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 Please note there are no attachments to this eLetter. No motion sickness bag needed. In fact, this week is what we would call a "value" week. The area between our return and the S&P 500's is what we call the value area. This week that area grew. Not losing is gaining in the area of value. Everyone who has followed this eLetter knows that our first objective is to not lose money. There will always be a time when making money in the market will be easy again. We want all our marbles still in the game when that time comes. This way, we won't spend all our time trying to simply get back to even. There are a number of reasons I'm concerned about the current market and why I believe everyone needs an investment approach similar to ours. I'll share a couple of them. The headline of an article on Wednesday said that an "organized default" by Greece, might be a positive for the market. Huh? European banks are in a worse situation right now than the American banks prior to the 2008 sub prime debacle. As I've said before, when things are so fragile, ANYTHING can become a trigger. Greece has been in default 160 out of the last 200 years. How could we be surprised when they do it again? No one really cares about Greece by itself because it is an insignificant part of the world's economy. The fear comes from the fact that the over leveraged European banks haven't had to put anything away in case a sovereign country defaults on their debt. The thought behind this rule is that sovereigns never default. Unfortunately the black swan always shows up sooner or later and the dominos begin to fall. Japan is one such economy, but one that everyone cares about. It is still the third largest economy in the world. John Mauldin says that Japan is a bug looking for a windshield because they are going to hit the wall within the next couple years. We've been in a secular bear market since 2000. "Secular" in this context means long. A Secular market simply means the long term trend. Therefore a secular bear market means the long term trend is down. I"ve found these long term cycles have a tendency to last about 15 years. If this is true, we still have a few years to wait this market out. Historically it's taken three solid recessions to get out of a secular bear market. We've had two so far and many believe we are either in or heading into our third. The good news is a deep recession could help straighten the world out. The bad news is how much people in the market would have to give up in order to get there. Thursday at 7 pm central this week, I will be doing a live Webinar explaining PivotPoint Advisors investment approach. An ex-anesthesiologist in Vermont is hosting the webinar and inviting 2,500 of his closest friends. You are all invited as well and I will be sending a link to join the event early this week. Feel free to share this link with anyone who may have motion sickness from their portfolio. This webinar may act as the dramamine they are looking for. Read the briefing if you would like to get a warm feeling about your portfolio, regardless of your risk profile.
Have a great day!!
John Norquay CEO PivotPoint Advisors |
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Sunday, October 2, 2011
A Bug Looking For A Windshield
Moderately Aggressive Model
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