Kirk Lindstrom's  Instablog

 

 

 

I want to point out that a correction in the stock market now would not necessarily change ECRI's call for an economic growth rate revival.  It takes a "pervasive" (for the majority) change of direction of their indicators in a "pronounced and persistent" way for ECRI to call for a turn in the economic cycle. These indicators and the trigger levels are proprietary.  I have found no one who has duplicated them or ECRI's success in calling business cycle turns based on their reading of their indicators.

Note that the chart above of the S&P500 vs. WLI shows a breakout above the dashed blue line that represents the neckline for a "Head and Shoulders Bottom" pattern.  This is a very bullish development.  A correction to test the pattern from above with a bounce to a higher high would be even more bullish, but not necessary for a continued market advance.

 

 

 

 

The economy is not very healthy because we are doing quantitative easing.  About 3 months ago, it looked like the economy was going into a double dip. Since then, the economy is looking "much, much better."
 

Dennis Stattman:

Chronic problems will be with us for a long time. We have too much debt.  We are not producing enough in our economy compared to what we are consuming.  Harder to get employment going due to higher costs of employment.  But, compared to expectations of three or six months ago, the economy on the short-term is doing better.  The big problems will be there for years.
 

6 quarters of 3% growth and unemployment last month was 9.8% so 3% is not enough to grow jobs. Thus believes the Fed and the president want 4% GDP growth to grow jobs.  Like Clinton, he believes Obama is doing his version of a move to the center to grow jobs and get reelected in 2012.
 

Dennis Stattman:  Believes the monetary policy is near the level of "desperate."  Spending has been very aggressive but little has been done to address the  production side of the economy.  Regulation and tax uncertainty is hurting small businesses.  Politicians will have to move to address this or they won't get reelected.
 

Ed Hyman: Believes focus will shift to 2012 with Q1-2011 GDP coming in at a "new high."
 

Dennis Stattman:   "Stocks in the US are quite reasonably priced."  Many US stocks benefiting from higher growth rates outside the US but are selling at low PE ratios due to US troubles.  Blackrock's Global Allocation fund is at 36% of fund in US Equities, the highest exposure in a long time.  Fixed income exposure is lowest ever and thinks bond market is dangerous to investors.
 

Ed Hyman: Believes the US stock market "is going up."  Adding to Dennis`s picture, Ed believes the Fed introduced QE2 to increase the value of stocks, to drive investors into riskier assets, to increase confidence with higher stock prices and thus lead to increased hiring.  Ed agrees "completely" with Dennis on bonds and believes that the bond market (10-year yield) is heading towards 4.0%.  To go above that would be "epic."
 

Dennis Stattman:  Has about a market weighting in the dollar or 60%.  Most investments are in dollar but that also means 40% are in non-dollar investments.   "I would be very nervous to be 100% US Dollar."
 

Ed Hyman: "Being neutral sounds like a reasonable position. "Agrees with Dennis and believes the emerging currencies like the Yuan will go up.  Not bullish or bearish on the dollar.
 

Dennis Stattman: Likes IBM (Charts & Quote).  Get a very solid growth investment with a 1.7% yield. Thinks IBM has a good "blueprint" to get earnings per share to $20 by 2015.
 

Ed Hyman:  "I would put my money in Dennis's fund."  The one stock that sticks out to him is Citigroup (C charts and Quote).  He likes emerging economies and Citicorp or Citigroup has done a better job than the other banks in the emerging markets.  He also believes Vikram Pandit is "an emerging markets person" and is a great leader.  If Citi gets over $5, then the stock can be bought by more institutional investors.  If I had to pick one stock, I'd pick that stock.

You can watch the full video interview here

I first published my list of favorite investment books in the mid 1990s shortly after I built my first personal web site on the free pages that came with my "netcom" account.  

Below is a photo and a list of the 11 books I have on an improvised bookshelf for quick access  from my desk.  Below that is a photo of my investment library along with two more recommendations.
 

#1 Technical Analysis of Stock Trends
By Robert D. Edwards,  John Magee and W. H. C. Bassetti

#6 Extraordinary Popular Delusions & the Madness of Crowds
By Charles Mackay and Andrew Tobias (Foreword) "This is the most important book ever written about crowd psychology and, by extension, about financial markets..." -- Ron Insana, CNBC

#7 The Intelligent Investor
by Benjamin Graham; Forward by John C. Bogle, Founder of The Vanguard Group

Graham's Intelligent Investor sets about educating the average person as to what makes an investment, what makes a speculation and how this knowledge can be applied to build wealth in the most risk-averse way possible.  A VALUE Investor's MUST HAVE book!

#8 Investors and Markets
By William F Sharpe, 1990 Nobel Prize in economics recipient for "Capital Asset Pricing Model" along with Markowitz and Miller.

This is a personally autographed book with a personal note sent to my by Professor Sharpe.  This is the most advanced book on my list.

"In this book, Sharpe changes that by setting out his state-of-the-art approach to asset pricing in a nonmathematical form that will be comprehensible to a broad range of investment professionals, including investment advisors, money managers, and financial analysts. Bridging the gap between the best financial theory and investment practice, Investors and Markets will help investment professionals make better portfolio choices by being smarter about asset prices."

#9 The Lazy Person's Guide to Investing 
#10  The Millionaire Next Door: Surprising Secrets of America's Wealthy
By Thomas Stanley and William Danko


By focusing on those with a net worth of at least $1 million, the authors show surprising results that reveal fundamental qualities of this group that are "diametrically opposed to today's earn-and-consume culture, including living below their means, allocating funds efficiently in ways that build wealth, ignoring conspicuous consumption, being proficient in targeting marketing opportunities, and choosing the "right" occupation"

After reading this book, you may never laugh at your friends who use coupons or shop Black Friday Sales again!

#11 The Oil Factor: Protect Yourself and Profit from the Coming Energy Crisis
 By Stephen and Donna Leeb

This book has some great research that shows the stock markets usually have terrible performance after the price of oil surges.  It is worth buying just for the table on page 17 that shows the stock market was between 17% lower and 4% higher after any time the price of oil changed by 100% in any 18 month period between 1973 and 2003.

This helped me know it was prudent to take profits and cut back on my asset allocation when the price of oil skyrocketed just before the last 2008 to 2009 bear market that saw the market crash by 57%.


#13 The Bond Book, Third Edition: Everything Investors Need to Know About Treasuries, Municipals, GNMAs, Corporates, Zeros, Bond Funds, Money Market Funds, and More By Annette Thau

This is a great book that includes:

• Buying individual bonds or bond funds
• The ins and outs of open-end funds, closed-end funds, and exchange traded funds (ETFs)
• The new landscape for municipal bonds: the changed rating scales, the near demise of bond insurance, and Build America Bonds (BABs)
• The safest bond funds
• Junk bonds (and emerging market bonds)
• Buying Treasuries without paying a commission