NEW YORK (Dow Jones) -- Investors Intelligence, edited by Michael Burke, is one of the letters I occasionally poll because their editors are what I rudely call "Geezers" - they were around at the last bear market bottom in 1974.
Burke long held the view that the stock market’s post-2002 action was a bear market rally. He thought we were in a trading range like 1966-1982.
Investors Intelligence puts out a huge barrage of very complex material daily. I haven’t yet dug through far enough to locate whether Burke has actually explicitly renounced this view.
Yeah, yeah. Unless you’re a subscriber, you’ve no idea what this entails.
And maybe it doesn’t matter anyway. The Hulbert Financial Digest uses Investors Intelligence’s "Fidelity Switch Fund (Equity)" as its timing benchmark. This portfolio seems to be driven entirely by Investors Intelligence’s very extensive proprietary indicators.
And, according to the HFD’s calculations, it outperformed the dividend- reinvested Dow Jones Wilshire 5000 by an average of 0.4 percentage points per year between the end of 1986 and the end of April 2007. Even better, it did so with 33% less volatility, or risk -- a winning combination. As a result, it beats the DJ Wilshire 5000 by a large margin on a risk-adjusted basis.
Currently, Institutional Investor is just 20% invested.
That’s down dramatically from April, when it was 80% invested.
Even before the break, on Wednesday morning, Burke and his colleague John Gray wrote in their hotline: "We remain very nervous and we have done some selling over the last few weeks. We are also adding some new positions. We may have been early with the profit taking but our indicators are not yet signaling a renewal of the bull market."
Among Investors Intelligence’s currently-favored stocks: General Electric Co. (GE) and McClatchy Newspapers, Inc. (MNI)
Investors Intelligence is famous for its Advisors Sentiment index, based on a subjective reading of each investment letter -- unlike the Hulbert Stock Newsletter Sentiment Index (HSNI), which is based on the letters’ actual recommended exposure. But both interpret sentiment from a contrary-opinion point of view.
This is one of those occasions when Burke and Hulbert clash. Mark Hulbert reads his indicator bullishly.
In contrast, Investors Intelligence wrote on Wednesday: "The bullish advisors contracted to 53.3%, after reaching a 2007 high last week at 56.7%. The bears were the big, bad news this week. Their number fell to 18.9%, from 21.1%, and that is the lowest level since July 2nd 2004 reading at just 17.7%. The Dow Jones Industrials closed at 10,282 that week and fell to 9,757 (-5.1%) by October. By then, the bearishness had increased to 25.5%. Very low numbers of bearish advisers are negative.
"Last week’s surge in the adviser optimism was a negative signal ... Bullish levels near 60% have proved dangerous, so watch to see if that is reached. The difference between the bulls and bears contracted to 34.4% after surging over 6% last issue to 35.6%. These recent differences are both negative and we could still equal the yearly high spread above 38% from December, with a positive reaction to the latest market rally."
Investors Intelligence notes: "Keep in mind, there is a lag with these figures as the advisers compile and transmit their newsletters."
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