Will that be Guns or Butter?

Paul Anthony Samuelson was an American economist, and the first American to win the Nobel Memorial Prize in Economic Sciences. His textbook Economics – ISBN- 0-07-0 092863-0 has become a classic in which he states in a chapter – Central Problems Of Every Economic Society - that a nation has to choose between two options when spending its finite resources. It may buy either guns (invest in defense / military) or butter (invest in production of goods), or a combination of both.

United States president Lyndon B. Johnson used the phrase to catch the attention of the national media while reporting on the state of national defense and the economy. Another use of the phrase was British prime minister, Margaret Thatcher's reference in a 1976 speech that, "The Soviets put guns over butter, but we put almost everything over guns.

Investors who are confused as to the Guns or Butter choice when it comes to investing should talk to their adviser. The consumer sector charted is probably not a good choice.

TV Talking Heads vs. Investing:

As you know – many of the broader Global stock indices are at or close to all-time highs.

We at Getting Technical conclude that any attempt to time the market is a failed strategy and that investors who use fully invested longer term models do better than investors who over-trade or market time. A long time ago a wise investor told me that most technical analysts who ”time” the markets end up with the ass out of their pants.

I am continually upset with technical analysts who use seasonal recommendations to buy and sell and also the technical analyst who tells the TV viewers to act on top like patterns such as the head & shoulders, key reversals and now recently an island reversal formation. It is frustrating for an investor to buy low, sell high and then have to buy back in even higher.

Investors who use fully invested dominant theme models do better than investors who over-trade or market time and our focus will remain on the Global, TSX models and Dominant Theme investing.

Long Term Market Cycles:

The Coppock Curve is rarely used today but according to Wikipedia the Coppock curve or Coppock indicator is a technical analysis indicator for long-term stock market investors created by E.S.C. Coppock, first published in Barron's Magazine on October 15, 1962. The indicator is designed for use on a monthly time scale. It is the sum of a 14-month rate of change and 11-month rate of change, smoothed by a 10-period weighted moving average.

Coppock, the founder of Trendex Research in San Antonio, Texas, was an economist. He had been asked by the Episcopal Church to identify buying opportunities for long-term investors. He thought market downturns were like bereavements and required a period of mourning. He asked the church bishops how long that normally took for people, their answer was 11 to 14 months and so he used those periods in his calculation.

A buy signal is generated when the indicator is below zero and turns upwards from a trough. No sell signals are generated (that not being its design). The indicator is trend-following, and based on averages, so by its nature it doesn't pick a market bottom, but rather shows when a rally has become established.

Coppock designed the indicator (originally called the "Trendex Model" for the S&P 500 index, and it has been applied to similar stock indexes like the Dow Jones Industrial Average. It is not regarded as well-suited to commodity markets, since bottoms there are more rounded than the spike lows found in stocks.    .

Strategy - Investors should remain fully invested during a “buy” and then go to a 10 to 15% cash position during a “sell” signal. The last “buy” on the TSX60 was signalled in April, 2016 at 20.54 on the index.