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*groan* Bull Market Over? Again?

eLeKTRon

TRIBE Member
This from today's Globe & Mail:

By DEREK DeCLOET
Wednesday, March 10, 2004

The new bull market -- call it a Baby Bull -- is nearly a year old and, by any measure, it has been an impressive one. Look at the numbers: the S&P/TSX composite is up 37 per cent in the past 12 months; the Dow Jones industrial average, up 35 per cent; the Nasdaq, up 53. People are pouring their money into mutual funds. Merger specialists are again hiring their own Brinks trucks to carry home their bonuses. The glory days have returned.
Vito Maida has watched all of this, and he thinks it's madness.
Mr. Maida has a low profile these days but, as the saying goes, he used to be famous. He was once the lead manager on two huge equity funds at Trimark Financial, now the fourth-biggest Canadian fund company. That was until the Great Bubble, when technology stocks soared and conservative types like Mr. Maida were derided for believing that price-earnings ratios actually matter.
Back then, Mr. Maida warned that investors were behaving irrationally, paying huge prices for companies with little revenue, no profits and dreamy business plans that could have been devised by a 19-year-old (and, in some cases, probably were).
Instead of joining the fray, he put his clients' money into out-of-favour resource companies and let the cash in the fund pile up, waiting for stocks to get cheaper. The performance lagged, as it usually does for value investors in frothy times, and brokers began telling their clients to get out. They listened. Trimark suffered massive redemptions, and, in early 1999, made Mr. Maida the scapegoat, removing him.
Before long, of course, he was proved right. The technology and telecom fanatics got crushed, and the value guys were the only fund managers who avoided Kilimanjaro-sized losses when the bubble burst. Trimark recovered, partly on the back of portfolios he had built. His bearish position was prescient, if early.
Meanwhile, Mr. Maida started his own firm, Patient Capital Management. So what does he see today? Doom, again.
While almost everyone else is enthusiastic about stocks -- Canadians bought an astounding $5-billion in mutual fund units in February, the industry's biggest month in four years -- he could hardly be less bullish. The cash is piling up again, for the simple reason that Mr. Maida can hardly find a single stock that he likes.
"Most of our peers in the money management industry are astounded when we tell them that our cash balances exceed 80 per cent of our portfolios. Some are downright hostile," he admitted this week in a letter to clients. "Many of those who don't agree with us claim to be value investors and true disciples of [billionaire investor] Warren Buffett." But, he said, he has no choice but to let the cash sit there, earning next to nothing, "because we cannot find anything to buy."
The alternatives to stocks, he says, are hardly better. Long-term bonds, with their rock-bottom yields, are "very risky." Real estate might be overvalued, too. The prevailing wisdom -- that financial markets are safer because U.S. Federal Reserve Board chairman Alan Greenspan is nursing the U.S. economy back to health -- is bogus, Mr. Maida argues. "History will judge Mr. Greenspan harshly."
His advice, in fact, is not to buy financial assets at all, but rather to "eliminate as much debt as possible." On Bay Street, that's not only contrarian; it's heresy.
Many value investors will tell you that they're more frustrated today than they were at the height of the bubble, when books like Dow 36,000, one of the most hilarious tomes ever written on investing, appeared on the shelves of your local Chapters.
Back then, the exuberance was mostly confined to growth stocks in hot sectors, while boring companies (like most of the Canadian life insurers) could be had on the cheap. This time, almost everything is up, and that's what spooks guys like Mr. Maida. You might find his views conservative in the extreme. But then, given his track record, you'd be a fool not to listen.
 
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Chris

Well-Known TRIBEr
Interesting,

I would say its back, and its great for us ie Mutual Fund Industry. Take a look at net-sales over the last few months or so, most of the banks and mutual fund dealers have been posting huge numbers.

Net new mutual fund sales for February alone are estimated at about $5 billion — 10 times that of February 2003 — after January brought in $1.8 billion, according to IFIC.

RBC in one month alone announced $969 million in overall net sales for the month of February. This includes $968 million in long-term net sales.

In terms of our performance overall the numbers are not as good as 2002, early 2003, but they are bouncing back in terms our proprietary funds. For the longest time our AUA was floating around low to mid teens (billions), suddenly since December we are now close to $20 billion. Mostly due to market appreciation.
 

Vote Quimby

TRIBE Member
I can't see how the bull market is over already. Companies have finally got there financials in order. Profits are returning. There's something worth investing in now.

I wouldn't want to have my money with this guy. He got it right once. In hindsight he made the right choice.

Using the lessons learned from the bursting of the bubble, one can see that it's a different market today. P/E are back in fashion. People pay attention to the bottom line, no longer investing in "potential" profits, unlike that of the tech boom, where every dot com company was going to make everyone rich.
 

judge wopner

TRIBE Member
from what little i know about economics:

human tendency is to believe collectively that history will not repeat itself when it comes to bad things, only good things.

stephen roach wrote a letter to the fed.
(sorry no link, check morgan stanley's website)

hes asking hte rates be 3 times what they, he cites any recent economic growth is actually due to phantom cash derived from infalted property value, line of credits and money diverted away from savings.

alot of people are teetering on the edge of serious debt,
im holding out to buy a condo in a year or two when prices really fall... they keep building em!!
 

Hi i'm God

TRIBE Member
I used to work with..well at the same company as Vito. I remember seeing him 6 months after he got canned walking the scotia plaza food court in jogging pants looking like a vagabond.
 
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2canplay

TRIBE Member
He's right. There is pretty much nothing to buy (from a value investing POV)...believe me, I've been looking.

I don't believe in bull or bear markets per se; sectors get hot, and sectors get cool, you just have to buy the ones that are sold down for illegitimate or short-term reasons (ie, in 2002 when the LA Port strike for 3 days knocked the retail sector values down 25%).

Right now though, I agree, everything seems to be frothy, with the small exception to the Pharmaceuticals and some food companies tied to Hi Carb products (pasta companies, some beer companies are coming down a bit, etc.).
 
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