By Peter Brimelow, MarketWatch
NEW YORK (MarketWatch) — OK, we choose our Letter of the Year by a scientific process: We pick whoever we feel like.
And we announce it whenever we feel like. I didn’t announce it in my last column because I thought the breaking news was the radical gold bugs’ snarling defiance in the face of gold’s slump. (See Jan. 2 column.)
WELL? Gold is up over 4% since Friday.
The 2011 Letter Of The Year is ... (drumroll) ... Dennis Slothower’s Stealth Stocks Daily.
Slothower has recommended himself to me by posting comments after every market close, a formidable commitment extremely useful to journalists on deadline. And he scored a great coup in effectively avoiding the Crash of 2008. (See Dec. 4, 2008, column.)
But Slothower has been substantially in cash ever since then, i.e. he has essentially refused to extend diplomatic recognition to the 5,000-point bounce since then.
For an investment letter, this takes a lot of courage. Although investment letters don’t have the same commission-driven pressure to be bullish that perverts brokerage-house research, their subscribers tend to expect some bang for their buck.
Nevertheless, Slothower stuck to his guns. And in the fall of this turbulent year, he was the top performer by Hulbert Financial Digest count. (See Oct. 6, 2011, column.)
Slothower slipped a bit since then — he’s now No. 14 for the year — but he’s still beating the market. Over the past 12 months through December, Stealth Stocks Daily is up 5.3% by Hulbert Financial Digest count vs. 0.98% for the dividend-reinvested Wilshire 5000 Total Stock Market Index. (See Dec. 26, 2011, column.)
Over the past three years, reflecting Stealth Stocks’ post-crash caution, the letter is up 3.26% annualized vs. 14.93% annualized for the total return Wilshire 5000. But over the past five years, the letter was up an annualized 3.26% vs. just 0.12% annualized for the total return Wilshire.
Bill Gross is high on bonds in 2012
After mistakenly railing against bonds in 2011, Pimco founder Bill Gross sees them attractive in 2012. Photo: Reuters.
I admit that I’m taking a risk in picking Slothower. The jury is still out on his mega-strategy. But the experience of 2008 suggests he can’t be dismissed.
And what draws me to Slothower is his highly articulate, incisive analysis of technical and fundamental market trends — plus, I admit, his daringly radical and loudly expressed conviction that markets are manipulated by the authorities and their private-sector chosen instruments. (See May 5, 2011, column.) It just makes a good story. And it might just be right.
In that respect, Slothower is rather like my 2010 Letter of the Year, The Aden Forecast. (See Dec. 30, 2010, column.) The Aden sisters also offer an elegant intellectual analysis of market trends, although they are committed recently.
Slothower bases his bearish case on deep imbalances in the U.S. and world financial system, most recently what he regards as the terminal crisis of the euro /zigman2/quotes/210561242/realtime/sampled EURUSD -0.0392% . He has long regarded the U.S. economy as being in danger of recession due to rising oil prices.
Currently Slothower is bullish — by his standards: 30% invested.
He wrote last night: “Presently, the tone of the market is technically pushing higher, at least for the broad market indexes — likely in anticipation that corporate earnings will be better than expected, given some of the better economic numbers we’ve seen.”
“I have mixed feelings about this, given that so many of the big-cap stocks are diversified internationally and are exposed to both Europe and Asia, where they are experiencing a sharp slowdown. This may set up a disappointment with earnings coming up — but bullishness is suddenly in vogue, at least for now, with the primary dealers driving prices higher.”
Technically, Slothower is particularly impressed that the S&P 500 Index /zigman2/quotes/210599714/realtime SPX -0.12% has held above its 200-day moving average — with more than 65% of stocks above their 200-day moving averages.
Slothower’s stock exposure is equally divided between:
Mitcham Industries Inc. /zigman2/quotes/207846575/composite MIND +0.49%
Silicon Motion Technology Corp. /zigman2/quotes/203091999/composite SIMO +2.65%
Momenta Pharmaceuticals Inc.