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Here are some of the recommendations or outlooks issued since our inception:
2005
In May 2005 in an article for L'AGEFI readers were alerted to the coming rally in European
indices. Less than two weeks later, European equities embarked on what turned out to be
a huge multi-month rally .
Later in the year clients were advised to be:
Long gold on September 1, 2005 at around $444 per ounce
Long S&P (and equities in general) on October 21,
2005 (the day of the bottom)
Long gold again on December 22, 2005 ( only
a few points from the low)
2006
On February 15, 2006 , in an article published in l'AGEFI, readers were warned of the
coming decline in US housing stocks and the potential for increased volatility in
commodities.
Active clients were then advised to be :
Short S&P 500 then Eurostoxx 50 in late February 2006 -via options only, long puts or
short calls June and September 06 expirations
Long select basic resource stocks in April 2006
Active clients were then advised later in May to:
Sell or greatly reduce long positions in equities on May 12 2006 (2 days after the top)
Sell long gold positions or go short on May 12 2006 (the day of the top)
In July a bottom in equities was identified as well as in US treasuries and bunds.
Clients were also warned about a possible top in crude oil.
On Friday August 11 2006, clients were advised to short crude oil . The following Monday
crude oil collapsed . That was the start of a $15 + decline, the biggest selloff in years.
2007
In late September 2007, we advised readers to reenter commodities and warned about an
impending major top in world equity markets and the collapse of the Chinese bubble.
Here are some excerpts of our October 07 Issue :
Even though we feel stockmarkets are getting very close to the end of the bullmarket we
have to take the Fed into account and consider that the party could still continue for a
while, as we see it, perhaps until late 2008, even 2009. Remember that 2007 is a pre-
election year, politicians helped by their central banker friends can always find a way to
keep the good times rolling until the election. That doesn't mean the market will keep
rising until then as bear markets most often take place after a period of consolidation at
the highs. That is why we believe conservative investors retiring in less than five years
should slowly start divesting of the bulk of their holdings in equities and take a short term
approach to investing until the next major bottom.
As we said before, we expect the Chinese bubble to burst , the explosion in the local
brokerage industry with lofty valuations and market caps now rivaling US industry
behemoths carry all the signs of a stockmarket mania. Even if we are wrong on this, an
extended correction will come soon or later and we think this is likely to happen before the
start of the Olympics in August 2008. This will be inevitably accompanied by a correction
of some kind in world markets. In essence a perfect storm is gathering ahead of us with:
1)a financial crisis of which we have yet to see all the ramifications, and the Fed can do
little to fix it as the issue with credit is more one of quality and confidence than one of
availability
2)an increasingly likely US consumer slowdown of which we had new indications with a
dreadful employment report this month showing the first decline in job creation (-4K jobs )
in four years
3)a US housing market that shows no bottom in sight (typically house prices decline for
several years before stabilizing)
4)an emerging market bubble that cannot last much longer
5)rising bond yields despite the Fed in easing mode, squeezing the weakest borrowers
even more
6)an acceleration of the dollar collapse
The decline of the dollar will likely continue for a while as well, but the greenback isn't
going to hell in a handbasket either. We have reached historic levels on most currency
pairs and currencies, like commodities, have cycles and fluctuate. To make an
analogy , at some point the rubber band will be getting so stretched that it will snap
back and the dollar will start going the other way. That is why we want to remain
diversified in terms of currencies as well. For the medium term expect more dollar
weakness. We are looking to add gold to our short term portfolio, we hope you have
already done so when we alerted you to the current rally . We believe momentum will
continue in the yellow metal and are forced to make it part of our portfolio .
We expect crude oil to top $100 a barrel in the next few months . Accordingly we
think appropriate to invest part of your portfolio in a commodity fund for the next 12-
24 months.
2008
Here's what we said in our March 08 Issue (02.25.08):
The bottom line is when it comes to deciding whether one should be invested in the
stockmarket, it's difficult to make a case for completely exiting stocks at this juncture.
Valuations are still reasonable and in any case long term technicals favor a rebound of
some sort after which the picture should become clearer for investors from both a
fundamental and technical standpoint. That is why we remain invested in equities although
with a very conservative exposure at around 50 %. Obviously aggressive investors will want
more exposure to broad market indices but we think anything more than 75% is taking too
much risk for too little reward.
We also continue to be invested in commodities via DBC (Powershares Deutsche Bank
Commodity Index ETF ) and of course GLD ( Gold Trust streetTRACK ETF) but we think
commodities are extremely vulnerable to a sharp correction . Gold and silver in
particular appear to have started the climactic phase of their rally. We will be
looking to sell our gold holdings as we approach the $1000 mark.
On the energy front, crude is likely to move higher and cross the $100 mark, this
should help sustain the rally in DBC even if the grains incur a correction.
After the rally we had expected materialized here is what we said in late April (May Issue):
Now as investors making short-term or long-term investment decisions on a weekly basis,
we do not want to put too much weight into our assesment of the economic conditions.
Rather we want to look at things such as sentiment and technicals. And what do
the charts tell us ? The charts tell us to be cautious in the face of the current
rally . As we noted in previous issues, the technical damage has been very
severe, the kind of damage that is not easily nor quickly repaired let alone
reversed.
Most indices are bumping against what could turn out to be long term resistance,
the site of their 20-month (or 10-month) moving averages, but we expect the month
to end in strength. Expect at the minimum a short term pullback next month, we will
however start very soon reducing from our current 60% exposure as soon as we
see overbought conditions between today and the first of May. Will “sell in May
and go away”be the thing to do this year ? Quite possibly but we still lean on
more upside after a pullback. We are however convinced that volatility will return
in a big way sometime this year and thus want to almost completely exit the
stockmarket at some point only keeping an exposure of 30% or less. Even if we are
wrong about what we fear will be a multi-month cascading decline out of long term
head-and-shoulders like patterns on indices, we believe investors will have other
opportunities to get back into equities at current prices or lower.
Commodities are in a bubble exacerbated singlehandedly by the Fed since the
start of its rate cutting campaign, no doubt about that, but we may have been a
little too early in calling the top. We are still convinced of a top in progress in
grains but with regards to oil , natural gas and metals we may have been wrong. A
superspike in crude and natural gas is possible but we would not bet heavily on
it.
But do not invest in commodities, this is no longer the time to invest no matter
the outlook you have on future prices. If you want to be involved you will have to
be a trader and be ready to exit your position at a moment's notice.
In May 2008, Buy Point advised to dramatically reduce exposure
to equities, by the end of that month we had liquidated most of
our long term holdings and our portfolio held less than 30 % of
equities.
Here is an excerpt of the July 2008 Issue:
It appears so far that our decision to dramatically reduce to less than 30% our long term
exposure to equities back in May was the right one, we are glad to have bought near the
lows in March doubling down on some long term positions initiated in early 2007.
As you know we started liquidating these positions along with other core holdings
(Spiders, QQQQ and Lyxor MSCI Europe ETF) in mid- May. We would certainly not
recommend such allocation for everybody but in the context of our market outlook and our
risk tolerance we did just that in our accounts.
We believe more than ever that we have entered some sort of protracted bear market, we
will stop short of calling it a secular bear market but this is probably what we are faced with.
The good times are over. Even if we are wrong we won't be by much because the good
times, as we had it, can never continue for ever and often end in tears. We have had over
the past 15 years a string of bubbles of historic proportions, the last one being the great
commodity bubble which could be most damaging across the globe. Enormous wealth was
created very rapidly in emerging markets most notably, there are more millionaires on the
face of the earth than ever before, and as another sign of the easy money era created by
central banks, the art market in London and New York is regularly seeing auctions that end
at prices defying sanity. That is why our emphasis is now on protecting assets
rather than looking for buy-and-hold returns we probably won't see for
quite some time. At the same time trading has become a more treacherous endeavour
as day-to- day volatility and intraday range in many markets have reached levels never
seen before scaring away even some of the oldest traders.
We have thus kept our risk reduced on short term positions ever since the market started
falling apart last year, with these markets it's a bad idea to try to be a hero.
The bottom line is that we are taking a wait-and-see attitude at this juncture looking for
short-term trading opportunities and without a strong directional bias. These are not
good times for long term investors in any asset class for that
matter, stocks, bonds, commodities or real estate.
...
Real estate, the residential kind will continue to suffer especially in countries and areas
that have seen sharp appreciation in the past decade. In New York, Southern California
metro areas and Florida , home prices are still about double what they were in 2000,
prices will correct further.
...
Commodities are in a bubble, we have been saying that for a few months now but like
many we made the mistake of underestimating the power of bubbles and of the strong
trends that characterize them.
...
I now think that aggressive traders should slowly start building a small short
position on the current breakout, because we may not get a clear sell signal
exactly when crude reverses. If we do see a short sell signal we will obvioulsy issue a
trade signal and add the short position to the short term portfolio. Because we closed the
month and the quarter in strength we can see a continuation of the rally for a couple of
weeks but when crude reverses the decline will be astonishing and huge profits will be
made on the short side.
...
As with the China bubble we warned you a few months ahead of the reversal, too
soon perhaps but the outcome will be the same, a decline of dramatic proportion
that will devastate those who put too much faith in a mania. If you have 15 % of
your portfolio in commodities as some advisors are now recommending even in
conservative portfolios and commodities decline by 50% , that 's a loss of 7.5%. In
late February we said to liquidate holdings of physical commodities, grains and
gold are still under their peak, most of the rise in commodities index is due to
energies, crude and heating oil, climbing on sheer momentum from fund buying.
2009
In the main portfolio, we continued to average down our equity holdings which we started
to increase - too early - in the fall of 2008. The first quarter of the year tested our
conviction that the market would ultimately rally very sharply as the S&P 500 dropped 10%
below the November 2008 low but ...
We continued to advise clients to add to their holdings to reach a fully
invested position. In the first days of March, we felt a bottom was at
hand and again advised to buy.
Much of the second quarter consisted of gradually unwinding the positions we had taken in
late 2008. We recommended clients buy again on July 10 for a short term trade but did not
expect such an extended rally.
In late August, we went long gold and traded in and out catching the brunt of the move to
the December high.
2005
In May 2005 in an article for L'AGEFI readers were alerted to the coming rally in European
indices. Less than two weeks later, European equities embarked on what turned out to be
a huge multi-month rally .
Later in the year clients were advised to be:
Long gold on September 1, 2005 at around $444 per ounce
Long S&P (and equities in general) on October 21,
2005 (the day of the bottom)
Long gold again on December 22, 2005 ( only
a few points from the low)
2006
On February 15, 2006 , in an article published in l'AGEFI, readers were warned of the
coming decline in US housing stocks and the potential for increased volatility in
commodities.
Active clients were then advised to be :
Short S&P 500 then Eurostoxx 50 in late February 2006 -via options only, long puts or
short calls June and September 06 expirations
Long select basic resource stocks in April 2006
Active clients were then advised later in May to:
Sell or greatly reduce long positions in equities on May 12 2006 (2 days after the top)
Sell long gold positions or go short on May 12 2006 (the day of the top)
In July a bottom in equities was identified as well as in US treasuries and bunds.
Clients were also warned about a possible top in crude oil.
On Friday August 11 2006, clients were advised to short crude oil . The following Monday
crude oil collapsed . That was the start of a $15 + decline, the biggest selloff in years.
2007
In late September 2007, we advised readers to reenter commodities and warned about an
impending major top in world equity markets and the collapse of the Chinese bubble.
Here are some excerpts of our October 07 Issue :
Even though we feel stockmarkets are getting very close to the end of the bullmarket we
have to take the Fed into account and consider that the party could still continue for a
while, as we see it, perhaps until late 2008, even 2009. Remember that 2007 is a pre-
election year, politicians helped by their central banker friends can always find a way to
keep the good times rolling until the election. That doesn't mean the market will keep
rising until then as bear markets most often take place after a period of consolidation at
the highs. That is why we believe conservative investors retiring in less than five years
should slowly start divesting of the bulk of their holdings in equities and take a short term
approach to investing until the next major bottom.
As we said before, we expect the Chinese bubble to burst , the explosion in the local
brokerage industry with lofty valuations and market caps now rivaling US industry
behemoths carry all the signs of a stockmarket mania. Even if we are wrong on this, an
extended correction will come soon or later and we think this is likely to happen before the
start of the Olympics in August 2008. This will be inevitably accompanied by a correction
of some kind in world markets. In essence a perfect storm is gathering ahead of us with:
1)a financial crisis of which we have yet to see all the ramifications, and the Fed can do
little to fix it as the issue with credit is more one of quality and confidence than one of
availability
2)an increasingly likely US consumer slowdown of which we had new indications with a
dreadful employment report this month showing the first decline in job creation (-4K jobs )
in four years
3)a US housing market that shows no bottom in sight (typically house prices decline for
several years before stabilizing)
4)an emerging market bubble that cannot last much longer
5)rising bond yields despite the Fed in easing mode, squeezing the weakest borrowers
even more
6)an acceleration of the dollar collapse
The decline of the dollar will likely continue for a while as well, but the greenback isn't
going to hell in a handbasket either. We have reached historic levels on most currency
pairs and currencies, like commodities, have cycles and fluctuate. To make an
analogy , at some point the rubber band will be getting so stretched that it will snap
back and the dollar will start going the other way. That is why we want to remain
diversified in terms of currencies as well. For the medium term expect more dollar
weakness. We are looking to add gold to our short term portfolio, we hope you have
already done so when we alerted you to the current rally . We believe momentum will
continue in the yellow metal and are forced to make it part of our portfolio .
We expect crude oil to top $100 a barrel in the next few months . Accordingly we
think appropriate to invest part of your portfolio in a commodity fund for the next 12-
24 months.
2008
Here's what we said in our March 08 Issue (02.25.08):
The bottom line is when it comes to deciding whether one should be invested in the
stockmarket, it's difficult to make a case for completely exiting stocks at this juncture.
Valuations are still reasonable and in any case long term technicals favor a rebound of
some sort after which the picture should become clearer for investors from both a
fundamental and technical standpoint. That is why we remain invested in equities although
with a very conservative exposure at around 50 %. Obviously aggressive investors will want
more exposure to broad market indices but we think anything more than 75% is taking too
much risk for too little reward.
We also continue to be invested in commodities via DBC (Powershares Deutsche Bank
Commodity Index ETF ) and of course GLD ( Gold Trust streetTRACK ETF) but we think
commodities are extremely vulnerable to a sharp correction . Gold and silver in
particular appear to have started the climactic phase of their rally. We will be
looking to sell our gold holdings as we approach the $1000 mark.
On the energy front, crude is likely to move higher and cross the $100 mark, this
should help sustain the rally in DBC even if the grains incur a correction.
After the rally we had expected materialized here is what we said in late April (May Issue):
Now as investors making short-term or long-term investment decisions on a weekly basis,
we do not want to put too much weight into our assesment of the economic conditions.
Rather we want to look at things such as sentiment and technicals. And what do
the charts tell us ? The charts tell us to be cautious in the face of the current
rally . As we noted in previous issues, the technical damage has been very
severe, the kind of damage that is not easily nor quickly repaired let alone
reversed.
Most indices are bumping against what could turn out to be long term resistance,
the site of their 20-month (or 10-month) moving averages, but we expect the month
to end in strength. Expect at the minimum a short term pullback next month, we will
however start very soon reducing from our current 60% exposure as soon as we
see overbought conditions between today and the first of May. Will “sell in May
and go away”be the thing to do this year ? Quite possibly but we still lean on
more upside after a pullback. We are however convinced that volatility will return
in a big way sometime this year and thus want to almost completely exit the
stockmarket at some point only keeping an exposure of 30% or less. Even if we are
wrong about what we fear will be a multi-month cascading decline out of long term
head-and-shoulders like patterns on indices, we believe investors will have other
opportunities to get back into equities at current prices or lower.
Commodities are in a bubble exacerbated singlehandedly by the Fed since the
start of its rate cutting campaign, no doubt about that, but we may have been a
little too early in calling the top. We are still convinced of a top in progress in
grains but with regards to oil , natural gas and metals we may have been wrong. A
superspike in crude and natural gas is possible but we would not bet heavily on
it.
But do not invest in commodities, this is no longer the time to invest no matter
the outlook you have on future prices. If you want to be involved you will have to
be a trader and be ready to exit your position at a moment's notice.
In May 2008, Buy Point advised to dramatically reduce exposure
to equities, by the end of that month we had liquidated most of
our long term holdings and our portfolio held less than 30 % of
equities.
Here is an excerpt of the July 2008 Issue:
It appears so far that our decision to dramatically reduce to less than 30% our long term
exposure to equities back in May was the right one, we are glad to have bought near the
lows in March doubling down on some long term positions initiated in early 2007.
As you know we started liquidating these positions along with other core holdings
(Spiders, QQQQ and Lyxor MSCI Europe ETF) in mid- May. We would certainly not
recommend such allocation for everybody but in the context of our market outlook and our
risk tolerance we did just that in our accounts.
We believe more than ever that we have entered some sort of protracted bear market, we
will stop short of calling it a secular bear market but this is probably what we are faced with.
The good times are over. Even if we are wrong we won't be by much because the good
times, as we had it, can never continue for ever and often end in tears. We have had over
the past 15 years a string of bubbles of historic proportions, the last one being the great
commodity bubble which could be most damaging across the globe. Enormous wealth was
created very rapidly in emerging markets most notably, there are more millionaires on the
face of the earth than ever before, and as another sign of the easy money era created by
central banks, the art market in London and New York is regularly seeing auctions that end
at prices defying sanity. That is why our emphasis is now on protecting assets
rather than looking for buy-and-hold returns we probably won't see for
quite some time. At the same time trading has become a more treacherous endeavour
as day-to- day volatility and intraday range in many markets have reached levels never
seen before scaring away even some of the oldest traders.
We have thus kept our risk reduced on short term positions ever since the market started
falling apart last year, with these markets it's a bad idea to try to be a hero.
The bottom line is that we are taking a wait-and-see attitude at this juncture looking for
short-term trading opportunities and without a strong directional bias. These are not
good times for long term investors in any asset class for that
matter, stocks, bonds, commodities or real estate.
...
Real estate, the residential kind will continue to suffer especially in countries and areas
that have seen sharp appreciation in the past decade. In New York, Southern California
metro areas and Florida , home prices are still about double what they were in 2000,
prices will correct further.
...
Commodities are in a bubble, we have been saying that for a few months now but like
many we made the mistake of underestimating the power of bubbles and of the strong
trends that characterize them.
...
I now think that aggressive traders should slowly start building a small short
position on the current breakout, because we may not get a clear sell signal
exactly when crude reverses. If we do see a short sell signal we will obvioulsy issue a
trade signal and add the short position to the short term portfolio. Because we closed the
month and the quarter in strength we can see a continuation of the rally for a couple of
weeks but when crude reverses the decline will be astonishing and huge profits will be
made on the short side.
...
As with the China bubble we warned you a few months ahead of the reversal, too
soon perhaps but the outcome will be the same, a decline of dramatic proportion
that will devastate those who put too much faith in a mania. If you have 15 % of
your portfolio in commodities as some advisors are now recommending even in
conservative portfolios and commodities decline by 50% , that 's a loss of 7.5%. In
late February we said to liquidate holdings of physical commodities, grains and
gold are still under their peak, most of the rise in commodities index is due to
energies, crude and heating oil, climbing on sheer momentum from fund buying.
2009
In the main portfolio, we continued to average down our equity holdings which we started
to increase - too early - in the fall of 2008. The first quarter of the year tested our
conviction that the market would ultimately rally very sharply as the S&P 500 dropped 10%
below the November 2008 low but ...
We continued to advise clients to add to their holdings to reach a fully
invested position. In the first days of March, we felt a bottom was at
hand and again advised to buy.
Much of the second quarter consisted of gradually unwinding the positions we had taken in
late 2008. We recommended clients buy again on July 10 for a short term trade but did not
expect such an extended rally.
In late August, we went long gold and traded in and out catching the brunt of the move to
the December high.
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