Latest Research

At the risk of beating the “we’re in a recession” theme into the ground, we thought some analysis of the hot-off-the-presses March employment data would be worthwhile.

We believe that the CPI understates, not overstates inflation.

The U.S. economy is slowing and probably fell into recession in Q4 2007

Are we asking the wrong question about Consumer Stocks versus Staples? This month’s “Of Special Interest” looks at the relationship between all Consumer groups (both Discretionary and Staples) compared to Commodity related groups.

First, let us be thankful February 29th only occurs every four years. No, we haven’t done a historical performance analysis of past leap year extra days, but you can be certain somebody now has. Whatever, it was a bad end to February 2008.

What follows is my attempt to accentuate the positive; why the current bear market may be maturing and bottoming out sooner than you might think.

When stocks get back to median valuation levels, the odds are the stock market is at or close to its lows.

What follows are my personal observations and opinions. I am an anti-inflation fiscal conservative and I know some would add “curmudgeon” to this description.

The stock market continued to trend lower in February, with most broad indexes posting losses in the 2%-3% range by month end.

Profit margins contracting. Assuming margins fall back to median historical levels, this implies a market decline of about 18%.

Following patterns of past burst bubbles, Homebuilders seem poised to rally.

The factor measuring “Big Block Insider (Dollar)” transactions is now rated positive.

“Given the broad declines in the stock market since October 2007, are there any particular industry groups which are beginning to look washed out enough to trigger a buy signal on the VLT work you employ in your Group Selection Scores?”

Optimists have continuously cited low unemployment and the ever resilient U.S. consumer as two “pillars of strength” that will help keep the economy afloat. It has become considerably more difficult to make this case in recent months, as jobs and spending data have weakened to levels associated with recessions.

Conventional wisdom and modern day historical evidence indicate that Value stocks do better in bear markets. But from the 1920s through the 1970s, it was Growth that held up best during bear market declines.

Major Trend Index remains Negative; assume the cyclical bear market prevails, but we increased net equity exposure. Why?

The stock market tends to peak out 6-12 months prior to recession but turns back up prior to the end of a recession.

70% of all the market declines since 1945 (post WWII), bottomed within 10% of the median historical normalized P/E ratio.

A popular buzz word in recent months is “decoupling”, often used in building a case for investing in fast growing foreign stock markets even though the U.S. economy is entering a phase of minimal economic growth or recession.

To the extent that the January Barometer can still be trusted—and in judging its recent track record, it certainly can’t—the losses in January provide a foreboding message for the bulls in early 2008.