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Liz Ann Sonders: Investment Outlook (March 17, 2014)
On the contrary, her final paragraph suggests investors use caution, noting that the 1990s melt-up did not end well at all, and that as investors start to rush into the market, the current scenario might indeed resemble the late 1990s, when valuations became way out of line. I would suggest that Ms. Sonders tends to be cautiously optimistic for the most part, but certainly not pollyannish at all. She is one of the handful of economic strategists I listen to regularly. Is she always right? Of course not, but she has tended to be more right than wrong, which is certainly better than most of the other so-called experts, including a few loud portfolio managers (know any of them?), and all of the perennial bears, who get a lot of media coverage. We believe it is important to listen to a good mix of strategists, then sift through the comments and data sources to see where our own views are suspect. It is very easy to think only those who agree with our outlook are worthy of consideration.
@bobc, I don't pay much attention to any of these analysts for my investment decision to be accused of confirmation bias. My core is a highly diversified holding that doesn't care about market conditions and the play portfolio is a price momentum technical strategy which doesn't need fundamental analysis to make decisions.
However, I do read articles like these and have found her to be more of a market cheerleader in conclusion all the time and it will be correct in any rising market and wrong in down markets. You can call it cautiously optimistic just because of a few obligatory caveats in any article and perhaps that is your own confirmation bias for your outlook.
I consider her as a talking advertisement to draw and hold money into Schwab which is her job. Over time, she has ignored to even consider warning signals before downturns and why I consider a Pollyanna that is not very objective. I respect your opinion but wholly disagree with it.
What was she saying in 1999-March 2000 before the bear, and March 2000, 2001, 2002 during the bear? And in 2007 before the bear, and 2008-March 9, 2009 during the bear? That would give us a good idea of how accurate her thinking on markets has been. I've not followed her, but did she her as one of the guest panelists on Louis Rukeyser's Wall St. Week on occasion.
She has tried to counter the perma bull label by, for example, pointing out that she warned about the problem with housing in 2007 and the inverted yield curve. But, the primary direction at any time as far as US stocks are concerned is always bullish with caveats (Economy is strong but don't be surprised by a 10% correction). Some might call it, cautiously optimistic I suppose if that confirms their bias.
" But, the primary direction at any time as far as US stocks are concerned is always bullish with caveats (Economy is strong but don't be surprised by a 10% correction). "
Unfortunately, there's a tremendous conflict of interest for any person in her position, regardless of the brokerage firm, or mutual fund firm. There are some notable exceptions of course, but some of them probably have conflicts of interests in the bearish direction, like Peter Schiff, etc...
I'm reading some of the writings of Benjamin Graham, who seemed to be totally honest and without conflicts of interest. He was ready, willing and able to turn his back on stocks when they became overvalued and unattractive.
"There are some notable exceptions of course, but some of them probably have conflicts of interests in the bearish direction, like Peter Schiff, etc..."
I think there are people who are considered "bearish" but are "realists" - Faber is labeled as "bearish", but if you actually listen to him on Bloomberg or elsewhere, he is often "negative on this, positive on that." He pretty much called the bottom in 2009. Faber also often manages to be one of the funniest economic commentators on CNBC or elsewhere. What other commentator responds to the question of how to allocate assets with: "Well, it depends on how many girlfriends you have."
Or, in 2008, he noted: "The federal government is sending each of us a $600 rebate. If we spend that money at Wal-Mart, the money goes to China. If we spend it on gasoline it goes to the Arabs. If we buy a computer it will go to India. If we purchase fruit and vegetables it will go to Mexico, Honduras and Guatemala. If we purchase a good car it will go to Germany. If we purchase useless crap it will go to Taiwan and none of it will help the American economy. The only way to keep that money here at home is to spend it on prostitutes and beer, since these are the only products still produced in US. I've been doing my part."[22]"
I don't see Schiff as having conflicts of interest, he simply has his views on monetary theory and he's sticking to them. Euro Pacific has a bunch of various mutual funds - yes, there are gold and hard asset funds, but an assortment of US/International funds. What's kind of meh is that you'd think the gold and hard asset funds would be doing better, given Schiff (he doesn't manage them, but still...)
Schiff and Faber, usually considered as permabears, are no more or less realistic than the permabull Jeremy Siegel. Calling someone a realist is more often than not a good indicator of confirmation bias.
The problem with these kinds of people isn't that they are wholly wrong about whatever drum they are beating. Just that they get into hyperbole on that one thing as if that is the only thing that matters for how the markets behave and so often wrong for long periods or irrelevant to investment decisions. But it is these very extreme positions that keep them on TV. They are all character actors in Hollywood parlance.
Schiff's schtick is a lone voice against the tide even if he is fighting a severe case of haemorhoids to be on TV. Faber's is that of a humorous and dotty uncle with strong opinions but mostly harmless. Etc.
Everybody plays their part in the theater we call the Market.
and scott/cman, what are your opinions about John Hussman, who seems to me to be very honest and probably without conflict of interest (in the sense that he is free to form and express whatever market opinions he wants, as his mutual funds have the freedom to adopt whatever investment stance he has), although he has been very wrong for a long time and his mutual fund investors have suffered.
Hussman's evaluation of the markets gives him a bearish signal most of the time and so he is unable to exploit the increase in the markets.
I agree with his analysis most of the time as an intellectual debate. But I see him as proof that markets have very little to do with fundamentals and that their movements come primarily as a derivative betting on the fundamentals between investors, betting not on where the fundamentals are going but where they think the investors are going next.
So, money-flows in and out and investor psychology becomes even more important than fundamentals. If there is a lot of money coming into play and investor psychology is positive, the multiples just expand and make any level possible as long as those conditions hold and vice versa. The fundamentals are important only to the extent that they suddenly affect investor behavior because of macro trigger events and the reason why we see volatile swings.
This is why I think people who analyze the economic climate and fundamentals can be absolutely right about their analysis but make terrible investment returns except by accident. They are playing a game that doesn't really exist.
and scott/cman, what are your opinions about John Hussman, who seems to me to be very honest and probably without conflict of interest (in the sense that he is free to form and express whatever market opinions he wants, as his mutual funds have the freedom to adopt whatever investment stance he has), although he has been very wrong for a long time and his mutual fund investors have suffered.
What I want to know is this:
1. Hussman has had an overly complex set of options hedges on his funds for a while and I think he's been fully hedged for some time.
What I want to know is: had he not been hedged, what would the returns have been?
1. Hussman has had an overly complex set of options hedges on his funds for a while and I think he's been fully hedged for some time.
What I want to know is: had he not been hedged, what would the returns have been?"
scott, Hussman's returns would have been just fine had he not been hedged. A mixed bag, but my impression is overall positive. Here's some quotes from the most recent Morningstar Analyst report of Hussman Strategic Growth, HSGFX, about this very issue:
"In 2010, for example, the fund's long equity portfolio outpaced the S&P 500 (16.6%, respectively, compared with 16.0% for the index). But net of hedges, the portfolio lost 3.6%"............ "In 2012, for example, the fund lost 12.6%, even worse than its 2008 showing. Its equity positions lagged the S&P 500 by an astounding 7.0% last year [2012], owing the balance of the losses (more than 28%) to the fund's hedges. Whereas Hussman typically shines at stock-picking (in 2009 the equity portfolio beat the S&P 500 Index by 13.9%), in 2012 poor stock-picking and an underweighting to financials stocks turned against him."
Comments
However, I do read articles like these and have found her to be more of a market cheerleader in conclusion all the time and it will be correct in any rising market and wrong in down markets. You can call it cautiously optimistic just because of a few obligatory caveats in any article and perhaps that is your own confirmation bias for your outlook.
I consider her as a talking advertisement to draw and hold money into Schwab which is her job. Over time, she has ignored to even consider warning signals before downturns and why I consider a Pollyanna that is not very objective. I respect your opinion but wholly disagree with it.
She has tried to counter the perma bull label by, for example, pointing out that she warned about the problem with housing in 2007 and the inverted yield curve. But, the primary direction at any time as far as US stocks are concerned is always bullish with caveats (Economy is strong but don't be surprised by a 10% correction). Some might call it, cautiously optimistic I suppose if that confirms their bias.
Unfortunately, there's a tremendous conflict of interest for any person in her position, regardless of the brokerage firm, or mutual fund firm. There are some notable exceptions of course, but some of them probably have conflicts of interests in the bearish direction, like Peter Schiff, etc...
I'm reading some of the writings of Benjamin Graham, who seemed to be totally honest and without conflicts of interest. He was ready, willing and able to turn his back on stocks when they became overvalued and unattractive.
I think there are people who are considered "bearish" but are "realists" - Faber is labeled as "bearish", but if you actually listen to him on Bloomberg or elsewhere, he is often "negative on this, positive on that." He pretty much called the bottom in 2009. Faber also often manages to be one of the funniest economic commentators on CNBC or elsewhere. What other commentator responds to the question of how to allocate assets with: "Well, it depends on how many girlfriends you have."
Or, in 2008, he noted: "The federal government is sending each of us a $600 rebate. If we spend that money at Wal-Mart, the money goes to China. If we spend it on gasoline it goes to the Arabs. If we buy a computer it will go to India. If we purchase fruit and vegetables it will go to Mexico, Honduras and Guatemala. If we purchase a good car it will go to Germany. If we purchase useless crap it will go to Taiwan and none of it will help the American economy. The only way to keep that money here at home is to spend it on prostitutes and beer, since these are the only products still produced in US. I've been doing my part."[22]"
I don't see Schiff as having conflicts of interest, he simply has his views on monetary theory and he's sticking to them. Euro Pacific has a bunch of various mutual funds - yes, there are gold and hard asset funds, but an assortment of US/International funds. What's kind of meh is that you'd think the gold and hard asset funds would be doing better, given Schiff (he doesn't manage them, but still...)
The problem with these kinds of people isn't that they are wholly wrong about whatever drum they are beating. Just that they get into hyperbole on that one thing as if that is the only thing that matters for how the markets behave and so often wrong for long periods or irrelevant to investment decisions. But it is these very extreme positions that keep them on TV. They are all character actors in Hollywood parlance.
Schiff's schtick is a lone voice against the tide even if he is fighting a severe case of haemorhoids to be on TV. Faber's is that of a humorous and dotty uncle with strong opinions but mostly harmless. Etc.
Everybody plays their part in the theater we call the Market.
Hussman's evaluation of the markets gives him a bearish signal most of the time and so he is unable to exploit the increase in the markets.
I agree with his analysis most of the time as an intellectual debate. But I see him as proof that markets have very little to do with fundamentals and that their movements come primarily as a derivative betting on the fundamentals between investors, betting not on where the fundamentals are going but where they think the investors are going next.
So, money-flows in and out and investor psychology becomes even more important than fundamentals. If there is a lot of money coming into play and investor psychology is positive, the multiples just expand and make any level possible as long as those conditions hold and vice versa. The fundamentals are important only to the extent that they suddenly affect investor behavior because of macro trigger events and the reason why we see volatile swings.
This is why I think people who analyze the economic climate and fundamentals can be absolutely right about their analysis but make terrible investment returns except by accident. They are playing a game that doesn't really exist.
1. Hussman has had an overly complex set of options hedges on his funds for a while and I think he's been fully hedged for some time.
What I want to know is: had he not been hedged, what would the returns have been?
"What I want to know is this:
1. Hussman has had an overly complex set of options hedges on his funds for a while and I think he's been fully hedged for some time.
What I want to know is: had he not been hedged, what would the returns have been?"
scott, Hussman's returns would have been just fine had he not been hedged. A mixed bag, but my impression is overall positive. Here's some quotes from the most recent Morningstar Analyst report of Hussman Strategic Growth, HSGFX, about this very issue:
"In 2010, for example, the fund's long equity portfolio outpaced the S&P 500 (16.6%, respectively, compared with 16.0% for the index). But net of hedges, the portfolio lost 3.6%"............ "In 2012, for example, the fund lost 12.6%, even worse than its 2008 showing. Its equity positions lagged the S&P 500 by an astounding 7.0% last year [2012], owing the balance of the losses (more than 28%) to the fund's hedges. Whereas Hussman typically shines at stock-picking (in 2009 the equity portfolio beat the S&P 500 Index by 13.9%), in 2012 poor stock-picking and an underweighting to financials stocks turned against him."