Are we in a bear market?
Take a look at the Prudent Bear Fund.
Ponzi Finance Dynamics Still at Play
Second quarter GDP expanded at a 3.3% pace, the strongest since Q3 2007’s 4.8%. Durable Goods Orders, Existing Home Sales, and the Chicago Purchasing Managers' index were all reported “stronger-than-expected”. And with commodity prices almost 20% off July highs – and crude oil notably unimpressive this week in the face of a major Gulf hurricane – the markets seem to lend support to the waning inflation viewpoint. The dollar rallied further this week. Meanwhile, despite today’s downdraft, Freddie Mac gained 60% this week and Fannie Mae advanced 37%. Monoline insures MBIA and Ambac surged 59% and 35%, respectively. MBIA saw its stock price more than double during August, to surpass $16. The Bank index jumped 3.1% this week and the Broker/Dealers rallied 4.0%.
Homebuilding stocks were up 9%. Investors are increasingly willing to accept that the worst of the Credit crisis has passed. Talk that the nation’s housing markets are bottoming becomes louder each week.
And every day market participants seem more receptive to the “economic resiliency” thesis. First of all, I am certainly of the view that the economy is much weaker than the headline 3.3% growth rate. At the minimum, I am skeptical that the 1.2% annualized increase in the GDP price index accurately captures what I believe is a significant inflationary component in current “output”. It is worth noting that the favored inflation gauge of Greenspan and the Fed, the PCE Deflator, was up 4.5% from a year earlier, the strongest year-over-year increase since 1991.There is bountiful wishful thinking when it comes to our nation’s mortgage and housing crises. Granted, many of the burst Bubble markets – including some spectacular busts throughout California, Florida, Nevada, and Arizona – have in some cases seemingly reached somewhat of a “clearing price”. Transaction volumes are up significantly in many of the locations with the greatest y-o-y price declines. I’ll suggest, however, that it is unwise to extrapolate trading dynamics in these burst markets to national housing trends more generally.
What does Prudent Bear Fund invest in? Quality companies like Capstone Mining CS on TSX, Yamana, GoldCorp on NYSE (remember MAI's McEwan?), even those in early stage if the right management with solid track records is there to navigate it through difficult times.
For an interesting list of what else Prudent Bear Fund holds take a look at this link or consult with SEC info page directly. There should be an interesting reason why a large fund like Prudent Bear with a successful fund manager like David Tice will look at a micro-cap like TNR if a large billion dollar portfolio is filled with the likes of Gold Corp, Barrick, and Capstone, right?
In a bear market, perhaps experts like Mr. Tice can offer some more insights:
http://www.financialsense.com/editorials/gordon/2004/0316.html
Let's take a look at the returns for the fund so far versus popular indexes...
In the last 1-3 years, the change to bear market certainly has benefitted the fund, and large part is due to growth microcap stocks, of which 80% of the fund is comprised of.
Quality management, little known projects in stable regions, and plenty of patience will pay off soon enough. The question now is, do you think we'll be in a bear market for awhile given all the bank problems... or do you think 2008-2009 will see a drastic turnaround where trillions of banking losses will magically disappear?
I think that's a fact that has been confirmed months ago by many financial writers and analysts, regrettably I might say. Some might even agree that there's a tendency amongst media when it comes to finances to be overly optimistic.
The picture to the left indicates home prices in California for the average family - it's tumbled all the way down to 2003 prices, essentially saying that if you bought your house within the last 5 years, your mortgage might be worth more than your home!!
Greg McCoach mentioned in a recent article that 70% of all families in US now owe more money than what their house is worth... frightening thought, no?
The picture to the left indicates home prices in California for the average family - it's tumbled all the way down to 2003 prices, essentially saying that if you bought your house within the last 5 years, your mortgage might be worth more than your home!!
Greg McCoach mentioned in a recent article that 70% of all families in US now owe more money than what their house is worth... frightening thought, no?
After all, news is reactionary. The day that Fox News at 6pm is going to predict tomorrow's latest stocks will be the day when value investors like Warren Buffet will go out of business. Isn't the best business relying on investing in something that no one values, now?
Take a look at the Prudent Bear Fund.
The fund focuses on performing well in a Bear market. And true to its mission statement, has done very well in the last few months. Their head analyst Mr. Noland wrote up a report update recently - the essence of which confirms our suspicions here - the headline GDP is a shallow attempt to misguide the public into thinking... the worst is over.
Second quarter GDP expanded at a 3.3% pace, the strongest since Q3 2007’s 4.8%. Durable Goods Orders, Existing Home Sales, and the Chicago Purchasing Managers' index were all reported “stronger-than-expected”. And with commodity prices almost 20% off July highs – and crude oil notably unimpressive this week in the face of a major Gulf hurricane – the markets seem to lend support to the waning inflation viewpoint. The dollar rallied further this week. Meanwhile, despite today’s downdraft, Freddie Mac gained 60% this week and Fannie Mae advanced 37%. Monoline insures MBIA and Ambac surged 59% and 35%, respectively. MBIA saw its stock price more than double during August, to surpass $16. The Bank index jumped 3.1% this week and the Broker/Dealers rallied 4.0%.
Homebuilding stocks were up 9%. Investors are increasingly willing to accept that the worst of the Credit crisis has passed. Talk that the nation’s housing markets are bottoming becomes louder each week.
And every day market participants seem more receptive to the “economic resiliency” thesis. First of all, I am certainly of the view that the economy is much weaker than the headline 3.3% growth rate. At the minimum, I am skeptical that the 1.2% annualized increase in the GDP price index accurately captures what I believe is a significant inflationary component in current “output”. It is worth noting that the favored inflation gauge of Greenspan and the Fed, the PCE Deflator, was up 4.5% from a year earlier, the strongest year-over-year increase since 1991.There is bountiful wishful thinking when it comes to our nation’s mortgage and housing crises. Granted, many of the burst Bubble markets – including some spectacular busts throughout California, Florida, Nevada, and Arizona – have in some cases seemingly reached somewhat of a “clearing price”. Transaction volumes are up significantly in many of the locations with the greatest y-o-y price declines. I’ll suggest, however, that it is unwise to extrapolate trading dynamics in these burst markets to national housing trends more generally.
What does Prudent Bear Fund invest in? Quality companies like Capstone Mining CS on TSX, Yamana, GoldCorp on NYSE (remember MAI's McEwan?), even those in early stage if the right management with solid track records is there to navigate it through difficult times.
For an interesting list of what else Prudent Bear Fund holds take a look at this link or consult with SEC info page directly. There should be an interesting reason why a large fund like Prudent Bear with a successful fund manager like David Tice will look at a micro-cap like TNR if a large billion dollar portfolio is filled with the likes of Gold Corp, Barrick, and Capstone, right?
In a bear market, perhaps experts like Mr. Tice can offer some more insights:
http://www.financialsense.com/editorials/gordon/2004/0316.html
Let's take a look at the returns for the fund so far versus popular indexes...
| Total return for quarter ending 06/30/2008: | Average Annual Returns | |||||
|---|---|---|---|---|---|---|
| 3 month | 1 Year | 3 Years | 5 Years | 10 Year | Since Inception (12/28/1995) | |
| BEARX | 2.27% | 20.59% | 11.67% | 3.79% | 4.67% | -0.03% |
| S & P 500 | -2.73% | -13.12% | 4.41% | 7.58% | 2.88% | 7.85% |
| NASDAQ | 0.61% | -11.92% | 3.69% | 7.16% | 1.93% | 6.51% |
In the last 1-3 years, the change to bear market certainly has benefitted the fund, and large part is due to growth microcap stocks, of which 80% of the fund is comprised of.
Quality management, little known projects in stable regions, and plenty of patience will pay off soon enough. The question now is, do you think we'll be in a bear market for awhile given all the bank problems... or do you think 2008-2009 will see a drastic turnaround where trillions of banking losses will magically disappear?
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