Dennis Gartman is Exposed as Just Another Blowhard

Fabrice Taylor, at the Globe Investor, has written a critical piece on CNBC regular Dennis Gartman who writes The Gartman Letter. It turns out that Gartman has a market neutral (both long and short) ETF, the Horizons AlphaPro Gartman ETF; a risky undertaking in the newsletter business. And in a familiar theme, the ugly truth reveals that Gartman can't outguess the market...not even close.

Taylor writes, "The fund launch was well-timed, coming as it did just as stocks were about to start one of the greatest runs of all time. Mr. Gartman's investors, though, are down. The units, sold to investors for $10 a few months ago, closed at $9.12 on Friday, giving the ETF a market cap of about $52.5-million." Problem is, the market is up 30% since the fund was launched.

Source:

theglobeandmail.com
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John Hussman Predicts an 80% Chance of Second Market Collapse

Henry Blodgett recently published an article regarding the views of John Hussman, considered by many to be a thoughtful and far-sighted money manager, but one who has largely missed the rebound since March.

Hussman has recently written, "In my estimation, there is still close to an 80% probability (Bayes' Rule) that a second market plunge and economic downturn will unfold during the coming year. This is not certainty, but the evidence that we've observed in the equity market, labor market, and credit markets to-date is simply much more consistent with the recent advance being a component of a more drawn-out and painful deleveraging cycle. Meanwhile, valuations are clearly unfavorable here, and even under the “typical post-war recovery” scenario, we are observing an increasing number of internal divergences and non-confirmations in market action."

Source:

Businessinsider.com
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Money Market Funds Pay Virtually Nothing

The yield on money market mutual funds have sunk to "under mattress" levels. Andrew Bary at Barron's reports that all of the largest funds are yielding less than 0.2%.

Bill Gross quipped, "If I was hoping to double my money, it would take approximately 6,932 years to get there at that rate!" after noticing a fund he has money in was yielding 0.1%.

The low rates are a result of the Federal Reserves' attempt at reviving the economy and explain a lot about the massive rally in risky assets over the past year.

Source:

Barron's
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Global Institutional Investors Remain Shell-shocked

Mike Santoli at Barron's Magazine has commented on the subdued confidence displayed by institutional investors. The index made a nice rebound off the lows reflecting an increased risk appetite. However, it has since fallen back to the levels when the crisis was beginning late last year. Santoli also speculates about the seriousness of the Dubai debt crisis.

Source:

Barron's
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The Amazing Valuation Journey

The Value Line Investment Survey has been around a long time. I grew up reading their reports since my father subscribed to it for many years. At their website readers are allowed a complimentary look at the 30 stocks that make up the Dow Jones Industrials. The charts and yearly earnings reveal how cheap the market for large caps is now compared to 1998 -2000.

For example, in 1999 the price of Wal-Mart stock hit a high of $70.30 and the company earned $1.28 per share, which works out to a PE multiple of 55. Wal-Mart is now trading at $54.63 and is expected to earn $3.62 per share; a PE multiple of 15. In other words, Wal-Mart is now making about three times more money than 10 years ago, but their stock is down 22%. The story is similar for Procter and Gamble, Coca Cola and a slew of other companies.

Lesson to Jeremy Siegel: growing earnings don't always translate into growing stocks and when buying stocks investors should never ignore price and valuation.

Sources:

Value Line Complimentary Dow 30 Reports

Value Line Wal-Mart Report
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Bullish Sentiment of Newsletter Writers is High

Bespoke Investment Group points out that the spread between bullish and bearish writers is a wide 33 percentage points, the highest since December 2007. Bullish writers now stand at over 50%. Looking at this development as a contrarian indicator places the market on thinning ice.

SMA Comment: As a group, stock market newsletter writers are not very prescient. However, I wouldn't get overly bearish on the market unless we saw 70% of them become bullish.

Source:

Bespoke Investment Group
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Richard Russell Flip Flops to Bearish

Within the past month, Richard Russell said he was bullish on the market. Something about primary and secondary trends. CXO Advisory now says Russell, in one of the quickest changes of opinion ever recorded, has turned negative on the market. Russell switched to bearish based on his "gut feeling."

CXO also posted recently that Robert Prechter, another famous name from the past, recommends a 200% short position.

SMA Comment: I wonder if Dubai stirred something in Russell's gut.

Source:

CXO Advisory
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