The markets seem caught between improving sentiment and a slumping economy. After last week's finale to the masterfully executed stress test propaganda, the markets are waiting for a catalyst from either the bear or bull side to ignite the next move. Below is a survey of some professional opinions on the state of the markets:
Of the four listed, Bill Miller is the one most on the hot seat due to such subpar performance that his 18-year S&P-beating streak has now been eclipsed by a long-term losing record. Some of his statements in the article suggest the pressure to make back his money may be paramount in his reasoning. His assertion that financials are the best place to invest because they are the sector most likely to outperform reeks of desperation and resembles more tactical allocation and market-timing vs. value investing, which he's often alleged to practice.
Meredith Whitney has made a reputation in the current crisis and when it comes to bank stocks, it's hard to find another analyst who has hit the target more accurately than Whitney. She also doesn't need to double her money to get back to even and so bases her bearish outlook on financials on a slumping economy and weak underlying earnings power. I know who I'd place bets on.
David Tice is a less-followed manager who's played the role of Chicken Little for several years until he was proven right in recent years. I have watched him with interest for a few years now and usually find his views helpful. Now, Tice is calling for the S&P 500 to hit 400 within 6 months! While Tice is pretty prescient on his views, I can not remember him previously trying to hit the timing on his calls too. He even mentions how difficult it is to nail down timing yet attempts to do so at the host's behest. So take his call with a grain of salt.
I haven't talked much about good ol' Jim Rogers lately because frankly, he's awfully repetitive. Rogers is basically a macro investor focusing on long-term economic trends which take a long time to play out. Rogers holds to his long-standing call to buy commodities and short the US dollar. He also expects a near-term market pullback after 9 straight weeks of gains.
I lean more towards the bearish camp. It is interesting that even as headline numbers show "second-derivative" improvement (economy worsening less quickly), past month numbers are continually revised downward from the initial headline. Is it purposeful progaganda? Pop the markets on overly optimistic initial numbers and then revise them down the next month after no one cares? Today's retail numbers only extend this trend, with last month's numbers revised lower.
For the past 3 years, nearly every major pronouncement from Ben Bernanke has proven false, from his view that the lack of wage inflation was good for the economy (today, the government is inventing new methods to "put money in the hands of consumers") to the whole "subprime is contained" debacle to the soft landing scenario. Now I'm supposed to believe in his green shoots?
I'll mention it again: it amazes me to no end that market players who so heartily believe that government can do nothing right lend so much credence to the statements of government officials, especially those consistently proven to be wrong.
Despite my bearish views on the economy, I have no plans to sell out of all my holdings. It is one thing to have a view on markets and something else to make money from those views. Markets are wild, unpredicatable creatures and even more so now the government is a primary player. But in bear markets, attractive companies can be found selling at discounts to intrinsic value and indeed, bear markets are the best time to buy these stocks if they can be identified. I can not hope to time the bottom so waiting out the bear is not an option. I only hope not to run out of ammunition before the bottom.
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Davy Bui
http://enlightened-american.com
- [Bill] Miller Wrestles [Meredith] Whitney in Showdown Over Bank Stocks
- Federated's [David] Tice Sees S&P 500 at 400 Within Six Months
- Dollar Rally Will End, [Jim] Rogers Says; May Short Stocks
Of the four listed, Bill Miller is the one most on the hot seat due to such subpar performance that his 18-year S&P-beating streak has now been eclipsed by a long-term losing record. Some of his statements in the article suggest the pressure to make back his money may be paramount in his reasoning. His assertion that financials are the best place to invest because they are the sector most likely to outperform reeks of desperation and resembles more tactical allocation and market-timing vs. value investing, which he's often alleged to practice.
Meredith Whitney has made a reputation in the current crisis and when it comes to bank stocks, it's hard to find another analyst who has hit the target more accurately than Whitney. She also doesn't need to double her money to get back to even and so bases her bearish outlook on financials on a slumping economy and weak underlying earnings power. I know who I'd place bets on.
David Tice is a less-followed manager who's played the role of Chicken Little for several years until he was proven right in recent years. I have watched him with interest for a few years now and usually find his views helpful. Now, Tice is calling for the S&P 500 to hit 400 within 6 months! While Tice is pretty prescient on his views, I can not remember him previously trying to hit the timing on his calls too. He even mentions how difficult it is to nail down timing yet attempts to do so at the host's behest. So take his call with a grain of salt.
I haven't talked much about good ol' Jim Rogers lately because frankly, he's awfully repetitive. Rogers is basically a macro investor focusing on long-term economic trends which take a long time to play out. Rogers holds to his long-standing call to buy commodities and short the US dollar. He also expects a near-term market pullback after 9 straight weeks of gains.
I lean more towards the bearish camp. It is interesting that even as headline numbers show "second-derivative" improvement (economy worsening less quickly), past month numbers are continually revised downward from the initial headline. Is it purposeful progaganda? Pop the markets on overly optimistic initial numbers and then revise them down the next month after no one cares? Today's retail numbers only extend this trend, with last month's numbers revised lower.
For the past 3 years, nearly every major pronouncement from Ben Bernanke has proven false, from his view that the lack of wage inflation was good for the economy (today, the government is inventing new methods to "put money in the hands of consumers") to the whole "subprime is contained" debacle to the soft landing scenario. Now I'm supposed to believe in his green shoots?
I'll mention it again: it amazes me to no end that market players who so heartily believe that government can do nothing right lend so much credence to the statements of government officials, especially those consistently proven to be wrong.
Despite my bearish views on the economy, I have no plans to sell out of all my holdings. It is one thing to have a view on markets and something else to make money from those views. Markets are wild, unpredicatable creatures and even more so now the government is a primary player. But in bear markets, attractive companies can be found selling at discounts to intrinsic value and indeed, bear markets are the best time to buy these stocks if they can be identified. I can not hope to time the bottom so waiting out the bear is not an option. I only hope not to run out of ammunition before the bottom.
--
Davy Bui
http://enlightened-american.com
