'A Smooth Stretch of Highway'
The market continued its amazing run with an additional gain of 3.81% in October, and now stands at a respectable 9.06% for 2010. Our results are posted on the Performance Page. Although these recent results have investors giddy, the shorter term internals are pointing to a less sanguine picture, and unlike September's broad advance, the current one is quite a bit narrower in scope. The good news is that all of the longer term technicals from Lowry research remain quite positive, and so any correction should be contained to no more than three to five percent, and in fact, there has never been more than one correction of more than ten percent in any bull market since 1940, and this bull has already had one after the April peak. Some thoughts below stemming from the investment conference held by BCA in New York.
Antoine van Agtmael, CIO Emerging Markets Management: "Emerging markets will move from being bit players to playing a leading role on the world stage". He concludes by saying that "Being underweight EM may be hazardous to your health."
Paul Brodsky, Co-Founder with Lee Quaintance of QB Asset management: Paul believes that QE2 (Quantitative Easing) will continue to debase the currency and eventually lead to inflation and a parabolic move in the price of gold. Price target: $8000 derived from the ratio of gold's price to the monetary base.
Andy Smith, Senior Metals Analyst Bache Commodities: Andy reaches a target of $64,000 by correlating the price to his private calculation of M3, with a more modest price of $32,000 when calculated as a percentge of the monetary base. Wouldn't that be nice.
Jeffrey Applegate, CIO Morgan Stanley: Jeff expects the market to do well after the elections, and points to the fact that the average appreciation after midterm elections is +27%. He would underweight cash, underweight bonds (but favor EM Sovereign debt), overweight equities with preference for Emerging markets, overweight commodities as a play on EM growth, and finally believes the path of least resistance for the dollar is down.
To conclude, it's been 'a smooth stretch of highway' for the market these past couple of months and the long term internals project a continuation of the current bull market. If the pundits above are even close to being accurate in their predictions, our current allocation of assets should perform rather nicely.
-Joe