Bill Meridian's Interview

This is the 8 April Interview conducted on the Orpheus Thomson Reuters Technical Analysis Forum
Mukul Pal: Welcome Bill
Bill Meridian aol.com Hi
Cosmin Grozea: hello
Mukul Pal: Hello Everybody
Mukul Pal: Thank you for all for your presence today
Mukul Pal: Bill Meridian from CYCLES RESEARCH is here with us today
Bill Meridian aol.com Hello
Mukul Pal: We at the Technical Analysis forum welcome you Bill. Thanks for being here today.
Mukul Pal: I will give your brief introduction for all the members here
Mukul Pal: and then we can start the interaction
Mukul Pal: Bill Sarubbi obtained his MBA in 1972 and began to study cycles in the same year. A 7-year psychotherapeutic training apprenticeship followed.
Mukul Pal: Since the 70’s, he has been on Wall Street applying cyclical theory to markets, developing his own software in the process. Most recently, he spent 14 years as a fund manager in the Middle East, and has been operating his own money management and consulting service since 2004.
Mukul Pal: He has been applying the cyclical methodologies learned in the market to historical events and to industry analysis. Having been influenced by cycle theorists such as Ed Dewey, Charles Jayne, George Lindsay, and R.N. Elliott, he believes that fundamental developments, as well as prices, can be projected with a certain degree of accuracy.
Mukul Pal: He is a member of the Vienna-based Kenos Circle and a director of the Foundation for the Study of Cycles.
Mukul Pal: Cycles Research LLC advises institutions and manages funds utilizing unique combinations of cycles, fundamental analysis, and market analysis. His website and e-mail address are: cyclesresrearch.com and bill@cyclesresearch.com.
Mukul Pal: We can start the interaction
Mukul Pal: please feel free to ask bill about markets and assets and cycles
Cosmin Grozea: Could you tell us the few reasons why you think US equity market is going top in April – May 2010?
Bill Meridian aol.com April to May is usually weak.
Bill Meridian aol.com There are several time cycles that expire in April.
Bill Meridian aol.com The 24 and 40 month cycles have already topped.
Bill Meridian aol.com Years ending in zero are down 65% of the time.
Bill Meridian aol.com Q2 in the 2nd year past a Pres. election is usually weak.
Bill Meridian aol.com I am awaiting technical confirmation of a top.
Mukul Pal: What kind of technical confirmation are you waiting for Bill? Some break in key supports?
Mukul Pal: any levels you have in mind on DOW below which we get the negative confirmation?
Bill Meridian aol.com Typically, new highs less new lows, breadth and the Lowrys indices top months before the markets do.
Orpheus Research orpheus.asia You do follow sentiment indicators. What is the current status of Reuter’s poll for US fund managers?
Bill Meridian aol.com They held 66% of assets in Feb., highest level in 14 mos.
Mukul Pal: any ideas on historical extremes for such readings bill?
Mukul Pal: do the readings go up above 70%
Bill Meridian aol.com No.
Mukul Pal: k
Mukul Pal: so 66% is already extreme complacency
Bill Meridian aol.com I think that it is when you look at the very low VIX reading.
Mukul Pal: so 66% gives us the idea that a large section of the market is already invested
Bill Meridian aol.com The impression that I get is that PMs do not know what to do, so they are simply sitting on what they have.
Mukul Pal: I understand
Bill Meridian aol.com They are trying to figure out what will happen next in the economy. The admin. is heaping more and more taxes and regulations on business.
Bill Meridian aol.com So, this is not a normal recovery.
Mukul Pal: correct
Mukul Pal: what kind of retracements are you looking at on DOW?
Mukul Pal: back to 9000
Mukul Pal: or are you looking at a low below MAR low?
Mukul Pal: on DOW
Bill Meridian aol.com I think that a 10-15% correction is due. The last time we were in this position was in 2000.
Bill Meridian aol.com It was a year ending in 0 and we were entering Q2, which we know from Art Merrill’s work, is traditionally weak 2 years past an election.
Mukul Pal: so you are looking at a general slowdown and negative year
Mukul Pal: not necessarily fast and harsh down
Mukul Pal: with the kind of low volatilities one would expect fast and sharp moves
Bill Meridian aol.com I think the economy is still contracting but at a lesser rate. Stocks are likely to fall and then to recover late in the year.
Bill Meridian aol.com The period from the US mid-term elections (Nov is typically an important low for stocks.
Mukul Pal: i understand
Bill Meridian aol.com The period between now and then is statistically/historically weak.
Mukul Pal: I am sure members here would be keen to know how you see DOW till 2012
Mukul Pal: there is some opinion that DOW may get into a new high
Mukul Pal: what’s your opinion beyond 2010 negativity
Bill Meridian aol.com Years ending in 2 are usually lows according to the decennial pattern.
Bill Meridian aol.com Economically, we are in a period like 1966-1982.
Mukul Pal: that is long sideways action
Bill Meridian aol.com the admin. Keeps hampering the economy.
Bill Meridian aol.com This is like the 1930s where the economy was held back by the New Deal.
Bill Meridian aol.com WW2 ended the New Deal and that allowed the economy to recover.
Bill Meridian aol.com That is why the market is so choppy.
Mukul Pal: even after 1930’s market was sideways for 21 years
Bill Meridian aol.com Yes.
Mukul Pal:: You are bearish on bonds. What’s your outlook on US notes for the next quarter of the year?
Bill Meridian aol.com Bonds are seasonally weak in the first half of any year since 1980.
Bill Meridian aol.com June is the worst month.
Bill Meridian aol.com I do not see a low until June.
Bill Meridian aol.com But, the 54-year rate cycle bottomed in 2005. This cycle is developed from corp. rates, which did bottom in 2005.
Bill Meridian aol.com US notes can carry on a bit longer, stretching the cycle to 60 years.
Bill Meridian aol.com I think that that top is now in, too.
Bill Meridian aol.com Thus, notes should be especially weak in the 1st half, as the bear market sets in.
Cosmin Grozea: When is the long term view (54 year long cycle) view on interest rates?
Bill Meridian aol.com Sydney Homer tells us that rate cycles can last 21-36 years.
Bill Meridian aol.com This looks like the beginning of a big bear-the fundamentals are obvious.
Bill Meridian aol.com The 54-year cycle has already topped.
Mukul Pal: just to clarify here
Bill Meridian aol.com OK
Mukul Pal: Bill has written extensively on interest rates and inflation
Mukul Pal: in his books he has mentioned about 50 year cycles of interest rates
Mukul Pal: the 54 year cycle being discussed here is the K – Kondratieff Cycle
Mukul Pal: please correct me if I am anywhere wrong Bill
Bill Meridian aol.com I think that that is correct. There are many natural cycles of 54-60 years.
Mukul Pal: So bill if the 54 year cycle has topped
Mukul Pal: are we not if for a long period of interest rates low
Bill Meridian aol.com I did not get the question.
Mukul Pal: the 54 year interest rate cycles has already topped
Mukul Pal: when was this?
Bill Meridian aol.com Yes..
Mukul Pal: top
Bill Meridian aol.com In 2005, based upon the study of corp. rates done by the FSC.
Mukul Pal: so what should happen now
Mukul Pal: the interest rates should fall for how many years
Mukul Pal: ?
Mukul Pal: more
Bill Meridian aol.com Bonds re in a weak position-rallies should be sold.
Mukul Pal: k
Mukul Pal: From an Intermarket perspective BONDS are known to lead, is this true?
Mukul Pal: do you find such conventional relations working in markets
Bill Meridian aol.com You mean leading on the way down?
Mukul Pal: both on way up and down
Mukul Pal: bonds reverse first
Mukul Pal: in an economic cycle
Mukul Pal: do u see such relationships?
Bill Meridian aol.com I think that is correct in the current climate.
Bill Meridian aol.com Yes.
Orpheus Research orpheus.asia What’s happening to Oil? It is moving sideways from October. When do you think it will trend? What is the next quarter outlook for Oil?
Bill Meridian aol.com Overall, I think that the trend for commodities is up.
Bill Meridian aol.com I do not think that China will slow, so the D for oil will stay high.
Bill Meridian aol.com Much of the price appreciation is simply $ weakness.
Mukul Pal: do you think we are going back to 100 in 2010?
Mukul Pal: or next year?
Bill Meridian aol.com Yes,
Bill Meridian aol.com This year and next year. i think that conflict late in the year or in Q1 will spike oil up.
Mukul Pal: what kind of conflict are you referring to bill?
Bill Meridian aol.com Iran-Israel over the missiles and nukes.
Bill Meridian aol.com Israel
Mukul Pal: k
Mukul Pal: Majority of us here are interested in Gold
Mukul Pal: please enlighten us regarding Gold
Mukul Pal: What’s the next quarter outlook on Gold? Any price targets?
Bill Meridian aol.com Gold is in a bigger bull market due to the expansion of paper currencies.
Bill Meridian aol.com Years ago, I said that the response to a crisis will be more credit-this has historically been the solution…
Bill Meridian aol.com …but there is one catch. All constraints have been removed. The Monetary Control Act of 1980 allows banks to lower their reserve requirements to 0, which means they can loan an infinite amount of money.
Bill Meridian aol.com This has been the trend for many years.
Bill Meridian aol.com Many years.
Bill Meridian aol.com Q2 is typically weak.
Bill Meridian aol.com But, the price may simply move sideways here.
Bill Meridian aol.com June is usually a low in a bull market.
Bill Meridian aol.com The lowest, I expect here is 1000-1050.
Mukul Pal: so 500 – 700 dollars is unexpected?
Mukul Pal: wishful thinking
Bill Meridian aol.com Yes.
Bill Meridian aol.com I recall $38 in the sixties.
Mukul Pal:
Bill Meridian aol.com We thought it might go as high as 200.
Mukul Pal: I was not born
Mukul Pal: what is your long term target on Gold
Mukul Pal: do you think it will go above $ 3000?
Bill Meridian aol.com At an interview at ValueLine in NYC, one market vet said that the top fund managers used to wear $600 suits in the 60s, but that would never happen again.
Bill Meridian aol.com I think that 2000-3000 is a minimum. But the governments will take action.
Bill Meridian aol.com That is why A, Sutton titled his book, The War on Gold.
Mukul Pal: what etfs would you suggest to buy Gold? What % allocation would you suggest in a portfolio?
Bill Meridian aol.com I like the UGL, which is the double long fund. The GLD is the one times fund.
Bill Meridian aol.com I would avoid gold stocks because I think that the commodity will exceed the equity.
Mukul Pal: This should be a first time? Or did this happen in 80’s?
Mukul Pal: commodity exceeding gold stocks?
Bill Meridian aol.com Commodity-based stocks outperform the commodity for short periods…
Cosmin Grozea: Where do you see the start of the bearish rally as a time interval – more detailed if possible like dates?
Bill Meridian aol.com but then the commodity exceeds the stocks in the long run. This has been demonstrated by studies in the Financial Analysts Journal.
Cosmin Grozea: For equities
Mukul Pal: interesting
Mukul Pal: we all know you are good with dates
Bill Meridian aol.com The question is where do I see the low points in 2010?
Mukul Pal: let us a date to SHORT
Mukul Pal: tell us
Mukul Pal:
Mukul Pal: i understand
Bill Meridian aol.com I think that it might be now and again in June.
Mukul Pal:
Mukul Pal: How can the forum member’s subscribe to your newsletter?
Bill Meridian aol.com They can do so at the website billmeridian.com under publications.
Mukul Pal: we can take a few more questions
Mukul Pal: from the members
Cosmin Grozea: Bill what do you think about a Short equities and Long commodities now and in June also scenario? is it advisable?
Bill Meridian aol.com I think it is viable.
Mukul Pal: we have a question from one of the Orpheus members posted now on the internet
Mukul Pal: what is a viable business in the times ahead
Bill Meridian aol.com OK
Mukul Pal: what sector
Mukul Pal: what should a businessman do
Bill Meridian aol.com I use the 1966-1982 period as a guide.
Bill Meridian aol.com I think any commodity-related biz will do well.
Mukul Pal: industrial metals, agro, energy
Bill Meridian aol.com In addition, there is lots of liquidity and uncertainly, so trading will be profitable, if you get the markets right.
Mukul Pal: yes i agree
Bill Meridian aol.com In the last period, Frankie Joe and the traders cleaned up.
Bill Meridian aol.com Long-only fund managers did poorly, and they will do so again.
Bill Meridian aol.com I have shifted to try to fit the times.
Mukul Pal: a large % of the market is still long only
Mukul Pal: no?
Mukul Pal: investment managers
Bill Meridian aol.com People used to ask why I did not stock with managing a big tech fund-the answer came in 2000-2002.
Cosmin Grozea: Can you pls tell us what are the cycles saying about VIX: short, medium and long term ?
Bill Meridian aol.com I can add bps to long only funds, but they are still swimming upstream.
Mukul Pal: yes i agree
Bill Meridian aol.com i think that the VIX is due to rise short and intermediate term.
Mukul Pal: Bill it was wonderful having you here. It was pleasure talking to you like always. From all of us here at the Orpheus technical analysis forum, we thank you for coming.
Mukul Pal: we would like to invite you soon again
Cosmin Grozea: Thanks a lot Bill for the time and answers
Bill Meridian aol.com Great-thank you from Vienna.
Mukul Pal: Thank you Bill!
Orpheus Research orpheus.asia Yes, thank you Bill
Bill Meridian aol.com OK
Mukul Pal: you can visit billmeridian.com
Mukul Pal: for subscriptions to Bill’s newsletter and his latest books