What Has QE Wrought? – John Mauldin

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Source: PPCA Inc

I find this chart useful, in that to believe the stock market will rise next year you have to believe that we will see SIGNIFICANTLY above-forecast growth in earnings, which is hard to conclude from recent corporate financial releases, or that P/E ratios will rise. While I doubt the former, it is quite possible that we’ll see a rise in earnings multiples if investors keep their optimistic, momentum-driven psychology in place. That sort of thing has happened a lot. What will actually happen? I have no idea that is better than your own, and mine could be worse (and probably is) because when I analyze the situation I probably way overthink it.

Corona del Mar, Dubai, Saudi Arabia, and Canada

I am in San Diego as I finish this letter and will drive up the coast in a bit to Corona del Mar to attend my friend Rob Arnott’s annual Christmas party and watch the Newport Beach Parade of Lights, a nighttime parade of fabulously lit-up boats and yachts through the harbor. I was there a few years ago and was amazed at how spectacular it was. Tomorrow I will be home for the holidays until January 8, when I leave for Dubai and then Riyadh for a week. Then I am back home for a week before flying to Vancouver, Edmonton, and Regina for a three-day speaking tour at the respective cities’ annual CFA forecast dinners. A note from a reader in Edmonton pointed out that it is already -30 there. I think I may try to find my thermal underwear.

I should note that Mauldin Economics Publisher Ed D’Agostino recently interviewed Grant Williams, editor of the wildly popular Things That Make You Go Hmmm… and Bull’s Eye Investor, about global macroeconomic policy and how it relates to the Bull’s Eye Investorportfolio. In this “warts and all” interview, Ed and Grant discuss what worked in 2013, what didn’t work and why it didn’t work, and howBull’s Eye Investorwill target opportunity in the coming year. As always, Grant’s analysis, as you will see, is spot on. He has the unique ability to distill complex “big picture” perspectives into actionable investment ideas. Click here to see the video interview between Ed and Grant now.

I spent time with Jon Sundt and the newly announced Chief Investment Officer of Altegris Investments, Jack Rivkin. Jack and I first met years ago in Phoenix at a symposium conducted by the Thunderbird School. He is one of the intellectual thought leaders in the investment world and has been enormously successful in his career, heading up Neuberger Berman before his first retirement to a life of cutting-edge venture capital and private equity. I love hearing his stories of high-tech start-ups. We share a lot of the same interests and a fascination with the future.

The owners of Altegris enticed him out of retirement to come and take the reins of their investment process, and that makes me enormously happy. Jack is an investment force of nature and will help shape a direction that will give us ways to manage assets that make sense in a Code Red world. I spent an evening over a steak with him last night, and I really look forward to sharing his ideas and energy with you in the coming years.

In theory, when we get back to Dallas, the apartment will be 98% finished. I might even be given the iPad minis that control the electronics and allowed to play! There should be no more major construction crews, just people putting in door hardware when it shows up, some art here and there, etc. Reviews from friends are going well, but the credit all goes to my niece, who is responsible for the design and architecture. She is used to designing Ritz-Carltons and suites in Abu Dhabi, Macau, and Vegas and has recently gone out on her own. The timing was lucky for me, although she managed to destroy what I thought was my budget. But it has been totally worth it. The only limiting factors  have been my personal tastes, which she has worked diligently to expand, and my budget. But she keeps pointing out that she has done a lot with little and helped me get good value. As a value investor, how could I argue?

It is time to hit the send button. I am at the Hyatt La Jolla, where we held the first seven of ten Strategic Investment Conferences. The place is home to so many good memories, and they were kind enough to give me the big suite for the night, which, perhaps because of those memories, is one of my favorite hotel rooms in the world. The gym next door is world-class, and I will spend a few hours working off that steak before driving on up to Rob’s soiree. And perhaps we’ll engage in a little more investment talk, as he tends to attract some very talented friends in the industry. I guess that just happens when you manage $100 billion or so, as he does from his shop at Research Affiliates. (Rob is no stranger to longtime readers. You know him as the intellectual driver behind the extremely successful All-Asset Fund at PIMCO and through his patented Fundamental Indexes.)

Have a great week. I see Christmas dinner with all the kids and grandkids and friends, although it will be a smaller event than Thanksgiving was. I will shut down on Christmas Eve afternoon to go into chef mode for a few days, and then try and relax at home for a few weeks.

Your more optimistic than ever analyst,

John Mauldin

[email protected]


(c) Millennium Wave Advisors


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