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Michael A. Gayed
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Michael A. Gayed, CFA, is chief investment strategist and co-portfolio manager at Pension Partners, LLC., an investment advisor which manages a mutual fund and separate accounts according to its ATAC (Accelerated Time and Capital) strategies focused on inflation rotation. Prior to this role,... More
My company:
Pension Partners, LLC
My book:
Intermarket Analysis and Investing: Integrating Economic, Fundamental, and Technical Trends
  • Week in Review - December 26, 2011 0 comments
    Dec 26, 2011 11:20 AM | about stocks: SPY, EEM, IVV, DIA
    "Always do whatever's next." - George Carlin

    Allow me to start off this Week in Review by wishing everyone Happy Holidays and by thanking you for following me and Pension Partners on our path towards the future. Ever since the MarketWatch article which featured me and Ed Dempsey for having called the "Summer Market Plunge" was published and the subsequent attention afterwards, we have continuously been humbled by the kind words and interest people like you have expressed in us and our way of thinking.

    With that said, I want to focus attention on what happens next given the incredible amount of volatility and record setting moves in markets which have occurred over the past few months. First, allow me to remind you that this unequivocally has been one of the most unusual bear market environments in recent history given the resilience of the U.S. stock market relative to nearly all other global equity markets which are in many cases down in the double digits for the year. Statistically, 2011 has been more volatile than 2008, and certainly has given traders and investors more anxiety as a result of events occurring overseas.

    Speaking of that, it appears that the Long-Term Refinancing Operation (LTRO) initiated by the European Central Bank (ECB) last week which resulted in a substantial amount of new money flooding the system has resulted in fears of a Lehman-like event abating given the breathing room newly printed money gives financial institutions.  As I said this past Thursday on Bloomberg Radio, It certainly does not solve any structural problems occurring in Europe as governments must still undergo very sharp austerity measures. What it does do is likely remove the event risk of a bank failure for now, which may be just enough of a reason for a bull market to return at some point next year.

    For now, however, our ATAC models remain largely in "risk-off" mode, but is close enough to a change that could result in us entering 2012 with maximum equity exposure. Admittedly, our models have been whipsawed in the volatility which even in terms of ATAC's own backtesting has never been as severe as it has been this year.  However, we are encouraged by our research which suggests a possible return to normalcy in market relationships and volatility is imminent. What this means is that the volatile sideways and directionless movement will end, and a trend (either up or down) will assert itself.

    This idea that a return to trends will occur is the main idea behind my new seasonal call, which I am calling the "Winter Resolution of 2011, or the Great Relief." Our research indicates that markets have exhausted themselves and a resolution to the volatility likely will result in a move towards definitive direction in the coming months. While some may be disappointed that I am not making a specific directional call as I made with the Summer Crash and Fall Melt-Up, this Winter Resolution call is in many ways far more important from a strategy standpoint. A trader and investor can do well in a trend independent of direction because it means one can stick with positions longer, and does not have to be as concerned about the whipsaw risk and increased false signals resulting from directionless volatility.

    We will be vetting out this idea more in the coming newsletters - I encourage you to forward this along to friends and colleagues interested in markets because if I am right, 2012 could be an incredible year to generate performance in as the anxiety and memory of 2011 fades away. I also encourage you to visit www.minyanville.com every Monday, as I will be writing a special "Lead-Lag" comprehensive report on various sector and asset class movement.

    Please have a safe, happy and healthy New Year!


    Sincerely,

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

    Summary of Writings Published Last Week:

    The Lead-Lag Report: Are Markets Warning of a Serious Collapse? - http://www.minyanville.com/businessmarkets/articles/market-Summer-Crash-Health-Care-Consumer/12/19/2011/id/38462

    Gold and Silver Weakness Not Over - http://www.minyanville.com/businessmarkets/articles/precious-metals-gold-price-of-gold/12/20/2011/id/38489

    From Fall Melt-Up to Winter Resolution - http://www.minyanville.com/businessmarkets/articles/Winter-Resolution-stock-market-outlook-price/12/21/2011/id/38508

    Wal-Mart Signals More Problems Ahead - http://www.marketwatch.com/story/wal-mart-signals-more-problems-ahead-2011-12-21

    The Winter Resolution of 2012 - http://www.etftrends.com/2011/12/the-winter-resolution-of-2012/

    Deflation Rears Its Ugly Head - seekingalpha.com/article/314807-deflatio...

    Why the Surprise in Housing Starts? - seekingalpha.com/article/315022-why-the-...

    The Winter Resolution of 2012, Or The Great Relief - http://seekingalpha.com/article/315568-the-winter-resolution-of-2012-or-the-great-relief

     

    ATAC Backtested Model Results:

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

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

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

    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.

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