"I'd like to comment on the article yesterday on extreme sentiment readings.

" While I continue to hold positions in most of the themes that are and have been presented in David's newsletter, I do attempt to keep abreast of certain market managers and/or commentators who I have come to respect greatly. Yesterday, I saw an interesting article in which John Hussman stated that he agrees wholeheartedly with Jeremy Grantham that U.S. quality stocks are undervalued compared to other world equities. Quality would be defined as consistent growth, margins, ROE, and low debt to equity ratios. I ran a fairly tight screen for these and came out with a short list of mainly staple non-cyclical stocks. This jives with Hussman who has an interesting chart showing the ratio between cyclicals and staples (CYC:CRC) since 1993 reaching close to levels of cyclical outperformance, which have reversed on each occasion (meaning staples begin to outperform cyclicals bringing the historical ratio back to its mean (Grantham's mean reversion). Also, Grantham's 7 year moving forecast of asset classes shows extremely low expected returns over the next 7 years in all asset classes except quality U.S. equities. For me, this does not mean I throw away cyclical stocks I own, but it may be wise to add some staples to the mix at this level (JNJ, MRK, both making the list as well as other well known names. Also, referring to a statement made by David yesterday, Grantham has been interviewed and written on what he calls the emerging market and commodity bubble (that's a mouthful). He is very careful to not call it anything close to a bubble presently, but heading in that direction. One last comment is that one of the best looking examples of the above mentioned traits (using 5 years of consistency) is the cyclical Chevron (CVX). I found that interesting. Nice call, David, on Long Bonds."

David Fuller's view Thanks for these interesting points, although I have one qualification regarding your opening sentence. I consider the current sentiment readings to be bullish but not at extreme levels.

Regarding valuations, I have not seen the article to which you refer but you may recall that throughout the stock market recovery to date, Fullermoney's favoured themes have included western multinational leaders leveraged to the Asian-led global economy. The majority of western multinationals which fit that description are American companies.

Incidentally, readers interested in Fullermoney Secular Themes will find a complete list which was posted in the Subscriber's Area on 19th November. Also, a secular theme correctly identified will almost certainly develop a sufficient market following to become an eventual bubble. That is generally good news for those who have invested in them because the profits will be greater, provided one has the wit to recognise a market cycle extreme and not overstay.