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Peter Brimelow
Dec. 9, 2010, 12:32 a.m. EST
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Is gold in a perfect (bullish) storm?
First Take "º
Consumers cling to moderation
By Peter Brimelow, MarketWatch
NEW YORK (MarketWatch) "” A top timer expects stock strength into the spring, maybe even a "buying panic" "” although it vows to stay on its toes.
The Cabot Market Letter is back on a roll. Over the past 12 months through November, Cabot is up 33.2% by Hulbert Financial Digest count, versus 12.6% for the dividend-reinvested Wilshire 5000 Total Stock Market Index.
Over the past three years, which included the Crash of 2008, the letter lost a mere negative 0.4% annualized, versus negative 5.9% annualized for the total return Wilshire 5000.
And before that, it has a long record of strength. Thus, over the past eight years, the letter was up an annualized 12.1% versus 6.8% annualized for the total return Wilshire 5000. The letter is one of just a handful of those followed by the HFD, whose market timing has beaten a buy-and-hold over the last 15 years on a risk-adjusted basis.
Cabot says frankly that it is temperamentally optimistic. But it's at pains to point out: "We don't invest blindly, and we are not always bullish." This appears to be true.
Cabot was one of the first post-2002 bulls to disengage from the stock market, in 2007. It also turned bravely bullish in early 2009, a call which has given it some bad moments. ( See Oct 21 column.)
In its issue dated December 1, when stocks were once again sagging, Cabot made three predictions based on its seasonal studies:
"First is that the correction will end soon, somewhere between today and mid-month. Second is that the month will end with a bang, perhaps even a buying panic, as professional investors clamber onto the fastest horses so their year-end snapshots look good. And third is that the bull market will run into the spring.'
Looks good so far. Perhaps too good. Cabot did add tensely: "You can be sure we'll remember that markets are never wrong, but opinions often are." And in its Wednesday night hotline, it was worrying that sentiment had improved too quickly.
Already, based on their action, it had downgraded to "hold" two of the ten stocks in its Model Portfolio: Google Inc. /quotes/comstock/15*!goog/quotes/nls/goog (GOOG 590.54, +3.40, +0.58%) and Aruba Networks Inc. /quotes/comstock/15*!arun/quotes/nls/arun (ARUN 22.90, +0.60, +2.69%) . It added: "Because we don't have profit cushions, we'll have to keep both on tight leashes. If our indicators turn negative, we'll look to do some selling and build on our current 22% cash position.'
Editor Michael Cintolo says he's been in the business for forty years, and although he usually focuses tightly on stocks, he periodically makes interesting general observations. In the December 1 issue, he writes:
"In the stock market, trends often last longer and go farther than most investors expect "” what is thought as "?unusual' action actually occurs far more regularly than many realize. At the current time, keeping this in mind means you shouldn't write off some stocks that have made super-powerful moves in recent weeks just because they seem "?too high.'"
He gives two current examples: Las Vegas Sands Corp. /quotes/comstock/13*!lvs/quotes/nls/lvs (LVS 46.04, -1.55, -3.26%) , which "believe it or not, could be shaping up for another run" and Motricity Inc. /quotes/comstock/15*!motr/quotes/nls/motr (MOTR 25.00, +0.50, +2.04%) , which provides integrated service platforms for internet devices. Right now, he's rating them "Hold" and "Watch" respectively.
Cintolo also makes an interesting observation about another stock also not yet in his model portfolio: Sothebys Holdings Inc. /quotes/comstock/13*!bid/quotes/nls/bid (BID 42.29, -0.28, -0.66%)
He says it's "been in business since 1744, and it knows how to weather economic downturns by dialing back operations "¦ which is what it did in 2008 and 2009." He rates it a "Buy".
But he adds: "Right now though, business is great, with Chinese collectors battling for Chinese art and artifacts; a recent auction in London saw an 18th century jade deer sell for $168 million."
Cintolo is optimistic about China too. However, in my typically pessimistic way, I wonder if this is not another sign that China's rich are getting really worried about inflation. ( See Dec. 6 column.)
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."
Reports from four big companies show major spending still isn't in the cards.
3:35 p.m. Dec. 8, 2010
"Peter Brimelow: Is a stock-buying panic possible? http://on.mktw.net/e7fuyJ" 12:50 a.m. EST, Dec. 9, 2010 from MKTWBrimelow
"Peter Brimelow: Is gold in a perfect (bullish) storm? http://on.mktw.net/dUccaD" 4:00 a.m. EST, Dec. 6, 2010 from MKTWBrimelow
"Peter Brimelow: Are China letters canaries in coal mine? http://on.mktw.net/fN5YCz" 2:39 a.m. EST, Dec. 2, 2010 from MKTWBrimelow
"Peter Brimelow: Ruff Times is top performer http://on.mktw.net/hgtJpq" 10:54 a.m. EST, Nov. 29, 2010 from MKTWBrimelow
"Peter Brimelow: Coming competing currency devaluations http://on.mktw.net/h4vNe6" 5:24 a.m. EST, Nov. 25, 2010 from MKTWBrimelow
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