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Gary Gordon  

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  • Stocks And Long Bonds Know That The Fed's In A Pickle [View article]

    Since the end of QE3, the S&P 500 gains have been muted relative to long-term treasury bonds. That was the intent of the paragraph and the accompanying chart where the sentence occurred.

    Granted, that may not have been the best paragraph that I have composed in 1600+ articles over the last 10 years here on SA. Nevertheless, I think most folks understood what I meant, whether they agreed with the me or not. I was not describing year-over-year returns.


    Apr 7, 2015. 01:29 PM | Likes Like |Link to Comment
  • Bull Market, Bear Market Or Barely Moving Market? [View article]
    I am referring to the standard definition of a bear market... 20% off the top. For example, the S&P 500 would need to close at 1693.91 or lower for a bear in this index to occur where 2,117.39 is the closing high.

    A correction is 10% off the top. The S&P 500 would have to close 1905.65 or lower. Anything less can be described in terms of corrective activity, selling pressure or a pullback.

    Once a bear market occurs, it must rise 20% off of whatever bottom is reached before the start of a new bull market can be declared. Once a correction takes place, it cannot be deemed finished until new highs for the bull or an emergence of a bear.
    Apr 1, 2015. 05:12 PM | 1 Like Like |Link to Comment
  • 50% Recession Possibility Calls For A 'Higher-Than-Usual' Allocation To Non-Stock ETFs [View article]

    On these indicators, which one can look at on a month-over-month basis, I believe 2011 is the only year where there were several months topping 50%. I believe there was a month or two - perhaps August and September - where it hit 80%.

    Remember, a recession and a bear market in equities are not synonymous. That said, we often see self-fulfilling prophecies such that lower lows in the S&P 500 (stock market fear) and widening credit spreads (bond market fear) spiral downward alongside weakness in businesses (PMI) and the consumer (Consumer Sentiment Future Expectations)

    Mar 31, 2015. 07:37 PM | Likes Like |Link to Comment
  • 50% Recession Possibility Calls For A 'Higher-Than-Usual' Allocation To Non-Stock ETFs [View article]

    Nobody genuinely knows if there will be a recession soon or not... certainly not me. Yet perhaps you do not realize how the bond market moves. Treasury bonds strengthen when an economy is weakening or there is a fear of an economy weakening. That's an easy one to demonstrate throughout history. Rising bond market prices tend to represent fear/concern/worry/panic whereas rising stock market prices tend to represent enthusiasm/excitement/...

    Further, in today's world of the currency wars, the stronger the currency, the weaker the economic situation in the near future. This is already being reflected in the first quarter's expectation of negative earnings for the S&P 500 for the first time since 2009.

    Historically, the dollar weakened dramatically for many years during the expansion prior to 2007. Then, during the Great Recession 10/07-3/09, the dollar was remarkably strong as a safe haven. It then weakened considerably for years of the start of the recovery well into 2011, before once again strengthening when the world endured the euro-zone crisis. The dollar then weakened to multi-decade lows into 2013, before the tapering of QE3 was announced. Since, then, the strength of the dollar, has been a direct function of the QE that Japan and Europe are now engaged in.

    Countries look to weaken their currencies to stimulate their economies. Unfortunately, today's strong dollar may be a harbinger of economic weakness. A more stable dollar -- not rising too rapidly or falling too rapidly -- is a sign of strength in these currency wars.

    Mar 31, 2015. 07:28 PM | Likes Like |Link to Comment
  • 50% Recession Possibility Calls For A 'Higher-Than-Usual' Allocation To Non-Stock ETFs [View article]
    Exactly. It has been working for six-plus years, and it will probably continue to do the trick. Until one day, it just doesn't work anymore.
    Mar 30, 2015. 06:45 PM | 4 Likes Like |Link to Comment
  • 50% Recession Possibility Calls For A 'Higher-Than-Usual' Allocation To Non-Stock ETFs [View article]

    I am not so sure that assessing the probability of a recession is, as you say, "as useless as flipping a coin." For proof that your comment may be missing the mark, you can look at the same exercise that I conducted in December of 2007 right here at Seeking Alpha (70%), I did it again in January of 2008 for Investors' Business Daily (80%).

    The higher the odds, the more that I ratcheted down the risk for hundreds of client accounts. I don' think that I need to remind you that the less risk investors were taking in 2008, the better they performed and the less ground they needed to make up from 2009 forward.

    Granted, assigning any percentage probability may not be the best way to convey the efficacy of the predictive tools. Yet the five that I listed above - PMI, Consumer, S&P 500 Lower Lows, CCBR Versus 10-Year and 3-Month Treasury Spread With 10-Year Note - you better be watching them.

    Mar 30, 2015. 06:42 PM | 1 Like Like |Link to Comment
  • Are Transportation Stocks Hinting At A New Recession? [View article]
    HA! And that guy nailed it, didn't he?

    More importantly, that guy had an approach for protecting his clients from the bulk of the bear mauling.

    Thanks for finding that!
    Mar 27, 2015. 10:50 AM | 1 Like Like |Link to Comment
  • Are Transportation Stocks Hinting At A New Recession? [View article]
    "Time alone does not end a bull market."

    It is accurate to say that time itself does not cause a bear in stock assets. Yet probability based on historical length and strength of all 35 bull markets since 1900 is as worthy as other indicators, including fundamental, contrarian, economic and technical price indicators. Price movement, for instance, is little more than the plotting of price over time... and only the uninformed fail to recognize the impact of a benchmark's price falling below and staying below a 200-day moving average.

    One can certainly say that time is irrelevant or that things are different this time (interest rates are super low and so forth). We heard the "it's different" argument with the New Economy in the late '90s, as well as "time does not end bull markets" in the late 90s. Yet those that paid attention to the bull market's duration and epic price gains in the late 90s -- alongside insane valuations -- were able ride the wave and safely get off of it thanks to historical probability.

    One might insist that only a recession causes a bear. Yet we heard NBER declare the 10/07 recession one full year after the bear had already mauled portfolios (10/08). So how has the statement that recessions cause bears been helpful to participants?

    Another might explain that bears respond to extreme overvaluation. Okay, but when exactly? Are we not presently staring at the highest median stock P/Es and highest median stock P/S ratios in recorded history? We are.

    It follows that time may not end bull markets, but time is a lot more powerful in discerning probable outcomes than you may be willing to acknowledge. 35 bull markets since 1900? It is certainly reasonable to consider average length, strength, and deviations from both. And when one witnesses an exceptionally long bullish period coupled with an exceptionally large percentage gain that deviates markedly from historical norms, it is instructive to be mindful of the 35 events that came before.
    Mar 26, 2015. 05:02 PM | 3 Likes Like |Link to Comment
  • Why A 'Rate Hike Tantrum' Will Not Kill Bond ETFs In 2015 [View article]

    One jobs report? That certainly does not take into account debt servicing requirements of households and the U.S. government.

    Due to debt doubling from $9 trillion to $18 trillion in the recovery - as well as promises like Social Security, Medicare and universal healthcare - the 35-year bond rally will continue. Our debts require servicing which, in turn, require ultra-low rates. The U.S. government and its citizens would not be able to service debts without exceptionally low yields. Is it any surprise that the former Fed chair, Ben Bernanke, said that he will not see rates normalize in his lifetime?

    There was a monstrous plunge in bond yields out of the 2015 gate on a few bad pieces of economic data. The spike in yields after the jobs report simply returned things back to the 2015 gate, and now 10-year yields are back below 2% yet again. We started 2015 at 2.17%.

    For as long as I can remember, people have been talking about the inevitability of higher rates when the opposite has held true for 35 years. Does this trend really look as though it is ending? (See chart at link below.) Long-term maturities like the 30-year have set new record lows since the 2013 taper tantrum, since the economic "acceleration," since the terrific jobs report(s), since the Fed stopped buying bonds.

    In other words, the Fed could raise overnight lending rates, the jobs reports can keep on "keeping on," and it will not change certain likelihoods. Specifically, the country requires very low rates to survive. And, when a cyclical recession occurs, you'll see any Fed funds targets reverse course and head back down to zero (if not with more QE.) What's more, those longer-term treasury yields will keep trending lower. (See chart below.)

    Mar 25, 2015. 05:19 PM | 1 Like Like |Link to Comment
  • Selling Winners In Your Portfolio Is Never Easy [View article]
    Fourteen months ago, I placed my convictions and my reputation as a money manager on the line. Truth was, you could not find a single long bond advocate east or west of the Mississippi, unless that person happened to be a bond fund manager. And, well, then there was one individual... me.

    At first, the gallery took shots at my investment selection of EDV and similar proxies because it was easy to parrot how rates had to go higher. Yet the comment writers and media speakers completely missed the direction of interest rates. As the year progressed, the gallery took shots at me because it was easy to say the move would be temporary. Again, they were wrong; some were even mean-spirited in the presentation of their position.

    How easy it is it for someone to comment anonymously? How easy is it for those without hundreds of clients or tens of thousands of readers to attack via a keyboard? Too easy. Nevertheless, my long bond conviction that countered mainstream gospel came out on top.

    Sometimes, it is not my conviction taking fire. It may be my discipline. I choose to apply insurance to the investing process. Stop-limit loss orders, trendlines, multi-asset stock hedging - none of these methods of reducing risk meet with approval six-plus years removed from the financial crisis.

    However, it was these very approaches that helped my clients sleep better at night during 2008-2009 and during 2000-2002. Clients maintained more of their dollars. And they recovered from the downturn far more quickly than had they been stuck in a hold-n-hope world.

    In sum, my discipline does not permit me to fall in love with my convictions. Rather, my convictions allow for a buy decision, whereas my discipline ultimately insures favorable outcomes (i.e., big gain, small gain, small loss). Indeed, 45% gains on EDV are fine for now... I can always revisit extended duration treasuries at another time.
    Mar 9, 2015. 04:54 PM | 6 Likes Like |Link to Comment
  • U.S. Stocks And U.S. Bonds: What The Heck? [View article]
    The last two weeks simply turned back the clock to the beginning of the year, providing a buy-the-treasury-dip opportunity. I am not particularly concerned about the last two weeks, and I feel pretty darn good about the last 14 months. As one of the few that began talking about a flattening of the yield curve, regularly since December 2013, the gains have more than made up for a few setbacks. If the treasury bond rally is truly over, we will see it in a breakdown at the 200-day... but I expect the U.S. 30-year yield to move down to around 1.75%-2% and the the 10-year to move down to the 1% region before it is all said and done.
    Feb 18, 2015. 04:04 PM | Likes Like |Link to Comment
  • Risk Aversion Gains Momentum And Risk Taking Loses It [View article]

    The ETFs that I talk about depend upon the commentary. Am I comparing maturity dates? I often use IEF. Am I discussing client holdings? I often discuss EDV. Am I talking about multi-asset stock hedging? TLH and ZROZ. Am I talking long maturity in general? TLT might get the nod.

    IEF, TLH, TLT, EDV, ZROZ... I talk about them all... depending on the article.


    Feb 4, 2015. 11:00 AM | Likes Like |Link to Comment
  • Risk Aversion Gains Momentum And Risk Taking Loses It [View article]
    Data on the index itself only goes back to 6/2011. The specific exchange-traded fund components have only been in existence for a brief period.

    Data on component asset types? The safest of safer haven assets during bearish periods are relatively well documented. We're talking about sovereign debt (e.g., TIPS, long maturity treasuries, zero coupon bonds, JGBs, German bunds), U.S. state debt (i.e., munis), currencies (e.g., Swiss franc, U.S. dollar, yen) and precious metals (i.e., gold).

    Individual components as safer havens going forward can be debated until the cows come home. Of course, that's the benefit of diversifying with multi-asset stock hedging. These are the types of the assets that, together, are extremely likely to produce positive returns in bearish stock periods without the use of leverage or shorting.
    Feb 4, 2015. 10:50 AM | Likes Like |Link to Comment
  • Risk Aversion Gains Momentum And Risk Taking Loses It [View article]

    I am not exactly sure what you are saying in your comment above, but the 30-year treasury bond yield does not hit an all-time record low when risk is "on." Nor do long-duration bonds significantly outperform stocks when risk is "on." Nor do small-caps, high yield bonds, foreign stocks and commodities all struggle when risk is "on."

    You might want to read the following, and take notice of the accompanying charts:

    Either the rest of the world will get a jolt from various forms of stimulus efforts, helping global growth return to admirable expansion and propelling the equity bull market forward. Or those efforts will fail such that the lack of global growth drags on the U.S. economy, making folks even queasier about equity risk.

    Feb 3, 2015. 03:57 PM | 1 Like Like |Link to Comment
  • Bears Growl At Bonds And Energy, So Buy Both [View article]

    Every article that I write is for mass consumption; the assets that I talk about are not specific recommendations. That said, there are a variety of alternatives on the long end of the curve, from TLH to TLT to VGLT to ZROZ. In my client portfolios, however, most own EDV and BLV.


    Jan 9, 2015. 10:51 AM | Likes Like |Link to Comment