UPDATE 09:02AM 25/07/13 – I received some feedback on our call yesterday from 3 market participants whom I respect and they tell me they remain long. Below also entered my inbox from a fellow asset manager/research house –
“I think that when the correction comes again it will prove to be mild, and that 2013 is going to stack up as a great year for investors in terms of annual returns. For this reason I continue to hold an overweight position in equities and hold little in terms of available and ready cash.
I also read a report recently that highlighted the amount of cash investors are holding, which continues to be at very elevated levels. This is deadly for investment returns in a rising market, and doubly so at this point in the cycle where returns on cash are at historically low levels.
Recent capital inflows into equities in the US are now at the highest level since the height of the tech boom in 2000.”
The fact that the market remain resolutely long in the face of stretched valuations, 4 1/2 years into this bull run, complacency is prevalent, and the technicals are tiring, all increase my conviction on the short side and we plan to increase further our short exposure. Already some of the leaders of this run in the US – the crazily valued tech stocks like NFLX & LNKD are beginning to roll over and I see these as a lead indicator for the wider market
News out today from the AAII sentiment survey revealing that bulls are now outnumbering bears by over 30 points (a pretty rare occurrence that has a very high coincidence of calling intermediate tops in the market) whilst the US indices probe new highs on slim volume, has just added to the welter of evidence relayed here only 2 days ago that we believe the market is reaching an important top (Link – http://www.spreadbetmagazine.com/blog/a-veritable-welter-of-data-warning-of-an-impending-major-mar.html)
It is of course dangerous to go out on the podium and make a bold call of any kind, but at Titan Investment Partners, this is precisely what we are paid to do in investing our and other investors monies within a spread betting account.
On previous occassions when we have made big asset allocation calls we have been largely spot on (our “banana skin” being the mining sector during 2Q this year). Below is a record of our calls: –
http://www.spreadbetmagazine.com/blog/a-reminder-of-our-call-of-thurs-20-june-against-consensus.html (This resulted in a near 8% rally in the S&P 500 over the next 4 weeks)
http://www.spreadbetmagazine.com/blog/the-japanese-bubble-reaches-new-technical-extremes.html (this was literally a day before the Nikkei broke to the downside in dramatic fashion)
http://www.spreadbetmagazine.com/blog/now-3-make-that-4-scary-technical-observations-to-reflect-on.html (again, we were just days before the shakeout here)
http://www.spreadbetmagazine.com/blog/sbm-v-john-piper-evil-knievil-its-time-for-a-tactical-short.html (say no more!)
http://www.spreadbetmagazine.com/blog/2012/8/14/japanese-yen-poised-to-weaken.html (this called the JPY weakness to the week)
http://www.spreadbetmagazine.com/blog/japanese-equities-dont-miss-the-train.html (we were right at ground zero on the move in Japan here, and then correctly calling the turn per above some 7 months later)
http://www.spreadbetmagazine.com/blog/2012/9/19/time-for-a-contrarian-bet-on-china.html (this caught a 20% rally in the Chinese market)
http://www.spreadbetmagazine.com/blog/wti-brent-wti-discounts-widens-again-to-over-20barrel.html (per our blog earlier this week, this gap has now closed and is in fact back to a premium)
As the primary fund manager of Titan Investment Partners, my job is to look for inflection points and to try and posiiton appropriately for them. Asset allocation is where we believe excess returns are largely created and the Global Macro fund we run is based upon this theme.
We also launched at the end of June our Precious Metals fund, believing that the Gold and Silver markets, and the Miners in particular were/are at generational lows and offer a compelling investment opportunity (see blog here –http://www.spreadbetmagazine.com/blog/is-gold-about-to-pop-and-put-the-real-squeeze-on-the-shorts.html and here – http://www.spreadbetmagazine.com/blog/post-reminder-an-absolute-must-read-and-why-we-are-wading-in.html). Bear in mind that we were largely a lone voice last year and as is detailed in the Gold Bear Call guide on the Trading Guides page that called gold down to $1200/oz too.
Take a look at the chart below of the ARCA Gold Bugs index over the last 4 weeks since we launched our fund to take advantage of this opportunity…
Arca Gold Bugs index – 1 month chart
Our indicators are presently flashing warning signals on the markets to us now. With an historic record on the big market calls per above, we intend to follow our nose and are currently building a short position. This is being structured via the options market (which we believe is a better route at present given the low volatility and so cheap basis of implementing this view). We would not be surprised to see the S&P 500 index back at 1500-1550 before the end of 3Q is out.
If you’d like to learn more about our funds and receive our latest global macro fund overview PDF, or indeed join us in which we invest our OWN money, then click the banner below or email “global macro” to info@titanip.co.uk for more details.
Richard Jennings, CFA. Titan Investment Partners