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Near Term Market Outlook

On August 9, 2010, in Bonds, Economy, Housing, Stocks, by Tim

[The following commentary is from the latest issue of the Weekend Update (Volume V, Issue 32) at Iacono Research. For subscription details, click here.]

Over the last few weeks, prices for stocks and bonds have been rising together in what is a most unusual sequence of events where, clearly, one of the two is wrong about the future direction of the economy. Typically, higher bond prices (that result in yields being pushed lower) indicate economic weakness ahead and the lack of pricing pressure, whereas, rising equity markets are typically a harbinger of stronger economic growth and higher consumer prices.

As best I can tell given the recent spate of disappointing economic reports and the beginning of the process where Wall Street economists begrudgingly revise their growth estimates lower rather than higher, the bond market is the one that has it right at this juncture. But, the stock market is now taking its cues (to some degree at least) from the recent talk about quantitative easing (i.e., money printing) and, along with the natural resource sector, prices are being bid higher in anticipation of this effort being successful, that is, at least insofar as it inflates asset prices.

One thing is certain, the economic recovery in both the U.S. and elsewhere in the world at just past the mid-point in 2010 is not what it was expected to be just a few months back when stock prices were soaring and American workers were being hired by the hundreds of thousands. Last week’s labor report was dismal given that we are supposedly more than a year into an economic recovery and the prior week’s Q2 GDP now looks even worse a week later after the latest data came in.

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It Was a Good First Half For Some…

On July 2, 2010, in Bonds, Commodities, Stocks, by Tim

In updating the graphic for the companion investment website Iacono Research at the conclusion of the second quarter the other day, I couldn’t help but notice that the last decade’s best performing mutual fund, Ken Heebner’s CGM Focus (CGMFX), didn’t do so well and the model portfolio at Iacono Research is now back out in front.

You can see why the Pimco Total Return fund (PTTRX) has become so popular in recent years – slow and steady seems to have won them a lot of new clients despite the four percent front-end loads. Of course, the real lesson in the performance data above might be that simpler is better – if you had only sold your stocks and bought dumb ‘ol gold coins back in 2000, you’d be far, far ahead of just about any other investment on the planet.

For Iacono Research subscription details (where fees are far lower than Pimco’s), click here.

Full Disclosure: Long the model portfolio at time of writing.

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This Week’s Precious Metals Commentary

On May 16, 2010, in Commodities, by Tim

[Following are excerpts from the current issue of the Weekend Update at  Iacono Research.]

Strong demand for an alternative to paper money after the European debt crisis again took a turn for the worse and leaders from both the European Union and central bank announced a $1 trillion bailout package saw the gold price surge in euro terms and go on the make new all-time highs when measured in U.S. dollars at $1,249 an ounce.

Heavy inflows to gold ETFs – more than 50 tonnes in the last seven days for the SPDR Gold Shares ETF (NYSE:GLD) – confirmed that investor interest has again ratcheted up though the silver price saw an even bigger rise. For the week, the spot gold price rose two percent, from $1,206 an ounce to $1,231, and silver gained five percent, from $18.35 an ounce to $19.34.

What has astonished many investors lately is that, while the gold price is understandably rising sharply against the euro, it is also moving higher against the U.S. dollar, something that many pundits thought to be unlikely given the historical relationship between the trade-weighted dollar and gold (an idea that I’ve railed against for some time now because there is no fundamental reason for the inverse relationship to exist). It would seem that either investors are losing confidence in all paper money or they figure that Europe’s troubles will eventually cross the Atlantic and are bidding prices higher in advance of that.

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Hedge Fund Radio Interview

On April 7, 2010, in Commodities, Personal, Stocks, by Tim

I recently did an interview with John Thomas (a.k.a. The Mad Hedge Fund Trader) that is now available over at his Hedge Fund Radio website, so, if anyone’s interested in hearing what I sound like these days, this is your chance. Here’s the intro:

Tim Iacono, is a man who lives without stocks. He does this from a remote mountain top in rural Bend, Oregon, where he has the luxury of spending his days researching long term trends in the financial markets. Maybe it is the incessant rain that keeps him working indoors so long, sifting through the grains of data he pulls off the Internet.

Whatever Tim is doing, it is working. It was his spot on calls on precious metals and commodities during the “naughties” that has enabled him to live this sought after lifestyle. When his research led him to conclude that real estate was careening off a cliff, he sold his California properties and made the move north. His successes led him to launch a blog in 2005 and an investment website in 2006. Today, The Mess Greenspan Made boasts 26,000 followers at the aggregator site www.seekingalpha.com.

With the exception of the odd commodity producer or gold mining shares, Tim has completely avoided investing in paper securities for the past decade. He believes that stocks are still in a secular bear market that has at least a few more years to play out. When government stimulus runs its course later in the year we could be in for another downdraft as severe as the debacle that ensued in 2008-2009.

Maybe it’s me, but I didn’t think my outlook was quite that negative. It’s been a while since I’ve done any sort of an interview and this one was certainly fun as John not only has one of those smooth radio voices (even with a cold when we spoke), but he’s pretty funny too.

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I Quit My Job Three Years Ago Today

On March 1, 2010, in Personal, by Tim

Time really does fly when you’re having fun. It was three years ago today that I quit my job at semiconductor test equipment manufacturer Teradyne, Inc. in Southern California to head north and then head further north a couple years after that … we still never really look back.

The job market must be pretty awful for U.S.-based engineers these days. As I understand it, the facility where I worked in Agoura Hills that, at the peak of the tech boom had over 2,000 employees, is now down to about 10 or 20 percent of that.

I’m glad I only think about thinks like this once a year – on the anniversary of my departure in 2007 when the following post was offered up. It is reproduced in its entirety below.

* * *

After more than seven years, today is my last day at Teradyne, Inc. (NYSE: TER), a major manufacturer of test equipment for the semiconductor industry.

I’d like to thank all the great people I’ve worked with over the years and I wish you all the best of luck in the future.

Since joining the company in January of 2000, time spent here has been mostly enjoyable – writing software for a world-class semiconductor test platform has had more than its share of excitement and challenges.

I can’t say that the last year or two have been as enjoyable as some of the earlier ones. Maybe it was because I was distracted by other interests.

Maybe too it was because “perpetual fire drill” is no way to live and there’s been a steady stream of talented engineers out the front door. Despite assurances heard by employees, the attrition rate doesn’t look normal to me.

Yes, I know things are changing – good luck with that.

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