Best of the Week
Most Popular
1. The Trump Stock Market Trap May Be Triggered - Barry_M_Ferguson
2.Why are Central Banks Buying Gold and Dumping Dollars? - Richard_Mills
3.US China War - Thucydides Trap and gold - Richard_Mills
4.Gold Price Trend Forcast to End September 2019 - Nadeem_Walayat
5.Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - Anika_Walayat
6.US Dollar Breakdown Begins, Gold Price to Bolt Higher - Jim_Willie_CB
7.INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - Nadeem_Walayat
8.Will Google AI Kill Us? Man vs Machine Intelligence - N_Walayat
9.US Prepares for Currency War with China - Richard_Mills
10.Gold Price Epochal Breakout Will Not Be Negated by a Correction - Clive Maund
Last 7 days
Seven Key Words That Explain "Stupidly High" Bond Market Prices - 23rd Aug 19
Is the Fed Too Late Prevent A US Housing Bear Market? - 23rd Aug 19
Manchester Airport FREE Drop Off Area Service at JetParks 1 - Video - 23rd Aug 19
Gold Price Trend Validation - 22nd Aug 19
Economist Lays Out the Next Step to Wonderland for the Fed - 22nd Aug 19
GCSE Exam Results Day Shock! How to Get 9 A*'s Grade 9's in England and Maths - 22nd Aug 19
KEY WEEK FOR US MARKETS, GOLD, AND OIL - Audio Analysis - 22nd Aug 19
USD/JPY, USD/CHF, GBP/USD Currency Pairs to Watch Prior to FOMC Minutes and Jackson Hole - 22nd Aug 19
Fed Too Late To Prevent US Real Estate Market Crash? - 22nd Aug 19
Retail Sector Isn’t Dead. It’s Growing and Pays 6%+ Dividends - 22nd Aug 19
FREE Access EWI's Financial Market Forecasting Service - 22nd Aug 19
Benefits of Acrobits Softphone - 22nd Aug 19
How to Protect Your Site from Bots & Spam? - 21st Aug 19
Fed Too Late To Prevent A US Housing Market Crash? - 21st Aug 19
Gold and the Cracks in the U.S., Japan and Germany’s Economic Data - 21st Aug 19
The Gold Rush of 2019 - 21st Aug 19
How to Play Interest Rates in US Real Estate - 21st Aug 19
Stocks Likely to Breakout Instead of Gold - 21st Aug 19
Top 6 Tips to Attract Followers On SoundCloud - 21st Aug 19
Holiday Nightmares - Your Caravan is Missing! - 21st Aug 19
UK House Building and House Prices Trend Forecast - 20th Aug 19
The Next Stock Market Breakdown And The Setup - 20th Aug 19
5 Ways to Save by Using a Mortgage Broker - 20th Aug 19
Is This Time Different? Predictive Power of the Yield Curve and Gold - 19th Aug 19
New Dawn for the iGaming Industry in the United States - 19th Aug 19
Gold Set to Correct but Internals Remain Bullish - 19th Aug 19
Stock Market Correction Continues - 19th Aug 19
The Number One Gold Stock Of 2019 - 19th Aug 19
The State of the Financial Union - 18th Aug 19
The Nuts and Bolts: Yield Inversion Says Recession is Coming But it May take 24 months - 18th Aug 19
Markets August 19 Turn Date is Tomorrow – Are You Ready? - 18th Aug 19
JOHNSON AND JOHNSON - JNJ for Life Extension Pharma Stocks Investing - 17th Aug 19
Negative Bond Market Yields Tell A Story Of Shifting Economic Stock Market Leadership - 17th Aug 19
Is Stock Market About to Crash? Three Charts That Suggest It’s Possible - 17th Aug 19
It’s Time For Colombia To Dump The Peso - 17th Aug 19
Gold & Silver Stand Strong amid Stock Volatility & Falling Rates - 16th Aug 19
Gold Mining Stocks Q2’19 Fundamentals - 16th Aug 19
Silver, Transports, and Dow Jones Index At Targets – What Direct Next? - 16th Aug 19
When the US Bond Market Bubble Blows Up! - 16th Aug 19
Dark days are closing in on Apple - 16th Aug 19
Precious Metals Gone Wild! Reaching Initial Targets – Now What’s Next - 16th Aug 19
US Government Is Beholden To The Fed; And Vice-Versa - 15th Aug 19
GBP vs USD Forex Pair Swings Into Focus Amid Brexit Chaos - 15th Aug 19
US Negative Interest Rates Go Mainstream - With Some Glaring Omissions - 15th Aug 19
US Stock Market Could Fall 12% to 25% - 15th Aug 19
A Level Exam Results School Live Reaction Shock 2019! - 15th Aug 19
It's Time to Get Serious about Silver - 15th Aug 19
The EagleFX Beginners Guide – Financial Markets - 15th Aug 19

Market Oracle FREE Newsletter

The No 1 Gold Stock for 2019

Legendary Investor Betting on Another Stock Market Crash

Stock-Markets / Financial Crash Sep 01, 2009 - 10:57 AM GMT

By: Graham_Summers


Best Financial Markets Analysis ArticleHaving studied under two legendary value investors Max Heine and Michael Price, Winters has a long history of producing outsized gains: before he was 40, he was overseeing some $35 billion in assets as Chief Investment Officer for Franklin Templeton Advisors. During this period (2001-2004), David outperformed the S&P 500 by an average of 10% a year.

In 2005, Winters struck out on his own to launch the Wintergreen Fund (WGRNX), one of the top performing mutual funds available to ordinary investors. Unfortunately, last year’s performance brutalized his returns, bringing the fund’s performance since inception to break-even. However, there is little doubt Winters will soon be back producing the large double digit gains his investors are used to: in 2006 he returned 20%, in 2007 it was 21% and year to date he’s up 10%.

With this kind of track record, Winters is one of my favorite investing legends to watch. Which is why I was absolutely floored to see his latest Quarterly holdings revealed a total of $116 million (15% of his $748 million portfolio) in US Treasuries all maturing between October 2009 and March 2010.

As you know, short-term Treasuries are primarily used as safe haven investments during periods of market volatility. Investing in them otherwise offers little if any reward (short-term yields currently stand at 0.14%-0.26%). So if someone’s loading up on short-term Treasuries today, they’re likely doing it out of fear, NOT greed.

The Wintergreen Fund’s prospectus gives us some insights as to what David Winters might be thinking:

The Investment Manager may keep a portion, which may be significant at times, of the Fund’s total assets in cash or invested in high-quality short-term, money market instruments, corporate debt, or direct or indirect U.S. and non-U.S. government and agency obligations, when it believes that insufficient investment opportunities meeting the Fund’s investment criteria exist or that it may otherwise be necessary to maintain liquidity.

For example, when prevailing market valuations for securities are high, there may be fewer securities available at prices below their intrinsic value. In addition, when the Investment Manager believes market or economic conditions are unfavorable for investors, the Investment Manager may invest up to 100% of the Fund’s assets in U.S. or non-U.S. dollar denominated short-term investments, including cash or cash equivalents.

Thus, the two possible explanations are:

1) Winters doesn’t see a lot of opportunity in today’s markets
2) Winters is worried about market volatility or a potential crash

Regarding #1, Winters regularly asserts that today’s markets are a value investor’s dream come true. Here are a few quotes from interviews he’s given in the last six months:

“… [today’s market] is heaven, it’s like gems on the beach.”
Smart Money Interview June 2, 2009

"… around the world as people become wealthier, we think there are a lot of ways to make money”
CNBC Interview May 28, 2009

“… it’s actually a great time to be a value investor… the smart investors are buying.”
Bloomberg May 9, 2009

Outstanding Investor Digest March 17, 2009

Obviously Winters sees opportunity in today’s market. So the idea that he’s got nearly 1/7th of his portfolio in short-term Treasuries because of “insufficient investment opportunities,” doesn’t work.

This, then, leads me to conclude that Winters is extremely worried about market volatility or a potential crash. Indeed, looking over his fund’s historic portfolio holdings, we see that Winters only began buying short-term Treasuries in May 2008, after the financial crisis had begun in earnest (Bear Stearns had already gone under).

Winters’ Treasury holdings hit a peak of 24% of assets in the wake of the financial collapse in November 2008. So it’s quite telling to me that despite a 25% rally in stocks since the November lows (42% since the March ’09 lows),

Winters continues to hold 15% of assets in short-term Treasuries. This is especially bearish when one considers that Winters is repeatedly stating that today’s market is a long-term value investor’s dream come true.

In light of this, I would argue that Winters expects greater market volatility ahead… possibly even another Crash. After all, if opportunities are so abundant, why does he have 1/7th of his portfolio in short-term Treasuries (a safe haven)?

I urge to you to be extremely cautious investing in today’s market. If investing legends like David Winters remain heavily invested in short-term Treasuries then were are DEFINITELY not out of the woods yet. I wouldn’t be surprised to see something of a repeat of last year’s September-November performance. Looking at David Winters portfolio, I’d say he’s thinking the same thing.

I’ve put together a FREE Special Report detailing THREE investments that will explode when stocks start to collapse. I call it Financial Crisis “Round Two” Survival Kit. These investments will not only protect your portfolio from the coming carnage, they’ll also show you enormous profits: they returned 12%, 42%, and 153% last time stocks collapsed.

Swing by to pick up your FREE copy!!

Good Investing!

Graham Summers

Graham Summers: Graham is Senior Market Strategist at OmniSans Research. He is co-editor of Gain, Pains, and Capital, OmniSans Research’s FREE daily e-letter covering the equity, commodity, currency, and real estate markets. 

Graham also writes Private Wealth Advisory, a monthly investment advisory focusing on the most lucrative investment opportunities the financial markets have to offer. Graham understands the big picture from both a macro-economic and capital in/outflow perspective. He translates his understanding into finding trends and undervalued investment opportunities months before the markets catch on: the Private Wealth Advisory portfolio has outperformed the S&P 500 three of the last five years, including a 7% return in 2008 vs. a 37% loss for the S&P 500.

Previously, Graham worked as a Senior Financial Analyst covering global markets for several investment firms in the Mid-Atlantic region. He’s lived and performed research in Europe, Asia, the Middle East, and the United States.

    © 2009 Copyright Graham Summers - All Rights Reserved
    Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

    Graham Summers Archive

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules