Lots and lot of interesting data and comments of late. Let’s try and get you up to speed. The talk of a bubble in asset markets has some legendary money managers out and about giving their two cents. Ben Inker of Grantham Mayo, a money management firm in Boston with over $100 billion in assets, believes that the Fair Value for the market is 1100 on the S&P 500 and the firm expects returns of -1.3% in the stock market over the next 7 years. Ray Dalio of Bridgewater Associates, the largest hedge fund on the planet, also believes that the market is going to produce less than stellar returns over the next decade and they will be in the area of 4% a year. Let’s hope Dalio is right and not Inker.
Dalio went on to state that he believes that the Fed is running out of bullets which we agree with and is our biggest worry when it comes to investing. According to Dalio, asset purchases (by the Fed) work well when prices are low but with asset prices reaching new highs QE is less effective. He goes on to say that asset prices are so high that “low relative levels of return are nearly assured”. He advised that in this environment investors need to create a proper balance between stocks, bonds and cash. -Seeking Alpha 11/11/13
The 10 Year US Treasury remains the key. The infusion of central banker’s massive asset purchases into the US Treasury market is distorting rates and key signals historically used to identify price patterns in markets. For decades, the bond market has always been the place to look for clues as to investors’ behavior. Will investors take back the bond market? Pricing pressure in the 10 year US Treasury is the place to look. The 10 year has risen to the 2.8% level and stocks do not seem nervous yet. Will a move thru the 3% level make them more nervous? One thing that we know for certain is that markets go up and markets go down. It seems like all it does is the former of late. We don’t know when but that will change even if only for a short time. The calendar is coming more into play as the year end approaches. Players will want to take profits at some point and funding may tighten. Time will tell. Markets will continue to trace higher as long as the Fed balance sheet trends higher. A taper may only taper the pace of gains in the market.
It being November 22 and the 50th Anniversary of the JFK Assassination we are jumping aboard the media train with some interesting coincidences between the JFK and Lincoln Assassinations first brought to us from our good friend Arthur Cashin. Both men were succeeded by men named Johnson. Both Johnsons were Senators from the South and born 100 years apart. Kennedy and Lincoln were elected 100 years apart. The assassins, John Wilkes Booth and Lee Harvey Oswald, were also born 100 years apart. Both Kennedy and Lincoln were killed on a Friday seated next to their wives. Lincoln’s assassin killed him in a theatre and hid in a warehouse while Kennedy’s assassin killed him from a warehouse and hid in a theatre. Lincoln was killed in Ford’s theatre while Kennedy was killed in a Lincoln Continental built by Ford.
Have a safe and Happy thanksgiving!
To learn more about us and Blackthorn Asset Management LLC visit our website at www.BlackthornAsset.com .
A pessimist sees the difficulty in every opportunity; an optimist sees the opportunity in every difficulty. – Winston Churchill
Disclosure: This blog is informational and is not a recommendation to buy or sell anything. If you are thinking about investing consider the risk. Everyone’s financial situation is different. Consult your financial advisor.