Survey
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
fullermoney.com Our theme: Empowerment Through Knowledge 48th Annual Contrary Opinion Forum David Fuller 7th October 2010 Two Different Worlds fullermoney.com Our theme: Empowerment Through Knowledge The old labels are misleading: ‘old world, new world, developed, developing, emerging…’ What do all economies have in common? They are either progressing or regressing on an absolute or relative basis. fullermoney.com Our theme: Empowerment Through Knowledge Progressing Economies Have: • • • • • • • Superior economic governance Relatively strong GDP growth Current account surpluses Low levels of government debt High personal savings rates Sound banking sectors Young, motivated & educated workers fullermoney.com Our theme: Empowerment Through Knowledge Regressing Economies Have: • • • • • • • Poor economic governance Relatively weak GDP growth Current account deficits Increasing government debt Low personal savings and high debt Weak, dysfunctional banking sectors A shortage of skilled workers fullermoney.com Our theme: Empowerment Through Knowledge How do countries transform from regressing to progressing? • Governance is everything! It starts with good leadership and is a top-down process. • Luck helps: climate, water, indu. resources • Empowerment of women & minorities • Education and equal opportunity • A ‘Can Do’ attitude and strategic planning • Favourable demographics fullermoney.com Our theme: Empowerment Through Knowledge How do countries go from progressing to regressing? • A failure of governance: pork, shorttermism, CEOs game the system, a morally bankrupt financial sector • Bad luck: drought, floods, few resources • Deteriorating educational standards • An entitlement mentality - hubris • Impoverishment by military commitments • Social divisiveness - loss of confidence fullermoney.com Our theme: Empowerment Through Knowledge Stock market question: Do two severe bear markets within eight years make it more or less likely that another dramatic decline will occur within a few years? fullermoney.com Our theme: Empowerment Through Knowledge S&P 500 Index since 1953 David, SPX historic, semi-log here Secular valuation contraction Secular valuation contraction Box and label the valuation contraction cycles 1967 to 1982 2000 to 2015? fullermoney.com Our theme: Empowerment Through Knowledge Many US economic commentators say that America is in a depression! We also heard this in 1974, 1987 and 2001. This crisis is more serious, but… fullermoney.com Our theme: Empowerment Through Knowledge What we actually have is the worst credit crisis recession since the 1930s. ‘100 years of history show that it takes five to seven years for an economy to recover from a credit crisis recession.’ The US economy has been helped by stronger Asian-led growth. fullermoney.com Our theme: Empowerment Through Knowledge With the US economy still in trouble why shouldn’t the S&P 500 Index fall to new lows as many forecast? “It’s not about the economy, stupid.” Russell Napier of CLSA 10 September 2010 Equity investors buy companies… not the economy. fullermoney.com Our theme: Empowerment Through Knowledge NASDAQ 100 Index (weekly) David, put NDX chart here with comment: Does this look like a depression or even A bear market to you? Does the action since the Nov 2008 low look like a depression or even a bear market to you? fullermoney.com Our theme: Empowerment Through Knowledge Bonds or equities? Baby boomers have been pouring savings into bonds and selling stocks. “An estimated $179 billion has been put in bond funds this year, while $35 billion has been pulled from stock funds, according to the Investment Company Institute, a trade group for the mutual fund industry.” 24 Sep 2010 But does this make sense today? fullermoney.com Our theme: Empowerment Through Knowledge September 1981 US 10-Yr Bond Yield David, put historic US 10-year yield here Annotate with question: Does it make sense to buy at these yields? Does it make sense to buy bonds at these yields? fullermoney.com Our theme: Empowerment Through Knowledge ‘Bond markets are taking their cue from the developed economies, equities from the developing.’ Mike Lenhoff of Brewin Dolphin Securities 24 September 2010 This astute observation explains why investors in bonds see little recovery, unlike investors in equities. fullermoney.com Our theme: Empowerment Through Knowledge fullermoney.com Our theme: Empowerment Through Knowledge Norfolk Southern in 100-year issue – Financial Times 24 Aug 2010 The company sold $250m in bonds with a yield of just 5.59 percent – an attractive rate for a company rated Baa1 by Moody’s Investors Service. “We decided to [issue the bonds] because rates are so low and there is strong appetite for 100-year bonds,” said Robin Chapman, a spokesman for Norfolk Southern. “You are giving a company money for a long period of time with no ability to foresee the conditions in that period of time and for a very low interest rate,” said Jason Brady, a portfolio manager at Thornburg Investment Mgt. Investors who bought Ford’s century debt at a higher rate in an issue from 1997 saw their bonds fall to less than 15 cents on the dollar when the US car industry was in crisis over the past few years, Mr Brady said. They have since recovered but still trade at less than 90 cents on the dollar. The price of bonds also falls when rates rise. fullermoney.com Our theme: Empowerment Through Knowledge US equities: Is this irrational pessimism and gratuitous gloom? Press reports: “death crosses” “DJIA 400”, says… “Hindenburg Omen” Meanwhile, progressing markets lead a resumption of the bull trend. fullermoney.com Our theme: Empowerment Through Knowledge Indonesia (monthly) Asia’s market leader among larger population counties 330m people Brobdingnagian base Uncoupled from Wall St in June Due for some reversion towards rising MA mean fullermoney.com Our theme: Empowerment Through Knowledge ASEAN uncoupling from S&P 500 in June fullermoney.com Our theme: Empowerment Through Knowledge Thailand (monthly) fullermoney.com Our theme: Empowerment Through Knowledge Singapore (weekly) The new Switzerland fullermoney.com Our theme: Empowerment Through Knowledge Shanghai Composite Index (weekly) Supply to increase bank reserves Currently undervalued co-favourite BRIC fullermoney.com Our theme: Empowerment Through Knowledge Hong Kong Hang Seng Index (weekly) fullermoney.com Our theme: Empowerment Through Knowledge Vietnam SE Index (weekly) shunned due to devaluation Asia’s lowest valuations fullermoney.com Our theme: Empowerment Through Knowledge Vietnamese Dong USD/VND (weekly) devaluation should be nearly over fullermoney.com Our theme: Empowerment Through Knowledge India BSE Sensex Index (monthly) Brobdingnagian base Advance temporarily overextended near 2008 peak Fantastic long-term story co-favourite BRIC fullermoney.com Our theme: Empowerment Through Knowledge Bombay Banks Index (weekly) Contrast this performance with western banks fullermoney.com Our theme: Empowerment Through Knowledge Chile General Index (weekly) Susceptible to temporary mean reversion towards the MA fullermoney.com Brazil Bovespa Index (weekly) Fullermoney’s 3rd favourite BRIC Our theme: Empowerment Through Knowledge fullermoney.com Our theme: Empowerment Through Knowledge Germany DAX Index (weekly) exporters leveraged to global economy fullermoney.com Our theme: Empowerment Through Knowledge Canada TSX (weekly) Completing consolidation fullermoney.com Our theme: Empowerment Through Knowledge S&P 500 Index (weekly) Bloomberg: ‘best September gain since 1939’ fullermoney.com Our theme: Empowerment Through Knowledge Fiat Currencies The least bad in this environment: Those of Asia-led growth economies, resources exporters, financial currencies (Swiss franc & Singapore $) Higher risk: Debtor currencies – US$ appeal mainly as a liquid reserve currency and haven in times of crisis In the distant future: Chinese Renminbi will be the next global reserve currency but probably not before 2050 fullermoney.com Our theme: Empowerment Through Knowledge Asian Dollar Index (monthly) Brobdingnagian base fullermoney.com Our theme: Empowerment Through Knowledge Singapore Dollar USD/SGD (monthly) the new Swiss Franc fullermoney.com Our theme: Empowerment Through Knowledge Commodities Secular bull market, but volatile: ‘Supply inelasticity meets rising demand’ Gold has been remonetised in the eyes of investors Commodity price inflation – an opportunity and also the next big risk fullermoney.com Our theme: Empowerment Through Knowledge Continuous Commodity Index (Old CRB) since 1954 Brobdingnagian base fullermoney.com Our theme: Empowerment Through Knowledge Gold bullion (monthly) Sep ‘09 Secular bull markets usually end with a dramatic upward acceleration Sep ‘07 Sep ‘05 Sep ‘03 Sep ‘01 fullermoney.com Platinum divided by Gold Ratio currently 1.27 historic range 0.97 to 2.3 arguably better value than gold today Our theme: Empowerment Through Knowledge fullermoney.com Platinum (weekly) Has catch-up potential Our theme: Empowerment Through Knowledge fullermoney.com Palladium (weekly) rumours that Russian stockpile running out Our theme: Empowerment Through Knowledge fullermoney.com Our theme: Empowerment Through Knowledge Copper CMX China stockpiling new highs likely in this cycle fullermoney.com Tin LME (weekly) Leading the way up among industrial metals currently overextended Our theme: Empowerment Through Knowledge fullermoney.com Our theme: Empowerment Through Knowledge Uranium (weekly) since 2001 Currently the cheapest metal and bottoming out fullermoney.com Crude oil NYME The next upside breakout will be a warning All spikes in crude oil have caused recessions Our theme: Empowerment Through Knowledge July 2008 fullermoney.com Rogers International Agriculture Commodity Index Our theme: Empowerment Through Knowledge Feb 2008 Base completion Food price inflation would be a problem fullermoney.com Our theme: Empowerment Through Knowledge Medium to longer-term risks • • • • • • • • • Industrial commodity price inflation Food price inflation Progressing economy inflation (current) Regressing economy stagflation Higher interest rates Trade protectionism Commodity ‘wars’ High frequency trading (another WMD) Global warming fullermoney.com Our theme: Empowerment Through Knowledge Current bull points • • • • • • • • Monetary policy is accommodative Interest rates are low CPI inflation is low Progressing economies are healthy The West’s recovery is only 15 months old Household savings are rising Equity valuations are reasonable Corporate balance sheets are mostly strong* * (Where leveraged to the global economy) fullermoney.com Our theme: Empowerment Through Knowledge Fullermoney summary forecasts • The Asian, resources and tech-led global stock market recovery is resuming • This cyclical bull market should have several more years to run, provided energy and food prices do not spike higher • The USA will avoid a double-dip recession with the help of progressing economies • The three-decade bull market in US government bonds is ending – yields will range higher over the medium to long term fullermoney.com Our theme: Empowerment Through Knowledge Fullermoney summary forecasts • Gold’s secular bull market has at least several more years before it is halted by higher rates • The secular bull for industrial commodities will continue, punctuated by recessions • Progressing Asian and resources economy stock markets will continue to lead • US and European multinationals leveraged to the global economy will outperform • Leading or promising sectors include: technology, healthcare, mining, agriculture, global infrastructure, and dividend increasers fullermoney.com Our theme: Empowerment Through Knowledge Thank you very much Fullermoney is a Global Strategy Service produced by David Fuller & Eoin Treacy We invite you to visit our site