Words From the Wise
Two ‘geezers’ who are bullish
Commentary: Eisenstadt and Fosback both forecast higher market
By Mark Hulbert, MarketWatch
CHAPEL HILL, N.C. (MarketWatch) — “The years teach much which the days never knew.”
I was reminded this week of Ralph Waldo Emerson’s classic comment about the wisdom of old age, having received the latest forecasts of two stock market veterans with more decades of investment experience than most of the rest of us have even been alive.
You might not agree with them, but their years of experience suggest we should at least pay close attention to their forecasts.
Interestingly, furthermore, both of them currently are bullish.
The first of these veteran advisers is Sam Eisenstadt, the former research director at Value Line who, prior to his retirement in December 2009, had spent 63 years at that firm — including playing a pivotal role in creating Value Line’s famed stock ranking system. At the time of his retirement, Value Line’s flagship publication, the Value Line Investment Survey, was in first place for risk-adjusted performance over the three decades the Hulbert Financial Digest had been tracking advisory performance.
Eisenstadt in retirement continues to closely follow the stock market, periodically updating his econometric model that spits out a six-month forecast for the S&P 500 index /quotes/zigman/3870025 SPX -0.70% . His latest forecast is for the S&P to be trading at the 1,430 level at the end of this year.
That is equivalent to a 5.7% return from current levels, or 11.7% on an annualized basis.
Eisenstadt bases his econometric model on monthly readings of numerous economic and financial variables over the last six decades — back to 1952, in fact.
While Eisenstadt stresses that no model is perfect, he reports that the model’s forecasts over the last six decades have been statistically significant.
Last December, you may recall, Eisenstadt was forecasting an 11.9% increase over the first half of this year. As fate would have it, the S&P rose just 5% for the year through June 30, though — given that some last December were forecasting a resumption of the bear market — coming this close has to be judged at least a partial success (if not more).
The other veteran whose latest forecast I received over the past week is Norman Fosback. Compared to Eisenstadt, of course, Fosback is a spring chicken, having been actively following the market for “just” 40 years — first as president of the Institute for Econometric Research, and in recent years, as editor of Fosback’s Fund Forecaster.
Though Fosback’s econometric model doesn’t issue six-month forecasts, it does make 12-month forecasts — and its bullishness is in the same order of magnitude as Eisenstadt’s model: Fosback is predicting a gain over the next 12 months of 17%, and a 61% return over the next five years.
The factors on which Fosback base this forecast include sentiment, valuations, and technical indicators . But the most bullish single factor, in Fosback’s opinion, is Fed policy: “The monetary evidence couldn’t be more powerfully bullish,” he writes.
This bullishness on the part of these two market veterans reminds me, in an ironic way, of the contrast between so-called “kids markets” and what fellow columnist Peter Brimelow has referred to as the “geezers markets.”
The concept of “kids markets” traces back to Adam Smith, the pseudonymous author in the late 1960s of the famous book “The Money Game.” A “kids market” is one in which the investors making the most money are those too young to remember the distant past — and whose investment approach is not affected by those memories.
“Geezers markets,” in contrast, are periods in which long-term experience translates into outperforming the kids.
If indeed the bull market still has a long way to go, for example, the “kids” could very well lose out because they have a very lively memory of the trauma of the 2007-2009 Great Recession and no recollection of prior decades.
And though it is too early to know whether we are indeed in a geezers market, it is striking that these two veterans are markedly more bullish than many of their younger brethren.
Mark Hulbert is the founder of Hulbert Financial Digest in Annandale, Va. He has been tracking the advice of more than 160 financial newsletters since 1980.
Commentary: Eisenstadt and Fosback both forecast higher market
By Mark Hulbert, MarketWatch
CHAPEL HILL, N.C. (MarketWatch) — “The years teach much which the days never knew.”
I was reminded this week of Ralph Waldo Emerson’s classic comment about the wisdom of old age, having received the latest forecasts of two stock market veterans with more decades of investment experience than most of the rest of us have even been alive.
You might not agree with them, but their years of experience suggest we should at least pay close attention to their forecasts.
Interestingly, furthermore, both of them currently are bullish.
The first of these veteran advisers is Sam Eisenstadt, the former research director at Value Line who, prior to his retirement in December 2009, had spent 63 years at that firm — including playing a pivotal role in creating Value Line’s famed stock ranking system. At the time of his retirement, Value Line’s flagship publication, the Value Line Investment Survey, was in first place for risk-adjusted performance over the three decades the Hulbert Financial Digest had been tracking advisory performance.
Eisenstadt in retirement continues to closely follow the stock market, periodically updating his econometric model that spits out a six-month forecast for the S&P 500 index /quotes/zigman/3870025 SPX -0.70% . His latest forecast is for the S&P to be trading at the 1,430 level at the end of this year.
That is equivalent to a 5.7% return from current levels, or 11.7% on an annualized basis.
Eisenstadt bases his econometric model on monthly readings of numerous economic and financial variables over the last six decades — back to 1952, in fact.
While Eisenstadt stresses that no model is perfect, he reports that the model’s forecasts over the last six decades have been statistically significant.
Last December, you may recall, Eisenstadt was forecasting an 11.9% increase over the first half of this year. As fate would have it, the S&P rose just 5% for the year through June 30, though — given that some last December were forecasting a resumption of the bear market — coming this close has to be judged at least a partial success (if not more).
The other veteran whose latest forecast I received over the past week is Norman Fosback. Compared to Eisenstadt, of course, Fosback is a spring chicken, having been actively following the market for “just” 40 years — first as president of the Institute for Econometric Research, and in recent years, as editor of Fosback’s Fund Forecaster.
Though Fosback’s econometric model doesn’t issue six-month forecasts, it does make 12-month forecasts — and its bullishness is in the same order of magnitude as Eisenstadt’s model: Fosback is predicting a gain over the next 12 months of 17%, and a 61% return over the next five years.
The factors on which Fosback base this forecast include sentiment, valuations, and technical indicators . But the most bullish single factor, in Fosback’s opinion, is Fed policy: “The monetary evidence couldn’t be more powerfully bullish,” he writes.
This bullishness on the part of these two market veterans reminds me, in an ironic way, of the contrast between so-called “kids markets” and what fellow columnist Peter Brimelow has referred to as the “geezers markets.”
The concept of “kids markets” traces back to Adam Smith, the pseudonymous author in the late 1960s of the famous book “The Money Game.” A “kids market” is one in which the investors making the most money are those too young to remember the distant past — and whose investment approach is not affected by those memories.
“Geezers markets,” in contrast, are periods in which long-term experience translates into outperforming the kids.
If indeed the bull market still has a long way to go, for example, the “kids” could very well lose out because they have a very lively memory of the trauma of the 2007-2009 Great Recession and no recollection of prior decades.
And though it is too early to know whether we are indeed in a geezers market, it is striking that these two veterans are markedly more bullish than many of their younger brethren.
Mark Hulbert is the founder of Hulbert Financial Digest in Annandale, Va. He has been tracking the advice of more than 160 financial newsletters since 1980.
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