Rodney Johnson | Wednesday, April 17, 2013 >>
My daily routine is pretty well set. After a daily run, my fix of reading material includes the Wall Street Journrnal, the New York Times, and the Financial Times before I even turnrn on my computer, where I then peruse a number of financial blogs and news sources.
My drive to work includes a stint of listening to Bloomberg Radio and when Bloomberg goes to commercials I listen to snippets of CNBC.
My weekly routine brings in other publications, like the Economist magazine… and then there are monthlies and even quarterlies such as Foreign Affairs.
To say that I am informed is something of an understatement.
My chosen profession requires this level of commitment so I can bring the best possible information, analysis, and opinions to you, my readers. It’s a good thing I like my work!
But I’m not blind to the problems this can cause…
Too much information can lead to over-analysis and poor outcomes.
It’s not surprising that so many sources of information often provide conflicting data…
Are we really in a recovery, or is this a Fed-induced sugar high?
Are low interest rates here to stay, or will bond markets demand greater returnrns the longer intervention goes on?
Are commodities going to rocket higher on inflationary concernrns, or have we turnrned the cornrner and are headed for lower prices on natural resources?
All good questions that could easily take many hours and volumes to discuss, without us ever reaching a clear conclusion. It’s the old adage of not being able to see the forest for the trees.
Right now there are lots of trees! That’s why, from time to time, I check in with long-term trend forecasters that have been reliable for many years.
One of those forecasters, Martin Pring, has been a constant fixture in the field of technical analysis for decades. He is one of the leading experts in the area. If you pursue a Chartered Market Technician (CMT) designation, you’ll spend time reading books authored by Pring.
Last fall we had the pleasure of having Martin speak at our Network Advisor conference in Tampa, where he outlined his view of the six stages of the business cycle (he calls this the Pring Turnrner Business Cycle).
Each stage has unique attributes that make the investing environment more or less favorable for stocks, bonds and commodities. Each of the three asset classes are in favor for three stages. By breaking the complex world down into large segments (three asset classes across six stages of the cycle), it gives us a way to understand a lot of information in a short period of time.
The cycle itself is broken into two distinct phases – expansion and contraction – which are each comprised of three stages. As the economy begins to contract, bonds are in favor, and remain so during the entire contraction. In the darkest days of the contraction investors should be adding stocks.
Then as the economy begins to perk up a bit commodities come into favor. As an expansion takes hold both commodities and stocks are in favor, but as the growth extends over time, stocks should be sold and then commodities.
It sounds so easy!
Of course, the hard part is knowing exactly where we are in the business cycle.
Cutting through all the noise and hype, currently Martin estimates that we are in Stage IV, which puts the business cycle squarely in the first stage of growth. Now, at first blush this might seem to contradict our views on what is going on right now, but on further inspection our views are in sync.
We see the economy as growing very modestly in response to massive, over-stimulation by the Fed.
Martin doesn’t get bogged down by the whys, he simply addresses the whats.
Are we growing, or not? In his book, and ours, we are… but for how long?
Per his analysis, Martin points out that he expects the business cycle to peak somewhere in the summer, so the time for turnrning away from equities is quickly approaching. A move to sell commodities will follow, as the economy turnrns down.
When we add back into Martin’s research all the things we know from other sources – earnrnings, Fed operations, troubles in the euro zone, effects of sequestered cuts, the looming debt ceiling and budget debates – it is easy to see how the timing of mid-summer for a top could be spot on.
Will you be ready for the great crash later this year?
Publisher’s Note: As Rodney mentions above, the problem with information today is there’s just so much of it. And everything seems to conflict with everything else. Here at Dent Research we strive to filter through the clutter and B.S. (as Harry calls it) to give you the information you need to make the best financial decisions possible. When it comes to making decisions about your retirement, it is even more important you’re getting the best information. I’ve no doubt you don’t want to be like Steve Brill, who lost $6 million thanks to the wrong information. Read his story here. – Shannon Sands
Ahead of the Curve with Adam O’Dell
The basis of a sector rotation strategy is this: some sectors perform best heading into market peaks while other sectors perform best heading into market troughs.