Pumping Iron

My Minyanville article this week, "Barbells Will Strengthen Your Portfolio", describes the barbell approach to the current stock market climate using large and mega cap issues on one side and emerging markets on the other:

"On the assumption that my bifurcated earnings season produces underperforming mid- and small-cap sectors (resulting in the long overdue stock market correction), one very attractive investment strategy to employ while waiting would be a barbell approach with large and mega cap on one side and emerging markets on the other. The Smids (small and mid cap) would be held to a minimum.

This strategy covers both the short and near-term bases and should enable..."

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Minyanville article: Big and Small Companies: Divergences You Must Follow

This week's Minyanville article brings into sharp focus the points made on this blog and in the media these past week's re bifurcated earnings season and stock market divergences.

excerpt from article: "As investors move deeper into the thick of earnings season, the perspective as to its meaning for near-term stock-market action becomes of great value. What I'm referring to specifically is to watch for any divergence in earnings performance between big and smaller companies..."

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Minyanville article: Momentum Readings Suggest Top Is Coming

This week's Minyanville article re the odds of a stock market top due to bifurcated earnings season ahead is posted.

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Minyanville Article: Sustainability Should Top the Economy's To-Do List

This week's Minyanville article last week's posts along with yesterday's Beyond the Sound Bite interview with Subodh Kumar.

"I'm becoming increasingly convinced that the upcoming earnings season will produce bifurcated results with larger companies generating at or above consensus results while smaller, more US-centric companies come in at or below consensus readings..."

"With credit availability still constricted, deleveraging still underway, and consumer balance sheets still in repair, expecting a robust economic advance and a further equity marketrally to emerge out this soup of stress is a concoction only for the most optimistic and most hidebound to formulaic thinking (such as low inflation justifies above average P/Es)..."

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Minyanville article: What A Correction Can Do For You

This week's Minyanville article combines the past two days worth of comments and links them together with last week's (Sept. 15) "air pocket" correction forecast.

"If you’re uncertain as to the central rationale being made by the bulls for this overvalued equity market getting even more overvalued, here’s the argument in a nutshell:

Low levels of both core inflation and interest rates suggest that the normalized P/E on stocks should be..."

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Minyanville Article: Take Action to Make Portfolios Walk the Talk

This week's Minyanville article focuses on one of the practical aspects of managing a portfolio - what to do when you have a sector (or asset class) that you don't like for the long term but believe can outperform in the short term?

"Whenever I appear in the media, be it electronic or print, I answer the questions posed by the interviewer from the wellspring of research that I conduct every hour of every working day. I pontificate with the best of them. I am, in effect, talking the talk.

However, having a point of view regarding the economy and markets -- however sound, articulate, and well thought out -- is the start, not the end point, for investment decision-making..."

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Minyanville article: Out of the Woods, Into the Swamp

"By all accounts, the global economy appears to be out of the woods. But, does that mean we're now in the clear? Perhaps the move out of the woods doesn't lead to a wonderful open field, but into a swamp: a swamp of economic uncertainties and unresolved issues.

In a swamp, there are many sinkholes and other dangers waiting to.."

Plus: (correction) Vinny the short term bear returns to Bloomberg radio tomorrow (3:30 PM eastern).

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Minyanville article: Why Stocks Will Stop Defying Valuation Gravity

"Romantics have a word that best describes the stock market’s current levitation act: nostalgia. The newly emboldened buy-the-dips crowd, flush with cash and longing for the bygone days of beta-inspired rates of return, perceived the recent market swoon as yet another opportunity to defy valuation gravity and are apparently attempting to levitate stocks to new highs. Will it work?..."

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Minyanville article: Dabbling in the Dark Art of Chart-Pattern Reading

"I've stated several times that I'm not a chart-pattern guy. I've found that trying to predict the future of any asset via the patterns its chart reveals yields, for me, a 50/50 proposition. Yet, there's some merit to chart-pattern recognition -- many others do follow the dark art. Therefore, since the name of the investment game is to outwit your unseen investment opponent (that’s how you generate alpha), seeing what they see (and possibly believe) can be a productive exercise.

To illustrate, let’s look at a basic chart of gold..."

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Minyanville article: Four Ways to Play If Your Assets Are in Cash

"Now that buy-the-dips has made it an investment hell for those with large sums of cash (and a very low exposure to stocks), I want to offer not words of encouragement (hang in there, bears stuff), but an investment opportunity that may ease some of the pain if you missed the rally and now don’t know what to do. Before I describe this investment, let me touch on a few points that may help place the current environment in context.

There are 2 points in market cycles when investors who have a high percent of their assets in cash are most unsure how to proceed. One point is when..."

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Minyanville article: Buyer Beware - The Bottom Is Not In Yet

"My article for Minyanville this week focuses on a subject that is very much a part of the investment equation for most investors - emotions. "Stocks are on a tear again today hitting new recovery highs, as passionately bearish investors just tear their hair out. And that emotional quality is the subject of this article.

In philosophy, “I think, therefore I am” is a truism. In investing, however, it seems that many investors subscribe to the variation, “I feel, therefore I invest." And therein lies the subjective rub that imposes the belief of what "should be" and alters the objective view of "what is."..."

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Minyanville article: Three Reasons Investors Should Curb Their Enthusiasm (for Financials)

"Investor spirits for Financials may have been buoyed by the recent earnings results of the major banks, however, there are at least 3 reasons why such enthusiasm should be tempered. Let’s start with the dustup that's emerging between fund giant BlackRock (BLK) and the investment banks."

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Minyanville article: Why The Bear Will Become The Bull

My article for Minyanville this week puts in context the above consensus macro economic and earnings reports, the bottom building process for stocks, and the transitional nature of the economy and markets.

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Minyanville article: S&P Watch: Higher Earnings in Coming Months?

"In my blog post yesterday, I referred to valuation points made here and previously and tied them to the earnings reports from second quarter, which will kick in next month. Since we're in the pre-announcement period, investors should be alert for any early warnings signs that earnings will be at or below expectations. Only at-earnings- or above-earnings reports will provide the fundamental juice to power stocks higher from currently fully valued levels...."

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Minyanville article: Playing the Valuation Game

In this week's article for Minyanville I elaborate on the Fully Valued Market blog posting of Tuesday (see below) as well as describe the behavioral finance aspects of forward looking valuation analysis:

"After several months of glorious advances, stocks have stagnated of late. Trading in a largely narrow range, stocks appear to be searching for a reason to move. Some expect them to advance, while others anticipate, at best, a long-overdue (meaningful) correction, or, at worst, a test of the lows we saw last November and in early March of this year. Both camps can find plenty to support their points of view..."

"The 2 central points I'm attempting to make are these: First, like technical analysis, forward-looking valuation analysis contains the message of the market. Second, investors are better served debating the future, which is contained in the valuation message of the market, rather than the present or the past.

Market methodologies such as valuation analysis and technical analysis shift the focus away from..."

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Minyanville article: Reading Economic Reports for Bullish Signs

In this week's article for Minyanville I describe a macro economic process that I developed over the past several months that helps identify the direction of future economic forecasts and the resulting future earnings forecasts:

"A "sense" of something is not the best way to make investment decisions. Gut feelings are all well and good, but they're hardly the primary basis upon which investment decisions should be made. Yet, a sense of where the economy -- and therefore earnings and stocks -- are headed is all most investors end up with when it comes to reading the daily economic reports that so influence the market. Take today's employment data, for example.

Many investors find macro-economic data such as this interesting, and they know it's important as it provides a sense of where the economy might be headed. However, beyond a sense of the economy, most investors lack the ability to..."

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Minyanville article: Small Cap Strategy - Lose the Weight

My Minyanville article this week discusses the merits of underweighting small caps.

"Throughout the credit-enhanced era, small-cap issues were one area where investors were well-advised to overweight in their portfolios. As history informs us, small-cap stocks outperform large caps due to their (on average) higher growth rates and (generally) greater risk. Greater risk equals greater rewards. Recently, however, circumstances have changed, and small caps look to bear the brunt of..."

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Minyanville article: A Mega Trend Reversal?

excerpt from this week's article: "Bullish investors who subscribe to chart patterns are getting all lathered up over the prospects of a major head-and-shoulders bottom..."

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Minyanvile article: Executive Pay Caps - Be Careful What You Wish For

excerpt from this week's article: "By all accounts, the concerns expressed in my prior 2 Minyanville articles, Bulls Out of Momentum and Advice for Stressed-Out Bears, as well as several recent blog postings, appear to be working out. Stocks -- fully valued with suspect technical-analysis credentials -- have stalled, and are likely headed toward a range-bound summer, with winners and losers producing a zero-sum period of returns.

If this comes to pass, the decision on what to do over the next few months, how to exploit a mini range-bound/sideways market, becomes a priority for actively managed portfolios. On this matter, I'll have some ideas in next week’s article. What I want to touch on now is something that has far more serious consequences for the market: regulatory overreach by the US government. More specifically, the current attempts by congressional Democrats to dictate pay policy for financial-service firms.

I get this argument, which focuses on the systemic risk posed by..."

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Minyanville article: Advice for Stressed-Out Bears

excerpt from this week's article:
"As the stock market continues its unsustainable climb, and portfolio values recover from the depths of their devilishly low point of early March (S&P 500 at 666), there's one group that hasn't been enjoying the merriment of late: the bears. Clinging to the ill-advised belief that the end of capitalism was upon us, the flexibility necessary to successful investing was...

As stocks embrace the pending results of stress tests, it looks as though bears need not stress out for much longer. However, my longer-term advice to the bears is this: One-way, die-hard thinking is always stressful. It may make for entertaining television, but it's not good for your financial health...."

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