Where Are We Into Days Global Market Cycle David Fuller

8/3/2019 Where Are We Into Days Global Market Cycle David Fuller

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fullermoney.com Our theme: Empowerment Through Knowledge

49th Annual Contrary Opinion ForumDavid Fuller 6th October 2011

Where are we in todaysglobal market cycle?


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S&P 500 Index since 1957

Secular valuationcontraction

1966 to 1982

Secular valuationcontraction

2000 to 2016?


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We are currently experiencinga cyclical bear market

within a secular valuation contraction(which some call a secular bear market)

Todays cyclical bear has probably

commenced its latter stages but thereare still risks to the downside and noclear signs that the lows have been seen


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Main causes of the cyclical bear:Europes sovereign debt crisis

US economic weakness, debt and politicsMonetary tightening by growth economiesSpikes in commodity prices earlier this year

(This latter factor is mentioned less frequently butspikes in commodity prices, especially crude oil,

have always resulted in economic slowdown orrecession. Commodity price inflation is arguably abigger problem for Asian-led growth economies

than the wests economic problems.)


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Key European Indicator:

Spread between Italian and

German 10-Yr Govt bond yieldsHigher levels reflect Greece

contagion fears


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Spread between Italian and

German 10-Yr Govt bond yields

Higher levels reflect Greececontagion fears


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Euro STOXX Bank Index

Needs upward dynamicas seen in March 2009


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Key European Indicator:Germany DAX Index

Potentially building support

above 2008/9 base


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Fullermoney European Forecasts:

Reports of the euros demise are premature Greece will have an orderly, controlled default Portugal may as well, although not immediately The new European Financial Stability Facility

(EFSF) should contain risk of further contagion The European Stability Mechanism (ESM) may bebrought forward from 2013 to replace EFSF

The necessary fiscal union for a single currencywill be negotiated and eventually ratified

Europe will remain a slow-growth region but has

a number of world-class multinational companies


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The Autonomies(Fullermoneys moniker for the worlds most

successful multinational companies)

Many of todays successful

multinational companieshave become quasi-autonomous,

mobile principalities.


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Western corporate Autonomies

are the antitheses of their

home countries


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Most developed economies have:high debt, high unemployment,

slow GDP growth,crumbling infrastructure

and questionable governance.

Fortunately, as investorswe buy companies -

not economies.


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The Autonomies(successful multinational companies)

have strong balance sheets and

improved governance since 2008.

They profit from global GDP growth bymanufacturing where they receive

competitive costs and entry tooverseas markets, and sell where they

earn the best returns.


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Most Autonomies pay dividends andsome are Dividend Aristocrats

Excluding the financial sector,

dividends of S&P 500 companiesare now 20 percent higher than at

the 2007 peak.The Wall Street Journal


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The USA has far more Autonomiesthan any other country

They are household names such as:

Amazon, Apple, Bristol-Myers Squibb,Coca-Cola, Colgate-Palmolive, Costco,

Google, Heinz, IBM, Johnson &

Johnson, MasterCard, McDonalds,Nike and Visa

f ll


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Amazon

Excellent relative strengthwhile it remains aboveits rising 200-day MA

f ll


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Coca-Cola

Excellent relative strengthwhile it remains above

its rising 200-day MA

f ll O


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McDonalds

Outstanding relative strengthalmost recession and

bear market proofYields 3.2%

f ll O h E Th h K l d


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Stock market question:

Do two severe bear markets within

eight years make it moreor less

likely that another dramaticdeclinewill occur within a few years?

We are about to find out over thenext few months, meanwhile

f ll O th E t Th h K l d


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Investors Intelligence

Oversold but falls furtherin significant bear trends

f llermone com O th E t Th h K l d


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S&P 500 Index

QE2August lownear 1100

under pressure

fullermoney com O th E t Th h K l d


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Nasdaq 100 Index

QE2

Relativestrength

but also top

heavyand needs

to rallyback above

MA to offsetlower scope

fullermoney com Our theme: Empowerment Through Knowledge


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Many US economic commentatorssay that America is in a depression!

We also heard this in 1974, 1987,

2001 and 2008.

This crisis is serious, but



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What we actuallyhave is the worstcredit crisis recession since the 1930s.

100 years of historyshow that it takes five to seven years

for an economy to recover from acredit crisis recession.

If the US recession ended in 2Q 2009,we are less than halfway into the third

year of the convalescence



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Fullermoney USA Views & Forecasts:

Second difficult decade due to myriad reasonsfrom governance to bubbles, war and debt

US corporate success shows decline not systemic Inspired governance required then America canrediscover its core values and historic strengths

Shale oil and gas will help fuel the US economy toenergy self-sufficiency within ten to fifteen years

This eliminates the deficit and a govt. surplus

funds infrastructure rebuilding across the USA Americas creative culture reinvigorates economyled by technology, manufacturing and services



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Asia remains the global GDP growthengine but it has been slowedby the fight against inflation

A change in Asian monetary policy

from restrictive to accommodativeis needed to revive global GDP growth

Lower commodity prices would

enable monetary easing in Asia



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China Shanghai A Index

Record share offeringsand monetary squeeze

have weighed on marketbut valuations are approaching

historic lows



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India BSE Sensex Index

12 consecutive rate hikesmonetary reversal

required



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Indonesia Jakarta Comp Index

Relative strength standoutsuccumbs to global bear trend

prior to another buyingopportunity



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Fullermoney Asia Forecasts:

Asia remains the engine room for global GDP growthdue to capitalism, population and demographics

Asias proportion of global GDP growth will increase Asias inflation will remain a problem, not least whenstrong growth causes commodity prices to surge

China is not a bubble economy but it is bubble prone Intra-Asian trade will expand significantly Asias middleclass will continue to increase rapidly

Asian demand for most commodities grow steadily Environmental problems especially drought arethe main risks to Asian economic prosperity

Cambodia, Myanmar and North Korea will eventuallyadopt Asias state-led capitalism



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Rising yields make equities

increasingly attractive index yields:

Asia Pacific: Australia AS51 5.0%, Hong Kong HSI3.8%, New Zealand NZSE 5.5% Singapore FSSTI4.1%

Europe: France CAC 5.4%, Germany DAX 4.3%,Sweden OMX 4.7%, United Kingdom FTSE 3.9%

South America: Brazil IBOV 4.4%North America: Canada SPTSX 2.9%, United StatesS&P 2.2% Note: in 2Q 1982 the S&P yielded 6.2% as

the last secular valuation contraction ended



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September1981 US 10-Yr Bond Yield

Does it make senseto buy 10-year

Treasuries at 2%?



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Fiat Currencies

The least bad in a growth environment:Those of Asia-led growth economies, resources

exporters, financial currencies (Singapore $)

Higher risk:

Debtor currencies US$ appeal mainly as a liquidreserve currency and haven in times of crisis

In the future:Chinese Renminbi will become another reservecurrency a few years after full convertibility is

established



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Asian

crisis

Asian Dollar IndexFrom Oct 1994

USbankcrisis

Europeansovereign

crisis



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Commodities

Secular bull market, but volatile:

Supply inelasticity meets rising demand

Gold has been remonetised in the eyes ofinvestors

Commodity price inflation an opportunityas recession ends but an increasing risk

when global GDP growth increases



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y p g g

Continuous Commodity Index (Old CRB) since 1954

Brobdingnagianflatline base,

until Nixon endsBretton Woods

Agreement in 1971

Paul Volckersdisinflationary

secular bear forcommodities commences

Greenspans monetary expansionand China-led GDP growth

cause secular bull in commodities

recessionscommence



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y p g g

Continuous Commodity Index (Old CRB)since Oct 2006

Global monetary

tightening

Global monetaryreflation

Asian monetary

tightening

QE2

Commodityreset occurringAsian monetaryeasing to follow



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y p g g

Crude Oil NYME

Spikes in oil pricescause recessions

July2008

April2011



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y p g g

Brent Crude Oil IPE

This contractis more representative of

oil import costs in Europeand Asia

Ranging lower -a further decline

would seed globaleconomic recovery



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y p g g

Copper CME

Some further downsidebut should bottom

well above 2008 lows



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y

Rogers Int AgriculturalCommodity IndexFood price inflation

February 2008

Food price inflationFebruary 2011

The problem isnow abating



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Ron Paul to Ben Bernanke earlier this year:

Is gold money?

Ben Bernanke, after hesitation:

Its an asset.Ron Paul:Why have people used it as money for thousands

of years?

Ben Bernanke:

Tradition.Fullermoney view:Gold remains the worlds most enduring monetaryasset.



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Gold Bullion since 1957log scale

Nixon endsBretton WoodsAgreement on

August 15, 1971

Volcker appointedFed Chairman onAugust 1, 1979

monetary squeeze

commences

Greenspan appointedFed Chairman onAugust 11, 1987

Bernanke FedFeb 1, 2006



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Gold monthly since 1990

Brobdingnagian base

Trend accelerates



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Gold weekly (5-years)

We are currently experiencinga medium-term pause

in a secular bull market

Reversion to MAsupport buildingrequired, some

risk of contagion

while stockmarkets are weakand USD strong



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Lastly, for equity investors the mostimportant comment in this

presentation:

Wealth is createdin down marketsand realised in up markets



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Thank you very much

Fullermoney is a

Global Strategy Serviceproduced by

David Fuller&Eoin Treacy

We invite you to visit our site:

www.fullermoney.com
http://www.fullermoney.com/http://www.fullermoney.com/

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