Upload
others
View
11
Download
1
Embed Size (px)
Citation preview
Pring.com PringTurner.com
Investing in the Second Lost Decade
Martin J. Pring
IFTA Europe 2014
Pring.com PringTurner.com
pring.com/IFTA-2014.html
• 1. Copy of this presentation
• 2. Copy of article “Is the Secular Bear Market
About to Resume?
• 3. Copy of latest newsletters
Pring.com PringTurner.com
US Stock Prices 1900-2014
S&P Composite
Source S&P
1909 17% higher than 1902
1973 27% higher than 1966
New high 22% above 2000?
These look like trading ranges.
Pring.com PringTurner.com
Deflated S&P Composite
Trading ranges in nominal terms bear markets in reality.
1
2
3
4
Deflated US Stock Prices (1900-2014 )
1 2 3?
1 2 3
1 2 3
Pring.com PringTurner.com
March 2000 CPI Adjusted S&P = 8.75
February 2014 CPI Adjusted S&P = 7.90
13-year loss = 9.7%
Pring.com PringTurner.com
Deflated S&P Composite
S&P versus MSCI World Index 1973-2014 (Deflated)
Pring.com PringTurner.com
Deflated MSCI World Stock Index
S&P versus MSCI World Index 1973-2014 (Deflated)
Pring.com PringTurner.com
Causes of Secular Bear Markets in Equities
• Structural
• Psychological
• Unstable Commodity Prices
Pring.com PringTurner.com
ECRI Weekly Leading Indicator
Secular Bear
Secular Bear
Secular Bull
ECRI Weekly Leading Indicator 1967-2014
Red = Recessions
Pring.com PringTurner.com
Nonfarm Payrolls/Involuntary Part Time
Nonfarm Payrolls/Involuntary Part Time Workers 1955-2014
Secular Bear Secular Bear Secular Bull
Secular Bull
Pring.com PringTurner.com
Annual Working Age Population Growth and Projection
??????
Pring.com PringTurner.com
Causes of Secular Bear Markets in Equities
• Structural
• Psychological
• Unstable Commodity Prices
Pring.com PringTurner.com
2 3
4
1
Real Earnings are not Correlated to Stock Prices (1870-2014)
Inflation Adjusted Equities
Shiller Real Earnings (10-year MA)
Pring.com PringTurner.com
19-years/ 69%
decline/ 6
recessions
19-years/ 67%
decline/ 4
recessions
16-years/ 62%
decline/ 4
recessions
CPI Adjusted S&P Composite
Shiller P/E
Deflated US Stock Prices versus Shiller P/E Ratio1900-2014
??
12-years/ 60%
decline/ 2
recessions
Pring.com PringTurner.com
Causes of Secular Bear Markets in Equities
• Structural
• Psychological
• Unstable Commodity Prices
Pring.com PringTurner.com
CPI Adjusted S&P Composite
Commodity Prices
Deflated US Stock Prices vs US Commodity Prices (1830-2014)
Pring.com PringTurner.com
Secular Trends for Commodities
Pring.com PringTurner.com
US Commodity Prices
US Commodity Prices 1840-2014
22
23
19
12
33
13
18
22
13
Average bull=19-years
Average bear=21-years
Current bull is
13-years old.
Pring.com PringTurner.com
Price Oscillator (60/360)
CRB Spot Raw Industrials
US Commodity Prices 1840-2014
Upside reversal
Pring.com PringTurner.com
Secular Trends for Bonds
Pring.com PringTurner.com
31-years
29-years
21-years
40-years
21-years
Average=25-years
Average=30-years
US Govt Bond Yields (20-30-years)
US Government Bond Yields 1860-2014
Pring.com PringTurner.com
US Govt Bond Yields (20-30-year)
96-month EMA vs 9-month EMA
Trendline and
MA at 4.1%.
US Government Bond Yields 1865-2013
Green plot when 9-EMA is
above 96-month EMA.
9-month EMA
96-month EMA
Pring.com PringTurner.com
Secular Trend Reversals Characterised by Extreme Swings in
Psychology
Pring.com PringTurner.com
US Govt 20-30-year Yield
ROC (12)
Record reading
Exhaustion move
US Government Bond Yields 1865-2014
Great volatility at
secular reversal.
Pring.com PringTurner.com
Government Bond Yields
Bnd Yields versus Commodity Prices(1868-2014)
Commodity Prices
??
II. Investing Around the
Business Cycle
Pring.com PringTurner.com
Pring.com PringTurner.com
Leading
Coincident
Lagging
ECRI Leading, Coincident and Lagging Indicator Momentum 1972-2013
Pring.com PringTurner.com
Commodities
Are all part of the business
cycle sequence.
Bonds
Stocks
Pring.com PringTurner.com
Contraction
Growth
Idealized Business Cycle
B
S
B
C
S
C
Pring.com PringTurner.com
S&P Composite
Coincident Indicators (1/9 trend deviation)
S&P Composite vs Coincident Indicator Momentum (1955-81)
Pring.com PringTurner.com
Economy
growing
Economy
contracting
Approximately 41-months between
cyclic lows
Growth declines
but does not go
negative.
B S
C
B
S
C
B S
B
C
Double Cycle
The Double Cycle
Pring.com PringTurner.com
Introducing the Six Stages
Pring.com PringTurner.com
S
2 S
5
Idealized Business Cycle
1
B
C
6 3
C
B
4
Commodities
Stocks
Bonds
Pring.com PringTurner.com
If the stock market discounts the economy then ……
.…individual stock market sectors should discount
the economic sector they represent!
The Market’s Discounting Mechanism
Pring.com PringTurner.com
Homebuilders lead housing Capital goods stocks lead
capital spending
Capital spending stocks
Capital spending
Housing
Homebuilders
How Market Sectors Lead Economic Sectors
Pring.com PringTurner.com
Home Builders
Housing Starts
Home Builder KST Housing Start KST
Homebuilders vs. Housing Starts
Pring.com PringTurner.com
Home Builder KST
Housing Start KST
Homebuilders vs. Housing Starts(1989-2014)
Pring.com PringTurner.com
XHB IAI
CARZ
GDX
XME
XLP
SMH
XRT
XLV IEO
IYW
Pring Six Pring Six Stages
Pring.com PringTurner.com
Where are we now?
Pring.com PringTurner.com
Idealized Business Cycle
S
2 1
B
S 5
C
6 3
C
B
4
Commodities
Stocks
Bonds
Pring.com PringTurner.com
Government 5-year Yield
Short-term Momentum Reversing to the upside
Government 5-year Bond Yield 2006-2014
Long-term Momentum Still bullish for yields
Pring.com PringTurner.com
Bund
German Bun LIFFE
KST
Still falling
Possible top
Pring.com PringTurner.com
Bund
German Bun LIFFE
Short-term KST Sell signal
Key level is 139
Intermediate KST
Long-term KST Turning?
Pring.com PringTurner.com
S&P Composite
S&P versus KST Momentum 1993-2014
KST
Still rising
MA and trendline at 1700-1720.
Pring.com PringTurner.com
MSCI World ETF (ACWI)
RSI (18/4)
$54 is the key area.
MSCI World ETF 1966-2014
Pring.com PringTurner.com
Inflation Adjusted S&P Composite
Shiller P/E/Corp Bond Yield
S&P versus Shiller P/E/Corp Bond Yield Ratio 1880-2014
Pring.com PringTurner.com
S&P Composite
Govt Bond Yield (12-ROC)
S&P vesus 20-year Govt Bond Yield 12 ROC 1967-2014
Red highlights = recessions
Pring.com PringTurner.com
48-ROC S&P/GDP
Inflation Adjusted S&P Composite)
S&P versus S&P/GDP Ratio Momentum 1880-2014
Pring.com PringTurner.com
The Special K
• 1. An indicator designed to typically experience simultaneous
primary trend reversals with the price.
• 2. Capable of signaling reversals in the primary trend at a relatively early stage.
• 3. Triggers short-term buy and sell signals within that context.
Pring.com PringTurner.com
Primary trend
9 months to 2 years
Short-term trend 2 to 6 weeks
Intermediate trend
6 weeks to 9 months
Special K
Market Cycle Model
Pring.com PringTurner.com
The Special K: Drawbacks and Benefits
• 1. The Special K assumes a 4-year business cycle in its
calculation and does not do well when the cycle is substantially different.
• 2. Linear trends do not lend themselves well to momentum interpretation.
• 3. Sector rotation is cyclical, so the Special K works well on relative action.
Pring.com PringTurner.com
DAX
Special K
7900 is the key area.
DAX 1996-2014
Pring.com PringTurner.com
CRB Spot Raw Industrials
Global Commodity Index vs the Global Economy 1966-2014
OECD Leading Indicator
Pring.com PringTurner.com
CRB Spot Raw Industrials
18-month ROC
US Commodity Prices (1920-2014)
Pring.com PringTurner.com
CRB Spot Raw Industrials
Commodity Prices versus a Momentum Indicator(1971-2014)
Commodity Diffusion Indicator
Pring.com PringTurner.com
CRB Spot Raw Industrials
ECRI JOC Industrials
DJ UBS Commodity
CRB Composite
Four breakouts
Pring.com PringTurner.com
CRB Spot in Euro
Short-term Momentum
Bullish
CRB Spot Raw Industrials in Euro 2006-2014
Long-term Momentum Flat
Pring.com PringTurner.com
Cross Checks with Inter-Asset and Intermarket Relationships
Pring.com PringTurner.com
Commodity/Bond Ratio
Secular Oscillator
Commodity/Bond ratio and a Secular Oscillator(1890-2014)
Pring.com PringTurner.com
Commodity/Bond Ratio
KST
Deflated US Stock Prices vs US Commodity Prices (1963-2014)
Inflationary
Deflationary
Rising peaks and troughs still intact.
Pring.com PringTurner.com
S&P Composite
KST (Ratio)
S&P Composite/Commodity Ratio
Hesitated in February.
Pring.com PringTurner.com
S&P/Commodity Ratio
KST (Ratio)
Special K Momentum
Rolled over in February.
Uptrend is intact
Pring.com PringTurner.com
Bullish primary trend momentum
Bearish primary trend momentum
Theoretical Long-term Smoothed Momentum (Stage IV Start)
S&P
Bonds
Commodities
Pring.com PringTurner.com
Long Term Momentum Position February 2014
El Utilities
Telecom
Homebuilders
Staples
Gold Shares
Semiconductor
Industrial Commodities Steel
Materials
Bonds
Health Care
Con Disc
Financials
Capital Goods
Industrials
Drillers
Aluminum Technology REITS
Early Cycle leaders Late Cycle leaders
S&P
Energy
Pharmaceuticals
65
Pring.com PringTurner.com
Interesting theory…
…but does business cycle
investing work in the real
world?
Pring.com PringTurner.com
Source: S&P Dow Jones Indexes
Bonds
Stocks
Commodities
DJ Pring
Pring.com PringTurner.com
Less Risk
Better return
Pringturner.com
Bonds Stocks
Commodities
DJPring
Pring.com PringTurner.com
S&P Composite Total Return
Dow Jones Pring Business Cycle Index
(DJPRING)
DJPRING versus S&P Composite 2006-2014
Recaptures 2007-9 loss
Recaptures 2007-9 loss
Whipsaw barometer signal
Pring.com PringTurner.com
Summary
• Secular trend for stocks is still alive
• Secular uptrend for commodities is intact but at a crucial point.
• Tentative signs that the secular trend for bond yields has reversed to the upside.
• The business cycle is currently in Stage IV which is bullish for stocks and commodities and bearish for bonds.
Pring.com PringTurner.com
Thanks for Listening…
Please Visit our website www.pring.com to join our free e-mailing list.
“The book sees another ‘lost
decade,’ but also ways to
make it a winner.
Paul B. Brown – New York Times
Pring.com PringTurner.com
pring.com/IFTA-2014.html
• 1. Copy of this presentation
• 2. Copy of article “Is the Secular Bear Market
about to Resume?
• 3. Copy of latest newsletters