Seeking Alpha
Long/short equity, ETF investing, macro
Profile| Send Message|
( followers)

I attended a Richard Russell tribute dinner in San Diego on Saturday. This function, in honor of the 84-year-old Russell’s 50 years as a newsletter writer, was attended by almost 500 people, including the likes of John Mauldin, Robert Precter, Ian McAvity, the Aden Sisters, Ivan Boesky, Bill Bonner, Bert Dohmen and a host of others.

There was a brief question and answer period. One visitor asked him what he would do if he was running the country. In classic Russell fashion, the venerable analyst answered, “I’d do nothing. I’d let it happen. I’d let the bear market do its work.”

For the rest, Aaron Task of Yahoo Finance Tech Ticker pulled me aside for a short video interview, and the paragraphs below are from his report.

“There was a general sense of optimism this weekend in San Diego [PduP: In no small way influenced by the fact that the market had seen four straight weeks of gains], where I attended a hedge fund conference and separate tribute dinner for newsletter legend Richard Russell.

“Among those in attendance - and feeling at least cautiously optimistic - was Prieur du Plessis, noted blogger [PduP: Thanks Aaron!] and executive chairman of Plexus Asset Management, a South African-based firm with about $2 billion of assets.

“The market’s message is ‘the tide is turning’, says Du Plessis, who cited the same valuation argument as BCA’s Martin Barnes as well as these recent trends:

Outperformance of small-caps stocks over large.
Strength in growth-oriented sectors like tech, basic materials and consumer discretionary.
Strength in T.I.P.S., commodities and emerging-market stocks.
The traditional carry trade currencies such as the US dollar and Japanese yen losing steam.

“These are the kinds of signs ‘one would typically expect at a bottom’, says Du Plessis. Even if the recent rally - over 20% for the Dow and S&P in the past four weeks - is a case of ‘too much too fast’, the money manager believes the S&P has established a new trading range between the March lows (666) and January highs (935).

“While the global economy remains ‘murky’ and America’s banks the ‘big elephant in the room’, Du Plessis believes a ‘bottoming area’ has been established. [PduP: More accurately, the charts have the look of base formation development.] He expects emerging markets, notably China and resource-rich nations like Brazil, will continue their recent outperformance.

“On any near-term pullbacks, Du Plessis recommends investors play the ‘reflation’ trade via ETFs, including:

China: iShares FTSE/Xinhua China 25 Index (NYSEARCA:FXI)
Brazil: iShares MSCI Brazil Index (NYSEARCA:EWZ)
India: iPath MSCI India Total Return Index ETN (NYSEARCA:IPN)
Materials: iShares S&P Global Mat. Sector (NYSEARCA:MXI)
Gold: SPDR Gold Trust (NYSEARCA:GLD) and Market Vectors Gold Miners (NYSEARCA:GDX)
T.I.P.S.: iShares Barclays TIPS Bond Fund (NYSEARCA:TIP)

“‘I suspect this is a trade that will be perpetuated over the next few years,’ he says.”


Source: The Tide Is Turning