Transcript Document

Financial Market Update
The Secular and Cyclical Outlook for Stocks, Bonds, and Commodities
Technical Security Analyst Association of San Francisco
Saturday January 15, 2011
Presented by: Tom Kopas, Martin Pring, and Joe Turner
www.pringturner.com
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Secular Trend Stocks
16-years/ 62% decline/
4 recessions
19-years/ 69% decline/
6 recessions
19-years/ 67% decline/
4 recessions
?
10-years/ 34% decline/
2 recessions
?
Halfway Through Secular Bear
Completed
Secular Bear
Target Area
2016-2020
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U.S. Stock Prices
(Inflation Adjusted)
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U.S. Commodity Prices
Commodity Oscillator
(72/240)
3
2
2000
1966
1929
1901
2
4
1
2
1 3
4
2
2 4
6
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6
4
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3
7
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3
5
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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
Setting the Scene for the Very
Long-term Trend of
Commodities and Bond Yields
Presented by
Martin J. Pring
www.pringturnercapital.com
US Commodity Prices 1840-2010
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US Commodity Prices
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Average bear=21-years
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Average bull=19-years
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13
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Current bull is
8-years old.
US Commodity Prices 1840-2010
US Commodity Prices
Danger
level in
330-360
zone.
Price Oscillator (60/360)
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CRB Spot Raw Industrials versus the Commodity Barometer
CRB Spot Raw Industrials
100% reading in
December
Pring Turner Commodity Barometer
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CRB Spot Raw Industrials versus the Global Economy
CRB Spot Raw Industrials
Global Economy
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Largest decline
when bullish.
A long way
from a zero
crossover.
CRB Spot Raw Industrials
Still rising but
fully stretched.
Commodity Diffusion Indicator (24/9)
US Government Bond Yields 1860-2010
US Govt Bond Yields
30-years
Average=30-years
Average=25-years
40-years
29-years
21-years
21-years
US Government Bond Yields 1865-2010
96-month MA
US Govt Bond Yields (20-30-year)
Line is around
4.6%.
240-month (20-year) ROC
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US Government Bond Yields 1865-2010
US Govt Bond Yields (20-30-year)
Green plot when yield is
above 96-month MA.
240-month (20-year) ROC
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Trendline
and MA at
4.6%.
US Government Bond Prices versus the Bond Barometer
US Government Bond Prices
Pring Turner Bond Barometer
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35% reading in
December.
Master Yield versus Long-term Momentum 1958-2010
Master Yield
Another buy
signal?
Long-term Momentum
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3-Month Commercial Paper Yield
Green highlight shows
when Growth Indicator
is above +20%.
Growth Indicator
Indicator ticking
up again.
3-month Commercial Paper Yield
Loans All Banks/Governments
Turning?
KST (Ratio)
Commodity versus Bond Prices 1855-2010
US Commodity Prices
Government Bond Yields
6-years
4-years
8-years
6-years
Inflation/Deflation Ratio 1961-2010
Inflation/Deflation Ratio
KST
Bullish
Commodity/Bond ratio 1860-2010
Breakout
Commodity/Bond Ratio
Price Oscillator (60/360)
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Early
stage of
the
secular
bull
market.
Commodity/Bond ratio versus Government Bond Yields
Leading the way
Commodity/Bond Ratio
A double break
would be
highly
significant.
Government 20-30-year Yield
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The Stock Market
is
Fear and Greed Superimposed
Over
the Business Cycle
Joe D. Turner
Pring Turner Capital Group
www.pringturner.com
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The Random Noise of
Economic News!
Money Supply
Bond Prices
Stock Prices
Economy
Commodities
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Pring Turner Investment Approach
Shortest: 10 Months
Shortest: 6 Months
Longest: 120 Months
Longest: 65 Months
We are Here
Secular Bull Market
15.5%
In a Recession
Secular Bear Market
31.7%
In a Recession
The Rest of the World is Growing Faster…
… Creating Global Inflation
4 to 5 YEARS
Bonds
Stocks
Inflation
Utilities
Banks
Technology
Food
Producers
Technology
Transports
U.S.
Treasuries
Consumer
Discretionary
Oil Drillers
Oil Drillers
Diversified
Metals
Energy
Diversified
Metals
Healthcare
U.S.
Treasuries
Tactics to Protect and Grow Your Wealth
Class
Stocks
Secular
Bear
Cyclical
Bull
Secular Trend at
Critical Juncture
Bonds
Inflation
Sensitive
Assets
Bear?
Bull
Tactics
Use Business Cycle to Tactically Allocate Assets
Inflation Themes are in Secular Bull
Resourced Based, Foreign-Emerging Markets
Quality with International Exposure
Income Producers
Bear
Review and Reconsider Risks
Lower Bond Allocation
Reduce Bond Maturities
Set up Short-term Bond Ladder
Hedge Bonds with Inflation Sensitive Securities
Bull
Favor Natural Resource Companies
Emerging Market Theme, Global Resource Demand
Precious Metal Exposure
Resource Based Countries
Canadian Royalty Trusts
Pring Turner Capital Group
Key Points: Investing Around the Business Cycle
 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
Seasonal and Cyclic Outlook for
2011
Presented by
Martin J. Pring
www.pringturnercapital.com
Decennial versus Third Year of
Presidential Cycle
Decennial Cycle
Secular bulls
All decades
Secular bears
Weakness into mid-”2”-year.
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
Mid-August-Oct
+17%
Mid-August-Oct
+10%
+7%
July-November
Year 11 of Secular Bear
Sept-Oct
-7%
Years Ending in “1” 1900-2010
Mid-April-Dec
-5%
Years Ending in “1” 1900-2010 Secular Bears
Mid-April-Dec
-13%
Early-April-Dec
Years Ending in “1” Secular Bears Prez 3
-18%
Cyclical Equity
Indicators
S&P Composite /Commodity Prices
3
10
120-month (10-year) ROC
10
8
S&P Composite
Shiller P/E 18-ROC
Topping?
S&P Composite & KST Dividend Yield 1890-1960
S&P Composite
KST Dividend Yield (Inverted)
S&P Composite & KST Dividend Yield 1960-2010
S&P Composite
Stalling from
a high risk
area.
KST Dividend Yield (Inverted)
S&P Composite versus the Stock Barometer
S&P Composite
Barometer
is bullish.
Pring Turner Stock Barometer
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S&P Composite
Int KST S&P.
Int KST Con Staple RS line.
Thanks for Listening…
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Pring Turner Capital Group
www.pringturner.com
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