06 Feb The Lato Letter: Volume 1, Issue 3.
A great employment number and market rally on Friday and a great Super Bowl on Sunday with the Giants’ win positively triggering the largely irrelevant “Super Bowl Indicator” was the right way to start February. North American equity markets, particularly in the US, have started very strongly in 2012, to the surprise of many investors. Valuations and monetary conditions remain very positive but in the very short term, markets may be a little over-bought and subject to a bit of a pullback. That being said, I think the comments and chart below from Jeffrey Saut, the market strategist at Raymond James are definitely worth heeding.
“Remember all those Negative Nabobs that caused you to panic and sell-out at the August lows? Or, the Bear Boos who told you the undercut low of October 4, 2011 was the start of a whole new leg to the downside? Then there was the Cowering Crowd that insisted the first half of 2012 was going to be terrible. Such rants have left the world profoundly underinvested in U.S. equities. So when you are thinking of getting really bearish, study the attendant chart from our friends at Riverfront, and sourced to Intrinsic Research, which shows revenues, earnings, and the SPX’s share price for the past decade (through 12/8/11). Revenues and earnings are at all-time highs, yet the SPX is ~13.5% below its October 2007 “high”; indeed, “Strange brew trying to get through to you…” (Cream 1967; Eric Clapton at his finest).”
Big earnings week this week with a number of the holdings in the portfolios reporting their fourth quarter results including Agrium, ATS Automation, Cineplex, Manulife, Pepsi, Shoppers Drug Mart, Visa and Vitran. Should be an interesting week.
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