By Yves Lamoureux
How often have you seen us get worried this year on stocks? Never! We held a courageous bull stance all year and never let go. This was taped in January with Jeff Macke.
This cannot be a permanent state of affairs. Many studies are pointing to risk ahead. We would prefer to leave some upsides to others. The best part about reducing risk is also pocketing handsome profits.
Conditions are quickly deteriorating. We did preview the chart of money velocities. It is falling to such an extent that we are shocked. Perhaps the uncertainty created by taper is to blame in part. We are asked about our view of bonds if stocks fall.
We mentioned in the past that this would become a nightmare for asset allocators. We believe in the positive synchronicity of both bonds and stocks to revert to an historic correlation. We think bonds can fall while stocks fall too.
The bond bear is really just at the onset. There is incredible damage ahead for people who have enjoyed bonds for decades. To them, there are no other alternatives certainly not stocks. They will suffer in the same way that stock holders did for a little bit more than the last decade. We had been over the same period very wary of stocks and had always preferred the safety of bonds. Oh my! How things change.
The rotation out of bonds to stocks will continue and remains the foundation of our strong bull market case in stocks to come. We think we are now providing investors ample time to re-balance portfolios accordingly. Now is the time to take some evasive action!
We understand that we cannot go to cash in a big way as clients will be less than delighted. Guess what? People who feared the market, now, want a bigger stock representation. We try to use our contacts intelligently to measure the pulse of investors. We think this represents applied behavioral studies at its best.
We feel that this high is a perfect point to take money off the table.
We continue to be huge bulls on Asia. We think that the Shanghai market has begun a multi-year bull market. Our advise stands to rotate out of expensive markets like the S&P and go to emerging markets that now offer tremendous cheap values.
One of the really big mistake of retail investors is to feel comfortable with their own regional markets.
This will be a costly mistake for years to come. As many emerging markets appear to go into the next stage of growth. They will also gain an exponential revaluation. They will go into bubble mode!
Excerpt from Lamoureux & Company's weekly commentaries dated November 7th 2013