I like his advice on how to handle this era: "select active managers who have proven abilities to trade" (granted, I'm biased)
Two parts (about 6 minutes each)
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Part I: Trillions More - Government Will Keep Spending Until Economy Reflates
Barack Obama's stimulus package has now grown to $825 billion, news that comes as no surprise to John Mauldin, president of Millennium Wave Advisors.
"We are in uncharted waters. But the captains of the boats are all Keynesians," Mauldin says, meaning they believe government spending is key to fighting the downturn. "They will keep spending until the economy reflates."
Mauldin, who has been notably bearish on the economy and stocks in his popular Thoughts from the Frontline e-letter, does not believe the government will be successful in turning the economy anytime soon; "this recession is going to be the longest in anyone's memory," he writes. "It is going to seem like it is never going to end."
Still, he does believe the government spending will prevent the most dire economic outcome and that from the rubble of Wall Street a new, private banking system will emerge - even as the government continues to prop up the old, failed model.
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John Mauldin, president of Millennium Wave Advisors, was one of the few analysts whose forecasts for 2008 proved accurate (and worth repeating). Mauldin made bullish bets on gold and Treasuries, and remained wary of stocks. Although he did believe the U.S. was in recession heading into 2008, which wasn't consensus at the time, Mauldin readily admits he wasn't negative enough on the economy (again distinguishing himself from most forecasters who never seem to admit their failures.)
Looking out into 2009, Mauldin's forecast can be summed up in two words: Deflation and Recession -- with new lows for the stock market thrown in for good measure.
"We have a structural program in that deflation has the potential to get some very real traction going forward," he writes in his popular Thoughts from the Frontline e-letter. "Why? Because not just in the U.S., but all over the world, we built too much of almost everything. And when demand due to the recession drops as well, prices fall as producers try to stay in business."
As discussed in the accompanying video, Mauldin's baseline scenario features:
- Deep recession throughout 2009 and a "muddle through" scenario in 2010 and 2011, the earliest he believes housing inventories can be worked off.
- The potential for a short-term rally in stocks as money redeemed from hedge fund comes back into the market (via directly or other managers) but new lows in the summer as earnings continue to disappoint.
- The potential for a 1974-like bottom in late 2009 as valuation compression generates selective opportunities.
This is my description of the "muddle through" era [The Economic "Recovery"]
3 comments:
This is the sumnation from "CXO Advisor Group". I do follow their blog and have to say that although they do seem to be very thorough and scientific in their approach. All they do is review various 'Gurus', trading ideas and timing methods. In essence, people write in with a concept or asking about someone's track record and they'll backtest it. Anyway, this report on Mauldin came out Jan 10, 2009. Pretty timely, huh :
In summary, John Mauldin's accuracy in forecasting stock market behavior is below average. Confidence in this conclusion is fairly high.
We infer, especially from his more recent commentaries, that John Mauldin would agree to evaluation of his forecasts only over very long periods, such as a decade. For example, in his 8/6/04 commentary, he states: "You cannot time the market on a year to year basis, at least I can't." Such a stance appears to represent avoidance of accountability with respect to the many comments in which he has provided an outlook for U.S. equities. To construct even a marginal sample (say 20-30) of independent observations each a decade long would take 200-300 years. No investor can hope to obtain out-of-sample confidence that such long-cycle views of a guru have validity.
jegan
Someone emailed me after I posted this and said they have been following him quite a while and he really missed the severity of this downturn and only in the past few months has really turned "negative". Since I don't follow him I did not know that - he sounded very much like me, but apparently only in the past few months.
Oh well!
TM... I get his weekly blog. It really isn't a bad blog, or wrong, it is however, kind of vague. I read it because he includes a lot of obtuse stuff that I don't catch in my normal trolling. If I had to categorize it, I'd lump his blog in with fortune telling. Yes it has the smell of being pertinent, but is vague enough that you can read into it what you want. His blog isn;t like Schaeffer's or Bill Luby's, no real calls, and no techinuques to incorporate.
Anyway, you weren't wrong in posting the links. What he has to say presently, reinforces what you seem to be saying and what I feel. (Gee! That has to make it correct!)
If you ever feel the need to get a 'scientific' approach to a technique, or a 'Guru', you can search CXO's site at:
http://www.cxoadvisory.com/blog/
Whenever I read about someone who has a very high rate of return, or a process that is guaranteed to rock you finances. I search this site to confirm. I do have to say that their processes are possibly a little dry and maybe a little biased to the downside, but always one page with a two sentence summary. Very handy site.
jegan
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