Are You Going to "Moo" and Join the Herd?

April 14, 2011 - PRLog -- I believe that the average American, who follows investments or the economy, thinks we are going to see interest rates and gold go up and the US dollar go down. Now before we get started on this topic, I don't really have a position one way or the other. I make decisions on when to get in and out of investments with a disciplined/non emotional approach but as far as predicting the future I don't go down that road. Why? I have seen too many people use money doing the "obvious" thing and investing in something that would "definitely" only go up. The only dog I have in the fight is to see my clients' accounts go up. Other than that, I could care less what "crashes" or "sky
rockets"!

One of the best newsletters I have read in a while was recently published by Elliot Wave International on March 18, 2011. Here are the first words of this edition: "Economists' opinions tend to lag cycle and super cycle -degree waves by 5 to 10 years. Once opinion crystallizes in a direction, it doesn't change for a long time. For example, opinion crystallized in the late 1990s around the idea of a "new economy. " Even though the great bull market ended in 2000, economists have stayed net bullish (aside from a few manths of despair near the 2009 market bottom) ever since even though stocks have lost value.

They can be just as stubbornly negative. It's hard to believe now, but even though stocks bottomed in 1974/1982 (depending on the measure), economists remain bearishly inclined pretty much through 1985."

Great quotes from this edition of the Elliot Wave Theorist:
•"Any passionate consensus among economists is a terrific market timing signal, because it means that there is no one left to convince and therefore the market in question should have extreme difficulty continuing in the predicted direction."
•Under the section titled "Consensus Thinking on The Dollar" -"According to the many people, there is only one currency not under consideration for any sane person to own: the U.S. dollar. How is such a one sided view among investors, advisors, economists, and money managers possible? As Smart Money says, 'A host of factors are enticing investors to dip their toes into the currency waters. ' Such factors are of course of the 'fundamental' type, which means they are rationalizations for why almost everyane is herding in a particular direction."
•Regarding interest rates, "The overwhelming opinion among market strategists appears to be that interest rates on U.S. Treasury debt will rise. The argument seems airtight: The Fed is inflating the supply of dollars; Congress continues to spend more than it takes in, and the economy is on the rebound. Also it is pointed out that the manager of 'the biggest bond fund recently traded his entire portfolio of Treasury bonds for cash."

Bob Prechter, the author of Elliot Wave Theorist, goes on to write that "it is highly likely that at some
time in coming months and years, the US dollar will be a lot higher than it is today", and, "US Treasury bonds will probably go up in price as markets
crumble and investors seek the least unsafe havens. Deflation is good for AM rated bonds."

As you know, I only believe God knows the future and that no man can know it. My first recommendation is that you not read the financial pundits. However, many of you are reading all of the inflation material which discusses the demise of the US dollar (commodities go up) and bond and the "to infinity rise" of gold. For those of you with this dogmatic view I definitely recommend you subscribe to The Elliot Wave Theorist just to give you a balanced view.

I prescribed EWT newsletter to one of my inflationary
minded clients and it has really helped him to relieve a lot of his symptoms. He no longer calls me to ask about my opinion of the US dollar. He no longer forwards me emails stating that bonds are going to be smashed into the depths of hell or that gold is going so high we will have to catch a space shuttle to visit it. He realizes that no one really knows and that everyone has good reasons and data to support their position. Hhe also understands and appreciates the importance of me haVing a disciplined entry and exit strategy for every position in his diversified portfolio. I do not take a buy and hold stance with any of his asset classes. In fact, many of the asset classes I manage I am willing to even short rather than just sell and go to cash. The theme of this newsletter is
"the cost of being narmal or thinking like the
crowd."

Matthew 7:13b - "for the gate is wide and the way is broad that leads to destruction, and there are many who enter through it." [NASB]

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Eleven Two Fund Management is a Registered Investment Advisor (RIA) located in Marietta, GA. We are proud to be working with Christian Individuals, small business owners, and Families in over 16 states.