“Bull markets are born of pessimism, grow on skepticism, mature on optimism, and die on euphoria.” Sir John Templeton assembled these wise words to crystallize market cycles.
I’ve just invested the last 4 days attending the 2014 edition of the Las Vegas MoneyShow. I have been doing this annual event now for over 15 years. It never disappoints. The consensus expert opinion from the 2014 event is that the Bull market is presently in the optimistic phase of Templeton’s model. It has a way to go.
Here’s my field report.
The MoneyShow features one-half to one hour presentations delivered at 10 simultaneous lectures starting at 7:30 each morning and ending after 7 each evening. It’s a well organized, full schedule with attendance numbers approaching 10 thousand millionaires.
Yes, I said millionaires. According to economist Mark Skousen, each attendee is a guaranteed millionaire, especially if the unit of measure is the Mexican Peso. Lesson One: Measurement units must be specified.
The overarching theme of this year’s conference was the stability and continuity of the current Bull market; especially, what are the prospects for the remainder of the year?
In one form or another, all the speakers have skin in the game so some skepticism is a cautionary watchword. One pertinent story tells of a man meeting with the Devil and with God in his last days on Earth. The man has the option to choose, so he asks both about the afterlife.
The Devil surprisingly describes the Underworld as being an equivalent Las Vegas; God describes Heaven as an idyllic, sunny, no pressure environment. The man elects the Las Vegas option. When he arrives, the pit is hot with dense choking smoke; it’s a miserable abyss that earns it reputation. The man challenges the Devil about the deception. The Devil explains that at the earlier meeting, the man was a prospect; today he is a client. Lesson Two: Buyer beware.
In the opening session, a distinguished panel that included Peter Schiff, Ken Fisher, Jim Stack, Gary Shilling, and Steve Forbes hotly debated the market direction issue. Peter Schiff was the sole Bear (his usual position), and the others brutally attacked his arguments. At a minimum, these eminent panel members are guardedly optimistic and did not hesitate to pile-on the outgunned Schiff. He handled it well.
In keeping with his tradition for the last few years, Jim Stack reviewed the status of the numerous signals that he deploys to gauge the Market’s near term prospects. A few of these signals have been penetrated, but most remain positive for near term returns.
So Stack is still heavy into equities, but he has made a marginal shift to increase a modest cash position. Earlier, an MFO member asked how Stack performed in the 2008 meltdown. Including reinvested dividend, Stack claims that while the S&P 500 lost 37%, his overall portfolios lost 17%, about half as volatile on the downside swing.
Many of the presentations focused on market crash protection strategies. These strategies varied across a broad spectrum that greatly reflected the personalities and policies of each individual professional investor and advisor.
For example, Louie Navellier advised that it is not an issue if you are a careful and prudent investor or hire one, namely Navellier himself. He concludes that solid profit generating companies exist under any market environments, and research can discover these gems at attractive prices. He recommends being fully invested under all circumstances. Lesson Three: Wall Street arrogance knows no boundaries.
S&P’s Sam Stovall endorsed a rules-based sector strategy that provides portfolio protection under all conditions. Stovall’s strategy is the end output from examining sector performance separately under both Bull and Bear market scenarios.
Stovall examined historical performance statistics. He concluded that the equity allocation of a portfolio benefits from an overweighting of Consumer Staple and Healthcare segments. His studies demonstrated that an extra 20% weighting in each of these two sectors yielded a net gain over a pure S&P portfolio across many past market cycles. Lesson Four: The statistical data sets contain actionable secrets when sliced and diced carefully.
BMO’s (Bank of Montreal) Jack Albin is a mega-macroeconomist who uses a dashboard of 5 generic metrics to inform his investment dynamics. He believes that extremely broad market investment category decisions are far more decisive than specific stock or sector selection. The 5 signal areas are: Valuation, Economy, Momentum, Liquidity, and Psychology. His presentation material is accessible on MoneyShow.com. You will need to register. The title of his talk is “Five Factors for Evaluating the Market”.
Please give it a test ride. Albin is easy to follow and crystal clear in his explanations. I like his macro-perspective and the fact that he emphasizes process rather than specific findings. He currently is neutral on equities so he recommends that you should hold present equity positions, but don’t increase them. Longer term, he favors European and Emerging markets. Lesson Five: Process is more influential than specific outcome.
Mark Hulbert is always the fly in the ointment at these sessions given that all of the expert participants, and most of the conference attendees, advocate an active investment philosophy. Hulbert monitors newsletter performance. He does identify a few newsletters and advisors who outperform relevant benchmarks. But even these superior professionals suffer dry periods. Warren Buffett has underperformed his equity benchmark over the last 5 years. ValueLine seems to have lost its edge.
Hulbert has an easy-going, Southern personality, but does manage to quietly agitate his audience at times. At one session, Hulbert told his audience that if they all invested an equal amount today, and then returned 15 years later, he would outperform 90% of them by simply investing in Index products.
He further speculated that he would only outdistance 80% of the professionals. The amateurs are such poor market timers and herd followers that the final count would reach the dismal 90% level. Lesson Six: Folks only want to hear confirmatory statements; his attendees hated this projection.
Hulbert’s goal is to identify the longer-term, persistently successful newsletters. Currently, his 15-year mutual fund leader list includes: No Load Mutual Fund Set & Timing, Sector Navigator, InvesTech Research Portfolio Strategy, and Fidelity Navigator. The absolute standings are very timeframe and investment environment dependent.
The bottom-line takeaway from the just concluded Las Vegas conference is to stay the equity course for the next 6 to 9 months. Most experts project a modestly upward sloping US equity marketplace.
This summary only captures a small fraction of the Las Vegas happenings, but it is far, far too long at this juncture.
As usual, Las Vegas is always a stimulating and pleasant stopover. Most of the folks staying in Sin City these days are foreigners. It’s good that they are returning wealth to the USA. It’s a good deal for both them and us.