‘Huge’ stock decline — but not yet

Commentary: Adens say near term looks good, but ‘mega trend’ looks grim

By Peter Brimelow, MarketWatch               Dec. 13, 2010

NEW YORK (MarketWatch) — An apocalyptic hard-money letter says party on — for now.

When I last checked with the Aden Forecast, the well-argued service edited by Costa Rican-based sisters Pamela and Mary Anne Aden, they were making one of their periodic tacks in the face of market conditions. ( See Oct. 18 column.)

The Adens expect a hyperinflationary collapse — but they also have great respect for the Federal Reserve’s ability to stave off the end, short-term. And they concluded that market action was telling them the Fed has succeeded, again.

This combination of strategic insight and tactical flexibility has worked. Over the past 12 months, the Aden Forecast is up 17.9% by Hulbert Financial Digest, versus 12.6% for the dividend-reinvested Wilshire 5000 Total Stock Market Index. Over the past three years — which includes the Crash of 2008, remember — the letter is up 6.55% annualized versus negative 5.86% annualized for the total return Wilshire 5000.

And the Adens’ success is sustained. Over the past ten years, the letter was up an annualized 9.79%, versus 1.95% annualized for the total return Wilshire 5000.

Recently, the Adens explained their thinking on market signals. They began conventionally enough:

“It’s important to remember that the markets lead. They look ahead. They’re not reacting to what’s currently happening, but to what lies ahead and for now they’re telling us that better times are coming.”

Then they took an unusual twist:

“Also important, the markets usually take a more near-term view, looking out to the next few quarters or so. And they often don’t focus on the underlying fundamentals, especially when it comes to the very long mega trends, which overpower the near-term trends. But megatrends take years or decades to evolve. In the meantime, other factors will come to center stage, as we’re currently seeing [with Fed stimulation]”.

READ MORE HERE