Neil Woodford: 'Now is a once-in-a-decade investment opportunity' … Best time to buy since aftermath of technology crash, says Invesco Perpetual's star fund manager. "I've been in this business 25 years and only seen an opportunity like this once before – after the technology bubble," said Neil Woodford, the star manager who runs Invesco Perpetual's equity income funds. "This is a career making market." – UK Telegraph
Dominant Social Theme: There are times in men's lives that provide enormous opportunity for the bold. This is one of them. Buy stocks now. Buy blue chips and not-so-blue chips. Buy. Buy more. Borrow and buy. But buy. Buy, Buy Buy!
Free-Market Analysis: Is this really the case? Are stocks really a screaming buy? (See article excerpt above.) Or is it a power-elite dominant social theme? Certainly the UK's Neil Woodford is a legitimate stock drummer, having run, according to the Telegraph two funds – High Income and Income – that were "once the unshakeable stalwarts of the UK equity income sector."
Apparently no more. The two have suffered from two years of underperformance, the Telegraph tells us. In fact, in the last 12 months Mr. Woodford's Income fund "has returned seven percent compared with 32 percent from the best performer in the sector, Unicorn UK Income." Woodford is no quitter, though. He wishes to hold undervalued equity (companies that have more intrinsic value than their share price mathematically offers) and intends to do so.
For someone like Woodford, the math is simple. What he does is crunch numbers. If a company is throwing off considerable profit, has valuable properties and holdings and has pared its debt, Woodford may be able to come up with a number that pegs the company itself (its market value or break-up value) as one that is considerably higher than its total market cap (number of shares outstanding times price). If this is the case, Woodford will conclude that the market is "undervaluing" the company. What happens then? Let Woodford answer, via the Telegraph:
"I cannot say what the catalyst will be, but valuation is like gravity – it is a principal influence on markets, it will assert itself … The disparity between fundamental value and price was stretched once before, after the technology crisis – I see an opportunity of that scale now."
In other words sooner or later the "market" will catch up to Woodford's number crunching, assuming it's accurate. It probably is. He's good with numbers. He enjoys playing with them. It's brought him an enviable lifestyle. There is probably no argument to be had with his valuations. The trick is to determine when the market itself will finally begin to value the companies it trades at his version of "fair" valuations.
Woodford now waits for "gravity" to make the expected adjustments. As it does his portfolio will rise in value and he will be rewarded both for the mathematical analyses he has conducted and for having the confidence of his convictions. In the meantime, presumably, Woodfords continues to gradually add certain kinds of "undervalued" companies to his portfolio.
Woodford is said to be overweighted in the pharmaceutical sector, which has been undergoing a considerable beating for a variety of reasons. (It couldn't happen to a nicer group!) But this does not deter Woodford who is buying more pharmaceutical shares. The "negative press" from which pharmaceuticals now suffer is merely so much "noise" (a term of art) to Woodford.
"The valuations are so depressed that, even if you ignore all potential future patents and only consider the existing products the pharmaceutical companies have, it is still a good investment opportunity," the Telegraph quotes him as saying.
Again, we can see that Woodford is not speaking from intuition. He has calculated the value of certain patents, discounted them, then merely concentrated on cash flows from existing products and STILL come up with higher valuations than the market is currently providing. For Woodford then this is a "hand-over-fist" once-in-lifetime buying opportunity.
Lest one think that Woodford, despite his realistic approach to investing, tends toward the optimistic, the Telegraph presents his views on the British economy, which are actually downbeat. He believes that the economy will not grow as fast as the government projects. He also predicts that the Bank of England will not begin its long-threatened tightening because "to do it now would crush the consumer … The next few quarters will be a weak period for the UK economy, and that will diffuse the appetite for interest rate rises."
Of course, these observations, too, despite their seeming negativity, are good news for Woodford's portfolio. The easier money is, the more apt it is to flow back into the stock market, or so Woodford must believe. All the calculations can be correct (as they doubtless are) but if the velocity of money stays depressed then capital will not circulate and share prices will not rise.
This is actually the non-mathematical part of the analysis, and it is one that turns Woodford's figures from firm to fuzzy. Math can provide paper proof of company valuations but it is the larger economy – its boom-and-bust cycles manipulated by the West's central banking economy – that should ultimately have the final and lasting impact.
Usually, the cycle itself doesn't matter so much because central banks by printing money can flood markets will liquidity, which makes people like Woodford look like geniuses. But early in the second decade of the 2000s, nothing is working quite the way the Masters of the Universe have planned. The entire Western economy derailed in 2008 and putting it back on track has proven to be a far more difficult task than might have been expected.
And this assumes that the powers-that-be WANT to put Western economies back on track. We are beginning to make the argument regularly now that they DON'T want to. The Anglo-American elite in our view wants to create a single world government and a single global currency. We've come to believe that the Anglosphere is willing to put up with – and even encourage – considerable chaos to realize its goals. It seeks chaos. And this means stock markets and mainstream stocks are not going to be going up much farther any time soon – or not as far as optimists suggest.
It is of course a fine line. The world's central-banking economy came within a whisker of failing in 2008 and the elites have been working overtime to stabilize it ever since, or so it goes. Controlled chaos is the preferred alternative; full-on chaos is unpredictable. But we can see the tumbles snapping into place one by one. Somehow there is a global food crisis. We predict sooner or later there will be a water crisis as well. The elites are beginning to squeeze the fundamental building blocks of survival. Economies have soured and next people – even in Western countries – will begin to experience various kinds of resource insecurity (energy included).
It is a combination of controlled scarcity, rising prices (price inflation) joblessness and austerity – all carefully implemented – that will result in the kind of controlled chaos that will make world government suddenly an attractive and viable option to the democratized masses.
Do we sound paranoid, dear reader? Perhaps so. But as we have recently pointed out in these pages, George Soros and the World Bank alike are working overtime to turn SDRs into a world currency. And the UN, thanks to the quiet overthrow of the Treaty of Westphalia in 2005, has suddenly emerged as the world's "decider" about what countries are "OK" and what countries need to be destabilized and their leaders hauled before the International Court in the Hague.
It is a two track elitist methodology. On the one hand, people's lifestyles are to be reduced and their very survival threatened, which will make a global currency more attractive. The other track involves encouraging a series of developing-country revolutions around the world to create a political impetus for a new world order. Economics and politics are to be reconfigured as money power continues with its transformative effects.
Yes, it's all very sketchy, dear reader. We don't blame you if you don't believe. But this is what we do. We track fear-based elite promotions, and boy did we pick a doozy of a time to start this journal. There hasn't been as much elite "seismic activity" in our view since the powers-that-be began to wind up the international community prior to World War II.
Of course, there are plenty of risks as well. The Internet itself has made elite manipulations far more transparent – and thus increased the level of anger directed at the Anglosphere, which is evidently and obviously (in our view) behind the drive to a One World Order. The entire program is perched on a kind of knife-edge. People have to feel unbalanced, even desperate. But the elites nonetheless have to retain control of the situation so that they can steer hysterical middle classes toward the desired goal.
This is the larger picture that someone like Woodford is grappling with in our view. And yet it is something totally out of his purview. (We're not trying to be snippy here, just honest.) Just as we would have difficulty with the math that he uses to calculate undervalued stocks, so he would doubtless have difficulty (and it is an assumption, yes) comprehending our worldview, with all of its various conspiratorial assumptions.
Of course we believe in our paradigm. We began forecasting a considerable rise in gold and silver way back in 2001. (We bet Woodford did not.) Additionally, we don't think equity markets are turning big-time bullish until this gold and silver bull market is done with. And that won't be until around 2015, we figure. But we also tend to believe that the dollar-reserve system itself may not last that long. If the elites don't take it down, the damage that's already been done to it will topple it.
Woodford (in our humble view) is accounting for none of this. He's watching his figures; we're watching our themes and trends. Woodford believes in gravity; we believe the main investment argument is between the market-based, truth-telling of the Internet and the duplicitous dominant social themes of money power, which even now is seeking to frighten people the world over into accepting an ever more aggressive one-world order.
Ironically, if the elites manage their trick, Woodford's number crunching will rapidly be justified. But if the elites are stymied in their quest for global economic and political consolidation, the carefully manipulated securities and derivatives markets will begin to fall to pieces. Gold and silver will go even higher, much higher, and the Anglosphere powers-that-be will be forced to take a step back, their plans for world domination considerably reduced, their portfolios damaged by their lack of success in taking the final, sought-after step.
Every savvy investor, we venture to say, is having this sort of internal dialogue though most lack the actual vocabulary to place everything in its proper context. If you are reading this, however, you probably understand the concepts, perhaps better than most in our humble opinion. Now you just have to make up your mind.
What does the future hold: controlled chaos and world government? Or will chaos (and the Internet) spin out of control, wrecking elite plans for the moment and creating new and unaccountable valuations in various commodities along with gold and silver? Will price inflation rise higher but ultimately be controlled or will the elites, having put inflation into play, prove unable to tame the hyperinflation that may follow? Will the elites clamp down so hard liquidity that new recessions and depressions are created? Will money power be able to control public fury if economic vitality drains away?
So many gambles. So many questions. The elites have rolled the dice. Everyone will have to live with the consequences or take matters into their own hands. Woodford, too.