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Magazine covers: Fact or fiction?

By Agvisors LLC

The information age has been in high gear for many years. It is easy to find information on pretty much any subject you want to research. Although this is a benefit to aid in making decisions it can also be a huge detriment. We give a lot of credit to Dorsey Wright and Associates for providing charts in our weekly markets webinar and our end-of-week recap published on Friday. One thing that Dorsey Wright also does is track magazine covers and articles where bold statements are made then tracks the results to see if the headline or article came to fruition.

First, we will look at a 10-year-old article covered in the magazine "The Economist," published on May 3, 2002. The cover reads, "The end of the Oil Age." There is a picture of a gas pump that is dilapidated in the middle of the desert. Anyone reading this article may have been persuaded to liquidate all energy-related stocks, as the ominous warning was issued by a well-read and respected magazine. So, what happened from May 3, 2002, to the end of our measuring period ending on Dec. 31, 2011? The question really is whether an investor should have invested in the stock market or the energy market. The simplest way to measure the outcome is to use the ETF representing the energy market, the (IYE) ishares Dow Jones Energy Sector Fund and compare it to the S&P 500 index (SPX).

IYE = +139.70 percent

SPX = +17.16 percent

(Return does not include dividends, transaction charges, and reflect the last sale of the date measured.)

You really have to wonder if a follow-up article was written to change the tone of the article.

Now we want to bring up an article published on April 11, 2011, on CNBC.com. We even commented on the rotation of the Pimco bond funds liquidation of U.S. treasuries. In a nutshell, Bill Gross who runs one of the largest bonds mutual funds made a decision to liquidate all of the funds in U.S. treasuries. The article is titled, "Everyone on Wall Street Agrees with Bill Gross: Short Treasuries." Bold statement--now how did this pan out almost a year later? To measure this we are going to use the following ETFs and show the return percentage.

iShares Barclays 20+ Year Treasury Fund (TLT) = 30.05 percent

iShares Barclays Aggregate Bond Fund (AGG) = 5.49 percent

US Treasury 30YR Yield Index (TYX) = -32.63 percent

ProShares UltraShort 20+ Year Treasury (TBT) = -50.91 percent

S&P 500 (SPX) = 1.37 percent

(Return does not include dividends, transaction charges, and reflect the last sale of the date measured.)

It is clear to see that using the magazine cover did not work out in favor of the investor who used the article as a basis for decision-making. Last week there was an article on Bloomberg where it appears Gross is back in the market for U.S. treasuries. In fact, he increased the Pimco Total Return's exposure to U.S. government and treasury debt to 38 percent of the fund's $250.5 billion assets. Time will tell if Gross made the right call. We will track the outcome of this decision over the year to see if the article pans out.

Remember, any investments we mention in our articles are not advice to purchase those investments. We simply are illustrating how investment strategies work as we want to educate our readers. Please consult your investment professional regarding your individual investment decisions.

Editor's note: Agvisors provides commentary about agricultural markets, including grain, dairy, livestock, equities, financials, and energy, highlighted by a live weekly webinar discussing conditions and responding to questions. For more information, visit http://agvisors.com.



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