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Linn Energy, LLC (LINE) Message Board

  • norrishappy norrishappy Apr 19, 2013 5:58 PM Flag

    One Way to Time the Market -WSJ


    The stock market in four years' time is unlikely to be much higher than it is now.

    That sobering forecast comes from a simple stock-market timing model that has an impressive track record over the past five decades. Among the more than 100 market timing strategies tracked by the Hulbert Financial Digest, in fact, this model has turned in the best performance of any in forecasting the market's four-year return.

    The clear investment implication is to begin reducing risk in your stock portfolio—either by building up cash or shifting your holdings toward more conservative stocks such as those with strong balance sheets and which pay high dividends.

    This market timing system is based on a single number that appears each week in the Value Line VALU -1.20% Investment Survey, the flagship publication of Value Line, a New York-based research firm. The number represents the median of the percentage gains that Value Line's analysts estimate the 1,700 widely followed stocks they monitor will produce over the next three to five years.

    Over the past five years, for example, this number—known as the VLMAP, for Value Line's Median Appreciation Potential—has been as low as 45% and as high as 185%. It currently stands at 50%.

    Value Line itself doesn't endorse using the VLMAP for market-timing purposes. Though the firm doesn't actively discourage investors from relying on this number or any of the other data that it produces, Value Line instead showcases a market-timing model that has a shorter-term focus.

    Those who do follow the VLMAP for market-timing purposes use it to project where the market will be in four years, the midpoint of the analysts' three- to five-year horizon. Because Value Line's analysts—like most of Wall Street—are on average too optimistic, followers of the VLMAP often adjust it downward when translating it into a specific four-year forecast.

    For example, Dan Seiver, an emeritus economics professor at Miami University of Ohio and chief economist at Reilly Financial Advisors in La Mesa, Calif., told me that he advises clients to use any VLMAP reading below 55% as the occasion to build up cash.

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    • This really is a fine measure from Value Line and I myself use it. Not being a trader the timing system is not much use to me. This does go back to Ben Stein's labelled book 'Yes you can time the market' based on fundamentals.

      That said this market is wildly divergent with defensive blue chips are massive yet not delusional valuations. But still cheap relative to the Fed manipulated bond yields.

      The 'high yield' high business risk stuff is also very richly valued. Which is not rational given all the event risk and inherent economic instability involves with no economic growth while both Obama and the Fed are stimulating the economy by never before imagined amounts with less and less resulting stimulation.

      LIne is defensive but certainly not a KO, PFE, JNJ, GIS but it certainly is an excellent way to get yield and long term participation in domestic energy markets and the eventual rationalization of the American natural gas market.

      All things in moderation is something Progressives/Collectivist/Socialist do not believe in. You can see it in the way they have 'hot tips' without understanding because being special they do not have to read and think like traditional Americans to have common sense to offer.

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