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Just about 2 years ago today, this is what they had to say.....
I do not take lightly, the ill of events upon others; as it affects all. Two of the best globally, from Aussie-Land, in the ability to "see" the chips and were they have or will fall. This video explanation of Euro events is near two years ago today, and little has changed, except the dollar amounts. Reality still bites.....
I posted this in another thread, but it works here:
I think Jacob Rothschild said it well the other day:
"Recovery may come, but not in months. In this reality, markets oscillate as before. Investment success in public markets has become a game of timing rather than fundamentals. The Western world may have finally woken up last year: it realised that the crash of 2008 was not just another market event, quickly to be recovered from."
"The debt mountain in government and households is just too high. The legacy of debt has first to be worked off. And that – people and markets now see – will take years. Recovery may come, but not in months. There are signs now that the impact from the loss of Western spending power has started to affect China too. In this reality, markets oscillate as before. But the ups do not last. And they are succeeded by falls. Unless one has a long horizon, investment success in public markets has become a game of timing rather than fundamentals."
This all, quite simply, is a mess. QE3 and all manner of other reflation attempts will provide boosts and one should protect themselves against the possibility that currency debasement is the one and only answer. However, as I've said since fundalarm, without real decisions and attempts to actually tackle structural flaws within the economy, we'll keep getting back to this point and having these discussions, only having spent trillions that resulted in diminishing returns.
People are desperate for yield - as Johnn noted in another thread, people piling into an ETN, which has the credit risk of the issuing bank, just to get yield. It's becoming evident that rates could stay low for YEARS - but I'm curious about the performance of the underlying asset (whether it be government bonds or dividend stocks) if things turn considerably South. You have the 10 year bond at record lows and some instances elsewhere in the world of negative yield.
Reply to @scott: Your previous commentary certainly does work well here.
I believe that he most critical investment question today is this: if the markets are no longer driven by investors trying to apply fundamental valuations, but rather largely by automated machinery attempting to apply micro-short term timing on a moment-to-moment basis, without consideration of any underlying factors, then exactly how are we supposed to fit into this picture? More and more I'm thinking that we don't.
Reply to @Old_Joe: No, we do not. If you want to play, you had better have a looooonnng-term time horizon, and be paid dividends while you wait (and not like, 2%, I'm talking 4-5+%). The Pfizers of the world will work okay. Telecoms (Vodafone, AT & T and others across the world)
I like Brookfield Infrastucture (BIP), which yields nearly 5% and is somehow actually up with the market down nearly 300. That has a history of being a volatile stock and is not something I would really recommend for conservative investors, but people want yield and I think there's really nothing like BIP. Large parent, as well. It is an MLP so it does send a K-1 at tax time.
Some companies with cash to take advantage will be down but may do better than the rest. Stay away from anything financial and I'd say stay away from anything luxury-related and it's the McDonalds and Wal-Marts instead of the high p/e and no dividend Chipotles.
I continue to like alternatives (Marketfield, AQR Risk Parity, etc) and have a large allocation to them.
The other question becomes whether or not those larger than us will still want to be playing either if things get worse.
I don't think people should leave entirely, but I think people have to get to a point where they can sleep at night and I think people do need to keep *some* (how much depends on your risk tolerance) protection against the possibility of further QE if the idea of "reflation at all costs" comes into play. People need to really circle the wagons around the amount of risk they feel comfortable with and get rid of anything superfluous.
Reply to @scott: Wouldn't you think that the mutual fund companies can see this for themselves, and apply the pressure necessary to shut down the automated trading? If they don't, they stand to lose one hell of a lot of money, as they already have.
Reply to @Old_Joe: There is a point where you get a snowball rolling. The industry completely did not understand the reality that was going on (CNBC still has no clue, they all look like they are crapping their pants today) and did not have any comprehension of the trust that many people lost in the financial system (see: gold, which is acting on a number of things which I discussed in a couple of other threads.)
I thought what was particularly interesting a couple of years ago was the fact that something like the Arbitrage fund (ARBFX), which is an equity fund with bond-like returns given the strategy, took in enough money to close, even as the market was ramping. It was an indicator that people did not want to take on risk, and that has only gotten worse - much worse. As for mutual fund companies, I'm sure Pimco is doing well in terms of taking in assets. Their move to equity funds may have been ill-timed, but interesting how their latest offering is a long-short fund that is a hedge fund they bought and converted to a mutual fund.
The Brokerages are in trouble. Commissions/fees way down. Don't own financials (I said that earlier, I'll say it again. I said it a couple of years ago when I said the banks had not cleared their problems up.)
The Facebook thing (whatever one's thoughts about people should have known the risks, etc) was an enormous loss of confidence for a large portion of the average investors out there. Mark Cuban said it best: "1. Say goodbye to the individual investor on Wall Street. Whatever positive impression they had of the IPO market and the stock market in general was just torched to the ground. When everyone you know associated with the stock market is telling you and the media is confirming that this could be a huge IPO that will make money for those lucky enough to get shares and the opposite happens, goodnight. All confidence in the stock is destroyed. Put your money in the bank or if you want to gamble, at least slot machines in Vegas pay out 98pct." (http://blogmaverick.com/)
The Morgan Stanley CEO calling investors in Facebook who hoped it would do well "naive" doesn't help matters, either.
I'm guessing QE3 is likely, but it shows a failure of understanding (or desire to actually do the work of addressing problems) that appear again and again. Meanwhile, the retail investor is gone. CNBC needs to start showing reality shows instead of the market, like MTV does now instead of playing music like they used to.
As for real estate, the homebuilder stocks down 8-9-10% today. Groupon lock-up period ends today, and that's down 9%. That stock is down huge from the IPO, and yet those who couldn't sell until now are running towards the f'ing exits. CNBC Morons babbling about how great oil coming down is - it isn't so great if oil tumbling every day is telling you something is wrong as it did in 2008. One analyst after another talking about how the chaos in Europe is "bringing great opportunities." Yeah, it is if they figure out how to kick the can one more time. If they don't....
The mutual fund companies will get inflows from bond funds, until that reverses (which could be 6 months or 6 years from now.) I could say there's a point where buying of bonds starts to dry up, but I could be quite wrong about that. I can't believe there's demand at this point, but people simply care about return of capital, they don't give a crap about return on capital.
Hi scott, I apologize for stepping on a post/link you had provided previously. I honestly don't recall. But, the video is worth a watch again for what today's world is, versus 2 years ago, eh? Take care, Catch
Reply to @catch22: No no, you didn't - I just posted that quote I used in another thread and thought it worked well here. That video is definitely worth a view.
Reply to @scott: These things go in cycles. Just when all hope is lost the market starts to go up again.
After a while some will wait too long and will be disappointed as they once again sell at the bottom and buy at the top. The key is stop trying to time in and out but invest in good funds with has delivered over a long term and limit the risk exposure to one that one is comfortable with.
I believe since most people are uncomfortable with pure equity risk, they should probably invest in balanced funds and asset allocation funds. Their short term cash needs should not invested in the market in any way.
Reply to @Investor: " Just when all hope is lost the market starts to go up again."
It's already *GONE* up, and whoever was still left after 2008 has been continually leaving. There's been equity fund outflows for the last three years that have been only increasing - this year WAY more than last year.
There's been plenty of "hope" the last few years, and the retail investor has continued to leave and pile into bonds the whole way.
Now that "hope" is starting to be replaced by "reality" again for something like the third year in a row (and QE3 isn't going to get the retail investor back, either), the remaining retail investors continue to pile out. $7B out of equity funds last week - how much does anyone think will head for the exit this week?
"After a while some will wait too long and will be disappointed as they once again sell at the bottom and buy at the top. "
They're not buying. Brokerage commissions down to the worst levels since 2006 or something like that.
As CNBC continually asks every five seconds, "Where are the retail investors?"
This time does, in fact, appear to be different. If you believe the retail investor is coming back anytime soon, I'd tell CNBC - they'll be thrilled (and they can finally stop asking irritating things like "Gee, what will get the retail investor's mojo back?")
"The key is stop trying to time in and out but invest in good funds with has delivered over a long term and limit the risk exposure to one that one is comfortable with. "
You can tell people that and they do not care. Just like CNBC can tell people that dividend stocks are "safe harbor" and people see the 3% yielding stock lose 10% in a matter of a couple of weeks.
Investing does require something of a time horizon, or maybe better yet - it *did*; people do NOT have the patience or the risk tolerance today, both in terms of small investors and large investors. Older investors do not want to risk another 2008 and are getting out of risk (or at least the kind of risk they had been in), probably for good. And the Facebook situation was a disaster from a market PR standpoint.
Dr. John Hussman has been saying this for the past four years (Hussman funds). Basically, true deleveraging has never occurred despite whatever one hears from the talking heads on CNBC. Until the large banks, brokerages financial institutions, etc. and their bondholders are forced to properly account for all the toxic debt they continue hold AND their bondholders are no longer made whole by repeatedly stealing taxpayer money and printing more worthless paper (i.e., the Fed and its QE and 'twist' interventions), this goes nowhere.
With regard to "Where is the retail investor?" you are spot on when you state that QE 3 will not get the retail investor back, anymore than QE 2 or QE 1 did. Helicopter Ben still believes that if he drives interest rates toward zero the retail investors will come streaming back into the stock market. Talk about clueless. As far as the individual investor is concerned:
QE 1: Fool me once, shame on you.
QE2: Fool me twice, shame on me.
QE 3: Are you #*&$!!!@! - ing me ?? !! Fuggedabout it.
Reply to @scott: I don't care much if the retail investor will stay in the sidelines or not.
The question is can they afford to stay on the sidelines. Some that has accumulated enough may.
The data that I am exposed says most others cannot stay at sidelines forever, when the income from bonds is not paying them they will get risk exposure one way or another, voluntarily or not. It is already happening with dividend stocks, MLPs and even good old REITs. Some will put their money on other so-called alternative strategies and I am afraid they will be disappointed once again.
Retail investor needs education and market is giving them real education. If they bought FB, it is themselves to blame, not FB, Morgan Stanley, Nasdaq. Instead of the fads, they need to invest suitable for their risk tolerance. Otherwise, they keep their money sidelines and hope it lasts their retirement.
Most retail investors should forget about making quick buck and adopt a long term saner strategy. How many times they need to be disappointed to realize that perhaps the problem is themselves.
Reply to @DlphcOracl: Again, I couldn't agree more. I think you'll see QE3 and further though, it's just too far down that path and they aren't going to admit that it isn't working.
We will undoubtedly see a QE 3 but even Helicopter Ben knows that this will be futile. The quants, high frequency traders and Pavlovian dogs will jump all over it, we will get the predictable rally in the stock market, etc. However, the bounce will be muted and short-lived. Meanwhile, the previous interventions have brought our national deficit and debt to GDP ratios to precarious levels, to a point where the modest effect on shoring up the stock market will be greatly outweighed by the additional debt burden.
Simply put: it is finally time to pay the piper and this will fully play out after the election in 2013, in my opinion.
Comments
I think Jacob Rothschild said it well the other day:
"Recovery may come, but not in months.
In this reality, markets oscillate as
before. Investment success in public markets
has become a game of timing rather than
fundamentals.
The Western world may have finally woken up last
year: it realised that the crash of 2008 was not just
another market event, quickly to be recovered from."
"The
debt mountain in government and households is just
too high. The legacy of debt has first to be worked off.
And that – people and markets now see – will take
years. Recovery may come, but not in months. There
are signs now that the impact from the loss of
Western spending power has started to affect China
too. In this reality, markets oscillate as before. But the
ups do not last. And they are succeeded by falls.
Unless one has a long horizon, investment success in
public markets has become a game of timing rather
than fundamentals."
This all, quite simply, is a mess. QE3 and all manner of other reflation attempts will provide boosts and one should protect themselves against the possibility that currency debasement is the one and only answer. However, as I've said since fundalarm, without real decisions and attempts to actually tackle structural flaws within the economy, we'll keep getting back to this point and having these discussions, only having spent trillions that resulted in diminishing returns.
People are desperate for yield - as Johnn noted in another thread, people piling into an ETN, which has the credit risk of the issuing bank, just to get yield. It's becoming evident that rates could stay low for YEARS - but I'm curious about the performance of the underlying asset (whether it be government bonds or dividend stocks) if things turn considerably South. You have the 10 year bond at record lows and some instances elsewhere in the world of negative yield.
I believe that he most critical investment question today is this: if the markets are no longer driven by investors trying to apply fundamental valuations, but rather largely by automated machinery attempting to apply micro-short term timing on a moment-to-moment basis, without consideration of any underlying factors, then exactly how are we supposed to fit into this picture? More and more I'm thinking that we don't.
I like Brookfield Infrastucture (BIP), which yields nearly 5% and is somehow actually up with the market down nearly 300. That has a history of being a volatile stock and is not something I would really recommend for conservative investors, but people want yield and I think there's really nothing like BIP. Large parent, as well. It is an MLP so it does send a K-1 at tax time.
Some companies with cash to take advantage will be down but may do better than the rest. Stay away from anything financial and I'd say stay away from anything luxury-related and it's the McDonalds and Wal-Marts instead of the high p/e and no dividend Chipotles.
I continue to like alternatives (Marketfield, AQR Risk Parity, etc) and have a large allocation to them.
The other question becomes whether or not those larger than us will still want to be playing either if things get worse.
I don't think people should leave entirely, but I think people have to get to a point where they can sleep at night and I think people do need to keep *some* (how much depends on your risk tolerance) protection against the possibility of further QE if the idea of "reflation at all costs" comes into play. People need to really circle the wagons around the amount of risk they feel comfortable with and get rid of anything superfluous.
I thought what was particularly interesting a couple of years ago was the fact that something like the Arbitrage fund (ARBFX), which is an equity fund with bond-like returns given the strategy, took in enough money to close, even as the market was ramping. It was an indicator that people did not want to take on risk, and that has only gotten worse - much worse. As for mutual fund companies, I'm sure Pimco is doing well in terms of taking in assets. Their move to equity funds may have been ill-timed, but interesting how their latest offering is a long-short fund that is a hedge fund they bought and converted to a mutual fund.
The Brokerages are in trouble. Commissions/fees way down. Don't own financials (I said that earlier, I'll say it again. I said it a couple of years ago when I said the banks had not cleared their problems up.)
The Facebook thing (whatever one's thoughts about people should have known the risks, etc) was an enormous loss of confidence for a large portion of the average investors out there. Mark Cuban said it best: "1. Say goodbye to the individual investor on Wall Street. Whatever positive impression they had of the IPO market and the stock market in general was just torched to the ground. When everyone you know associated with the stock market is telling you and the media is confirming that this could be a huge IPO that will make money for those lucky enough to get shares and the opposite happens, goodnight. All confidence in the stock is destroyed. Put your money in the bank or if you want to gamble, at least slot machines in Vegas pay out 98pct." (http://blogmaverick.com/)
The Morgan Stanley CEO calling investors in Facebook who hoped it would do well "naive" doesn't help matters, either.
I'm guessing QE3 is likely, but it shows a failure of understanding (or desire to actually do the work of addressing problems) that appear again and again. Meanwhile, the retail investor is gone. CNBC needs to start showing reality shows instead of the market, like MTV does now instead of playing music like they used to.
As for real estate, the homebuilder stocks down 8-9-10% today. Groupon lock-up period ends today, and that's down 9%. That stock is down huge from the IPO, and yet those who couldn't sell until now are running towards the f'ing exits. CNBC Morons babbling about how great oil coming down is - it isn't so great if oil tumbling every day is telling you something is wrong as it did in 2008. One analyst after another talking about how the chaos in Europe is "bringing great opportunities." Yeah, it is if they figure out how to kick the can one more time. If they don't....
The mutual fund companies will get inflows from bond funds, until that reverses (which could be 6 months or 6 years from now.) I could say there's a point where buying of bonds starts to dry up, but I could be quite wrong about that. I can't believe there's demand at this point, but people simply care about return of capital, they don't give a crap about return on capital.
I apologize for stepping on a post/link you had provided previously. I honestly don't recall.
But, the video is worth a watch again for what today's world is, versus 2 years ago, eh?
Take care,
Catch
After a while some will wait too long and will be disappointed as they once again sell at the bottom and buy at the top. The key is stop trying to time in and out but invest in good funds with has delivered over a long term and limit the risk exposure to one that one is comfortable with.
I believe since most people are uncomfortable with pure equity risk, they should probably invest in balanced funds and asset allocation funds. Their short term cash needs should not invested in the market in any way.
It's already *GONE* up, and whoever was still left after 2008 has been continually leaving. There's been equity fund outflows for the last three years that have been only increasing - this year WAY more than last year.
There's been plenty of "hope" the last few years, and the retail investor has continued to leave and pile into bonds the whole way.
Now that "hope" is starting to be replaced by "reality" again for something like the third year in a row (and QE3 isn't going to get the retail investor back, either), the remaining retail investors continue to pile out. $7B out of equity funds last week - how much does anyone think will head for the exit this week?
"After a while some will wait too long and will be disappointed as they once again sell at the bottom and buy at the top. "
They're not buying. Brokerage commissions down to the worst levels since 2006 or something like that.
As CNBC continually asks every five seconds, "Where are the retail investors?"
This time does, in fact, appear to be different. If you believe the retail investor is coming back anytime soon, I'd tell CNBC - they'll be thrilled (and they can finally stop asking irritating things like "Gee, what will get the retail investor's mojo back?")
"The key is stop trying to time in and out but invest in good funds with has delivered over a long term and limit the risk exposure to one that one is comfortable with. "
You can tell people that and they do not care. Just like CNBC can tell people that dividend stocks are "safe harbor" and people see the 3% yielding stock lose 10% in a matter of a couple of weeks.
Investing does require something of a time horizon, or maybe better yet - it *did*; people do NOT have the patience or the risk tolerance today, both in terms of small investors and large investors. Older investors do not want to risk another 2008 and are getting out of risk (or at least the kind of risk they had been in), probably for good. And the Facebook situation was a disaster from a market PR standpoint.
That's the environment we're presented with.
Dr. John Hussman has been saying this for the past four years (Hussman funds). Basically, true deleveraging has never occurred despite whatever one hears from the talking heads on CNBC. Until the large banks, brokerages financial institutions, etc. and their bondholders are forced to properly account for all the toxic debt they continue hold AND their bondholders are no longer made whole by repeatedly stealing taxpayer money and printing more worthless paper (i.e., the Fed and its QE and 'twist' interventions), this goes nowhere.
With regard to "Where is the retail investor?" you are spot on when you state that QE 3 will not get the retail investor back, anymore than QE 2 or QE 1 did. Helicopter Ben still believes that if he drives interest rates toward zero the retail investors will come streaming back into the stock market. Talk about clueless. As far as the individual investor is concerned:
QE 1: Fool me once, shame on you.
QE2: Fool me twice, shame on me.
QE 3: Are you #*&$!!!@! - ing me ?? !! Fuggedabout it.
The question is can they afford to stay on the sidelines. Some that has accumulated enough may.
The data that I am exposed says most others cannot stay at sidelines forever, when the income from bonds is not paying them they will get risk exposure one way or another, voluntarily or not. It is already happening with dividend stocks, MLPs and even good old REITs. Some will put their money on other so-called alternative strategies and I am afraid they will be disappointed once again.
Retail investor needs education and market is giving them real education. If they bought FB, it is themselves to blame, not FB, Morgan Stanley, Nasdaq. Instead of the fads, they need to invest suitable for their risk tolerance. Otherwise, they keep their money sidelines and hope it lasts their retirement.
Most retail investors should forget about making quick buck and adopt a long term saner strategy. How many times they need to be disappointed to realize that perhaps the problem is themselves.
We will undoubtedly see a QE 3 but even Helicopter Ben knows that this will be futile. The quants, high frequency traders and Pavlovian dogs will jump all over it, we will get the predictable rally in the stock market, etc. However, the bounce will be muted and short-lived. Meanwhile, the previous interventions have brought our national deficit and debt to GDP ratios to precarious levels, to a point where the modest effect on shoring up the stock market will be greatly outweighed by the additional debt burden.
Simply put: it is finally time to pay the piper and this will fully play out after the election in 2013, in my opinion.