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Is the Market Due for a Correction?
03/24/2014 7:00 am EST
Mark Skousen explains why he feels the market is due for a correction, the sooner the better, and suggests some plays for investing in private equity funds.
TERRY: I'm Terry Savage from MoneyShow.com sitting here with the legendary Mark Skousen, market historian, market analyst, and while we've got you here, it's early on into 2014, we had some incredible great bull market years going through the last three, four, five years. We started out pretty weak this year. What's your outlook for the market and where would you invest?
MARK: Well, it has been three years since there's been a 10% decline in the market so we are due for a correction, and the sooner the better, and maybe with Yellen coming in as the new fed chair and the tapering that's going on and the emerging market troubles, maybe that will shake out the market by 10% and will be a new buying opportunity, but yeah, I don't think 2014 is going to repeat 2013, 30% return -
TERRY: No, that would be a little bit -
MARK: - on the market, that would be very difficult.
TERRY: But it doesn't sound like you're really bearish. You're looking -
MARK: No, no.
TERRY: - for a buying opportunity.
MARK: Right, I am, I am, and even though the money supply has started to slow down and stuff, I think a correction is, we're in store for a correction but I'll be looking at that as a buying opportunity.
TERRY: Why are you bullish for the longer run or the bigger picture?
MARK: Well, I'm bullish because the markets, the economy is doing better. It is amending and improving, it's slowly but surely. IMF just reported that they think the global economy is going to grow a little bit faster than what they expected, so that's all very positive I think for the economy and that's one of the reasons I'm remaining fully invested in my investments.
TERRY: Oh, you're going to stick it out even through a correction.
MARK: And I'm out of bonds, so I'm almost entirely out of bonds, focusing almost entirely on the stock market.
TERRY: Well, given the fact that you've already got your positions, can you tell us where, if someone were saying, okay, well, gee, that made me bullish, where would you invest now?
MARK: Well, I'm talking about, Terry, I'm talking about one thing here that nobody else is talking about, and that is investing in private equity which you couldn't do five years ago, but now that you have Blackstone and KKR and Carlisle Group and Apollo, all of these groups are now publically traded. They invest in private companies, private deals. They're buyout specialists, and I believe M&A activity will be very active this year, especially if the stock market is consolidating.
TERRY: Mark, what makes you think they're going to let retail investors in on their good thing? They've always had terrific returns. They take these companies, they squeeze them, they divvy up the money, the partners of these private equity firms, and then they sold the stock to the public at a high premium so they got more money. What's left for us, the ordinary investor?
MARK: Well, they actually, any distribution that's made, they're required to pay out -
MARK: - 90%, so it's just very much like a real estate investment trust, and a lot of them are paying huge amounts of money. I mean, we're talking 6%, 7% yields on a lot of these private equity companies because the distributions which they've held for eight years, finally when the limited partnerships end, they must pay out and they don't pay out just to themselves, they pay out to the shareholders, so this is a dividend play that I think is very favorable and it's particularly focused on M&A activity picking up, lots of buyout activity.
TERRY: All right, so people don't have to rewind through this interview, give us those names again of the public -
MARK: Okay, so KKR is one of them, Apollo, APO, Main Street Capital invests in business development companies, a private equity firm, MAIN is one, and then there are several others. There are several ETFs that can invest in which I can't give out yet because I have to give them to my subscribers first.
TERRY: Okay, thanks for joining us. Good and interesting information. I'm Terry Savage from MoneyShow.com.
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