Opinion: Greed is still trumping fear, and that’s bad for stocks – MarketWatch 07-17-15

Salient to Investors:

Mark Hulbert writes:

  • Investor popularity of greed over fear indicates we are close to a stock market top. At the recent San Francisco Money Show, hundreds of seminars catered to greed, while only a handful catered to managing risk and loss.
  • At market tops greed completely replaces fear as investors’ primary concern. At market bottoms, fear dominates greed.
  • Martin Zweig maintained that newsletter advertisers are incredibly sensitive to which way the wind is blowing among individual investors. Zweig found that in the latter weeks of the 1973-74 bear market, there were zero bullish newsletter ads in Barron’s.
  • Late-stage bull markets can continue for some time despite irrational exuberance, viz the late 1990s.

Read the full article at http://www.marketwatch.com/story/greed-is-still-trumping-fear-and-thats-bad-for-stocks-2015-07-17?mod=MW_story_top_stories

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Jeremy Grantham: 3 Insights From a Top-Down Value Investor – The Motley Fool 06-02-15

Salient to Investors:

Jordan Wathen at TMFValueMagnet writes:

  • Eyquem found that from 1951 to 2013, the lowest PE decile of stocks compounded annual returns of 16.7% versus 9.3% for the highest decile.
  • Never pile in or out of an investment for the simple fear of falling behind.
  • No one gets fired for being average.
  • Individual investors’ single biggest advantage is not having to report to anyone, not having to match the market’s return every year.

Jeremy Grantham says:

  • Financial assets can be overpriced or underpriced but will always return to average.
  • Rewards come from buying cheap assets not from taking risks.
  • Professional investors’ behavior is driven by career risk. Keynes said their primary directive is first and last to keep their jobs and so never, ever be wrong on their own. The great majority therefore go with the flow, either completely or partially, thus creating the momentum that drives prices far above or far below fair price.

Read the full article at http://www.fool.com/investing/general/2015/06/02/jeremy-grantham-3-insights-from-top-down-value-i.aspx

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Why the Stock Market Rally Is Bad News – Bloomberg 10-22-14

Salient to Investors:

  • Regular investors, especially those saving for retirement, have an advantage over the professionals because they can afford to be patient and buy extra when stocks drop – “Be fearful when others are greedy, and greedy when others are fearful” – Warren Buffett.
  • David Santschi at TrimTabs Investment Research said that did not seem to care much when stocks started to drop this month.
  • Stock declines do not always predict a recession but a strong stock market is a sign the economic recovery may still be on track.

Read the full article at http://www.bloomberg.com/news/2014-10-22/why-the-stock-market-rally-is-bad-news.html

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What Putin Wrought Has World Asking What Russia Might Have Been – Bloomberg 09-29-14

Salient to Investors:

  • Michael McFaul at Stanford University sees long-term damage to Russia from Putin’s new direction.
  • Anders Aslund at the Peterson Institute for Intl Economics sees a similar shortfall in Russia’s 2014 growth to 2013’s growth of 1.3%, and versus IMF’s 2013 forecast of 3.9%.
  • Alexei Kudrin expects Russia to post zero or negative growth for the next 2 to 3 years.
  • Charles Collyns at IIF said engagement with Ukraine has put the Russian economy on a far weaker growth path.
  • EPFR Global said global investors withdrew $850 million from Russian bond and stock funds in the year through September 24.
  • Goldman Sachs and Citigroup CEOs skipped the Petersburg Economic Forum gathering in May. Blackstone has stopped seeking investments in Russia.
  • Sergei Guriev said Putin’s dream of making Russia one of the world’s 5 biggest economies by 2020 is in ruins and predicts he will soon have to shrink spending on military and pensions as a falling oil price provides another fiscal challenge.
  • Vladimir Lukin said the US and EU must bear some responsibility for their persistent and unilateral expansion of NATO, and then the EU, towards Russia’s borders.
  • Benoit Anne at Societe Generale expects further sell-offs in ruble assets because international investors are either primarily or have decided to avoid them.

Read the full article at http://www.bloomberg.com/news/2014-09-29/the-cost-of-putin-s-economic-u-turn.html

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Celebrities scammed by Madoff – Bankrate.com 08-15-14

Salient to Investors:

  • Steven Spielberg’s Wunderkinder Foundation lost an undisclosed amount – in 2006, about 70 percent of its interest and dividend income came from the Madoff firm.
  • Kevin Bacon and Kyra Sedgwick lost an undisclosed amount.
  • Elie Wiesel’s Foundation for Humanity lost substantially all of its assets, $15.2 million.
  • Sandy Koufax and other baseball greats lost undisclosed amounts.
  • Eric Roth said he suffered massive losses.
  • Larry King said he got back the money he had invested.
  • Zas Zas lost $10 million.
  • Jeffrey Katzenberg lost undisclosed millions.
  • John Malkovich said he was ruined financially by the scam.
  • Eliot Spitzer’s family real estate firm lost an undisclosed amount.

Read the full article at  http://www.bankrate.com/finance/investing/celebrities-scammed-by-madoff-1.aspx?ic_id=most_shared_default

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The 2014 Contrarian Investment Tour, From Rupees to Copper – Bloomberg 12-10-13

Salient to Investors:

Lewis Braham writes:

Contrarian funds can be a hedge of sorts, though a potentially volatile one as out-of-favor sectors tend to be cyclical and prone to booms and busts. Shorting is inherently dangerous as markets have been trending higher.

Brian Singer at William Blair Macro Allocation Fund said currencies help diversify portfolios because they behave very differently from stocks and bonds. Singer recently put 19 percent of the fund in the Indian rupee which he says is undervalued by as much as 70 percent and India’s new central bank governor has already taken actions to stabilize it by raising interest rates. Singer uses financial derivatives to earn a 6 percent yield on the equivalent of a bank deposit. Individual investors can buy currency CDs – a 3-month FDIC-insured rupee CD from Everbank yields 7.25 percent. Singer is short the iShares Russell 1000 Growth ETF and long the iShares Russell 1000 Value ETF  and says people believe the US is the only source of growth and stability in the world but will be surprised in 2014 at how volatile growth stocks can be.

Don Hodges at the Hodges Pure Contrarian Fund is betting on coal, iron and copper mining stocks and said a recovery in the sector will begin when the Chinese work off their commodity inventories and begin buying again.

Jason Hsu at Research Affiliates said emerging market stocks are at a tremendous discount to US stocks. Hsu said the Shiller PE ratio for the S&P 500 is 24 versus its 16.5 average, versus 13.5 for emerging markets. Hsu is buying TIPS – TIPS with maturities of more than 20 years are yielding 1.5 percent over inflation, and is betting on a decline in large US stocks as well as on improved prospects for high-yield and emerging market bonds.

The BlackRock Municipal Target Term Trust trades at an 11.5 percent discount to portfolio value and yields 6.73 percent on a tax-free basis.

Rudolph Riad-Younes at RSQ International Equity Fund does not like gold because it trades closer to 20 percent above its cost of production versus 10 percent to 15 percent historically, and that cost will fall in the next 5 years, further driving down gold prices.

Read the full article at http://www.bloomberg.com/news/2013-12-10/the-2014-contrarian-investment-tour-from-rupees-to-copper.html

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