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'market timing' or 'time in the market'?

The long-standing debate between proponents of 'buy and hold' (ie those who believe it is important not so much the moment you enter the market but the duration of the investment) and supporters of active management (with then need to properly identify the so-called market timing) is not going to be never completely finished, probably because neither of these strategies is the best.

As some analysts try to prove, as the market environment in which investment proceeds help to estimate the potential expected returns and, therefore, adopt the strategy that is considered best

John Hussman (www.hussmanfunds.com) has developed a method to estimate the expected returns in 10 years on the S & P 500 based on its evaluation of the P / E index, which refers to profits generated in coincidence with the peak of the economic cycle. according to this method, an investor 'buy' the market can now expect, reasonably, an annual return of just over 5% over a time horizon 10 years (total return performance, ie including dividends)



A similar attempt to estimate the expected returns for an investor 'passive' based on P / E is suggested by Shiller blog www.investmentpostcards.com .
in this case it cites a study, subdividing the ten-year returns based on P / E of the market at the time of investment, clearly shows that the years with P / E have achieved the lowest yield (total return) more interesting :



similar analysis was carried out based on the Dividend Yield (or the dividend paid on shares index):



We can conclude that if the strategy 'buy and hold' can still yield important investments are characterized by very favorable market valuations (low P / E Dividend Yield and low) that the investor will enter the market constancy of unfavorable evaluations (P / E Dividend Yield above average and unattractive) certainly will draw greater benefits from more active management of its buoyancy.

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Possible fix coming?

Many analysts emphasize the state of extreme overbought stock market is considered unsustainable for a long time, thus facing a future as imminent correction.
repropose this table (source: Bespoke) that reports on what occasions the market has risen to over forty sessions sessions without suffering a correction of at least one percentage point and the magnitude of subsequent adjustments before recording an increase of at least one percentage point:



as you can see, apart from a couple of occasions, the market has never gone beyond the fifty consecutive meetings without a drop of particular importance, we can therefore be considered statistically correct prediction of a drop in prices in the coming sessions although it is difficult predict the magnitude and duration.

personally would prefer a basic approach still bullish and the trend narrowing of spreads between corporate bonds (BAA rating) and ten-year U.S. supports the hypothesis that the stock market can still grow this



in this case, any correction should be seen as an opportunity to increase positions in

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range expected for the month of April 2010

Updating the values \u200b\u200bby which I expect prices will fluctuate during the month of April:

Elumen Från Goldwell.

of Angles

With the inspiration last week's stock markets be formally restored in the trend for the past one year.

The MSCI World is testing the maximum YTD levels, levels already exceeded by some European stock squares (Netherlands, Sweden, Switzerland and United Kingdom) and Canada but the impression is that the other indices should soon exceed this.

similar participation is also seen at the sectoral level with all indexes on the rise with the exception of the automobile. New highs for basic resources, food, pharmaceutical and Health, Industrial, Consumer Goods, Distribution, Technology.

also rising for all the commodities with fractional rise in the CRB index. The largest contribution comes from industrial metals, precious metals and energy commodities (oil this morning has exceeded the threshold of $ 82 a barrel), generalized reductions, however, between the colonial and agricultural commodities.

government debt and emerging

dollar slightly down (or € a slight recovery, depending on your point of view), slightly higher U.S. yields in recent weeks and yields EURO slightly down as a result of stringent measures taken by the government greek to overcome the crisis.

meanwhile continues the good performance of the market for government bonds issued by emerging countries, with particular interest in securities denominated in local currency.

I believe this remains the Assett class more interesting in the landscape bond.

still uncertain the economic climate

especially in the light of data on employment, good but not very good.

The latest data in fact suggest that the labor market is stabilizing in the U.S. (new requests for unemployment benefits increase less than expected, but up ...) while the situation is still critical in the euro area.

The readout of the ECRI weekly leading index is showing signs of weakness and there have been rumors alarmed. Nouriel Roubini all over, warns that at best the recovery in the United States is U-shaped (very slow), but it likely a relapse into recession.

monitor the recession

John Hussmann, a well-known hedge fund manager and former economist and university professor, suggests that four parameters to monitor in the past have proved useful to anticipate the peak of the business cycle:

1. widening of credit spreads between corporate bonds and government bonds than they were six months ago, and currently this difference is equal to 167 basis points while six months ago was around 170 basis points (and a year ago was 250 basis points);
2. The maturity spread falls below 0.25% is the spread between government bonds and securities at 10 years 3 months, is currently 3.58%, never so high in recent years
3. the S & P 500 falls below the level of the first six months, and currently we are at 1138 points against 1033 beginning in September 2009
4. The ISM Purchasing Managers Index drops below 50: The February reading was 56.6.

For now, the markets do not show so special concerns about the risk of relapse into recession.

Focus on profitability

The theme of the labor market, however, remains the center of attention of economists. David Rosenberg incorporates assessments of Paul Krugman arguing that to return to full employment levels, the U.S. economy will have to produce something like 12 million new jobs and, therefore, will required between 5 and 10 years with the result that, for the next year, deflation is likely to be the main topic of the next cycle to come.

To protect the portfolio from the effects of a deflationary period Rosenberg suggests some simple rules: 1

. focus on dividends 'safe', preferring to corporates issuers of good quality, not conditioned by the economic cycle, with good cash reserves and low debt;
2. preferred shares of companies with good growth prospects but are also a large dividend;
3. avoid at all costs, companies with high debt, the balance sheets and good capital ratios will be more important than ever;
4. focus on sectors and companies with these micro-features: low fixed costs, high variable costs, operating in sectors with high barriers to entry / low competition, lack of flexibility in the application (utilities, basic necessities, health)