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Investing in the Second Lost Decade

Investing in the Second Lost Decade. Martin J. Pring. H.S Dent Conference November 9, 2012. Complimentary download for latest InterMarket Review and Weekly InfoMovie review. Pring.com/tampa.htm. March 2000 S&P =1553. November 7 2012 S&P =1397. 12- year loss=10.3%.

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Investing in the Second Lost Decade

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  1. Investing in the Second Lost Decade Martin J. Pring H.S Dent Conference November 9, 2012

  2. Complimentary download for latest InterMarket Review and Weekly InfoMovie review Pring.com/tampa.htm

  3. March 2000 S&P =1553 November 7 2012 S&P =1397 12- year loss=10.3%

  4. S&P versus the MSCI World Index 1961-2012 Prices S&P Composite MSCI World Stock Index

  5. 1900-2012 US Stock Prices These look like trading ranges. 2 3 1 4

  6. March 2000 CPI Adjusted S&P = 8.75 October 31 CPI Adjusted 1212 S&P = 6.1 12-year loss = 30.3%

  7. Deflated US Stock Prices (1900-2012 ) 4 Deflated S&P Composite Trading ranges in nominal terms bear markets in reality. 3 2 1

  8. Causes of Secular Bear Markets in Equities • Structural • Psychological • Excessive Volatility of Commodity Prices

  9. Deflated US Stock Prices (1900-2012 ) Deflated S&P Composite Inflationary pressures from failure to finance Viet Nam war. Excess manufacturing. In 1929 US car industry capacity was 6.4 million yet best sales year was 4.5. Policy mistakes Inflationary pressures from WW War I. Tech & housing bubble, deficit.

  10. Nonfarm times Labor Participation Rate Nonfarm*Labor Participation Rate Secular Bull Secular Bear Secular Bear Secular Bull Nonfarm Payrolls

  11. ECRI Weekly Leading Indicator 1967-2012 ECRI Weekly Leading Indicator Secular Bull Secular Bear Secular Bear KST

  12. Causes of Secular Bear Markets in Equities • Structural • Psychological • Excessive Volatility of Commodity Prices

  13. Deflated US Stock Prices versus Shiller Real Earnings(1929-2012) Deflated S&P Composite Shiller Real Earnings

  14. Deflated US Stock Prices versus Shiller P/E Ratio CPI Adjusted S&P Composite 16-years/ 62% decline/ 4 recessions 19-years/ 69% decline/ 6 recessions 19-years/ 67% decline/ 4 recessions 12-years/ 60% decline/ 2 recessions Shiller P/E ?

  15. Causes of Secular Bear Markets in Equities • Structural • Psychological • Excessive Volatility of Commodity Prices

  16. Deflated US Stock Prices vs US Commodity Prices (1830-2012) CPI Adjusted S&P Composite Commodity Prices

  17. Deflated US Stock Prices vs US Commodity Momentum (1830-2012) CPI Adjusted S&P Composite Hesitating Commodity Momentum

  18. US Stock Prices 1800-2012 2000 Arrows flag the 17.5-year cycle. 1965 May 2017 1929 1982 1947

  19. US Stock Prices 1908-2012 Adjusted for Inflation and M2 CPI Adjusted S&P Composite Downtrend still intact. 96-month MA S&P Composite/M2 S&P/M2 24-ROC

  20. Shanghai Composite Shanghai 2007 Gold 1980 NASDAQ 2000 18-month ROC

  21. Secular Trends for Commodities

  22. US Commodity Prices 1840-2012 11 US Commodity Prices 22 Average bull=19-years Average bear=21-years 12 18 22 33 19 Current bull is 11-years old. 13 23

  23. US Commodity Prices 1840-2012 CRB Spot Raw Industrials Hesitating Price Oscillator (60/360)

  24. CRB Spot Raw Industrials 1955-2012 CRB Spot Raw Industrials Reversing from an oversold reading. Velocity Momentum M2

  25. CRB Spot Raw Industrials 1955-2012 Confidence momentum leads price momentum Turning?

  26. CRB Spot Raw Industrials 1962-2012 Declining but low. CRB Spot Raw Industrials

  27. CRB Spot Raw Industrials 1955-2012 CRB Spot Raw Industrials 18-month ROC Federal Reserve Getting historically oversold

  28. Secular Trends for Bonds

  29. US Government Bond Yields 1860-2012 US Govt Bond Yields (20-30-years) 31-years Average=30-years Average=25-years 40-years 29-years 21-years 21-years

  30. US Government Bond Yields 1865-2012 31-years US Govt Bond Yields (20-30-year) Trendline and MA at 4.4%. Green plot when 9-EMA is above 96-month EMA. Average secular trend =27-years 96-month EMA vs 9-month EMA 96-month EMA 9-month EMA

  31. Government 20-year Yield 18-month ROC

  32. Inflation/Deflation Relationships

  33. Commodity Bond Ratio Hesitating Momentum

  34. Commodity Bond Ratio 11-years so far Government Bond Yield 6-years 4-years 8-years ??

  35. H S S False break Turning?

  36. The Business Cycle

  37. Composite Economic Indicators (Momentum) Leading Coincident Lagging

  38. Composite Economic Indicators (Momentum) Leading Coincident Lagging

  39. Master Economic Indicator (Smoothed) S&P Composite Master Economic Indicator

  40. Are all part of the business cycle sequence. Bonds Stocks Commodities

  41. Idealized Business Cycle S C B C B S Growth Contraction

  42. S&P Composite vs Coincident Indicator Momentum (1955-81) S&P Composite Coincident Indicators (1/9 trend deviation)

  43. Idealized Business Cycle S C B C B S Growth Contraction

  44. S&P Composite vs Coincident Indicator Momentum (1955-81) S&P Composite Coincident Indicators (1/9 trend deviation)

  45. The Double Cycle S Growth declines but does not go negative. C B B Economy growing Economy contracting S S B B C C Double Cycle Approximately41-months between cyclic lows

  46. Introducing the Six Stages

  47. Idealized Business Cycle 1 6 4 5 2 3 S C B S B C Commodities Stocks Bonds

  48. Barclays 20-Year Trust vs the Bond Barometer Barclays 20-year Trust (TLT) Bullish = 6.96% Green and red highlights indicate bullish and bearish periods. Starting to deteriorate. Bond Barometer

  49. S&P Composite vs the Stock Barometer S&P Composite Bullish = 9.14% Currently at 83% Stock Barometer

  50. CRB Spot Raw Industrials vs the Commodity Barometer CRB Spot Raw Industrials Bullish = 14.61% Commodity Barometer

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