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Michael A. Gayed, CFA
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Michael A. Gayed, CFA, winner of the 2014 Dow Award and 3rd Place Wagner, is chief investment strategist and co-portfolio manager at Pension Partners, LLC., an investment advisor which manages mutual funds and separate accounts according to its ATAC (Accelerated Time and Capital) strategies.... More
My company:
Pension Partners, LLC
My blog:
Pension Partners Blog
My book:
Intermarket Analysis and Investing: Integrating Economic, Fundamental, and Technical Trends
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  • Week In Review – May 13, 2012

    "But after this last year and dealing with the studio, the rest of us are closer than we've ever been." - Bruce McCulloch

    *Please Note: We are in the process of migrating our email server and have not been able to receive any emails sent from the end of Friday the 11th to the 13th. We expect this issue to be resolved shortly, but in the meantime should you have any questions, you can reach us at 212-255-5000, through "Live Help" on our company website, or on Twitter @pensionpartners.

    Markets fell again as Europe continued to scare investors out of stocks and into bonds (the opposite of the "Spring Switch" thesis). Spain's 10 year yield spiked to over 6% in a sign of bond market panic re-asserting itself in the Eurozone, coinciding with consumer confidence which is at the highest level since 2008. Chatter over Greece leaving the Euro is getting louder by the day and could happen at any time. I addressed this recently in what has been one of my best live interviews to date discussing Europe, bonds, stocks, the negative narrative, and the bear paradox (http://www.youtube.com/pensionpartners).

    So far, U.S. stocks have behaved fairly resiliently off of the highs, with most European and emerging market equity averages down significantly more. Much of this I believe relates directly to the "Bear Paradox" idea which I have been bringing up more frequently in my various writings online. There is no doubt I thus far have been early in the "Spring Switch" call following the Summer Crash, Fall Melt-Up, and Winter Resolution. However, as I've noted in prior writings, our quantitative ATAC (Accelerated Time And Capital) models have kept us in defense mode, largely in bonds for our clients since the first week of April (http://www.marketwatch.com/story/bad-jobs-numbers-a-correction-and-risk-off-2012-04-06). I have been right so far about the idea that we would be entering a "mini-correction," and have argued all along that should U.S. markets behave resiliently, it likely means the reflation theme is still in place and that the 2003/2009-like move for risk assets remains a strong possibility.

    Our models ended the week sensing a much stronger deflation scare, putting us effectively more defensive than weeks prior. The next few weeks will be important to pay attention to. News crossed over the weekend that the People's Bank of China has decided to lower reserve ratio rates, helping to inject more liquidity into China's economy to counter slowing growth. In numerous Bloomberg interviews I have talked about how easier monetary policy coming from the world's second largest economy could help bolster demand for commodities and investment in emerging markets. While not as effective in its transmission as Quantative Easing 2 by the Fed, monetary easing is still in its early phases on a global emerging market level.

    For now we remain cautious, but I maintain my belief that every day that goes by brings us closer to the Spring Switch getting flipped. Companies are raising dividends, bond yields are at panic lows, and in many ways the stock market is now the only game left to play if you want to have a chance at keeping up with actual real inflation over a longer-term time frame. Of course, the crowd may not realize this reality for some time, but each day brings us closer to the "Great Re-Allocation" than the day before.

    Sincerely,
    Michael A. Gayed, CFA
    Chief Investment Strategist
    Pension Partners, LLC
    www.pensionpartners.com
    Twitter: @pensionpartners
    YouTube: youtube.com/pensionpartners

    Advantages of Pension Partners, LLC Managing Your Portfolio:

    1) ATAC - strategy designed to buy and rotate, not buy and hold

    2) Performance comparable to hedge funds without being one and with lower fees

    3) Liquidity and transparency through the use of ETFs

    4) Ease and security of using Fidelity

    Summary of Writings Published Last Week:

    The Lead-Lag Report: Major Market Changes Are Coming - http://www.minyanville.com/business-news/markets/articles/michael-gayed-sectors-investing-consumer-discretionary/5/8/2012/id/40865

    Rain in Spain or V to See? - http://www.marketwatch.com/story/rain-in-spain-or-v-to-see-2012-05-07

    Catalyst for Higher Stocks is No Catalyst - http://www.marketwatch.com/story/catalyst-for-higher-stocks-is-no-catalyst-2012-05-09

    When Risk-Free Turns Risky - http://www.marketwatch.com/story/when-risk-free-turns-risky-2012-05-11

    Junk Bonds Sing the Siren Song - http://seekingalpha.com/article/581351-junk-bonds-sing-the-siren-song

    Play Greek Votes with Brazil's Currency - http://realmoneypro.thestreet.com/articles/05/08/2012/play-greek-votes-brazils-currency

    Don't Fear a Falling Euro - http://realmoneypro.thestreet.com/articles/05/10/2012/dont-fear-falling-euro

    Could Be a Flash in the Pan - http://realmoneypro.thestreet.com/articles/05/10/2012/could-be-flash-pan

    Core Emerging Markets Assert Leadership - http://emergingmoney.com/bric/core-emerging-markets-assert-leadership/

    This writing is for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation regarding any securities transaction, or as an offer to provide advisory or other services by Pension Partners, LLC in any jurisdiction in which such offer, solicitation, purchase or sale would be unlawful under the securities laws of such jurisdiction. The information contained in this writing should not be construed as financial or investment advice on any subject matter. Pension Partners, LLC expressly disclaims all liability in respect to actions taken based on any or all of the information on this writing.

    May 13 8:05 AM | Link | Comment!
  • Week In Review – May 6, 2012

    "I must govern the clock, not be governed by it." - Golda Meir

    Most market averages experienced their worst decline in 2012 last week, as concerns over U.S jobs growth, coupled with fear over the outcome of France's elections kept investors jittery. Countering this was manufacturing data which continues to steadily improve, alongside stable yields in Italy and Spain which are not signaling a renewed period of panic in European debt markets. In addition, while Quantitative Easing 3 (QE3) and another round of Long-Term Refinancing Operations (LTRO) may be off the table, Australia reminded the world that monetary easing is not just a U.S. and European policy, as the RBA cut rates aggressively. It is worth noting that although Spain's equity markets have utterly collapsed in recent weeks, U.S. stocks continue to act in a resilient fashion.

    I recently wrote a piece on Friday for MarketWatch which I think is important to consider for investors. There is a "Bear Paradox" happening (http://www.marketwatch.com/story/the-bear-paradox-and-the-negative-narrative-2012-05-04?link=MW_TD). This idea is simple here. If you are very bearish on stocks, then you likely have to assume that another "flight to safety" wave happens into Treasuries. Yet, bond yields are (once again) at panic low levels. A big correction likely would send these yields even lower, which paradoxically makes stocks only more attractive on a comparative basis. I maintain the idea that stocks can have a surprisingly large move, similar to 2003 and 2009 given that the crowded trade appears to be in "risk-off" investments.

    Speaking of risk-off, our ATAC (Accelerated Time And Capital) models remain in defense mode, allowing us to perform nicely last week relative to broader market averages. Conditions have undoubtedly deteriorated in the very near-term, but not in a way indicative of a major decline to come. I noted in some of my prior writings that the "mini-correction" may not be over just yet. Market reaction to Francois Hollande in France winning the Presidential seat likely will be important to pay attention to. If the debate turns away from both austerity and government borrowing, and instead focuses on creating favorable conditions for growth to occur (primarily through regulatory and structural changes), then it is entirely possible investors put money back to work into Europe.

    The long-term is made up of a series of short-terms. Our models are run weekly to react to altering market dynamics, all within the context of what we intellectually and analytically believe could be a big year for stocks. If markets once again prove their resiliency in this period of volatility as they did last month, it once again furthers the case for the Spring Switch out of bonds and into stocks is a high probability scenario. I have stated numerous times that predictions are meaningless unless one understands the conditions one is operating in. And since the crowd sets price, crowd expectations which favor inflation means at some point, higher stock prices will likely be chased to ever higher highs out of fixed income investments.

    Sincerely,
    Michael A. Gayed, CFA
    Chief Investment Strategist
    Pension Partners, LLC
    www.pensionpartners.com
    Twitter: @pensionpartners
    YouTube: www.youtube.com/pensionpartners

    Advantages of Pension Partners, LLC Managing Your Portfolio:

    1) ATAC - strategy designed to buy and rotate, not buy and hold

    2) Performance comparable to hedge funds without being one and with lower fees

    3) Liquidity and transparency through the use of ETFs

    4) Ease and security of using Fidelity

    Summary of Writings Published Last Week:

    The Lead-Lag Report: Markets Remain Hesitant - http://www.minyanville.com/business-news/markets/articles/small-caps-energy-sectors-technical-analysis/4/30/2012/id/40708

    Point/Counterpoint: Peter Tchir and Michael Gayed Frame the Debate for Stocks - http://www.minyanville.com/business-news/markets/articles/SPY-JNK-TLT-S2526P-500-peter/5/3/2012/id/40781

    Everything You Think You Know About the Flash Crash is Wrong - http://www.minyanville.com/business-news/markets/articles/flash-crash-flash-crash-2010-flash/5/4/2012/id/4076

    Is Apple Safer than Treasuries? - http://www.marketwatch.com/story/is-apple-safer-than-treasuries-2012-04-30

    Energy Will Lead in a 2012 Reflation - http://www.marketwatch.com/story/energy-will-lead-in-a-2012-reflation-2012-05-02

    The Bear Paradox and the Negative Narrative - http://www.marketwatch.com/story/the-bear-paradox-and-the-negative-narrative-2012-05-04

    Selling the Sell in May, Go Away Strategy - http://seekingalpha.com/article/540981-selling-the-sell-in-may-go-away-strategy

    Energy Stocks Look More Attractive than Oil - http://seekingalpha.com/article/560741-energy-stocks-look-more-attractive-than-oil

    Emerging Markets Searching for Non-Chinese Leadership - http://emergingmoney.com/china/emerging-markets-searching-for-non-chinese-leadership/

    How to Play Brazilian Interest Rate Cuts: Through Consumers - http://emergingmoney.com/china/emerging-markets-searching-for-non-chinese-leadership/

    Is Gold Basing for the Next Leg Higher - http://www.forexpros.com/analysis/is-gold-basing-for-the-next-leg-higher%20-122282

    A Spring Switch Could Still be in Store - http://www.investorplace.com/2012/04/a-spring-switch-could-still-be-in-store/

    Anxious Times for India Investors - http://realmoneypro.thestreet.com/articles/04/30/2012/anxious-times-india-investors

    China's Aussie-Dollar Influence - http://realmoneypro.thestreet.com/articles/05/01/2012/chinas-aussie-dollar-influence-0

    Jockeying for the Weakest Currency - http://realmoneypro.thestreet.com/articles/05/02/2012/jockeying-weakest-currency-0

    This writing is for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation regarding any securities transaction, or as an offer to provide advisory or other services by Pension Partners, LLC in any jurisdiction in which such offer, solicitation, purchase or sale would be unlawful under the securities laws of such jurisdiction. The information contained in this writing should not be construed as financial or investment advice on any subject matter. Pension Partners, LLC expressly disclaims all liability in respect to actions taken based on any or all of the information on this writing

    May 06 4:57 PM | Link | Comment!
  • Week In Review – April 29, 2012

    "My attitude is that if you push me towards something that you think is weakness, then I will turn that perceived weakness into a strength." - Michael Jordan

    Equity averages rose nicely last week as stocks rebounded from the "mini-correction" I have been addressing in my writings since the beginning of April. Meanwhile, bond yields remain depressed as stocks continue to ignore the message of panic low interest rate levels. Economic data showed some slight improvements, particular on the housing front, and successful bond auctions from Spain and Italy brought bulls back into risk assets. The reflation theme I have been stressing remains very much in play, however the "Spring Switch" following the Summer Crash, Fall Melt-Up, and Winter Resolution has not happened just yet.

    The idea behind the Spring Switch is my belief that a "Great Re-Allocation" out of risk-free and into risk is about to occur by the retail investor as stocks continue to push for new all-time highs. Fund flow data still shows money flooding into bonds funds as equities continue to be disbelieved. I talked about this last Friday on Bloomberg's Taking Stock with Pimm Fox in a segment which can be seen on our YouTube channel at www.youtube.com/pensionpartners.

    And yet here we are recovering strongly in risk assets. Just weeks ago I received comments from readers of my various articles on MarketWatch and Minyanville that completely dismissed the idea that stocks would be resilient, a decline would be shallow, and that this was the test for the Spring Switch idea to begin with. Bullish investor sentiment so dramatically fell off a cliff that the crowd simply could not be right about the prospects of a deep correction. Earnings have continued to come out much stronger than expected (Apple and Amazon being the most notable), and Europe may suddenly become a source of strength for markets. I have noted earlier this year in numerous interviews that as elections take place, the rhetoric will change from austerity to growth initiatives. Words alone can cause risk-taking and markets seem to like the idea of shifting towards increasing revenue through economic activity, rather than a complete push towards spending cuts.

    Market internals did improve last week, particularly as Bernanke re-emphasized confidence in the economic recovery, while at the same time saying that should things disappoint in a major way, more stimulus would take place. High beta stocks which have broadly lagged for the past few months caught a strong bid, which is a good sign from a risk-sentiment standpoint. Our ATAC (Accelerated Time And Capital) models remain largely "risk-off" but less so than the past week. More time is needed to see if the next wave higher from here is coming, or if markets go flat for a bit longer before another leg up. Correction odds still remain high, but there is no denying recent improvement internally within risk assets. Given that our models are run on a weekly basis and the speed under which conditions can alter, I suspect at some point in May we will return to a full risk-on position.

    As to the "Sell in May, Go Away" mantra, I don't believe it will take place this year. If I am correct in making the analogy that 2012 is a year of reflation similar to 2003 and 2009, then stocks likely can continue pushing higher all year long. I will be addressing this in my writings next week, but suffice it to say that if everyone believes something will happen, it likely will not. As with the Summer Crash, Fall Melt-Up, and Winter Resolution ideas, contrarianism must be based on intermarket trends and anticipating the anticipation of others. As I said on Bloomberg, the contrarian trade is no longer one about stock market direction. The contrarian trade is one about time.

    Sincerely,
    Michael A. Gayed, CFA
    Chief Investment Strategist
    Pension Partners, LLC
    www.pensionpartners.com
    Twitter: @pensionpartners
    YouTube: youtube.com/pensionpartners

    Advantages of Pension Partners, LLC Managing Your Portfolio:

    1) ATAC - strategy designed to buy and rotate, not buy and hold

    2) Performance comparable to hedge funds without being one and with lower fees

    3) Liquidity and transparency through the use of ETFs

    4) Ease and security of using Fidelity

    Summary of Writings Published Last Week:

    The Lead-Lag Report: Correction Odds Remain Elevated - http://www.minyanville.com/business-news/markets/articles/health-care-financials-materials-consumer-discretionary/4/25/2012/id/40598

    Oil to Retailers: Pay Attention - http://www.minyanville.com/sectors/energy/articles/oil-prices-oil-retail-retailers-risk/4/26/2012/id/40627

    Is the Mini-Correction Over? - http://www.marketwatch.com/story/is-the-mini-correction-over-2012-04-23

    Apple, Tech to Lag Financials in Market Boon - http://www.marketwatch.com/story/apple-tech-to-lag-financials-in-market-boon-2012-04-25

    Trading Central Bank Paranoia - http://www.marketwatch.com/story/trading-central-bank-paranoia-2012-04-26

    Look for a Surge in China Stocks - http://www.marketwatch.com/story/look-for-a-surge-in-china-stocks-2012-04-27

    Natural Gas: Has the Extreme Happened? - http://seekingalpha.com/article/520741-natural-gas-has-the-extreme-happened-redux

    REITs Take Control in April - http://seekingalpha.com/article/532601-reits-take-control-in-april

    Government Seems Determined to Hold Back India with Imminent Legislation - http://emergingmoney.com/bric/government-seems-determined-to-hold-back-india-with-imminent-legislation/

    Asian Emerging Markets are Doing All the Winning - http://emergingmoney.com/bric/asian-emerging-markets-are-doing-all-the-work/

    If Hungary Gets a Bailout, it May be a Catalyst for Austria ETF - http://emergingmoney.com/analysis/if-hungary-gets-a-bailout-it-may-be-a-catalyst-for-austria/

    Betting on Natural Gas? Bet on Coal Instead - http://www.forexpros.com/analysis/betting-on-natural-gas%20-bet-on-coal-instead-121072

    European Financials Winding Up for a Big Move - http://www.forexpros.com/analysis/european-financials-winding-up-for-a-big-move%20-121588

    Why Biotech Investing is So Hard - http://www.investorplace.com/2012/04/why-biotech-investing-is-so-hard/

    Euro Bear? Short Emerging Currencies - http://realmoneypro.thestreet.com/articles/04/23/2012/euro-bear-short-emerging-currencies

    Trouble by the Pound - http://realmoneypro.thestreet.com/articles/04/26/2012/trouble-pound

    The BoJ is Out of Bullets - http://realmoneypro.thestreet.com/articles/04/27/2012/boj-out-bullets

    This writing is for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation regarding any securities transaction, or as an offer to provide advisory or other services by Pension Partners, LLC in any jurisdiction in which such offer, solicitation, purchase or sale would be unlawful under the securities laws of such jurisdiction. The information contained in this writing should not be construed as financial or investment advice on any subject matter. Pension Partners, LLC expressly disclaims all liability in respect to actions taken based on any or all of the information on this writing.

    Apr 29 11:54 AM | Link | 1 Comment
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