Our Call on the 7-Year Recovery

On August 21, 2009, we said the following:

“Based on the combination of the Dow Theory confirmation of July 23, 2009 and the IPI turning up from the June low, I will have to guess that the National Bureau of Economic Research (NBER) is going to proclaim June 2009 as the official end to the recession. The end to this recession will be lackluster and questioned from all corners.

“Additionally, the stock market will only follow the pattern of a cyclical bull market (bear market rally) within a secular (long term) bear market. I doubt that the general public will agree that the recession is over since jobs will not be as plentiful as the past.”

Below is the September 20, 2010 announcement from the National Bureau of Economic Research that the recession had officially ended in June 2009:

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In addition, the jobs data has been lackluster as is par for the course but was anticipated in our August 2009 review.

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Many claim that the employment data is rigged to reflect favorably for whichever politician that is in power at the time, so we have included the U-6 TOTAL unemployment data to verify if the economic environment really did turn around at or near the same period in time.

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From all appearances, the turn in the economy did arrive at the time that we thought that it should.  There are critics who say that the U-6 TOTAL unemployment data isn’t as low as it was at the 2007 period and therefore we aren’t in a recovery.  However, to achieve a low in the U-6 TOTAL unemployment you would need the clearly obvious bubble economy that we experienced at the peak of 2007.  Anyone who wants the same U-6 TOTAL unemployment as the 2007 period also wants the subsequent bust that is required of such a period.

We haven’t had as much luck calling a top in the economy as we had in calling the bottom.  On two occasions we had Dow Theory bear market indications which turned out to be false and in one instance, we’ve had the Industrial Production Index in decline.  However, we haven’t had both occur at the same time allowing us to make the call that the economy was entering a recession.

What are the odds that such a coincidence (saying that the recession was over a year before the NBER, that no one would believe it, that unemployment would be lackluster and that a bull market was in effect) could occur?  Got lucky is all we can say.

Canadian Dividend Watch List: August 2016

The chart below breaks down the performance of the stocks from the Canadian Dividend Watch List from August 2015.  We’ve decided to take a different tack than in the past by showing the performance of the watch list based on the analyst estimates that projected stocks that would increase in value in the following year (darlings), decrease in value (bums), the 2015 watchlist and the Toronto Stock Exchange (TSE).

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As we said of the bums last year, “stocks that are considered to decline in price should be examined first and eliminated based fundamental and technical factors.  Stocks slated to gain the most should be considered high risk.”  All stock are not created equal, however, stocks that have lower expectations by analysts should be considered first for their investment merit.  The darlings underperformed the Toronto Stock Exchange while the entire August 2015 watchlist exceeded the performance of the TSE by an average of +1.50%.

The Nature of Market Booms and Busts

In a recent article on SeekingAlpha.com titled “The Bigger The Boom, The Bigger The Bust” by William Koldus, it was suggested that:

  • “…we have already forgotten the lessons that should have been learned in 2008.”
  • “Monetary policy makers have set the course for the next ‘Minsky Moment.’"
  • “A good dose of volatility in both the stock and bond markets would be good for all financial market participants.”

In our review of Koldus’ work, we’ll attempt to demonstrate that analysis on stock market history should not begin with evidence that is narrowly defined. Our introduction of secular trends in the market might help put current market moves into perspective.  We’ll also show that the Federal Reserve might not be as powerful as some might think.  Finally, we hope to demonstrate that a moving market, either up or down, is good regardless of the extent and timing.

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U.S. Dividend Watch List: August 5, 2015

It was another strong week for the market and the continued to make new all-time high. The average was up 0.43% for the week and the Dow gained 0.6%. At the end of the week, there are 10 companies on our watch list. Continue reading

Transaction Alert

The NLO team executed the following transaction(s):

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