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Peter Brimelow
Oct. 18, 2010, 2:15 a.m. EDT
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Is there a bond bubble?
First Take "º
J.C. Penney circles the wagons
By Peter Brimelow, MarketWatch
NEW YORK (MarketWatch) "” A veteran hard-money letter is sticking to its apocalyptic scenario. But, while we're waiting, stocks look good.
I like to check in with the Aden Forecast, edited by Costa Rican-based Pamela and Mary Anne Aden, because of the great intellectual clarity and elegance of its long-term theory.
Of course, that doesn't guarantee results, but in fact the Adens' record is good. Probably one reason for this: They will tack, short-term, if they think market conditions warrant. ( See May 20, 2007, column.)
Right now, that's why they think exposure to the stock market is justified.
They wrote on Wednesday night: "The gold price is turning parabolic "¦ in true form for the second phase of the bull market. It's up almost 20% in the last 11 weeks, yet amazingly it could still rise further. Gold is super strong by staying above $1,310. Silver is even better; it's up 36% in the same 11 weeks, and it's super strong above $22. Likewise for gold shares "¦ the Gold/Silver Index /quotes/comstock/10y!i:xau (XAU 204.31, -1.75, -0.85%) is very strong above 197."
And they blamed the gold bugs' traditional enemy: "The culprit is the U.S. dollar and the Federal Reserve. "¦ The dollar index /quotes/comstock/11j!i:dxy0 (DXY 76.96, -0.08, -0.10%) fell to its January lows today on the growing belief that the Fed is about ready to launch another round of quantitative easing. Add this to the ongoing friction in the currency markets today because no country wants a strong currency, and you have gold, silver, commodities, stocks and other assets rising."
You might expect that the Adens would feel justified in proclaiming that the hyperinflation collapse they've long been predicting had arrived. But in fact they also write:
"The stock market rose further this week, and it's still looking good. It's at a nearly six-month high, and it has room to move even higher. The Dow Jones Industrial Average /quotes/comstock/10w!i:dji/delayed (DJIA 11,108, +44.73, +0.40%) and the Dow Jones Transportation Average /quotes/comstock/10w!i:djt (DJT 4,691, -4.25, -0.09%) are rapidly approaching their April highs near 11,205 and 4,760, respectively. If they can now break clearly above these levels, it'll be a super bullish sign, signaling they could continue up to the 2007 highs. The world stock markets are all bullish, and several are at record highs, reinforcing this positive outlook. Continue to hold."
The Adens reconcile this paradox simply: "Low interest rates and more money are helping the economy and the stock market. Even though this is not fundamentally sound, since it's all built on a mountain of debt, the market doesn't seem to mind, and we'll go with what the markets are telling us. And currently they're saying, stay in stocks. "¦ So we'll let the markets be our guide, despite all the reasons why stocks shouldn't be rising. The fact is they are."
The Adens write: "Bonds appear to be in a bubble, and the Fed's inflationary policies could burst this bubble at any time, driving interest rates higher."
But they are cautious about when this will happen. They hold Profunds Rising Rates /quotes/comstock/10r!rrpix (RRPIX 11.82, +0.19, +1.63%) and Proshares Ultra Short 20 Year Treasury /quotes/comstock/13*!tbt/quotes/nls/tbt (TBT 33.45, -0.72, -2.11%) , but say merely: "Our strategy is to sell at a better price during a rebound or perhaps ride the eventual up-wave, depending on what happens."
Over the year to date, the Aden Forecast is up 10.2% by Hulbert Financial Digest count, compared to 5% for the dividend-reinvested Wilshire 5000 Total Stock Market Index. Over the past three years "” i.e., including the Crash of 2008 "” the letter is up an annualized 4.07% against negative 6.46% annualized for the total return Wilshire 5000. Over the past 10 years, the letter was up an annualized 7.8% versus 1.11% annualized for the total return Wilshire 5000.
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."
Department-store operator J.C. Penney is standing up to the bullies who recently acquired a chunk of its shares and are expected to put some pressure on the company, writes Angela Moore.
16 min ago12:21 p.m. Oct. 18, 2010 | Comments: 1
- gluesch | 7:28 a.m. Today7:28 a.m. Oct. 18, 2010
"Peter Brimelow: Adens say end is nigh, but stocks good for now http://on.mktw.net/drzjtJ" 2:16 a.m. EDT, Oct. 18, 2010 from MKTWBrimelow
"Peter Brimelow: Is there a bond bubble? http://on.mktw.net/b5Y0gB" 9:15 a.m. EDT, Oct. 14, 2010 from MKTWBrimelow
"Peter Brimelow: Gold: Not over yet? http://on.mktw.net/cuhKWj" 11:27 p.m. EDT, Oct. 10, 2010 from MKTWBrimelow
"Peter Brimelow: Linde Equity Report keeps rolling along http://on.mktw.net/d858t2" 6:26 a.m. EDT, Oct. 7, 2010 from MKTWBrimelow
"Peter Brimelow: Most gold bugs confident of more gains http://on.mktw.net/bsBRiJ" 1:33 a.m. EDT, Oct. 4, 2010 from MKTWBrimelow
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