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Are we in a bull, a bear, or a cowardly lion market? As we will see, the answer can make a huge difference in your investment portfolio. In his recent book, Active Value Investing: Making Money in Range-Bound Markets (Wiley, 2007), he exhorted investors to fasten their seat belts and lower expectations for the next decade or so. He also provided a strategy for improving returns in this environment, what he calls range-bound or cowardly lion markets. In his presentation Katsenelson goes through his analysis of what will happen and provides an overview of how investors can make money in what will otherwise be an ocean of stagnant returns.
VITALIY N. KATSENELSON, CFA
Adjunct faculty member at the University of Colorado at Denver, Graduate School of Business.
Regular contributor to the Financial Times, Forbes.com, MarketWatch
and wrote articles for Barron's, BusinessWeek, The Rocky Mountain
News and many other financial publications.
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ActiveValueInvesting.com
Vitaliy N. Katsenelson, CFADirector of Research
Investment Management Associates, Inc.
7979 E. Tufts Ave, 820 Denver CO 80237 - Phone: 303.796.8333 - Email: [email protected]
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Cowardly Lion
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“bursts of occasional bravery lead to stock appreciation, but are ultimately overrun by fear that leads to a subsequent descent”
– Active Value Investing: Making Money in Range-Bound Markets
Copyright Kevin A. Tuttle 2007
range-bound ½
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Bull Range-Bound
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Market Economic Growth Starting Valuation (P/E)
Bull Good (Average) Low
Range-Bound Good (Average) High
Bear Bad High
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or
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2001 - 2009
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Expansion Growth
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Contraction GrowthContraction Decline
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We are today
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Takeaways: 1) Stocks are still not cheap 2) Earnings growth will be lower (consumer is deleveraging, government debt is growing – higher interest rates and higher taxes )
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We are today
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P/E + EPS = 0% + 6% ≈ 6%
“New” average expectations are NOT
met – P/E stopped expanding
End of Bull Market
P/E + EPS = -6% + 6% ≈ 0%
Returns are NOT “new” average, not average but
below average:
Range Bound Market
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not24
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True
False
NOT
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285 Bull + 5 Bear + 1 Range-Bound
![[CONTINUED FROM FRONT FLAP] $39.95 USA | $47.95 CAN€¦ · —VITALIY KATSENELSON Director of Research at Investment Management Associates, Inc., and author of Active Value Investing:](https://img.dokumen.tips/doc/110x75/5b0d8e0d7f8b9ab7658c93c0/continued-from-front-flap-3995-usa-4795-can-vitaliy-katsenelson-director.jpg)
