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- Herausgeber: John Wiley & Sons
- Kategorie: Fachliteratur
- Serie: Little Books. Big Profits
- Sprache: Englisch
To make money in this troubled economy you need to understand where the markets are headed, not where they?ve been. Clinging to outdated strategies and played out market trends are sure ways to miss out on new investments, and in The Little Book of Bull?s Eye Investing, acclaimed investment expert John Mauldin teaches you how to read the direction of the markets to make decisions that capitalize on today?s investment opportunities.
A practical road map to what?s in store for the markets to help you stay ahead of the curve, the book debunks many of the myths that have come to govern investment logic, particularly the buy-and-hold, relative return vehicles that Wall Street peddles to unsuspecting investors. Giving you a clear view of the trends shaping the markets right now which are likely to provide investment options for the decade ahead, The Little Book of Bull?s Eye Investing teaches the value of careful research before you put your money to work.
Whether the market is on its way up or down, there are always excellent opportunities to invest profitably. You just need to know where they are. Looking at how the markets have behaved in the past to make an educated prediction about where they?re going, The Little Book of Bull?s Eye Investing explains how to make investment decisions that make sense today, whether you?re trading stocks, bonds, gold, real estate, or anything else.
Making the most of the markets is like hitting a moving target?difficult, but not impossible?and with The Little Book of Bull?s Eye Investing in hand, you have everything you need to improve your eye for investing and make stable and secure trading decisions that can turn a profit in even the most turbulent of times.
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Seitenzahl: 204
Veröffentlichungsjahr: 2012
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Contents
Acknowledgments
An Introduction to Bull’s Eye Investing
Chapter One: It’s Good to Be King
Timing Is Everything
Where Were We Again?
When Past Is Not Prelude
Long Waves Explained (Finally)
Catching the Next Wave: Something New This Way Comes!
Chapter Two: Rules of Engagement
Jumping Ahead
Positively, Absolutely Relative
The Correlations Change
It’s All about Assumptions
Lies, Damned Lies, and Statistics
Mean Lean Reversion Machine
Don’t Worry! Be Happy!
Avoiding “Street Rage”
Chapter Three: Faith versus History
Secular Is Not a Religious Term
Sideways to Down for 20 Years?
And on the International Scene . . .
Your Pension or Your Life
Demography Is Destiny
Chapter Four: The Trend Is Your Friend (Until It Isn’t)
The Historic Trend of . . . the Trend
Investing by Committee
If You Take a Risk, You Get Fired
Bull versus Bear, Siegel versus Grantham
Cooking the Data Books
How to Spot a Market Cheerleader
What Will the Stock Market Return over 10 Years?
The “Surprise” in Index Investing
Nash-Kelvinator, Studebaker, and Other U.S. Giants
Chapter Five: Investors Behaving Badly
Chasing Cars
Analyze This: Analysts Are Useless
Tails You Lose, Heads I Win
Why Investors Fail
I’ve Got a Secret System
A Matter of Scale
The Role of Skill?
Analyzing a Fund
Becoming a Top 20 Percent Investor
Investors Behaving Badly
Chapter Six: Dancing with the Bear
The Fundamental Nature of Bull’s Eye Investing
The Home Field Advantage
Home Field Bias
Familiarity Breeds . . . (Over)Confidence
Evidence for Investor Overreaction
Head Cases
Chapter Seven: The Essence of Bull’s Eye Investing
Value, Value, Value
Your Advantage with Bull’s Eye Investing
The Small Investor Advantage
Get Some Help
A Few Ground Rules for Bull’s Eye Investing in Stocks
Where Are the Funds?
Suffering Along with Warren
Investing in Stocks for Income
Trading Away
Chapter Eight: The Sisyphus Syndrome
The Wrong Elevator
Chapter Nine: Spreading the Pain Around
Gold Is the New Gold
Taking Stock of Gold
Basic Commodities
What Are Global Macro Funds?
Risks and More Risks
How Do You Choose a Fund?
Getting Real
A Few Thoughts on Starting a New Business
In the End, You Are Responsible for You
Chapter Ten: Leading the Duck
The Nature of Change
Into the Looking Glass
Little Book Big ProfitsSeries
In the Little Book Big Profits series, the brightest icons in the financial world write on topics that range from tried-and-true investment strategies to tomorrow’s new trends. Each book offers a unique perspective on investing, allowing the reader to pick and choose from the very best in investment advice today.
Books in the Little Book Big Profits series include:
Copyright © 2012 by John Mauldin. All rights reserved.
Published by John Wiley & Sons, Inc., Hoboken, New Jersey.
Published simultaneously in Canada.
No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, (978) 750-8400, fax (978) 646-8600, or on the Web at www.copyright.com. Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, (201) 748-6011, fax (201) 748-6008, or online at www.wiley.com/go/permissions.
Limit of Liability/Disclaimer of Warranty: While the publisher and author have used their best efforts in preparing this book, they make no representations or warranties with respect to the accuracy or completeness of the contents of this book and specifically disclaim any implied warranties of merchantability or fitness for a particular purpose. No warranty may be created or extended by sales representatives or written sales materials. The advice and strategies contained herein may not be suitable for your situation. You should consult with a professional where appropriate. Neither the publisher nor author shall be liable for any loss of profit or any other commercial damages, including but not limited to special, incidental, consequential, or other damages.
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Library of Congress Cataloging-in-Publication Data:
Mauldin, John.
The little book of bull’s eye investing : finding value, generating absolute returns, and controlling risk in turbulent markets / John Mauldin.
p. cm. — (Little book big profits series)
ISBN 978-1-118-15913-2 (cloth); 978-1-118-22608-7 (ebk); 978-1-118-26406-5 (ebk);
978-1-118-23943-8 (ebk)
1. Investments. I. Title.
HG4521.M3667 2012
332.6—dc23
2012008112
To Art Cashin Greatest of Raconteurs, Finest of Teachers, Best of Friends
Acknowledgments
From South Africa in the BA lounge. Always working for you guys.
In a book with as many sources as Bull’s Eye Investing, it goes without saying that there are many people from whom I am constantly learning and who are great influences on my thinking. I am lucky in that so many people take the time to patiently help me understand the significance of various pieces of the puzzle and how they fit together. Bull’s Eye in particular owes a great deal to Ed Easterling, James Montier, and Rob Arnott. The idea for taking a rather large tome like the original Bull’s Eye Investing and making the best parts into a Little Book came from my extremely patient editor at John Wiley & Sons, Debra Englander. Deadlines come and go at least for me, but a good editor is hard to find.
And speaking of editors, I must gratefully acknowledge the masterful work of Terry Coxon, who took a very rough collection of material and turned it into a book and greatly improved upon the original writing while doing so, gently prodding me to be more clear in my prose. To have someone of his talent take the time under deadline pressures is most amazing, and I am grateful in the extreme.
And to those who said kind words about the original book and helped turn it into a best seller and a great career break for a little-known author, I will always be grateful. Without your acknowledgment, this Little Book would never have come about.
An Introduction to Bull’s Eye Investing
“Would you tell me, please, which way I ought to go from here?”
“That depends a good deal on where you want to get to,” said the Cheshire Cat.
“I don’t much care where . . .,” said Alice.
“Then it doesn’t matter which way you go,” said the Cat.
“. . . just so long as I get SOMEWHERE,” Alice added as an explanation.
“Oh, you’re sure to do that,” said the Cat, “if you only walk long enough.”
—Lewis Carroll, Alice’s Adventures in Wonderland
EVERY HUNTER KNOWS YOU don’t shoot where the duck is; you shoot where the duck is going to be. You’ve got to “lead the duck.” If you aim where the duck is at the moment you shoot, you’ll miss it.
Bull’s Eye Investing simply attempts to apply that same principle to the markets. In this book, I hope to give you an idea of the broad trends that I believe are at work now and will persist for the remainder of this decade. Then I’ll help you target your investments to take advantage of those trends.
Through the Looking Glass
When I was invited to do this Little Book of Bull’s Eye Investing, I wondered whether the original Bull’s Eye Investing (written nine years ago and dense in data and research, and not little at all) could be shortened and still deliver what put the book on the best-seller lists and earned it the top spot on Forbes publisher Rich Karlgaard’s roll call of the decade’s most important books on investing. It has since been published in several foreign languages and is still in print.
Thinking about doing the Little Book made me go back and carefully read the original, and I was pleased to find how much of it is still useful today. Much of the research that it reports is timeless and still will be valuable a generation from now. Many of the predictions, whether by luck or skill, were spot on. We are still on the path I mapped out but are much further along it. The task for the Little Book is to collect the parts that have held up well and then bring things up to date, and introduce new readers to the concept of Bull’s Eye Investing.
As I write this introduction (the final element), I’ve just come from Hong Kong, where Bull’s Eye Investing has something of a serious following. Publishers are eager to do a Chinese-language version for distribution in Hong Kong and the mainland. The principles of the long-term ebb and flow of markets really do work wherever human beings are involved in investing, which is to say, everywhere.
Successful investing for the remainder of this decade will mean doing things differently from what people did so profitably in the 1980s and 1990s and from what Wall Street is still telling people to do. We started the last bull market, in 1980, with high interest rates, very high inflation, and low stock market valuations. All the elements were in place to launch the greatest bull market in history.
The environment now is just the opposite. Stock market valuations are still relatively high (though well down from the stratosphere where they were flying at the beginning of the decade), and interest rates will eventually have to go up. In addition, gold is volatile, as is the dollar against other currencies, and the twin deficits of trade and government debt stare us in the face.
Everything Is Not Relative
So which way is the stock market going? And how about bonds? Gold? Real estate? Where should you invest?
Wall Street and the mutual fund industry say, “The market is going up. You should buy stocks, and now is the time to do it. You can’t time the markets, so you should buy and hold for the long term. Don’t worry about the short-term drops. And my best advice is to buy my fund.”
Wall Street is like the carpenter who only has a hammer: everything looks like a nail. Those brokers are in the business of selling stocks because that is how they make their real money. Whether they are sold one by one or packaged in mutual funds or as IPOs or in wrap accounts or in variable annuities or in derivatives, what the brokers want to sell you is some type of equity (stock)—and preferably today. They have rigged the rules against investors who would prefer more and safer choices so that most investors are unaware of the options.
Their advice for you to buy what they’re selling has been their same advice every year for a century. And it has been wrong about half the time. There are long periods when stock markets go up, but there also are long periods when markets go down or sideways. And by “long,” I mean longer than almost anyone is prepared to wait.
These cycles are termed secular bull and bear markets. (Secular as used in this sense is from the Latin saeculum, which means a long period of time.) Each cycle has its own good investment opportunities. When I wrote the introduction to Bull’s Eye Investing in 2003, I said we were entering a secular bear. Now, nine years later, we are in the latter part of that same trend.
The problem with Wall Street is that most of what it sells does poorly in secular bear markets, so most traditional portfolios have suffered since 2000. But they still tell you that things will get better, so buy and keep buying. “Just look at this chart prepared by our independent economists that proves the market will go back up. Just have patience, and please give us more of your money.”
In secular bull markets, an investor should search for assets that offer relative returns—stocks and funds that will perform better than the market averages. If you beat the market, you’re doing well. Even though there will be losing years, the strategy of staying invested in quality stocks during a secular bull market will be a long-term winner.
In a secular bear market, however, that strategy is a prescription for disaster. If the market goes down 20 percent and you go down just 15 percent, you’d be doing relatively well, and Wall Street would call you a winner. Your broker would expect a pat on the back. But you are still down 15 percent.
In markets like those we face today, the essence of Bull’s Eye Investing is to focus on absolute returns. Your benchmark is a money market fund. Success is measured by how much you make above Treasury bills.
Some will say, as they say each year, that the bear market is over and that the book you are reading is about ancient history. But experience says otherwise. A secular bear market can see drops much bigger than we have already been through, and it can last as long as 20 years. The shortest has been 8 years. None has ended with valuations as high as they were at the bottom in 2009. And that touches on one of the novel ideas in this book: bull and bear cycles should be seen in terms of valuations, not price.
Investors who continue to listen to the music from Wall Street will be sorely disappointed, in my opinion, as the facts I will present show that this bear market has years to go. For buy-and-hold investors planning to retire within a decade and live on their stocks, the results could be particularly devastating.
Walking “Long Enough”
Bull’s Eye Investing is not, however, about doom and gloom. Despite what Wall Street wants you to believe, there is no reliable connection between how the economy does and how the stock market performs. As we’ll see, the economy should muddle through, with just the usual kind of recessions sandwiched between periods of growth. The world as we know it is not coming to an end. It is merely changing as it is always doing. There are numerous possibilities for investment growth while the secular bear market proceeds. You just won’t find them on any standard Wall Street menu.
What I hope to do is give you a road map to the future by looking at how and why markets have behaved in the past. We will debunk many of the myths and so-called scientific studies used by Wall Street to entice investors into putting their money into buy-and-hold, relative return investments. As should be no surprise, they use “facts,” theories, and statistics that are carefully selected and in many cases plain wrong. And when the market goes down, they just shrug their shoulders like a Chicago Cubs (or my own Texas Rangers) fan and say, “Wait till next year. And buy some more, please.”
Chapter One
It’s Good to Be King
But Beware of Tailors Using Invisible Cloth
THE TRADITIONAL WISDOM OF Wall Street is to buy low and sell high. While it sounds simple enough, the philosophy has fostered an entire industry of financial advisors, prognosticators, and experts. When you reflect on the carnage on Wall Street in the last few years, it is easy to place stock market experts in the same category as TV weathermen. Television shows parade a seemingly endless lineup of financial, economic, and stock market experts who freely give this stock tip or suggest that investment strategy. Yes, they say, the economic outlook may seem gloomy, but happy days are right around the corner. This is the time to buy.
Every talking head seems to have an opinion. Often a show’s producer will recruit talking heads with conflicting views and let them battle it out. It can make for interesting viewing for some and confusion for others. How can a few sound bites really give you the information you need to confidently invest in today’s volatile markets?
Timing Is Everything
There’s a Wall Street legend that Joseph P. Kennedy, the scion of the Kennedy clan, survived the 1929 crash because he had divested all his holdings in the summer of 1929. He said that he knew it was time to get out when he started receiving stock tips from the shoeshine boy. If you were one of the smart or prescient investors who got out of the U.S. stock market before October 11, 2007, consider yourself lucky. Between 1929 and 1932, the stock market declined 89 percent, which contributed to the Great Depression. From October 2007 until March 2009, the market lost about 55 percent of its value—the second biggest decline in our nation’s history.
The U.S. economy began shrinking in December 2007. The recession, by the technical definition of the term, ended in June 2009 because that’s when the economy began growing again.
A nontechnical definition of a recession’s end has to do with consumer confidence and a general sense of optimism about the financial future of the country. We are now in the first quarter of 2012, and people are still looking for solid proof that the worst is behind us. Consumer confidence is at a level typical of a recession, and that is anomalous two years into a recovery. Instead of signs of fiscal hope, we are faced with daily reports of continuing high unemployment, declining home prices, increasing rates of foreclosures and bankruptcies, persistent federal deficits, high gas prices, and hints of coming inflation.
In the face of all the negative news, it would be easy to conclude that investing in the stock market with the hope of making any profit at all would be a fool’s errand. You might even believe that the safest course is to stick your money under your mattress and hope your house doesn’t burn down. You could do that, but you would be absolutely wrong.
In the face of all the negative news, it would be easy to conclude that investing in the stock market with the hope of making any profit at all would be a fool’s errand.
With every challenge, there is an opportunity for growth. In the middle of the chaos of war and disaster, there can be a moment of clarity and inspiration in which a hero emerges. We are in the midst of an economic war, and now is not the time to run and hide. Now is the time to take a deep breath, regain your focus, concentrate on your investment target, and pull the trigger.
Bull’s eye!
Where Were We Again?
A secular bear market is loosely defined as a period of years or even decades when stock prices are either flat or falling. (Think Japan since 1990 or the United States from 1966 to 1982.) Historically and classically defined, secular bear markets are as short as 8 years or as long as 17. By a broader definition that I prefer and will explain, the range is 13 years to as long as 20 years.
For the last century in the United States, the length has been remarkably consistent—about 17 years from the beginning of a secular bear to the beginning of the next true secular bull. My friend Art Cashin, head of UBS Floor Operations and dean and sheriff of the New York Stock Exchange, recently sent me a note he wrote at the beginning of the last decade:
Floor brokers have lots of theories of cycles and such. There’s even a fat and lean cycle theory. Just as in the Bible there were seven fat years followed by seven lean years . . . brokers claim to see a similar thing in Wall Street. Ours is much longer . . . 17.6 years.
You may think what I am about to tell you is negative. I suggest to you it is not. It raises your opportunity by eliminating mindless competition. It just means you have to work at it—seeking advice and information—and not [to leave] your investment policy on autopilot. That was what folks did in the fat cycle. That doesn’t work anymore.
In the fat cycle, which ended with the bubble, the Dow went from 900 to 11,700. You could throw a dart and pick a winner . . . lots of folks did. Those days are gone. Getting a decent return will be hard work for the next decade. You will need good judgment and good advice. Put the dartboard away. Just so you understand better, let me walk you through this concept.
The tech bubble or the bull market topped in about February 2000. Just so it works on your calculator, let’s call that 2000.2. The Dow is around 11,500. Subtract 17.6 years and you are in the middle of 1982. The Dow is around 900. It will soon embark on the greatest bull market in history. Subtract another 17.6 years from June of 1982 and you are back to the beginning of 1965. The Dow is around 900. Yes . . . that’s the same area you will find it in 17 years later. This clearly is the lean cycle. The Dow will go above and below 900 many times. Money will be made and new industries [will] flourish, but it will require skill and hard work to find them.
Subtract another 17.6 years from 1965 and you are back around the middle of 1947. The war has ended. Smokestack prosperity is in the offing. The Dow is around 220. This was to be a fat cycle.
Subtract another 17.6 years and you are back in early fall 1929. The Dow is around 380—but not for long. This . . . clearly . . . will be a lean cycle.
Now—on the slim chance that this is anymore than an oddity—what does it mean to you?
It means you have to get off autopilot. In a fat cycle people can almost throw darts and hit a winner. In a lean cycle they need to pay attention and seek advice from someone with skill and brains.
My contention, and I think the clear lesson of history, is that we are still (as of 2012) in the secular bear market that began in 2000. If the recent pattern holds, the bear market will continue for another five to six years in terms of valuations, if not in price. The key to successful investing will be to hold the types of stocks, funds, and other investments that do well in a secular bear market (when valuations are contracting) while avoiding the types that history has shown have less chance for success in such an environment.
