The Wall Street Journal’s recent article on forecasting (an article on forecasting), speaks to how inaccurate forecasters and forecasts typically are. When I read it, the following quote hit home:
“Sometimes forecasting isn't even about the future, some researchers say. The true goals of some predictions, says Kesten Green, a forecasting researcher at Monash University in Melbourne, Australia, include lighting a fire under the sales force or alarming the public into some sort of action.”
This holds true in the public policy arena and in the financial markets. It often appears that the forecasts are crafted to get attention, get elected, promote a product or strategy, sell a book, or all of the above! When the forecaster’s goal is "hey, listen to me," it's understandable why some forecasts are so extreme. The more in tune with public sentiment and the more outlandish the forecast is - the more attention it will likely garner. Remember, these ‘bed partners’ have similar goals; forecasters want attention and media outlets want eyeballs. Is this goal best achieved with a demure and soft-spoken guest or with one adamantly postulating an alarming scenario?
Consider this: With public confidence in the financial market very low right now, is the book touting Dow 36,000 or Dow 6,000 going to sell better? Is this forecasting or pandering?
It is possible to articulate a case for whatever you want others to believe, particularly if you selectively choose data and interpret it liberally. That doesn't make it correct. While it is sometimes interesting to contemplate what might happen, no one really knows. Worrying about what might happen, keeps individuals and corporations from acting in the here and now.
I think the market is so incredibly complex that it is not possible to make accurate forecasts. As a result, I rely on an adaptive process that modifies portfolio holdings as conditions evolve. This way the portfolio is based on what is actually happening, as opposed to what may or may not happen in the future.
This does not mean that I do not have opinions. I just don’t manage your portfolios based on my opinions because the market does not care what Michael Guilsher thinks should happen…
Securities and Investment Advisory services offered through NBC Securities, Inc., member FINRA and SIPC. Investment products 1) are not FDIC insured, 2) not guaranteed by any bank and 3) may lose value including a possible loss of principal invested. NBC Securities, does not provide legal or tax advice. Recipients should consult with their own legal or tax professional prior to making any decision with a legal or tax consequence.
This is not an offer to sell or buy any securities products, nor should it be construed as investment advice or investment recommendations.
Tuesday, September 27, 2011
Friday, September 23, 2011
Maintaining Objectivity
The Arab Spring preceded the European summer which in turn preceded the fed’s latest ‘twist’. The differences between these events are clear but the net result is similar - market volatility. For whatever reason, when we experience a day with volatility & declining markets the mind quickly flashes back to the days, a few years ago, when banks were being bailed-out at a fraction of their former values and Lehman Bros. was suddenly referred to in the past-tense. Sure, there are negatives with regard to the slowing of the US economy however I must objectively point out the positives (and negatives) regarding the current environment:
In the positive camp:
Interest rates are at historically low levels
Implications: low rates allow corporations & individuals to borrow very inexpensively to fund expansions & home purchases or remodeling projects
There is a lot of cash on the ‘side-lines’
Implications: This provides the ability & means to ‘buy on pullbacks’
80% of US corp. earnings for Q2 were above expectations & earnings were up approx 20%
Implications: US corporations are in very good shape
Emerging economies, as an aggregate, have about 2 billion people ‘coming on line’ who want to “live the good life”
Implications: potential for significant new demand for consumer goods & services
In the negative camp:
Unemployment is remaining high
Causes: ‘generous’ & extended unemployment benefits, workers lacking adequate skills & technological improvements usurping employees on production lines
Implications: negativity surrounding consumers’ ability to spend
Uncertainty regarding government policies
Implications: costs associated with Obamacare & other potential legislation weighs heavily on corporate hiring decisions
2008 is still fresh in the minds of investors
Implications: a proclivity to react emotionally
In the ‘for what it is worth’ camp:
The dividend yield on the S&P 500 now exceeds the yield on the 10-year Treasury notes. Sam Stovall, Chief Investment Strategist from Standard & Poor's, cites in his "Stovall's Sector Watch" from The Outlook that this doesn't happen very often. In fact, since 1953, there have only been 20 occurrences when the S&P 500 yielded more than T-Notes. He goes on to say, that the following 12 months, after this occurrence, the S&P 500 rose by an average of +20%.
Bottom line:
No one can predict what will happen. I am operating with a ‘set of tools’ that are unbiased and non-emotional. When the markets are volatile I take a step back and remind myself to be objective – asking "what is?" rather than "what if...?" Said another way, we will adjust to what the market is telling us.
Securities and Investment Advisory services offered through NBC Securities, Inc., Member FINRA and SIPC. Investment products 1) are not FDIC insured, 2) not guaranteed by any bank and 3) may lose value including a possible loss of principal invested. NBC Securities does not provide legal or tax advice. Recipients should consult with their own legal or tax professional prior to making any decision with a legal or tax consequence. This is not an offer to sell or buy any securities products, nor should it be construed as investment advice or investment recommendations.
In the positive camp:
Interest rates are at historically low levels
Implications: low rates allow corporations & individuals to borrow very inexpensively to fund expansions & home purchases or remodeling projects
There is a lot of cash on the ‘side-lines’
Implications: This provides the ability & means to ‘buy on pullbacks’
80% of US corp. earnings for Q2 were above expectations & earnings were up approx 20%
Implications: US corporations are in very good shape
Emerging economies, as an aggregate, have about 2 billion people ‘coming on line’ who want to “live the good life”
Implications: potential for significant new demand for consumer goods & services
In the negative camp:
Unemployment is remaining high
Causes: ‘generous’ & extended unemployment benefits, workers lacking adequate skills & technological improvements usurping employees on production lines
Implications: negativity surrounding consumers’ ability to spend
Uncertainty regarding government policies
Implications: costs associated with Obamacare & other potential legislation weighs heavily on corporate hiring decisions
2008 is still fresh in the minds of investors
Implications: a proclivity to react emotionally
In the ‘for what it is worth’ camp:
The dividend yield on the S&P 500 now exceeds the yield on the 10-year Treasury notes. Sam Stovall, Chief Investment Strategist from Standard & Poor's, cites in his "Stovall's Sector Watch" from The Outlook that this doesn't happen very often. In fact, since 1953, there have only been 20 occurrences when the S&P 500 yielded more than T-Notes. He goes on to say, that the following 12 months, after this occurrence, the S&P 500 rose by an average of +20%.
Bottom line:
No one can predict what will happen. I am operating with a ‘set of tools’ that are unbiased and non-emotional. When the markets are volatile I take a step back and remind myself to be objective – asking "what is?" rather than "what if...?" Said another way, we will adjust to what the market is telling us.
Securities and Investment Advisory services offered through NBC Securities, Inc., Member FINRA and SIPC. Investment products 1) are not FDIC insured, 2) not guaranteed by any bank and 3) may lose value including a possible loss of principal invested. NBC Securities does not provide legal or tax advice. Recipients should consult with their own legal or tax professional prior to making any decision with a legal or tax consequence. This is not an offer to sell or buy any securities products, nor should it be construed as investment advice or investment recommendations.
Wednesday, September 7, 2011
More of the Same
The last couple of weeks have been trying, to put it simply. Daily fluctuations, talking heads screeching about the next recession and lack of cooperation in Washington are enough to test even the most patient of us.
From my perch on the seventh floor I can see up 20th Street to UAB, but I also can look at the market without emotion or bias, and with the ability to draw upon three decades of experience deciphering market trends.
This is what I am observing: despite the volatility, on each pull-back the market does not fall as far as before and when it lurched forward, it moved ahead of the previous high.
What does this mean?
• The market has pulled back to where it traded last summer
• It is ‘building a base’, this is healthy and a normal part of what the market ‘does’
• It has not violated the long-term trend-line
• Supply (sellers) are getting ‘weaker’ as they are unable to push the market lower
• Demand (buyers) are getting ‘stronger’ as they have been able to push the market higher.
That is where we are - still.
From my perch on the seventh floor I can see up 20th Street to UAB, but I also can look at the market without emotion or bias, and with the ability to draw upon three decades of experience deciphering market trends.
This is what I am observing: despite the volatility, on each pull-back the market does not fall as far as before and when it lurched forward, it moved ahead of the previous high.
What does this mean?
• The market has pulled back to where it traded last summer
• It is ‘building a base’, this is healthy and a normal part of what the market ‘does’
• It has not violated the long-term trend-line
• Supply (sellers) are getting ‘weaker’ as they are unable to push the market lower
• Demand (buyers) are getting ‘stronger’ as they have been able to push the market higher.
That is where we are - still.
Friday, August 12, 2011
Crisis of Confidence
There is no question that the market correction of -17% makes the market, at the very least, oversold. There is no telling how long the market will remain in oversold territory or how much farther it may move in that direction, but we do know that historically speaking, when the market reaches these types of extremes there are most often attractive buying opportunities that follow. I am ready to pursue these with you when the time is right. That said, let’s discuss the US economic ‘big picture’:
The US is in the 8th consecutive quarter of rising GDP
US consumption is $500 billion higher than the 2008 peak
The recent economic soft-patch was primarily caused by the world’s 3rd largest
economy (Japan) going off line
80% of US companies reporting Q2 earnings exceeded projections
US Q2 earnings were up nearly 20%
We are a long way from being in the position of Greece or Italy
Even unemployment has declined slightly but will likely linger at higher than normal levels. Not to belabor the point, employment lags the recovery because of three key factors: generous US unemployment benefits, inadequate worker skill sets and corporate productivity gains thru technology. A client who sells to manufacturers has witnessed these gains first-hand – production lines have gained efficiencies by dropping to rejection rates of 1-2% from as much as 20% previously, a Gypsum board manufacturer increased production line speed from 250 feet/minute, to 575 ft/min and a carpet manufacturer whose lines were running @ 150 ft/min is now running them @ 1,100 - 1,200 with capabilities of 1,500 ft/min – significant productivity gains with fewer employees and without the associated over-head expenses.
Let’s also put the US debt issue in perspective; it’s not great but it’s not that bad either:
The US has $150 trillion in assets
debt totaling $14.5 trillion
and generates $15 trillion in income from these assets
In 2008 we had a financial crisis today we have a crisis of confidence. Remember the last time you narrowly avoided an accident while driving, how jittery you felt afterwards? The severity of the recent pull-back can largely be attributed to knee-jerk reactions fueled by jitters left over from the 2008 decline, I witnessed it first-hand with several long-time clients.
I strive to remain objective, but I see no evidence (currently) that the economy is folding however, we do need to get the US on a long-term sustainable fiscal course.
Securities and Investment Advisory services offered through NBC Securities, Inc., Member FINRA and SIPC. Investment products 1) are not FDIC insured, 2) not guaranteed by any bank and 3) may lose value including a possible loss of principal invested. NBC Securities does not provide legal or tax advice. Recipients should consult with their own legal or tax professional prior to making any decision with a legal or tax consequence. This is not an offer to sell or buy any securities products, nor should it be construed as investment advice or investment recommendations.
The US is in the 8th consecutive quarter of rising GDP
US consumption is $500 billion higher than the 2008 peak
The recent economic soft-patch was primarily caused by the world’s 3rd largest
economy (Japan) going off line
80% of US companies reporting Q2 earnings exceeded projections
US Q2 earnings were up nearly 20%
We are a long way from being in the position of Greece or Italy
Even unemployment has declined slightly but will likely linger at higher than normal levels. Not to belabor the point, employment lags the recovery because of three key factors: generous US unemployment benefits, inadequate worker skill sets and corporate productivity gains thru technology. A client who sells to manufacturers has witnessed these gains first-hand – production lines have gained efficiencies by dropping to rejection rates of 1-2% from as much as 20% previously, a Gypsum board manufacturer increased production line speed from 250 feet/minute, to 575 ft/min and a carpet manufacturer whose lines were running @ 150 ft/min is now running them @ 1,100 - 1,200 with capabilities of 1,500 ft/min – significant productivity gains with fewer employees and without the associated over-head expenses.
Let’s also put the US debt issue in perspective; it’s not great but it’s not that bad either:
The US has $150 trillion in assets
debt totaling $14.5 trillion
and generates $15 trillion in income from these assets
In 2008 we had a financial crisis today we have a crisis of confidence. Remember the last time you narrowly avoided an accident while driving, how jittery you felt afterwards? The severity of the recent pull-back can largely be attributed to knee-jerk reactions fueled by jitters left over from the 2008 decline, I witnessed it first-hand with several long-time clients.
I strive to remain objective, but I see no evidence (currently) that the economy is folding however, we do need to get the US on a long-term sustainable fiscal course.
Securities and Investment Advisory services offered through NBC Securities, Inc., Member FINRA and SIPC. Investment products 1) are not FDIC insured, 2) not guaranteed by any bank and 3) may lose value including a possible loss of principal invested. NBC Securities does not provide legal or tax advice. Recipients should consult with their own legal or tax professional prior to making any decision with a legal or tax consequence. This is not an offer to sell or buy any securities products, nor should it be construed as investment advice or investment recommendations.
Thursday, August 4, 2011
This IS different than 2008
Phones have been ringing; nearly everyone is concerned on some level about a repeat of the 2008 meltdown. However, the current environment is very different from the 2008 timeframe. Back then, the decline was liquidation driven as leveraged investors, forced to de-leverage, needed to raise cash fast. Because of the financial sector’s malaise, sellers could raise cash the quickest and get the best prices by selling the ‘better’ assets on their books, this inability to sell the ‘junk’, made the decline worse as it penalized holders of quality investments almost as much as holders of low-quality securities.
Today, there are no forced liquidations and 80% of US companies reporting second quarter earnings have exceeded earnings forecasts. In fact, S&P 500 earnings growth for the second quarter is now estimated at +20.4%. US corporations are in great shape. Despite this, unemployment is still high and will likely remain high for several reasons; unemployment benefits discourage would be applicants, worker skill sets are inadequate and corporations are making do with fewer employees.
In this extremely low yield environment there is no competition for the stock market. Investing in equities serves as a hedge against inflation and captures productivity growth. Dividend paying stocks provide the best of both worlds; appreciation potential and income potential. This pull back has created some compelling values as the S&P 500 is now 100% over sold.
As always, I am here to answer your questions & address your concerns.
Securities and Investment Advisory services offered through NBC Securities, Inc., Member FINRA and SIPC. Investment products 1) are not FDIC insured, 2) not guaranteed by any bank and 3) may lose value including a possible loss of principal invested. NBC Securities does not provide legal or tax advice. Recipients should consult with their own legal or tax professional prior to making any decision with a legal or tax consequence. This is not an offer to sell or buy any securities products, nor should it be construed as investment advice or investment recommendations.
Today, there are no forced liquidations and 80% of US companies reporting second quarter earnings have exceeded earnings forecasts. In fact, S&P 500 earnings growth for the second quarter is now estimated at +20.4%. US corporations are in great shape. Despite this, unemployment is still high and will likely remain high for several reasons; unemployment benefits discourage would be applicants, worker skill sets are inadequate and corporations are making do with fewer employees.
In this extremely low yield environment there is no competition for the stock market. Investing in equities serves as a hedge against inflation and captures productivity growth. Dividend paying stocks provide the best of both worlds; appreciation potential and income potential. This pull back has created some compelling values as the S&P 500 is now 100% over sold.
As always, I am here to answer your questions & address your concerns.
Securities and Investment Advisory services offered through NBC Securities, Inc., Member FINRA and SIPC. Investment products 1) are not FDIC insured, 2) not guaranteed by any bank and 3) may lose value including a possible loss of principal invested. NBC Securities does not provide legal or tax advice. Recipients should consult with their own legal or tax professional prior to making any decision with a legal or tax consequence. This is not an offer to sell or buy any securities products, nor should it be construed as investment advice or investment recommendations.
Tuesday, June 21, 2011
National Debt
Clients have been asking very timely questions about the spiraling problem of US government debt – and how that can impact the decisions we make as far as investing is concerned. It is because of situations like this that I apply ‘emotionless’ & ‘soulless’ analytical tools to determine if, and then where, to invest.
Since we cannot control what our illustrious leaders are doing, allow me to pose several questions:
• Are all the same old real world things – like creative destruction, supply and demand, innovation, and trial and error – still happening like they always have?
• Has the US experienced difficult financial times in the past?
• Did the US survive & did people make money during those times?
• Who benefitted – planners or worriers? Which one do you choose to be?
The Boy Scout’s motto is “Be Prepared”, my analytical tools keep me prepared.
When do you want to get started on your financial planning?
I offer modular financial planning in the following areas:
-Net worth & cash flow
-Accumulation
-Retirement planning
-Education funding
-Survivor
-Estate & tax planning
For a complimentary review, call or email me for a questionnaire.
Securities and Investment Advisory services offered through NBC Securities, Inc., Member FINRA and SIPC. Investment products 1) are not FDIC insured, 2) not guaranteed by any bank and 3) may lose value including a possible loss of principal invested. NBC Securities does not provide legal or tax advice. Recipients should consult with their own legal or tax professional prior to making any decision with a legal or tax consequence. This is not an offer to sell or buy any securities products, nor should it be construed as investment advice or investment recommendations.
Since we cannot control what our illustrious leaders are doing, allow me to pose several questions:
• Are all the same old real world things – like creative destruction, supply and demand, innovation, and trial and error – still happening like they always have?
• Has the US experienced difficult financial times in the past?
• Did the US survive & did people make money during those times?
• Who benefitted – planners or worriers? Which one do you choose to be?
The Boy Scout’s motto is “Be Prepared”, my analytical tools keep me prepared.
When do you want to get started on your financial planning?
I offer modular financial planning in the following areas:
-Net worth & cash flow
-Accumulation
-Retirement planning
-Education funding
-Survivor
-Estate & tax planning
For a complimentary review, call or email me for a questionnaire.
Securities and Investment Advisory services offered through NBC Securities, Inc., Member FINRA and SIPC. Investment products 1) are not FDIC insured, 2) not guaranteed by any bank and 3) may lose value including a possible loss of principal invested. NBC Securities does not provide legal or tax advice. Recipients should consult with their own legal or tax professional prior to making any decision with a legal or tax consequence. This is not an offer to sell or buy any securities products, nor should it be construed as investment advice or investment recommendations.
Tuesday, June 7, 2011
Market Flash Back?
Whenever we experience a day with volatility & declining markets the mind quickly flashes back to the days, a few years ago, when banks were being bailed-out at a fraction of their former values and Lehman Bros. was suddenly referred to in the past-tense. Sure, there are negatives with regard to the slowing of the US economy however, I must objectively point out the positives that persist, and among them are the continued strong relative strength of the US equity asset class; it remains ranked #1 while commodities are #2, international is #3, foreign currencies are #4, fixed income is #5 & cash brings up the rear at #6.
We have experienced an exhale from the recent highs in indices such as the S&P 500, but we have not seen a change of trend. It is important to remain objective in the face of days such as these, particularly since recent memories encourage emotion-based decision making over objectivity.
In summary: 75% of stocks in the NYSE are currently above their bullish support lines, and the weakness has certainly not been evenly spread; the Banking sector, for instance, has roughly 50% of its components in negative trends and the Savings & Loan sector is even higher. Meanwhile Gas Utilities still shows 86% above trend, while Chemicals and Oil Service also have percentages in the mid-70s.
Yes, while volatility tests our nerves & resolve and the ‘talking heads’ banter about the current ‘hot topics’, we steadfastly apply a non-emotional and disciplined approach to managing your assets. Looking ahead, some of the recent headwinds, the spike in gasoline prices and disruptions caused by the Japanese earthquake and US tornadoes are likely to fade in the second half of the year.
Securities and Investment Advisory services offered through NBC Securities, Inc., Member FINRA and SIPC. Investment products 1) are not FDIC insured, 2) not guaranteed by any bank and 3) may lose value including a possible loss of principal invested. NBC Securities does not provide legal or tax advice. Recipients should consult with their own legal or tax professional prior to making any decision with a legal or tax consequence. This is not an offer to sell or buy any securities products, nor should it be construed as investment advice or investment recommendations.
We have experienced an exhale from the recent highs in indices such as the S&P 500, but we have not seen a change of trend. It is important to remain objective in the face of days such as these, particularly since recent memories encourage emotion-based decision making over objectivity.
In summary: 75% of stocks in the NYSE are currently above their bullish support lines, and the weakness has certainly not been evenly spread; the Banking sector, for instance, has roughly 50% of its components in negative trends and the Savings & Loan sector is even higher. Meanwhile Gas Utilities still shows 86% above trend, while Chemicals and Oil Service also have percentages in the mid-70s.
Yes, while volatility tests our nerves & resolve and the ‘talking heads’ banter about the current ‘hot topics’, we steadfastly apply a non-emotional and disciplined approach to managing your assets. Looking ahead, some of the recent headwinds, the spike in gasoline prices and disruptions caused by the Japanese earthquake and US tornadoes are likely to fade in the second half of the year.
Securities and Investment Advisory services offered through NBC Securities, Inc., Member FINRA and SIPC. Investment products 1) are not FDIC insured, 2) not guaranteed by any bank and 3) may lose value including a possible loss of principal invested. NBC Securities does not provide legal or tax advice. Recipients should consult with their own legal or tax professional prior to making any decision with a legal or tax consequence. This is not an offer to sell or buy any securities products, nor should it be construed as investment advice or investment recommendations.
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