Weighing The Week Ahead: A Seasonal Soft Patch Coming? [View article]
wenlock00 -- For starters, the article you cite was not written by Doug Short. It was written by Chris Turner and published at Doug's site. Doug includes a wide variety of viewpoints on his site, often including my articles. You can check it out here: http://bit.ly/10psWOW
If you look at Mr. Turner's key chart, you will see that according to his methods the market has been overvalued for the last 25 years. I have written extensively about valuation methods, and the topic is too complicated for the comments.
But try this common sense test: If something is a good valuation method, it should show both periods of overvaluation and periods of undervaluation.
I'm not sure why the Seeking Alpha article carries Doug's name. One clue is that it refers to "Doug Short" and he (unlike Nixon) does not refer to himself in the third person!!
Weighing The Week Ahead: A Seasonal Soft Patch Coming? [View article]
Alan -- Concerning the Motley Fool article, I read it and chose my words carefully, emphasizing that many people seem to expect it to be a period of decline. The chart of their data shows an increase of 8.4% annualized gain for the October to May period, and a 5.1% gain for the May to October period. There is a 10% annualized gain for buy and hold. The numbers do not add up because the author (correctly) evaluated the strategies by assuming an alternative investment in bonds.
For each source I include I have to decide how much to explain, whether to show a table, or whether to highlight the link. The Motley Fool article is interesting, but involves a number of methodological questions that are too tricky for my weekly summary article -- what time period? what stock universe?
So I agree with your comment, and it is exactly what I am trying to say as well -- seasonal weakness, but not negative.
Thanks for joining in. I hope that your recent article gets an even wider readership. It is important and helpful.
mitchad1 -- I'd be happy to have a chance to meet for dinner, but we need to sharpen up the wager. It cannot be defined in terms of perceptions about the Fed, as you are doing. It has to be about data.
You should also keep in mind that this is a long-term research item for me. I have identified a curvilinear relationship in interest rates and stock values. No one seems to understand this. It is another topic that I hope to update this summer. Your 3% indicator could be very wrong. It depends on the reason for the increase.
dancing diva -- Let's start by noting that your first comment made the same mistake that I cite in the article. When I pointed that out, helpfully referring you to a good source, you ignored your initial error and asserted something else.
I don't understand your point about forward earnings estimates declining only around recessions. So what? Recessions are important, which is why I spend so much effort finding the best methods and writing about them. I prefer that those doing earnings estimates not try to be amateur economists! As you know, I think that a recession is very unlikely in the next nine months or so.
Those who do not understand the value of forward earnings should look here: http://bit.ly/XmNVnB
I hope to update this research during the summer when I have more help.
And finally, I also don't understand your comment about the overbought sectors. I do not (and cannot) report complete positions for each of the five programs I am managing. I also made no comment about what I have owned in the past -- and positions change frequently. Our Felix ETF model is often in top sectors and got us back into consumer staples today. When I write about fundamentals, I stick more to a value approach. For our enhanced yield program I am able to get dividends in the 3% range and boost yield to the 9% range by selling near-term calls.
To summarize, I am sure we are all happy to learn about what market sectors you favor, particularly when you offer a little reasoning. I am also happy to discuss the stocks I name in the article. I suggest that we stick to those topics rather than you speculating about whether I have owned the right sectors in the past -- something that you know absolutely nothing about.
dancing diva -- You are citing the change in estimates for a given time period, say a calendar year, not the one year forward earnings. This is exactly what I am warning against. Brian Gilmartin identified the trough in the one year forward earnings as coming in Q312.
Also, you can expect the multiple increase to continue. The equity risk premium has been at a peak, mostly due to recession fears, etc. As these abate, interest rates will move toward 4% on the ten year note and multiples will return to more normal levels (in forward terms).
I agree with you on which sectors are overbought, which is why I don't own them.
Weighing The Week Ahead: Can The Cyprus Fallout Be Contained? [View article]
thiazole -- We all know that markets have corrections -- often for reasons that seem mysterious except to those doing the post-mortem!
My weekly one-month forecast is from Felix, our trading model. Felix and I often disagree. Felix can change his mind pretty quickly. Felix's overall record is pretty good, especially on a risk-adjusted basis.
My own comments are directed to investors. Since I see economic progress, low valuations compared to forward earnings, little chance of recession, and low risk (via the SLFSI) I see a good time to invest. My biggest problem is how rapidly to deploy investments from new clients, many of whom are in cash or precious metals.
As to the chance of a pull back in 30 days, people have been saying this since January. Meanwhile, there are many who are under-invested.
To summarize -- I provide a trading forecast from Felix, but that is designed to be on the right side of trading moves. No one knows when the long-awaited correction will come, nor how deep it will be.
Weighing The Week Ahead: Can The Cyprus Fallout Be Contained? [View article]
Nolesince87 -- There are many things that can cause US stocks to decline. I have often suggested cautious trading positions and sometimes cautious long-term positions.
The reason that I post recession odds and the SLFSI each week is that these are good warning signals. The things you list are not good signals. They have no track record of success, nor do similar concepts.
I understand that many share your concerns, and thanks for joining in.
Weighing The Week Ahead: Can The Cyprus Fallout Be Contained? [View article]
Dancing Diva -- You are correct in both observations, but what is the implication?
You say that "all isn't well yet." Of course. You can always say this. If everything was fine we would be at Dow 20K. There is a lot of negativity built in. Old worries have been replaced by new ones. This is why it is important to evaluate rather than read headlines.
The net worth table is an aggregate -- and so is the stock market. I am well aware that not everyone has shared in the below-trend rebound, but I am not writing social commentary here.
BTW -- did you look at the other 17 charts? Just wondering....
Weighing The Week Ahead: Will Opinion Replace Data? [View article]
GaltMachine -- I saw a segment on CNBC today, but only had time to catch a snippet. The expert being interviewed agreed with your observation about the rising costs of colleges. The other aspect was the increased number of students.
It is partly a reflection of the economy. Young people who lack attractive job prospects are more likely to go to school or choose travel.
This is a form of investment. It is a worthy subject for further analysis. As you know, I often try to unearth things that we should be watching as part of the good and the bad -- not to mention the ugly!
Weighing The Week Ahead: Will Opinion Replace Data? [View article]
MLP Trader -- By all means, feel free to post some links for us.
I select information that I think will be useful, relying on sources that have proven to be helpful over time -- like Bespoke. I welcome other information from good sources.
Weighing The Week Ahead: A Seasonal Soft Patch Coming? [View article]
If you look at Mr. Turner's key chart, you will see that according to his methods the market has been overvalued for the last 25 years. I have written extensively about valuation methods, and the topic is too complicated for the comments.
But try this common sense test: If something is a good valuation method, it should show both periods of overvaluation and periods of undervaluation.
I'm not sure why the Seeking Alpha article carries Doug's name. One clue is that it refers to "Doug Short" and he (unlike Nixon) does not refer to himself in the third person!!
Interesting question!
Jeff
Weighing The Week Ahead: A Seasonal Soft Patch Coming? [View article]
For each source I include I have to decide how much to explain, whether to show a table, or whether to highlight the link. The Motley Fool article is interesting, but involves a number of methodological questions that are too tricky for my weekly summary article -- what time period? what stock universe?
So I agree with your comment, and it is exactly what I am trying to say as well -- seasonal weakness, but not negative.
Thanks for joining in. I hope that your recent article gets an even wider readership. It is important and helpful.
Jeff
Why Not Invest In Stocks? [View article]
You should also keep in mind that this is a long-term research item for me. I have identified a curvilinear relationship in interest rates and stock values. No one seems to understand this. It is another topic that I hope to update this summer. Your 3% indicator could be very wrong. It depends on the reason for the increase.
Jeff
Why Not Invest In Stocks? [View article]
I try to provide something special in each article, and it takes a lot of time.
It helps to know that people are reading the material carefully, checking the links, and finding value.
I agree with you that many on SA have the same motives, and I read them as well.
Thanks for being part of this community!
Jeff
Why Not Invest In Stocks? [View article]
I don't understand your point about forward earnings estimates declining only around recessions. So what? Recessions are important, which is why I spend so much effort finding the best methods and writing about them. I prefer that those doing earnings estimates not try to be amateur economists! As you know, I think that a recession is very unlikely in the next nine months or so.
Those who do not understand the value of forward earnings should look here: http://bit.ly/XmNVnB
I hope to update this research during the summer when I have more help.
And finally, I also don't understand your comment about the overbought sectors. I do not (and cannot) report complete positions for each of the five programs I am managing. I also made no comment about what I have owned in the past -- and positions change frequently. Our Felix ETF model is often in top sectors and got us back into consumer staples today. When I write about fundamentals, I stick more to a value approach. For our enhanced yield program I am able to get dividends in the 3% range and boost yield to the 9% range by selling near-term calls.
To summarize, I am sure we are all happy to learn about what market sectors you favor, particularly when you offer a little reasoning. I am also happy to discuss the stocks I name in the article. I suggest that we stick to those topics rather than you speculating about whether I have owned the right sectors in the past -- something that you know absolutely nothing about.
Fair enough?
Jeff
Why Not Invest In Stocks? [View article]
Also, you can expect the multiple increase to continue. The equity risk premium has been at a peak, mostly due to recession fears, etc. As these abate, interest rates will move toward 4% on the ten year note and multiples will return to more normal levels (in forward terms).
I agree with you on which sectors are overbought, which is why I don't own them.
Jeff
Weighing The Week Ahead: Can The Cyprus Fallout Be Contained? [View article]
These investors are not dumb, so they are expecting to sell at higher prices and maybe rent in the interim. It is still a signal.
Follow Calculated Risk, where Bill is doing a nice job of documenting the bottom in housing.
To summarize --- there will always be those who offer an excuse for not believing data.
My current viewpoint is that we have something real going on with housing. As always, we should watch the data each week.
Good question, and thanks for joining in!
Jeff
Weighing The Week Ahead: Can The Cyprus Fallout Be Contained? [View article]
Jeff
Weighing The Week Ahead: Can The Cyprus Fallout Be Contained? [View article]
Jeff
Weighing The Week Ahead: Can The Cyprus Fallout Be Contained? [View article]
My weekly one-month forecast is from Felix, our trading model. Felix and I often disagree. Felix can change his mind pretty quickly. Felix's overall record is pretty good, especially on a risk-adjusted basis.
My own comments are directed to investors. Since I see economic progress, low valuations compared to forward earnings, little chance of recession, and low risk (via the SLFSI) I see a good time to invest. My biggest problem is how rapidly to deploy investments from new clients, many of whom are in cash or precious metals.
As to the chance of a pull back in 30 days, people have been saying this since January. Meanwhile, there are many who are under-invested.
To summarize -- I provide a trading forecast from Felix, but that is designed to be on the right side of trading moves. No one knows when the long-awaited correction will come, nor how deep it will be.
Thanks for your comment and the kind words.
Jeff
Weighing The Week Ahead: Can The Cyprus Fallout Be Contained? [View article]
The reason that I post recession odds and the SLFSI each week is that these are good warning signals. The things you list are not good signals. They have no track record of success, nor do similar concepts.
I understand that many share your concerns, and thanks for joining in.
Jeff
Weighing The Week Ahead: Can The Cyprus Fallout Be Contained? [View article]
Weighing The Week Ahead: Can The Cyprus Fallout Be Contained? [View article]
You say that "all isn't well yet." Of course. You can always say this. If everything was fine we would be at Dow 20K. There is a lot of negativity built in. Old worries have been replaced by new ones. This is why it is important to evaluate rather than read headlines.
The net worth table is an aggregate -- and so is the stock market. I am well aware that not everyone has shared in the below-trend rebound, but I am not writing social commentary here.
BTW -- did you look at the other 17 charts? Just wondering....
Jeff
Weighing The Week Ahead: Will Opinion Replace Data? [View article]
It is partly a reflection of the economy. Young people who lack attractive job prospects are more likely to go to school or choose travel.
This is a form of investment. It is a worthy subject for further analysis. As you know, I often try to unearth things that we should be watching as part of the good and the bad -- not to mention the ugly!
Thanks for the link.
Jeff
Weighing The Week Ahead: Will Opinion Replace Data? [View article]
I select information that I think will be useful, relying on sources that have proven to be helpful over time -- like Bespoke. I welcome other information from good sources.
Thanks,
Jeff