{"id":39201,"date":"2013-06-21T20:22:38","date_gmt":"2013-06-22T00:22:38","guid":{"rendered":"http:\/\/countingpips.com\/forex-news\/?p=39201"},"modified":"2013-06-21T20:22:38","modified_gmt":"2013-06-22T00:22:38","slug":"industry-veteran-vern-gowdie-tells-it-like-it-is","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex-news\/2013\/06\/21\/industry-veteran-vern-gowdie-tells-it-like-it-is\/","title":{"rendered":"Industry Veteran Vern Gowdie, Tells It Like It Is"},"content":{"rendered":"

By MoneyMorning.com.au<\/u><\/a> <\/p>\n

In today’s Money Weekend <\/em>we put aside the events of the week and in the markets for a chat with Vern Gowdie<\/strong>, the latest editor to join Port Phillip Publishing. <\/p>\n

Vern is working on an exciting ‘Family Office’ style project that will draw on his nearly thirty years’ experience in financial planning. You might have seen a couple of his articles appear in Money Morning <\/em>over the last few weeks.  <\/p>\n

One thing we can say right off the bat is that Vern’s position is the complete opposite of regular Money Morning <\/em>editor Kris Sayce. <\/p>\n

Kris is backing a rising market over the next few years. Vern is anticipating a falling one. <\/p>\n

But the differing views don’t end there, so we thought you might like to hear his take on the market <\/a>today and the message he’ll be bringing to investors<\/strong> across Australia with his new service… <\/p>\n

CN:<\/strong> How is your view different from the other editors at Port Phillip Publishing?<\/strong> <\/p>\n

VG:<\/strong> Without differing views there would not be a market. Everyone would either be a seller or a buyer. Differing views are healthy.<\/p>\n

When I read the research of the other editors, we are not that dissimilar in our broad view of the global economy. They are highly critical of central bank intervention and the distortions this madness has created in markets. Our views differ on what this meddling will do to global share markets.<\/p>\n

Some editors expect the Fed’s levitation act to support higher equity prices, whereas others have a more bearish outlook. For reasons I will explain shortly, I am in the extremely bearish camp. Also, the other key difference is in our approach to asset allocation — the other editors are very much Alpha investors (individual stock selection and trading strategies) while my investment philosophy is purely Beta (index investing). The passive investor approach.<\/p>\n

CN:<\/strong> Can you expand on why you are so negative on the share market?<\/strong> <\/p>\n

VG: <\/strong>To paraphrase Heath Ledger’s character The Joker, ‘Why sooo bearish?’<\/strong><\/p>\n

As the saying goes ‘If it walks like a duck, quacks like a duck and looks like a duck, it must be a duck’. This market looks like a Secular Bear,has performed like a Secular Bear and has P\/E contraction like a Secular Bear —therefore my conclusion is it must be a Secular Bear.<\/p>\n

Every Secular Bearmarket since 1900 has ended when the index P\/E reached single figures. The S&P 500 index P\/E currently sits around 20x. So unless ‘this time is different’ (the most infamous phrase in investing) a 50% reduction in P\/E still awaits us from this Secular Bear market.<\/p>\n

The P\/E reduction can happen in three ways:<\/p>\n

    \n
  1. The price remains static while earnings increase (this is what has happened since 2000). The S&P 500 is only slightly above its 2000 level while earnings have more than doubled over the past thirteen years. The S&P 500 index P\/E in 2000 was 42x.<\/li>\n
  2. The earnings remain static while the price falls. <\/li>\n
  3. Earnings and price both fall — this is the dire (extremely bearish) outcome I think awaits us.<\/li>\n<\/ol>\n

    Think about this math:<\/p>\n