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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
  • Week in Review – December 18, 2011 1 comment
    Dec 18, 2011 5:52 PM | about stocks: IVV, SPY, TLT, IEF

    “Without a sense of urgency, desire loses its value.” – Jim Rohn

    Markets lost ground last week and bonds spiked up on continued fears over Europe.  Despite the global central bank intervention taken two weeks ago which resulted in equities having their best week since March 2009, European markets have effectively given back that entire gain while U.S. markets remain relatively resilient.  Interestingly, the U.S. bond market moved up in a panic-like way last week, sending yields lower as the Euro continued its descent and investors flocked to the safety of U.S. bonds.

    Markets seemingly had every reason in the world to rally last week, given monetary intervention, positive seasonality, good economic news in the U.S., etc.  However, the speed of the advance in bonds is troubling, signaling a sense of urgency to Europe that it must either come up with a true solution to its debt problem, or money will simply leave.  Europe is effectively in the midst of a modern day bank run on the country level, and a lasting solution remains questionable.  I firmly believed that markets would rally into the end of the year, and while they may still, I also can not deny that the speed at which the “bear trade” came back in just a few short days is signaling something significant may be on the horizon. 

    What happens in these last few days is unclear, as some kind of crescendo seams near. Central bank intervention taken two weeks ago may simply have delayed this.  Before intervention took place, I had been writing about a “December to Remember Breakdown” in equities as internals deteriorated.  When intervention took place, I wrote about the return to the Fall Melt-Up as those deteriorating internals of the market strengthened substantially.  The fact that sector and asset class price ratios are now back at levels seen before SuperBen and the League of Extraordinary Bankers stepped in is a troubling sign.

    Our ATAC models flipped back into defensive mode last Friday, with much of the signal change occurring between Thursday and Friday as markets actually closed positive on those days.  We remain in a challenged environment, but there is good news.  Markets are cornering European leaders and forcing an “endgame.”  Substantial amounts of new debt are set to be issued in the first five months of 2012; a solution must be found before those bonds come to market.  Bond markets have taken on an urgent tone, with investors pricing in that at least one country will leave the Euro some time next year.

    It is important to be ever-mindful that big money is made coming out of a crisis, and that it is only a matter of time when a fat pitch will express itself in stocks to allow those managers with a proven process the opportunity to not only make back earlier losses, but come out far ahead as a result.  It is also important to be honest with oneself and recognize that there are no “safe” investments- risk must be taken to earn reward.  Nothing is ever guaranteed, and making money investing is never an absolute outcome.  Ask those invested in Gold over the past four weeks for proof of that.

    Sincerely,

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

    Summary of Writings Published Last Week:

    The Home Construction Bull Market You Never Saw Coming - http://www.minyanville.com/businessmarkets/articles/market-home-construction-stock-market-price/12/12/2011/id/38339

    Three Ways to Fix Europe Without Europe’s Help - http://www.minyanville.com/businessmarkets/articles/european-debt-crisis-market-volatility-uptick/12/15/2011/id/38408

    Paper Beats Rock? Gold, Stocks, and the Fall Melt-Up Return - http://seekingalpha.com/article/313388-paper-beats-rock-gold-stocks-and-the-fall-melt-up-return

    Weak Euro Equals Strong Stocks - http://seekingalpha.com/article/313866-weak-euro-equals-strong-stocks

    Russia: Crisis or Opportunity? - http://seekingalpha.com/article/314167-russia-crisis-or-opportunity

    A Weak Euro Would Be Bullish News - http://www.marketwatch.com/story/a-weaker-euro-would-be-bullish-news-2011-12-13

    ATAC Backtested Model Results:

    ATAC - Conservative Model Backtested Results:
    http://www.pensionpartners.com/media/Pension%20Partners%20-%20ATAC%20Conservative%20Model%20Backtested%20Results.pdf

     

    ATAC - Moderate Model Backtested Results:
    http://www.pensionpartners.com/media/Pension%20Partners%20-%20ATAC%20Moderate%20Model%20Backtested%20Results.pdf

    ATAC - Aggressive Model Backtested Results:
    http://www.pensionpartners.com/media/Pension%20Partners%20-%20ATAC%20Aggressive%20Model%20Backtested%20Results.pdf

    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.

    Themes: macro outlook Stocks: IVV, SPY, TLT, IEF
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  • pokalolo
    , contributor
    Comments (594) | Send Message
     
    It was fairly simple. It was Huge mutual fund redemption's. Almost record levels,so, fund managers were selling into the rallies and if it doesn't stop we will not see any window dressing at years end as normally is the case. EU mental masturbation's are causing the melting from going anywhere but with gravity !

     

    So, if the redemption's stop hitting the funds an hedgees they will ,buy the years big winners back,but, if not the winners go to salvage small losses..... Mele kakikimaka
    18 Dec 2011, 06:16 PM Reply Like
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