Technical Security Analyst Association of San Francisco Saturday January 15, 2011 Presented by: Tom...
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Technical Security Analyst Association of San Francisco
Saturday January 15, 2011Presented by: Tom Kopas, Martin Pring, and Joe Turner
www.pringturner.com
Financial Market UpdateThe Secular and Cyclical Outlook for Stocks, Bonds, and
Commodities
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1
2
3
4
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19-years/ 69% decline/ 6 recessions
19-years/ 67% decline/ 4 recessions
16-years/ 62% decline/ 4 recessions
10-years/ 34% decline/ 2 recessions
?
?
Secular Trend Stocks
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Halfway Through Secular Bear
2016-2020
Completed Secular
Bear Target Area
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U.S. Stock Prices (Inflation
Adjusted)
U.S. Commodity Prices
Commodity Oscillator
1 2
3
4
(72/240)
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1901
1929
1966
2000
1 5
6
7
2
3
4
15
6
7
2
3
4 1
5
2
3
4
1
2
3
4
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Key Points: Secular Trend for Stocks
Long Periods of Alternating Good and Bad Performance
Secular Trends Change at Extreme Valuation Levels
Currently Halfway through our 4th Secular Bear Market
Be Aware of Commodity Secular Bull Market
Capitalize on Cyclical Stock Market Opportunities
Understanding Secular Environment is Key to Success
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Presented by
Setting the Scene for the Very Long-term Trend of
Commodities and Bond Yields
Martin J. Pring
www.pringturnercapital.com
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US Commodity Prices
US Commodity Prices 1840-2010
www.pringturnercapital.com
22
23
19
12
33
13
18
228
Average bull=19-years
Average bear=21-years
Current bull is 8-years old.
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US Commodity Prices
US Commodity Prices 1840-2010
www.pringturnercapital.com
Price Oscillator (60/360)
Danger level in 330-360 zone.
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CRB Spot Raw Industrials
Pring Turner Commodity Barometer
CRB Spot Raw Industrials versus the Commodity Barometer
www.pringturnercapital.com
100% reading in December
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CRB Spot Raw Industrials
Global Economy A long way from a zero crossover.
CRB Spot Raw Industrials versus the Global Economy
www.pringturnercapital.com
Largest decline when bullish.
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CRB Spot Raw Industrials
Commodity Diffusion Indicator (24/9)
Still rising but fully stretched.
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30-years
29-years
21-years
40-years
21-years
Average=25-years
Average=30-years
US Govt Bond Yields
US Government Bond Yields 1860-2010
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US Govt Bond Yields (20-30-year)
240-month (20-year) ROC
US Government Bond Yields 1865-2010
www.pringturnercapital.com
Line is around 4.6%.
96-month MA
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US Govt Bond Yields (20-30-year)
240-month (20-year) ROC
Trendline and MA at 4.6%.
US Government Bond Yields 1865-2010
www.pringturnercapital.com
Green plot when yield is above 96-month MA.
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US Government Bond Prices
Pring Turner Bond Barometer
US Government Bond Prices versus the Bond Barometer
www.pringturnercapital.com
35% reading in December.
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Master Yield
Long-term Momentum
Master Yield versus Long-term Momentum 1958-2010
www.pringturnercapital.com
Another buy signal?
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Growth Indicator
3-Month Commercial Paper Yield
Green highlight shows when Growth Indicator is above +20%.
Indicator ticking up again.
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3-month Commercial Paper Yield
Turning?
Loans All Banks/Governments
KST (Ratio)
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US Commodity Prices
Government Bond Yields
6-years
4-years8-years
6-years
Commodity versus Bond Prices 1855-2010
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Inflation/Deflation Ratio
KST Bullish
Inflation/Deflation Ratio 1961-2010
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Commodity/Bond Ratio
Early stage of the secular bull market.
Commodity/Bond ratio 1860-2010
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Price Oscillator (60/360)
Breakout
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Commodity/Bond Ratio
A double break would be highly significant.
Government 20-30-year Yield
Commodity/Bond ratio versus Government Bond Yields
www.pringturnercapital.com
Leading the way
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Pring Turner Capital Group
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25
The Stock Market is
Fear and Greed Superimposed
Over the Business Cycle
Joe D. Turner
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The Random Noise of Economic News!
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Money Supply
Commodities
Bond Prices
Stock Prices
Economy
?
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Pring Turner Investment Approach
We are Here
Shortest: 10 Months
Longest: 120 Months
Shortest: 6 Months
Longest: 65 Months
Secular Bull Market15.5%
In a Recession
Secular Bear Market31.7%
In a Recession
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The Rest of the World is Growing Faster…
… Creating Global Inflation
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4 to 5 YEARS
Bonds
StocksInflation Sensitive
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Utilities
Food Producers
U.S. Treasuries
Banks
Technology
ConsumerDiscretiona
ry
Technology
Transports
Oil Drillers
Diversified Metals
Energy
Oil Drillers
U.S. Treasuries
Diversified Metals
Healthcare
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Class Secular
Cyclical
Tactics
Stocks Bear Bull
Use Business Cycle to Tactically Allocate Assets
Inflation Themes are in Secular BullResourced Based, Foreign-Emerging MarketsQuality with International ExposureIncome Producers
Bonds Bear? Bear
Review and Reconsider RisksLower Bond AllocationReduce Bond MaturitiesSet up Short-term Bond LadderHedge Bonds with Inflation Sensitive Securities
Inflation
Sensitive
Assets
Bull Bull
Favor Natural Resource CompaniesEmerging Market Theme, Global Resource DemandPrecious Metal ExposureResource Based CountriesCanadian Royalty Trusts
Pring Turner Capital Group
Tactics to Protect and Grow Your Wealth
Secular Trend at Critical Juncture
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Markets are Linked in a Logical, Rational, Sequential Relationship
For over 150 Years, Markets have Tracked Business Cycle Sequences
During Secular Bear Markets Economy in Recession More Often
Pring Turner Organizes the Business Cycle into 6 stages
Currently in Stage 4 Good for Stocks and Inflation Sensitive Securities Bad for Bonds
Business Cycle Drives Profitable Asset Allocation Decisions
Key Points: Investing Around the Business Cycle
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Presented by
Seasonal and Cyclic Outlook for 2011
Martin J. Pringwww.pringturnercapital.com
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Decennial versus Third Year of Presidential Cycle
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Decennial Cycle
Secular bulls
All decades
Secular bears
Weakness into mid-”2”-year.
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Current US Secular Bear Market vs The Average of Three Previous Bears
Average of three previous secular bear markets.
Bear trend since 2000
Mid-twelfth year
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+17%
+10%
+7%
Mid-August-Oct
July-November
Mid-August-Oct
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Year 11 of Secular Bear
Years Ending in “1” 1900-2010
Years Ending in “1” 1900-2010 Secular Bears
Years Ending in “1” Secular Bears Prez 3
-7%
-5%
-13%
-18%
Sept-Oct
Mid-April-Dec
Mid-April-Dec
Early-April-Dec
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Cyclical Equity Indicators
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S&P Composite /Commodity Prices 8
10310
120-month (10-year) ROC
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S&P Composite
Topping?
Shiller P/E 18-ROC
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S&P Composite
KST Dividend Yield (Inverted)
S&P Composite & KST Dividend Yield 1890-1960
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S&P Composite Stalling from a high risk area.
KST Dividend Yield (Inverted)
S&P Composite & KST Dividend Yield 1960-2010
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S&P Composite
Pring Turner Stock Barometer
S&P Composite versus the Stock Barometer
www.pringturnercapital.com
Barometer is bullish.
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S&P Composite
Int KST Con Staple RS line.
Int KST S&P.
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Pring Turner Capital Group
www.pringturner.com
47
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