Technical Security Analyst Association of San Francisco Saturday January 15, 2011 Presented by: Tom...

Technical Security Analyst Association of San Francisco

Saturday January 15, 2011Presented by: Tom Kopas, Martin Pring, and Joe Turner

www.pringturner.com

Financial Market UpdateThe Secular and Cyclical Outlook for Stocks, Bonds, and

Commodities

1

2

3

4

19-years/ 69% decline/ 6 recessions

19-years/ 67% decline/ 4 recessions

16-years/ 62% decline/ 4 recessions

10-years/ 34% decline/ 2 recessions

?

?

Secular Trend Stocks

Halfway Through Secular Bear

2016-2020

Completed Secular

Bear Target Area

U.S. Stock Prices (Inflation

Adjusted)

U.S. Commodity Prices

Commodity Oscillator

1 2

3

4

(72/240)

1901

1929

1966

2000

1 5

6

7

2

3

4

15

6

7

2

3

4 1

5

2

3

4

1

2

3

4

Key Points: Secular Trend for Stocks

Long Periods of Alternating Good and Bad Performance

Secular Trends Change at Extreme Valuation Levels

Currently Halfway through our 4th Secular Bear Market

Be Aware of Commodity Secular Bull Market

Capitalize on Cyclical Stock Market Opportunities

Understanding Secular Environment is Key to Success

Presented by

Setting the Scene for the Very Long-term Trend of

Commodities and Bond Yields

Martin J. Pring

www.pringturnercapital.com

US Commodity Prices

US Commodity Prices 1840-2010

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22

23

19

12

33

13

18

228

Average bull=19-years

Average bear=21-years

Current bull is 8-years old.

US Commodity Prices

US Commodity Prices 1840-2010

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Price Oscillator (60/360)

Danger level in 330-360 zone.

CRB Spot Raw Industrials

Pring Turner Commodity Barometer

CRB Spot Raw Industrials versus the Commodity Barometer

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100% reading in December

CRB Spot Raw Industrials

Global Economy A long way from a zero crossover.

CRB Spot Raw Industrials versus the Global Economy

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Largest decline when bullish.

CRB Spot Raw Industrials

Commodity Diffusion Indicator (24/9)

Still rising but fully stretched.

30-years

29-years

21-years

40-years

21-years

Average=25-years

Average=30-years

US Govt Bond Yields

US Government Bond Yields 1860-2010

US Govt Bond Yields (20-30-year)

240-month (20-year) ROC

US Government Bond Yields 1865-2010

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Line is around 4.6%.

96-month MA

US Govt Bond Yields (20-30-year)

240-month (20-year) ROC

Trendline and MA at 4.6%.

US Government Bond Yields 1865-2010

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Green plot when yield is above 96-month MA.

US Government Bond Prices

Pring Turner Bond Barometer

US Government Bond Prices versus the Bond Barometer

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35% reading in December.

Master Yield

Long-term Momentum

Master Yield versus Long-term Momentum 1958-2010

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Another buy signal?

Growth Indicator

3-Month Commercial Paper Yield

Green highlight shows when Growth Indicator is above +20%.

Indicator ticking up again.

3-month Commercial Paper Yield

Turning?

Loans All Banks/Governments

KST (Ratio)

US Commodity Prices

Government Bond Yields

6-years

4-years8-years

6-years

Commodity versus Bond Prices 1855-2010

Inflation/Deflation Ratio

KST Bullish

Inflation/Deflation Ratio 1961-2010

Commodity/Bond Ratio

Early stage of the secular bull market.

Commodity/Bond ratio 1860-2010

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Price Oscillator (60/360)

Breakout

Commodity/Bond Ratio

A double break would be highly significant.

Government 20-30-year Yield

Commodity/Bond ratio versus Government Bond Yields

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Leading the way

Pring Turner Capital Group

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25

The Stock Market is

Fear and Greed Superimposed

Over the Business Cycle

Joe D. Turner

The Random Noise of Economic News!

Money Supply

Commodities

Bond Prices

Stock Prices

Economy

?

Pring Turner Investment Approach

We are Here

Shortest: 10 Months

Longest: 120 Months

Shortest: 6 Months

Longest: 65 Months

Secular Bull Market15.5%

In a Recession

Secular Bear Market31.7%

In a Recession

The Rest of the World is Growing Faster…

… Creating Global Inflation

4 to 5 YEARS

Bonds

StocksInflation Sensitive

Utilities

Food Producers

U.S. Treasuries

Banks

Technology

ConsumerDiscretiona

ry

Technology

Transports

Oil Drillers

Diversified Metals

Energy

Oil Drillers

U.S. Treasuries

Diversified Metals

Healthcare

Class Secular

Cyclical

Tactics

Stocks Bear Bull

Use Business Cycle to Tactically Allocate Assets

Inflation Themes are in Secular BullResourced Based, Foreign-Emerging MarketsQuality with International ExposureIncome Producers

Bonds Bear? Bear

Review and Reconsider RisksLower Bond AllocationReduce Bond MaturitiesSet up Short-term Bond LadderHedge Bonds with Inflation Sensitive Securities

Inflation

Sensitive

Assets

Bull Bull

Favor Natural Resource CompaniesEmerging Market Theme, Global Resource DemandPrecious Metal ExposureResource Based CountriesCanadian Royalty Trusts

Pring Turner Capital Group

Tactics to Protect and Grow Your Wealth

Secular Trend at Critical Juncture

Markets are Linked in a Logical, Rational, Sequential Relationship

For over 150 Years, Markets have Tracked Business Cycle Sequences

During Secular Bear Markets Economy in Recession More Often

Pring Turner Organizes the Business Cycle into 6 stages

Currently in Stage 4 Good for Stocks and Inflation Sensitive Securities Bad for Bonds

Business Cycle Drives Profitable Asset Allocation Decisions

Key Points: Investing Around the Business Cycle

Presented by

Seasonal and Cyclic Outlook for 2011

Martin J. Pringwww.pringturnercapital.com

Decennial versus Third Year of Presidential Cycle

Decennial Cycle

Secular bulls

All decades

Secular bears

Weakness into mid-”2”-year.

Current US Secular Bear Market vs The Average of Three Previous Bears

Average of three previous secular bear markets.

Bear trend since 2000

Mid-twelfth year

+17%

+10%

+7%

Mid-August-Oct

July-November

Mid-August-Oct

Year 11 of Secular Bear

Years Ending in “1” 1900-2010

Years Ending in “1” 1900-2010 Secular Bears

Years Ending in “1” Secular Bears Prez 3

-7%

-5%

-13%

-18%

Sept-Oct

Mid-April-Dec

Mid-April-Dec

Early-April-Dec

Cyclical Equity Indicators

S&P Composite /Commodity Prices 8

10310

120-month (10-year) ROC

S&P Composite

Topping?

Shiller P/E 18-ROC

S&P Composite

KST Dividend Yield (Inverted)

S&P Composite & KST Dividend Yield 1890-1960

S&P Composite Stalling from a high risk area.

KST Dividend Yield (Inverted)

S&P Composite & KST Dividend Yield 1960-2010

S&P Composite

Pring Turner Stock Barometer

S&P Composite versus the Stock Barometer

www.pringturnercapital.com

Barometer is bullish.

S&P Composite

Int KST Con Staple RS line.

Int KST S&P.

Pring Turner Capital Group

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47

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