Bull Market? Sell the Front Page, Buy the Back Page

Bull Market? Sell the Front Page, Buy the Back Page

June 19, 2014 Uncategorized
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(Last Updated On: January 18, 2017)

We are always on the lookout for market views and commentary. Below, we present commentary from a friend of Alpha Architect who is an avid market observer with a good track record at a multi-billion dollar fundamentals-based hedge fund:

A 10% correction anytime for any reason is always possible, but current conditions look favorable: US economic growth is solid and accelerating; no inflation; extremely accommodative Fed, BOJ, and now ECB; Tiny bonds yields giving a very low discount rate to the DCF. Pretty skeptical market participants, too. Less so in the last two weeks, but that is a very recent change. I think the bull run can go on.
Here’s David Rosenberg on market skepticism:
For all the talk of massive equity market bullishness, when one sees former uber-bulls like strategist David Bianco at Deutsche Bank calling for a year-end move in the S&P to 1,850 or a 5.2% decline from here, the positive sentiment is hardly universal as it usually is at market tops. To be sure, price-to-cash flow ratios are back to or above 200 and 2007 levels in many markets, but at the same time, central banks are keeping liquidity conditions flush and dividend yields command a premium to mid-term bond yields in many countries. At the same time, when “Stocks Climb to Fresh Record Highs Amid Central Bank Hopes” makes it to page 21 (!) of the FT, “Dow and S&P Reach Highs on Reports of Merger Deals” on B4 of the NYT, or “Deals Lift Stocks to Records” on page C4 of the WSJ, this remains a bull market that nobody is very excited about – remember the axiom that you want to sell the news on the front page and keep buying the news buried in the back up until it makes it to the front page.
As value investors, we are inclined to be hesitant when the market keeps moving skyward. However, we are also fully aware that our ability to forecast is probably close to zero. Maybe these guys know something we don’t?

Who thinks this bull has legs?


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About the Author

David Foulke

Mr. Foulke is currently an owner/manager at Tradingfront, Inc., a white-label robo advisor platform. Previously he was a Managing Member of Alpha Architect, a quantitative asset manager. Prior to joining Alpha Architect, he was a Senior Vice President at Pardee Resources Company, a manager of natural resource assets, including investments in mineral rights, timber and renewables. He has also worked in investment banking and capital markets roles within the financial services industry, including at Houlihan Lokey, GE Capital, and Burnham Financial. He also founded two technology companies: E-lingo.com, an internet-based provider of automated translation services, and Stonelocator.com, an online wholesaler of stone and tile. Mr. Foulke received an M.B.A. from The Wharton School of the University of Pennsylvania, and an A.B. from Dartmouth College.


  • Michael Milburn

    I have no idea – but trying to listen so when the market tells me it’s tired I’ll hear. Shiller’s PE would say we’re expensive right now, but like the article above mentions – there’s not much exuberance out there – more like a wall of worry.

    Shiller PE
    http://www.multpl.com/shiller-pe/

    I’m really not sure what to make of it currently as even the bottom of the financial crisis wasn’t very low by historical standards. But I’ll hesitate from conjecture of “it’s different this time” because that’s a sure sign of trouble if I do that.