Bernanke And The Fed: The Risks And Long-Term Reasons To Hold Gold And Silver Thursday, Sep 8 2011 

The markets are looking for a panacea in the form of additional quantitative easing but the leaders may not be in the mood to offer up the fix they are seeking. In Europe, leaders of both France and Germany spoke of the need for greater and tighter economic integration, insisting on balanced budgets and a strong EU with the mandate to overrule sovereign nations.

Bernanke And The Fed: The Risks And Long-Term Reasons To Hold Gold And Silver

Storm Clouds Over Europe Advise Caution Tuesday, Apr 12 2011 

Storm Clouds Over Europe Advise Caution

Weber’s Bundesbank Resignation and the ECB Warns on Rates Sunday, Mar 13 2011 

The resignation of Axel Weber as president of the Bundesbank was a very curious move given recent events at the ECB. I say curious in that he may have improved his candidacy for ECB President with the move by distancing himself from the Merkel government or he may have placed himself as an opposition candidate if the Merkel government falls.

Weber was expected to be a strong candidate for ECB President but ran into headwinds from dovish ECB governors and internal ECB politics. With tax receipts running below expected levels in Greece, a new government in Ireland, and Portugese banks in trouble the dovish members are pressuring the ECB to hold the line while the Bundesbank is pushing for a rate increase to help relieve the pressure on an overheating economy before inflation takes hold.

Weber mentioned that he felt stymied as a lone inflation hawk which is in direct contrast to numerous hawkish statements made by Trichet. Trichet has long held that interest rates may rise later this year and the emergency measures were to be placed in a different category.

Today, Weber stated that he expects 3 hikes this year as the ECB seeks to normalize rates which seems as though the ECB has become more hawkish.

Where Weber may have improved his candidacy is that by distancing himself from Merkel’s government, which is facing a backlash from the German populace regarding Germany’s role in the European bailouts, and placing himself as a hawkish outsider in the event Merkel’s government falls.

Last week’s introductory statement by the ECB included the following message: “Strong vigilance is warranted with a view to containing upside risks to price stability. Overall, the Governing Council remains prepared to act in a firm and timely manner to ensure that upside risks to price stability over the medium term do not materialise. The continued firm anchoring of inflation expectations is of the essence.”

Two points to take from this message. The first is that the hawkish statement is in direct contrast to Weber’s statements upon leaving the Bundesbank.

The second is that the phrase ‘strong vigilance’ was last used right before the ECB started raising interest rates and the final sentence referring to the anchoring of inflation expectations is cyptic to say the least.

At the start of the year it appeared as though the ECB would be looking to raise rates in the third quarter to 2011 but inflationary trends in agriculture and commodities have forced the ECB to shift their hand and stay ahead of the curve.

Later in the statement, Trichet mentions that euro area HICP inflation has risen to 2.4% in February and that in order to stem the rise in HICP and avoid its transfer to more broad based inflation, expectations must be anchored to the 2% level.

This indicates that the ECB is ready to begin raising rates from its low level in order to try and stem inflationary concerns.

If as expected, Portugal accepts a bailout in the coming weeks and the ECB is able to successfully restructure Greece’s debt it will set the stage for the ECB to begin raising the benchmark rate.

Disclaimer
Communications are intended solely for informational purposes. Statements made should not be construed as an endorsement, either expressed or implied. This article and the author is not responsible for typographic errors or other inaccuracies in the content. This article may not be reproduced without credit or permission from the author. We believe the information contained herein to be accurate and reliable. However, errors may occasionally occur. Therefore, all information and materials are provided “AS IS” without any warranty of any kind. Past results are not indicative of future results.
PAST RESULTS ARE NOT INDICATIVE OF FUTURE RESULTS. THERE IS RISK OF LOSS AS WELL AS THE OPPORTUNITY FOR GAIN WHEN INVESTING IN THE STOCK, BOND, AND DERIVATIVE MARKETS. WHEN CONSIDERING ANY TYPE OF INVESTMENT, INCLUDING HEDGE FUNDS, YOU SHOULD CONSIDER VARIOUS RISKS INCLUDING THE FACT THAT SOME PRODUCTS: OFTEN ENGAGE IN LEVERAGING AND OTHER SPECULATIVE INVESTMENT PRACTICES THAT MAY INCREASE THE RISK OF INVESTMENT LOSS, CAN BE ILLIQUID, ARE NOT REQUIRED TO PROVIDE PERIODIC PRICING OR VALUATION INFORMATION TO INVESTORS, MAY INVOLVE COMPLEX TAX STRUCTURES AND DELAYS IN DISTRIBUTING IMPORTANT TAX INFORMATION, ARE NOT SUBJECT TO THE SAME REGULATORY REQUIREMENTS AS MUTUAL FUNDS, OFTEN CHARGE HIGH FEES, AND IN MANY CASES THE UNDERLYING INVESTMENTS ARE NOT TRANSPARENT AND ARE KNOWN ONLY TO THE INVESTMENT MANAGER.
Before making any type of investment, one should consult with an investment professional to consider whether the investment is appropriate for the individuals risk profile. This is not intended to be investment advice or a solicitation to purchase any of the securities listed here. I will not be held liable or responsible for any losses or damages, monetary or otherwise that result from the content of this article.

Trichet and the ECB, Finalizing a Legacy Tuesday, Jan 18 2011 

On October 31, 2011 the tenure of ECB President Trichet will come do an end. In the coming months we will likely hear an increasing drumbeat of noise concerning who will replace Trichet and what policies the new leader of the ECB will embrace. In the meantime, it is likely that Trichet will use the remaining months to tie up loose ends regarding the PIIGS and set a potential course for his successor.

On January 13th, the ECB released its latest statement sending a hawkish tone to the markets and warning that if commodity prices continue to rise the ECB may have to step in a begin raising interest rates in an attempt to stay ahead of the inflationary curve.

During the press conference Trichet reminded the markets that in July of 2008 the ECB was faced with a difficult decision in the face of rising oil prices and not afraid to raise interest rates to maintain price stability..

As Trichet’s tenure as head of the ECB draws to a close we are likely to see him begin to tie up some loose ends so as not to burden the new President and allow him to start with a fresh plate.

This explains the recent push by Europe to get Portugal and Spain to accept bailouts. As noted in a fall speech Trichet warned the PIIGS that they cannot wait to get their respective houses in order and that it must be done quickly or else they risk being left behind.

By getting Spain and Portugal out of the way early in 2011, Trichet can turn his full attention to a very pressing matter, rising inflationary pressures.

Italy will become a wildcard if Burlusconi cannot hold onto power. If the Italian government falls then there will likely be pressure by the ECB and the market to accept reforms or a bailout.

December 2010 ECB inflation came in at 2.2%, slightly higher than the 2% upper band. Recent pressures in the agricultural and commodities sectors indicate that inflation may be stubborn and stay above the 2% level for most of 2011. In that case, Trichet may choose to end his term with a rate hike in order to get ahead of the inflation curve and set the course for hi successor.

During the press conference Trichet noted a clear difference between the building inflationary pressures and problems at the sovereign level by remarking that both areas are separate and distinct risks.

Rising commodity prices fuel inflation risk as consumers purchasing power is eroded through higher prices which in turn translates into rising wages.

The problems at the sovereign level fuel sovereign risk as governments are forced to pay higher rates in order to finance new debt and refinance existing debt.

The question yet to be asked is who will replace Trichet as head of the ECB?

The French are concerned as Trichet is the only French member of the council and his departure represents a loss of decision making power over interest rates.

Right now the ECB council is composed of representatives from France (Trichet), Italy, Spain, Germany, Austria, and Portugal. We may see an olive branch extended to France for support of a hawkish candidate by offering them the position currently held by Gertrude Tumpel-Gugerell, the representative from Austria, when she retires in May of 2011.

Late last year the French began to court the head of the Italian Central Bank as a possible successor in contrast to the head of the German Bundesbank who is a leading candidate.

One needs to ask themselves what favors the Germans asked for in return for their bailing out of Ireland and if the recent large purchases of debt by Japan and China were a negotiating ploy.

Whomever takes the reigns of the ECB following Trichet will be watched closely by the market as a hawk would indicate a continuation of the policies and the potential for interest rate increases. A dove would indicate a break with the policies of Trichet and an indication that interest rates are likely to remain low for some time into the future.

Disclaimer
Communications are intended solely for informational purposes. Statements made should not be construed as an endorsement, either expressed or implied. This article and the author is not responsible for typographic errors or other inaccuracies in the content. This article may not be reproduced without credit or permission from the author. We believe the information contained herein to be accurate and reliable. However, errors may occasionally occur. Therefore, all information and materials are provided “AS IS” without any warranty of any kind. Past results are not indicative of future results.
PAST RESULTS ARE NOT INDICATIVE OF FUTURE RESULTS. THERE IS RISK OF LOSS AS WELL AS THE OPPORTUNITY FOR GAIN WHEN INVESTING IN THE STOCK, BOND, AND DERIVATIVE MARKETS. WHEN CONSIDERING ANY TYPE OF INVESTMENT, INCLUDING HEDGE FUNDS, YOU SHOULD CONSIDER VARIOUS RISKS INCLUDING THE FACT THAT SOME PRODUCTS: OFTEN ENGAGE IN LEVERAGING AND OTHER SPECULATIVE INVESTMENT PRACTICES THAT MAY INCREASE THE RISK OF INVESTMENT LOSS, CAN BE ILLIQUID, ARE NOT REQUIRED TO PROVIDE PERIODIC PRICING OR VALUATION INFORMATION TO INVESTORS, MAY INVOLVE COMPLEX TAX STRUCTURES AND DELAYS IN DISTRIBUTING IMPORTANT TAX INFORMATION, ARE NOT SUBJECT TO THE SAME REGULATORY REQUIREMENTS AS MUTUAL FUNDS, OFTEN CHARGE HIGH FEES, AND IN MANY CASES THE UNDERLYING INVESTMENTS ARE NOT TRANSPARENT AND ARE KNOWN ONLY TO THE INVESTMENT MANAGER.
Before making any type of investment, one should consult with an investment professional to consider whether the investment is appropriate for the individuals risk profile. This is not intended to be investment advice or a solicitation to purchase any of the securities listed here. I will not be held liable or responsible for any losses or damages, monetary or otherwise that result from the content of this article.

2011 Investment Commentary Part 1 of 3 Monday, Jan 3 2011 

The problem with making a year long commentary is that things can change which throws off your initial theory. That was the main problem with my forecast as Bernanke decided to launch QE2 amidst criticism from global central banks. This put a floor under the market and lit the fuse for the rally in equities and commodities.

So what happens in 2011 and how does that affect investment portfolios? From my chair looking out over the world here is what I see happening based on current events.

This is the first of three parts. The first will focus on global regional commentary. The second will focus on investment areas and the third will tie the first two together.

EUROPE

Europe will be marked with a growing divergence between the economically strong countries like Germany and France and the PIIGS. As the year progresses expect Spain and Portugal to accept programs similar to Ireland and Greece.

Current chairman Trichet’s term ends on October 31, 2011 and there will likely be an internal tug of war between the PIIGS who would want a dove and Germany and France who will be pushing for a hawk.

In September, Trichet made some criptic comments in a speech saying that the problematic countries need to get their collective houses in order soon or risk being left behind.

Germany’s exports will continue to carry Eurozone growth in 2011. If the Euro begins to decline versus the US Dollar and global currencies we may begin to see inflationary problems as the year goes on with Germany possibly pressing the ECB to removing some excess credit.

This will provide the new ECB President with his first and possibly most important test. Will he be an inflationary hawk with a nod to removing some excess credit measures and attempting to get ahead of the inflationary curve or acquiesce to the PIIGS who will need a time to heal their sovereign balance sheets.

Europe will survive intact helped in part by their current account surpluses.

ASIA

Inflation will begin to turn its ugly head as 2011 goes on. Right now Asian central banks have begun a tightening cycle aimed at removing excess credit and attempting to stay ahead of the inflationary curve.

Unlike the late 1990’s Asian economies are on a much better footing to fight inflation with significant excess reserves, low debt ratios, and a willingness to move ahead of the inflationary curve.

One significant fly in the ointment is not coming from China but Australia, whose interest rate increases are slowing the Australian economy almost to the point of a recession. The ripples here will likely be limited to Australia and New Zealand.

Japan will continue to muddle along economically. This may upset market participants as many people have bet on some sort of crisis but Japan has continued on this path for more than a decade now. One area which may help economic growth is the Japan-Thailand FTA in which Japan has begun to outsource low end production to Thailand which is then exported to Japan where final assembly and export to the world takes place. Benefits from this FTA should become apparent as the year goes on.

The key for Japan will be a rise in exports combined with lower public spending. While this may continue to hold back economic growth a retraction in the public sector would be good for the Japanese economy long-term.

India and China will lead the rate raising cycle with increases of at least 100 bps expected across the board.

LATIN AMERICA

Argentina remains the wild card for South America. South America is undergoing an incredible economic growth story built upon the economies of Brazil, Chile, and Peru.

Central banks across the region will continue on a rate tightening cycle in an attempt to stay ahead of the inflationary curve.

Argentina remains a huge political risk with elections in 2011 with inflation already out of control.

NORTH AMERICA

In Canada, a combination of the H.SI implementation and high consumer debt levels will put a cap on the economic recovery. This is very good for the long-term.

Canada is ahead of the Federal Reserve with respect to interest rates. Baby steps are being taken to let the air out of the bubble and it is likely this will continue as 2011 goes on. We will likely see a couple of rate increases as the Bank of Canada would like to normalize interest rates but is very cognizant of the high debt levels and slow economic recovery. The divergent economic policy relative to the United States will continue.

No interest rate increases by the Federal Reserve until mid 2012 at the earliest and more than likely a slow incremental rate increase policy will begin in 2013.

Not until the mortgage resets have made their way through the system will the Federal Reserve entertain the thought of raising interest rates.

There is a tremendous aversion by consumers in the US to leveraging up. If you were foreclosed on and went back to renting it is unlikely that you have 20% for a downpayment after losing a house purchased with no downpayment.

We will continue to see problems and the grey market overhang will continue to depress prices.

There will be isolated pockets for growth but that is more driven by vulture buying.

Economic growth in the US will be higher than this year but lower than 4% with building inflationary pressures in the food and oil markets.

US POLITICS

The rush of voters to elect new candidates to Washington has changed the political landscape. Never before has the country experienced a split Congress with a Democratic President.

The question will be how closely will they move to cut spending when a strong proportion of the American public is against cutting Medicare, Social Security, and Defense and how quickly will the public turn on them when the spending is less than expected.

Right now the 2012 Presidential race has yet to kick into gear but as the year goes on the drumbeat from candidates canvassing Iowa will pick up and grab more and more of the headlines.

Expect lots of bluster and backpeddling from the new Congress. Notice how they are already going back on the earmarks promise before taking office. That will be something major to consider for the 2012 election.

Good economic growth will help tax receipts but I do not see any strong impetus to get spending under control. A great way to slow economic growth and help the Federal Reserve put off increasing interest rates (this creates new problem) would be to combine an increase in tax receipts through lower capital gains, dividend, and overseas profit repatriation tax rates with decreased spending. That would show the world that we are taking our budget deficit problem seriously.

If that happened as businesses and employment began to gain traction the government would be creating a drag to ensure we do not grow to fast and let inflation get out of control.

BTW, I am not a Keynesian. The above policy just makes sense to me at this point in time.

Disclaimer
Communications are intended solely for informational purposes. Statements made should not be construed as an endorsement, either expressed or implied. This article and the author is not responsible for typographic errors or other inaccuracies in the content. This article may not be reproduced without credit or permission from the author. We believe the information contained herein to be accurate and reliable. However, errors may occasionally occur. Therefore, all information and materials are provided “AS IS” without any warranty of any kind. Past results are not indicative of future results.
PAST RESULTS ARE NOT INDICATIVE OF FUTURE RESULTS. THERE IS RISK OF LOSS AS WELL AS THE OPPORTUNITY FOR GAIN WHEN INVESTING IN THE STOCK, BOND, AND DERIVATIVE MARKETS. WHEN CONSIDERING ANY TYPE OF INVESTMENT, INCLUDING HEDGE FUNDS, YOU SHOULD CONSIDER VARIOUS RISKS INCLUDING THE FACT THAT SOME PRODUCTS: OFTEN ENGAGE IN LEVERAGING AND OTHER SPECULATIVE INVESTMENT PRACTICES THAT MAY INCREASE THE RISK OF INVESTMENT LOSS, CAN BE ILLIQUID, ARE NOT REQUIRED TO PROVIDE PERIODIC PRICING OR VALUATION INFORMATION TO INVESTORS, MAY INVOLVE COMPLEX TAX STRUCTURES AND DELAYS IN DISTRIBUTING IMPORTANT TAX INFORMATION, ARE NOT SUBJECT TO THE SAME REGULATORY REQUIREMENTS AS MUTUAL FUNDS, OFTEN CHARGE HIGH FEES, AND IN MANY CASES THE UNDERLYING INVESTMENTS ARE NOT TRANSPARENT AND ARE KNOWN ONLY TO THE INVESTMENT MANAGER.
Before making any type of investment, one should consult with an investment professional to consider whether the investment is appropriate for the individuals risk profile. This is not intended to be investment advice or a solicitation to purchase any of the securities listed here. I will not be held liable or responsible for any losses or damages, monetary or otherwise that result from the content of this article.

4th Quarter Investment and Recommended List Thoughts Tuesday, Oct 5 2010 

The low for the year appears to be in and we are in a Presidential Cycle rally which should eventually take us back to the highs made earlier this year.

However, we are into October which is well known for the two previous crashes and not a generally positive month overall. October is one of the worst performing months for Gold so investors looking to add to Gold and Silver positions would be well advised to look for a buying opportunity as it comes becomes available this month.

For equities, it appears as though we are making a short-term top formation as worries are beginning to appear over not just third quarter earnings but the fourth quarter as well.

In addition, we have the unemployment rate on Friday along with 3rd Quarter GDP at the end of the month. Initial estimates have the GDP number coming in under 2% but we may just see a little boost given to the number, which has been the case over the past few quarters, only to see about a percent taken off in the revisions.

Investors would be well served to continue to follow the guidepost I put up at the beginning of the year focusing on blue chip stocks with solid dividends. Large institutions are just beginning to jump back on the dividend bandwagon and small investors would be well served to get aboard first.

With corporate balance sheets flush with cash we are likely to see a push for increased corporate stock buybacks and dividend increases along with increased M&A activity.

In terms of my recommended list, I like a number of global firms.

In Asia I am bullish on agriculture, banking, and stocks connected to automobile makers but not the automobile makers themselves.

In Europe, there are a number of interesting stocks in Greece which have no connection to the sovereign problems with strong dividend yields and are basing at the present time.

The German industrial machine is of particular interest with export demand showing signs of strength.

In North America, I like banks not in the US and oil and gas stocks with strong dividend yields.

Gold and Silver bullion is attractive while the best values in the mining industry continue to be at the exploration level rather than the development or production levels.

Defensive stocks with solid dividend yields will provide excellent value over the final quarter into next year.

You can contact me further details on the recommended list.

Disclaimer
Communications are intended solely for informational purposes. Statements made should not be construed as an endorsement, either expressed or implied. This article and the author is not responsible for typographic errors or other inaccuracies in the content. This article may not be reproduced without credit or permission from the author. We believe the information contained herein to be accurate and reliable. However, errors may occasionally occur. Therefore, all information and materials are provided “AS IS” without any warranty of any kind. Past results are not indicative of future results.
PAST RESULTS ARE NOT INDICATIVE OF FUTURE RESULTS. THERE IS RISK OF LOSS AS WELL AS THE OPPORTUNITY FOR GAIN WHEN INVESTING IN THE STOCK, BOND, AND DERIVATIVE MARKETS. WHEN CONSIDERING ANY TYPE OF INVESTMENT, INCLUDING HEDGE FUNDS, YOU SHOULD CONSIDER VARIOUS RISKS INCLUDING THE FACT THAT SOME PRODUCTS: OFTEN ENGAGE IN LEVERAGING AND OTHER SPECULATIVE INVESTMENT PRACTICES THAT MAY INCREASE THE RISK OF INVESTMENT LOSS, CAN BE ILLIQUID, ARE NOT REQUIRED TO PROVIDE PERIODIC PRICING OR VALUATION INFORMATION TO INVESTORS, MAY INVOLVE COMPLEX TAX STRUCTURES AND DELAYS IN DISTRIBUTING IMPORTANT TAX INFORMATION, ARE NOT SUBJECT TO THE SAME REGULATORY REQUIREMENTS AS MUTUAL FUNDS, OFTEN CHARGE HIGH FEES, AND IN MANY CASES THE UNDERLYING INVESTMENTS ARE NOT TRANSPARENT AND ARE KNOWN ONLY TO THE INVESTMENT MANAGER.
Before making any type of investment, one should consult with an investment professional to consider whether the investment is appropriate for the individuals risk profile. This is not intended to be investment advice or a solicitation to purchase any of the securities listed here. I will not be held liable or responsible for any losses or damages, monetary or otherwise that result from the content of this article.

Technical Commentary – October 4th Monday, Oct 4 2010 

Greece (Athens) General Share – During the month of September while world markets moved higher Athens moved lower intent on retesting the lows made earlier this year. While the market and newsflow is depressing there are a few interesting equities with solid dividend yields unaffected by the sovereign problems who have been basing rather than moving lower.

Germany (DAX) – We have back to the top of the trading range for the DAX. There needs to be a breakout shortly although we may make one last move lower. The key will be holding the 200 week moving average and making it support rather than resistance.

Disclaimer
Communications are intended solely for informational purposes. Statements made should not be construed as an endorsement, either expressed or implied. This article and the author is not responsible for typographic errors or other inaccuracies in the content. This article may not be reproduced without credit or permission from the author. We believe the information contained herein to be accurate and reliable. However, errors may occasionally occur. Therefore, all information and materials are provided “AS IS” without any warranty of any kind. Past results are not indicative of future results.
PAST RESULTS ARE NOT INDICATIVE OF FUTURE RESULTS. THERE IS RISK OF LOSS AS WELL AS THE OPPORTUNITY FOR GAIN WHEN INVESTING IN THE STOCK, BOND, AND DERIVATIVE MARKETS. WHEN CONSIDERING ANY TYPE OF INVESTMENT, INCLUDING HEDGE FUNDS, YOU SHOULD CONSIDER VARIOUS RISKS INCLUDING THE FACT THAT SOME PRODUCTS: OFTEN ENGAGE IN LEVERAGING AND OTHER SPECULATIVE INVESTMENT PRACTICES THAT MAY INCREASE THE RISK OF INVESTMENT LOSS, CAN BE ILLIQUID, ARE NOT REQUIRED TO PROVIDE PERIODIC PRICING OR VALUATION INFORMATION TO INVESTORS, MAY INVOLVE COMPLEX TAX STRUCTURES AND DELAYS IN DISTRIBUTING IMPORTANT TAX INFORMATION, ARE NOT SUBJECT TO THE SAME REGULATORY REQUIREMENTS AS MUTUAL FUNDS, OFTEN CHARGE HIGH FEES, AND IN MANY CASES THE UNDERLYING INVESTMENTS ARE NOT TRANSPARENT AND ARE KNOWN ONLY TO THE INVESTMENT MANAGER.
Before making any type of investment, one should consult with an investment professional to consider whether the investment is appropriate for the individuals risk profile. This is not intended to be investment advice or a solicitation to purchase any of the securities listed here. I will not be held liable or responsible for any losses or damages, monetary or otherwise that result from the content of this article.

Technical Commentary (Europe) – September 7th Tuesday, Sep 7 2010 

Greece (Athens) General Share – After the crisis this spring ran its course the ATG put in a nice double bottom in early June and July, which also confirmed the early 2009 bottom, and has moved up through the 50 day moving average. The short-term charts are mildly bullish with this week being key to see if the rally can continue and/or the 50 day moving average begins to provide support for the market. If so, there is a nice rally here up to the 1850 area.

The longer-term charts, while ugly, show a triple bottom around the 1500 level which provided a nice base in 2003, 2009, and 2010.

The Greek market looks to be a very nice contrarian play if the government continues to accept the bitter medicine it was prescribed this spring.

Unfortunately, there is no Greek ETF for small investors to play this rally.

Germany (DAX) – The short-term charts are bullish for Germany as it appears we are moving back to the top of the channel. Strong German economic performance is driving the DAX and we may see a breakout to new yearly highs later this year. The interesting part of the short-term charts are the higher lows on each selloff even if the high on the subsequent rally does not make a higher high.

The longer-term charts continue to rattle around between the 50 and 200 week moving averages making a strong base. An interesting note is the 50 month and 200 week moving averages are in the 6189 area providing serious resistance. A solid move above these levels on strong volume would likely see a move back up to the 8000 level.

US Commentary – We had a nice rally last week which was long overdue. This week will be slow due to the Labor Day holiday and Rosh Hashanah so trading volume is likely to be lighter than expected.

One thing that worries me about last week’s rally is how everyone seems to be tripping over themselves trying to call a bottom. That is typically not a good sign despite the bullish signals.

Disclaimer
Communications are intended solely for informational purposes. Statements made should not be construed as an endorsement, either expressed or implied. This article and the author is not responsible for typographic errors or other inaccuracies in the content. This article may not be reproduced without credit or permission from the author. We believe the information contained herein to be accurate and reliable. However, errors may occasionally occur. Therefore, all information and materials are provided “AS IS” without any warranty of any kind. Past results are not indicative of future results.
PAST RESULTS ARE NOT INDICATIVE OF FUTURE RESULTS. THERE IS RISK OF LOSS AS WELL AS THE OPPORTUNITY FOR GAIN WHEN INVESTING IN THE STOCK, BOND, AND DERIVATIVE MARKETS. WHEN CONSIDERING ANY TYPE OF INVESTMENT, INCLUDING HEDGE FUNDS, YOU SHOULD CONSIDER VARIOUS RISKS INCLUDING THE FACT THAT SOME PRODUCTS: OFTEN ENGAGE IN LEVERAGING AND OTHER SPECULATIVE INVESTMENT PRACTICES THAT MAY INCREASE THE RISK OF INVESTMENT LOSS, CAN BE ILLIQUID, ARE NOT REQUIRED TO PROVIDE PERIODIC PRICING OR VALUATION INFORMATION TO INVESTORS, MAY INVOLVE COMPLEX TAX STRUCTURES AND DELAYS IN DISTRIBUTING IMPORTANT TAX INFORMATION, ARE NOT SUBJECT TO THE SAME REGULATORY REQUIREMENTS AS MUTUAL FUNDS, OFTEN CHARGE HIGH FEES, AND IN MANY CASES THE UNDERLYING INVESTMENTS ARE NOT TRANSPARENT AND ARE KNOWN ONLY TO THE INVESTMENT MANAGER.
Before making any type of investment, one should consult with an investment professional to consider whether the investment is appropriate for the individuals risk profile. This is not intended to be investment advice or a solicitation to purchase any of the securities listed here. I will not be held liable or responsible for any losses or damages, monetary or otherwise that result from the content of this article.

Week in Review – September 3, 2010 Saturday, Sep 4 2010 

Stocks moved up this week led by better than expected economic reports and a rebound from oversold conditions.

The US ISM rose to 56.3 countering many regional reports which indicated a weakening manufacturing sector.

US unemployment held steady and was taken by the markets as a net positive after some worse than expected job numbers the past two months.

The ECB kept interest rates unchanged during their meeting this week.

In an odd move, the ECB announced before the ECB conference a plan to ban naked short sales of stocks and government debt.

Sweden’s Riksbank raised repo rates by 25 bp and indicated that they will continue to raise rates going forward.

Have a great Labor Day weekend everyone.

Next Week

Monday – Bank of Japan Policy Meeting

Tuesday – Bank of Japan Policy Meeting, Reserve Bank of Australia Policy Meeting, Japan Leading Economic Index, German Manufacturing New Orders,

Wednesday – Bank of Canada Policy Announcement, UK Industrial and Manufacturing Production

Thursday – US and UK Trade Balances, Bank of England Policy Meeting

Friday – Japan 2nd Quarter Final GDP

Disclaimer
Communications are intended solely for informational purposes. Statements made should not be construed as an endorsement, either expressed or implied. This article and the author is not responsible for typographic errors or other inaccuracies in the content. This article may not be reproduced without credit or permission from the author. We believe the information contained herein to be accurate and reliable. However, errors may occasionally occur. Therefore, all information and materials are provided “AS IS” without any warranty of any kind. Past results are not indicative of future results.
PAST RESULTS ARE NOT INDICATIVE OF FUTURE RESULTS. THERE IS RISK OF LOSS AS WELL AS THE OPPORTUNITY FOR GAIN WHEN INVESTING IN THE STOCK, BOND, AND DERIVATIVE MARKETS. WHEN CONSIDERING ANY TYPE OF INVESTMENT, INCLUDING HEDGE FUNDS, YOU SHOULD CONSIDER VARIOUS RISKS INCLUDING THE FACT THAT SOME PRODUCTS: OFTEN ENGAGE IN LEVERAGING AND OTHER SPECULATIVE INVESTMENT PRACTICES THAT MAY INCREASE THE RISK OF INVESTMENT LOSS, CAN BE ILLIQUID, ARE NOT REQUIRED TO PROVIDE PERIODIC PRICING OR VALUATION INFORMATION TO INVESTORS, MAY INVOLVE COMPLEX TAX STRUCTURES AND DELAYS IN DISTRIBUTING IMPORTANT TAX INFORMATION, ARE NOT SUBJECT TO THE SAME REGULATORY REQUIREMENTS AS MUTUAL FUNDS, OFTEN CHARGE HIGH FEES, AND IN MANY CASES THE UNDERLYING INVESTMENTS ARE NOT TRANSPARENT AND ARE KNOWN ONLY TO THE INVESTMENT MANAGER.
Before making any type of investment, one should consult with an investment professional to consider whether the investment is appropriate for the individuals risk profile. This is not intended to be investment advice or a solicitation to purchase any of the securities listed here. I will not be held liable or responsible for any losses or damages, monetary or otherwise that result from the content of this article.

The Week in Review, August 20, 2010 Saturday, Aug 21 2010 

The week was filled with disappointing economic reports from the advanced figure for seasonally adjusted initial unemployment claims jumping up to 500k and the Philly Fed Survey showing negative growth. If the ISM Manufacturing PMI confirms the Philly Fed Survey we are looking at a contraction in the manufacturing sector as it appears the underlying economy is much weaker than expected and the idea of a V shaped recovery might be put to rest.

On Monday, an article appeared on Bloomberg where Yu Yongding, part of a foreign-policy advisory committee and former adviser to the People’s Bank of China, stated that China has been a buyer of European bonds. Japan’s Ministry of Finance also stated that China was a buyer of Japanese debt during the first half of 2010. The US Treasury announced that China’s holdings of US debt were cut by $100 billion from June of last year. There was no word if the cuts were sales or maturation of debt with the proceeds being reallocated to Japan and Europe. 1

HP’s drop also weighed on the Dow as traders and managers weighed the future of the company.

The VIX traded flat for the week and is pushing up against a resistance level around 27. A move above this level would signal a coming correction in the markets. The weekly charts have a bearish tilt with the possibility that the we may see a move up but this is a difficult chart to read and the VIX is often oversold here for long stretches of time.

North American markets acted accordingly with the S&P selling off after putting in a possible short-term top at 1100. The S&P 500 seems range bound between 1070 and 1100 after last weeks shock. The 50 day moving average is at 1089 and we seem so be yo-yoing around this area looking for a resolution.

Canadian markets showed a bit more strength closing above its 200 day moving average but traders are fearful of what weakness in the US would mean for its largest trading partner. The BHP offer for Potash has everyone excited over more large M&A transactions coming on the heels of the Kinross-Red Bank merger.

Over in Asia markets were mixed with Japan showing signs of a slowdown while Taiwan is steaming ahead. GDP from Taiwan grew 12.53% in the second quarter, beating estimates of 10.15%, and only slightly down from 13.71% during the first quarter.

Hong Kong government took further steps at tightening as they extended the 40% downpayment requirement to apartments costing HK$12 million in an attempt to stabilize price appreciation. The prefectures government is under pressure to cool the market as the Hong Kong Dollar is pegged to the US Dollar and the ZIRP policy in the US is causing a real estate boom. Mortgage rates in Hong Kong are as low as 70 basis points above the Hong Kong interbank offered rate (0.22%) or just under 1%.

The Baltic Dry Index has fallen by more than 50% during the June 1 to July 15th period signaling concerns that the global economy may be slowing down. One factor to consider is that China ended export tax subsidies in July which more than likely push a lot of export shipments into June.

Next week:

Monday: German Manufacturing PMI
Tuesday: Existing home sales in the US
Wednesday: Durable Goods in the US and Trade Balance in Japan
Friday: 2nd Quarter US GDP Estimate, U of Michigan Confidence, Household Spending in Japan
All Week: Speeches by Federal Reserve Governors

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