Seven Reasons
to be a Bullish Boomer Right Now
By Eric Gemelli
Bob Carey is Chief Investment Officer at First Trust, an investment firm with the responsibility to supervise over $30 billion in assets. Carey has appeared throughout the United States and Canada as a guest on television and radio programs including Bloomberg TV, CNBC and Chicago’s WBBM Newsradio 780’s Noon Business Hour. He has been quoted by several publications, including The Wall Street Journal, Bloomberg News Service, and Registered Rep, a publication for investment professionals.
Carey gives the following reasons he believes we are likely to see 12 to 18 months of gains in the major markets:
- Corporate earnings are rebounding
- Evaluations are too low
- Economic indicators are turning
- $4 trillion of idle cash is being redeployed from money markets
- Return on capital at companies averages 8% and money follows the higher return
- A mechanical evaluation of the capital markets, related to economic growth, says the market is undervalued
- Cash isn’t circulating and it’s the governments intention to get it in circulation.
Carey’s background is as scientist so he brings a different approach to financial analysis. First Trust’s “main claim to fame as a firm is that we are very disciplined with our quantitative analysis.” Carey feels their service is unique to other investment houses because it is valuation based. He says there is “nothing worse than buying a great company that is overvalued. People buy after a company performs then wonder why it doesn’t keep going.”
First Trust handles sub-accounts (manage a portfolio) for Allianz, the biggest annuity company you’ve never heard of. Carey characterizes First Trust’s financial involvement with Allianz as “not much, just a couple hundred million.” But they handle “billions of dollars for Prudential,” according to Carey.
Sand dune trip with kids.
Government intervention could, however, affect the market’s rally. Just as Jaiman Ramesh, the official Secretary of State Hillary Clinton met with in India, rejected binding caps on emissions in his country due to the negative impact it would have on his country’s growth, US intervention in business “will cause tremendous dislocations in the economy. Clearly when you add on regulation (such as) cap and trade (it) would impose more hurdles. Policy concerns are at the heart of a lot of the down turn,” according to Carey.
Government intervention, no matter how noble, is a contributing factor to your 401k losing 40 percent.
Government intervention “creates a velocity issue,” says Carey. Government involvement slows the speed at which money changes hands. Carey says, “For roughly 100 years the velocity of money hasn’t changed much. The debate among economists is if the amount of money (the Fed pumps into the system) makes up for loss of velocity.”
Inflation, caused by huge government cash infusions, could cause new lows anticipated by technical analysts.
One way of making up lost ground in your portfolio is through one of First Trust’s family of Electronically Traded Funds (ETF) they call AlpaDEX® Fund. First Trust created a fund that uses the best of the S&P, for example, but takes out overly valued companies and companies with low returns.
One recent release is First Trust’s NASDAQ ABA ® Community Bank Index Fund, traded under the symbol QABA. Large “banks are under a lot of stress. Regional banks are struggling, but community banks are attracting deposits rapidly….the yield curve is steep: banks can borrow money very cheap right now and lend at kind of high rates,” adds Carey.
Author Eric Gemelli founded Cornerstone Financial Services LLC in 1997 and as the managing member has worked in mortgages, life and health insurance, raised venture capital, and trading commodities averaging 30% a month doing so. He offers market forecasting services, and is “sure enough of [his] ability that 80% of [his] fee is based on performance.”
