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Peter Brimelow
June 10, 2010, 12:01 a.m. EDT · Recommend (2) · Post:
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Gold knows something gold shares don't?
First Take "º
BP selloff pits fears against assets
By Peter Brimelow, MarketWatch
NEW YORK (MarketWatch) -- Stocks continue to flounder. A remarkable veteran editor says get used to it.
Harry Schultz' International Harry Schultz Letter was one of 2009's top 10 performers because it ran with the rally. ( See Dec. 28, 2009, column.) And I named it Letter of the Year for 2008 because it undeniably did predict the crash, although by Hulbert Financial Digest count it didn't benefit, for various technical reasons. ( See Dec. 28, 2008, column.)
Despite 2008, IHSL's longer-term record remains strong. Over the past five years, the letter has achieved an 11.39% annualized gain, vs. 1.02% annualized for the dividend-reinvested Wilshire 5000 Total Stock Market Index. Over the past 10 years, it has achieved a 6.12% annualized gain, vs. 0.22% annualized for the total return Wilshire.
Schultz specialized in grand theorizing, and his current Big Idea, based on pure intuition as far as I can see, is that stocks and the economy will head down, then up, in two 10-years swings, complicated by counter-trend rallies like that of 2009-10.
He writes in his most recent issue: "Remember my now-classic 20-year multi-faceted buying power 'V' formation? It's proven its worth so far. It's most unlikely to be totally prescient, but may be largely correct. Some thought, briefly, after the recent 12-month stock market rally and a few green shoots, that the 'V' would be broken. But things have returned to the pattern as so many events have occurred (including Greek financial explosion) -- which signal a fresh downtrend all round. Theoretically, not until 2017-2018 does the downward part of my 'V' end, and begin a positive, upbeat 10-year uptrend working back to where we were in 2007 ... reaching that level in 2028. We'll see. At least, you'll see. Maybe not me."
(After many years of being secretive about his age, Schultz has begun to complain loudly that he is "86.9." His dramatic prediction reminds me of an earlier "Market Methuselah," Edson Gould, who famously called the 1980s bull market which occurred long after his death.)
As 2009 showed, Schultz is capable of great tactical flexibility. But right now, all his flexibility appears bearish.
He comments: "Red alert if the S&P500 breaks below 1,035." (It closed Wednesday night at 1,056). On gold, he writes: "I said the next target will be $1,400. I'll stay with that forecast." Schultz says his eventual gold target is $6,000 -- the highest I've seen him mention.
One reason for Shultz' skittishness: what he sees as the extraordinary precariousness of the world financial system.
He writes: "We (collectively) are poised at a heart-stopping moment in economic times. On the one extreme side, the world is on the edge of massive deflation and depression. At the other extreme ... hyperinflation. My view is: Both these extremes are possible. Certainly deflation is, on balance, in play today and gaining ground as money supply is actually declining! Hyperinflation seems impossible when there is not much inflation in most economies. But ... hyperinflation is a monetary event, not an economic one, and will happen on an overnight basis, not via a general uptrend in inflation data."
Overnight?
Schultz added this late comment: "Meantime, as I write, gold is holding very near its high, as most stock markets are bungee jumping. This implies the unexpected hyper is pending, because if it were exclusively deflation ahead, gold action would be less buoyant.'
Schultz currently recommended asset allocation:
30-40% government notes/bills/bonds
8-10% stocks (non-golds)
10-15% commodities
40-50% gold stocks and bullion
0-5% bear stock-market protection via inverse exchange-traded funds
Peter Brimelow has been an editor at Barron's, Fortune and Forbes and is the author of "The Wall Street Gurus: How You Can Profit From Investment Newsletters."
Nagging questions about open-ended liability for a spill that's still not fully controlled, and might not be for months, seize the market and send the stock spiraling to a 13-year low.
7:12 p.m. June 9, 2010 | Comments: 58
- bornabear | 12:58 a.m. Today12:58 a.m. June 10, 2010
"Peter Brimelow: Hyperinflation could happen suddenly http://on.mktw.net/ahtXx0" 1:47 a.m. EDT, June 10, 2010 from MKTWBrimelow
"Peter Brimelow: Gold knows something gold shares don't? http://on.mktw.net/cWmUaB" 12:03 a.m. EDT, June 7, 2010 from MKTWBrimelow
"Peter Brimelow: Rebound vindicates a worried bull -- so far http://on.mktw.net/9WAkxQ" 11:52 p.m. EDT, June 2, 2010 from MKTWBrimelow
"Peter Brimelow: Nate's Notes fears 'waterfall drops' http://on.mktw.net/9wbScr" 12:09 a.m. EDT, May 31, 2010 from MKTWBrimelow
"Peter Brimelow: Two savage skunks, two unbowed bulls http://on.mktw.net/bKEiie" 1:08 a.m. EDT, May 27, 2010 from MKTWBrimelow
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