ago, I remain bullish on gold in the medium term but, given its notorious volatility, will only do additional purchases on pullbacks.

Tags: Analysis Presentation, Budget Deficit, Budget Deficits, Capital Of Slovenia, Consecutive Days, Eight Days, Eurozone, Gnomes, Gold, Gold Bullion, Investment Option, Japan Yen, Medium Term, Mish, New Peak, Ninth Day, Precious Metal, Pullbacks, Seventh Time, Weak Dollar, Winning Streak
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