Blog Posts by Matt Nesto

"Why would anybody buy gold except for fear?" asks Don Hays, the founder and chief investment strategist at Hays Advisory Group. And truth be told, it's a question lots of investors are asking lately, as the price of the most widely held precious metal has shed nearly 25% in seven months, and by Hays's calculations, could shed a comparable amount again as it shrinks back down to $1100 an ounce.

"If you look back, when the price of gold started moving up, it's almost perfectly synonymous with September 11, 2001. That's when the fear really started rising," Hays says in the attached video.

Interestingly, he finds gold to be more useful as a "fear index" than an outright investment, and explains that it's expected weakness bodes well for his core equity investments, and even the world.

"The terrorism effect obviously is starting to improve, democracy is starting to improve, the price of oil is coming down, so all of those things play into a much better (investment) environment for the next 10 to 15 years. That is what gold is telling us," he says.

To be sure, gold's 12-year run to record levels coincided with lots of what Hays refers to as "massive distortions and worries," including the financial crisis, a technology revolution and, of course, an unprecedented rise in global terrorism.

Three days ago, when Dell (Dell) announced that it was going to release it first quarter earnings results five days earlier than originally planned, the street took it as a warning sign that bad news was sure to follow.

Even before the change, it wasn't as if analysts were expecting great things from the humbled and hurting computer-maker, but the haste shown in trying to get the latest report out has not only served to take low expectations even lower, but has stoked a fresh round of speculation over founder Michael Dell's effort to privatize the company.

As my co-host Jeff Macke and I discuss in the attached video, Dell's existence is hardly dependent upon whether it meets or beats analysts expectations or offers bullish guidance about the future. No, Dell's results are all about valuation, and the worse they look, they more likely it will be that any and all shareholders will see that the current cash bid (of $13.65 per share from Michael Dell and Silver Lake Partners) might not be as much of a steal as certain shareholders have inferred.

"They've shopped the company and there's been a lot of umbrage, a lot of outrage, a lot of 'Michael Dell is trying to steal the company'," Macke says, pointing out that there's a ''scoreboard" that keeps track of these things everyday called the share price. "And it turns out Dell is worth about $13.65," he says.

It's frequently stated in this business that "mom & pop," or small investors, always get it wrong. They buy too late after stocks have risen, and then sell too early after a decline and end up missing the rebound. This trend is so predictably incorrect that some shops simply do the opposite and chalk up their gains to expertise.

With that in mind, it's no surprise that it is increasingly being argued that the record-high stock indexes are doomed simply because investors appear to be belatedly gaining confidence to test the waters, so to speak.

For Don Hays, founder of Hays Advisory Group and a 40-year veteran strategist, nothing could be further from the truth than to suggest that investors have gotten overly bullish.

It's been six months, 300 points and 21% since the S&P 500 (^GSPC) began its ascent into record territory. The astounding, unbending rise has left countless casualties in its wake, especially those who have waited, and waited and waited for the better entry point that never came.

"It's extremely difficult to time this market," says Simon Baker, founder of Baker Ave Asset Management, in the attached video. "This is one of the most unliked rallies ever. The market continues to hit new highs and people are just getting more and more frustrated."

His advice: Stop waiting and get fully invested in stocks.

"Scared money does not make money. You need to be in equities at this stage," he says. "When the Fed, ECB and Japanese are throwing money into the market you need to be long U.S. equities."

A large part of his resolve comes from the fact that too many people are currently waiting for a correction. In fact, Baker says half of the audience at a recent high net worth conference he was speaking at admitted they were waiting for a 5% correction.

Insurance is a wonderful thing — especially when you need it. But it's definitely not free. In fact, the cost of protecting your assets in the stock market has become really expensive, which is why some investment pros are of the mind that the cost of protection just isn't worth it anymore.

Put another way, better deals are currently available on cyclical stocks, rather than defensives.

"Cyclicals are actually cheaper versus the valuation of defensives, or staples, more so than at any time over the last 15 years," says Simon Baker, founder of Baker Ave Asset Management.

While he readily admits that these more conservative equity picks were all the rage in the first quarter, the "chase for yield" by people bailing on bonds has jacked up the price of these lucrative total-return picks. "All of a sudden they're a lot more expensive," Baker says.

For his money, cyclicals are the place to be and now is the time to be in them. That is, "if you do believe like we do: that the economy is turning around and the global recovery is in place."

He is particularly fond of Q1 laggards, such as material (XLB) and tech (XLK) and would advise investors to also "go along with strong themes," such as housing and its expected benefit to the financial sector (XLF).

It almost seems impossible that, at a time when stocks are setting record highs on almost a daily basis, that they could also be considered cheap. And yet, new research by the Federal Reserve Bank of New York entitled Are Stocks Cheap?, is not only arguing that point, but also contends that we'll see "historically high excess returns for the S&P 500 for the next five years."

"I clearly do believe it," says hedge fund manager Simon Baker, founder of Baker Ave Asset Management, in the attached video. "We're hitting new highs but we've basically just recovered where we were over the last 10 years."

Specifically, the analysis shows equity risk premium, or the excess return that investors expect to get from stocks versus a risk-free asset, has never been lower. Of course, part of this calculation is based upon the fact that interest rates are historically low, but Baker says there's more to it than that.

"Clearly the Fed's motive is to put money back into equities. 401(k)s will be higher, people will feel like they've got more assets and will be spending more money," he says. "I think it's interesting that the Fed is coming out and actually using some propaganda to try and get money into stocks."

When shareholders of JP Morgan Chase (JPM) huddle in Florida this weekend for their annual meeting, they'll find themselves about 35% richer than they were in 2012, despite enduring a crisis-filled year of turmoil, regulation and investigation. But instead of celebrating Jamie Dimon's achievement and management dexterity, they'll be voting on whether to demote the bank's hard-charging chairman and CEO.

Predictably, this type of professional affront and disrespect has not sat well with the man who has, by most accounts, capably run the nation's largest lender for nine challenging years. Officially, investors will be given the chance to defy the bank's board of directors and strip Dimon of his chairmanship duties, while installing an unknown entity in his place to oversee him.

While the shareholder vote is expected to be defeated again this year, as it was last, the lead up to the balloting has been anything but salutary. And as my co-host Jeff Macke and I discuss in the attached video, while it is understandable that investors are angry about the $6 billion in so-called "London Whale" losses incurred from a high-risk hedging program being run in the UK, they're taking an even bigger risk if they alienate the 57-year-old leader.

In fact, CLSA banking analyst Mike Mayo has just published a report that says if Dimon is rebuffed or riled enough to walk away from both jobs, shares of JP Morgan would likely drop by 10% or about $20 billion. Not only would it cause a tumultuous transition with no successor in place, but Mayo predicts subsequent executive departures would cause additional hardship.

Seven months from now, when most of the country will be consumed with holiday shopping and seasonal festivities, Ben Bernanke will be focusing on something entirely different. Himself.

That's because, come December 13th, six-weeks before his second term expires, the Federal Reserve chairman will turn 60 and have comparatively little wealth to show for his life's work despite all his success and knowledge and notoriety.

As my co-host Jeff Macke and I debate in the attached video, as much as traders argue over how and when the Fed will extract itself from $4 trillion worth of quantitative easing, recent news reports have stoked speculation about whether or not Bernanke will even stick around to oversee the clean-up of the unprecedented easy money policies he's fostered throughout the financial crisis which began in 2007.

It is at least worth noting that former Fed chief Paul Volcker was also turning 60 when he stepped down from atop the central bank in 1987. His decision also followed several grueling years battling double-digit inflation and unemployment, and was driven in part by a desire to make some private sector money "because he's not getting any younger."