Market Brief: Monday, November 22, 2010

It pays to be long-term bullish and to be biased on the positive side, and it pays to NEVER let herd sentiment determine your investment strategy.  That is exactly what our Asset Allocation forces us to do.  From our observation and study of history, the only time in 100 years this methodology would have failed to "see" a major bear or bull market approaching was in the deception of 2008's massive camouflage of leverage and fraud.  We believe that camouflage has been removed and that a major international economic and bull market is in the making.

So, the bottom line of our comment today is that the Asset Allocation Model is telling us three things:
  1. The stock market is extremely undervalued, and as Warren Buffet is telling you, stocks today are offering investors one of the best values in the last 30 years.
  2. The monetary liquidity today is overwhelming in its encouragement for economic activity.  The old adage of "Don't fight the Fed" is screaming to be extremely bullish.  You have to remember that market bottoms are almost always called months in advance by Psychology, but market tops do not occur until Monetary starts to weaken.  Today, Monetary is actually strengthening.
  3. Psychology has moved to P4, and that rating often precedes at least a short-term "pause" to repair any needed work on the "Wall of Worry" that bull markets have to have to survive.

Our matrix that combines all these indicators and recommends an Asset Allocation discipline is telling us (and you) to continue to have maximum exposure to stocks and minimum exposure to bonds and cash.

To read today's Market Commentary, click here.

Don Hays

Please see important disclosures at the bottom of this page.