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.

Technical Commentary – October 18th Monday, Oct 18 2010 

Canada (TSX) – The TSX broke out of its downtrend in late August and made new highs for the year. On the chart below, we have a double top made last week. If the TSX pulls back in the coming week it will likely move back to the 12300 support level.
This week will herald some important news, which I will discuss tomorrow.

S&P 500 – The S&P 500 is at a resistance level, which needs to be taken out before it can make a move to the 1220.

It appears as though technically we may be in the process of making a top similar to the one made earlier this year. While the S&P may push through these levels and continue to move higher it is possible that we see a pull back around the end of October/early November for the reasons we stated last week.

I am not short the market BUT looking at the speed at which selloffs occurred this year, it would be prudent risk management to protect your trading gains by tightening up stop losses in the event we see a sell off as traders and hedge funds choose to lock in performance gains for the year.

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, October 7, 2010 Monday, Oct 11 2010 

On Monday we opened with a selloff down to the bottom of the trend channel where we rattled around for most of the day.

Chevron will begin buying back shares at the rate of $500 million to $1 billion dollars per quarter.

Tuesday brought a surprise rate cut from the Japanese pushing rates back to essentially zero and pledges to buy 5 trillion yen in continued efforts to revive the economy and protect the currency.

The Reserve Bank of Australia decided to keep rates steady in a surprise move as well. The RBA was expected to hike rates by 25 bp in an effort to put a lid on inflationary pressures.

The Indonesian Central Bank held steady as well choosing not to raise interest rates.

Tuesday’s big move looked to be a coordinated action in order to help Japan. Inflationary pressures are on the rise in Asia everywhere except for Japan and while the Indonesian Central Bank was expected to keep rates on hold Australia was widely expected to raise rates.

Euro zone 2nd Q GDP came in at 1.0%, unchanged from the previous estimate.

While Trichet held ECB rates steady he made some curious comments about the ECB making policy for the euro area as a whole and not for a few countries. The implication is that if the larger countries continue to expand the policy rate will be hiked even if there are countries still in a recession. If true, this is a thinly veiled message to the PIIGS that they will need to get their house in order quickly as waiting increases the risk that they will be left behind.

The US unemployment report showed a mixed bag in September as businesses are still hesitant to add jobs. While the headline rate was steady at 9.6% the U-6 rate, which is described as the “total unemployed, plus all persons marginally attached to the labor force, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all persons marginally attached to the labor force”, jumped by 0.5% to 17.1%.

Next Week

Monday – Canadian markets closed

Tuesday – Minutes from FOMC meeting

Wednesday – Euro Industrial Production for September

Thursday – US PPI, OPEC meeting Vienna

Friday – Japan Industrial Production, Europe Core Inflation, US CPI, and Retail Sales

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.

Four year Presidential Cycle and the Equities market Tuesday, Aug 31 2010 

US equities have had a difficult time since April of this year as fears over a double dip recession, a stubbornly high unemployment rate, and the possibility of slowing corporate profit growth have weighed on the markets. In addition, small investors are pouring money into bond funds sending yields crashing through the floor while equities are being labeled as risky investments.

But one of the great trading cycles is getting ready to flash a contrarian buy signal to the markets.

The four year Presidential Cycle looks for higher returns during the last two years of a Presidential term than the first years. The expectation is that as a President takes office he begins to implement his proposals and investors, hunker down waiting to see the results. During the final two years the President becomes more concerned with his re-election and will ‘prime the pump’ in order to secure re-election.

As we move through the second year of the Presidential Cycle a low is put into place which often leads to a solid rally into the third year.

I would like to bring to everyone’s attention an important article written by Bill Hester of the Hussman Funds entitled Business Cycles, Election Cycles and Potential Risks.

The chart on Election Cycle Returns shows that during year 2 of the Presidential Cycle the first quarter is up on average while the second and third are down leading to a rally in the fourth quarter which lasts into 2011.

So far in 2010 the stock market is following the chart perfect with a move up in the first quarter followed by pullbacks in the second and third quarters of the year.

We may be near a bottom in the equity markets as September is the worst month on average for equities. We are likely to see some continual downside pressure to equities during the September time frame as continued weak economic reports and concerns over third quarter profits will dominate the news flow.

The AAII Investor Sentiment Index last week reached levels which foreshadow the beginning of an upcoming rally in the equity markets.

Yields on corporate bonds and Treasury securities are at extremely low levels on an historical basis while dividend yields on high quality blue chip equities are at very attractive levels. Small investors would do well to begin preparing for the next big rally by having some cash on hand ready to allocate when the next buying opportunity approaches in the coming months.

While the news flow for equities may be negative small investors should look ahead to the light at the end of the tunnel signaling an upcoming rally, one which may catch many market watchers by surprise.

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 (Asia Edition)– August 30th Monday, Aug 30 2010 

Nikkei – The Nikkei is in trouble across the board. The 9000 level did not hold and the short and long-term charts are all showing bearish signals.

The market is looking for the government to do something regarding the appreciation of the Yen to help exporters.

If something does not happen soon we may see a test of the 2003 lows around 7800 and if that level does not hold 7000. Should economic numbers come in weaker than expected do we see another round of quantitative easing by the government and the Bank of Japan?

South Korea (KOSPI) – The KOSPI has had a very volatile year with prices whipsawing between 1800 and 1525.

In early August the KOSPI broke through an ascending wedge and pulled back to the 1720 area where it appears as though a triple bottom is being formed. The question this week is will the 1720 level hold and if so is this a springboard to new highs on the year or does it become a trading range?

The weekly charts show strong support at the 50 and 200 week moving averages with an uptrending pattern.

If support holds and we see a strong rally then 1900 and 2100 are distinct possibilities.

Bombay Sensex (BSE) – The BSE just broke through an ascending wedge to the downside on Friday. The short-term charts indicate a pullback to the 17500 area which will make the Sensex flat for the year.

The longer-term charts are overbought but have a bullish slant to them. This coming pullback may just be a pause that refreshes the market.

On the weekly chart there is a clear W formation and this pullback may just be the springboard to set the stage for a rally back to the old high in the 21000 area.

India has been one of the better markets this year with strong economic growth and a proactive central bank already into a rate tightening cycle in an attempt to cool off the economy before inflation gets out of control.

US Comment: Friday’s rally was well overdue in this pullback. Since the sell off following the Federal Reserve meeting rallies have been weak and met with selling. This week we need to a follow through with respect to Friday’s move up and get in position to take out resistance at the 50 day moving average and 1100 on the S&P 500.

AAII sentiment numbers are extremely bearish which points to a possible contrarian rally, one that may just catch people off guard.

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 – August 27, 2010 Saturday, Aug 28 2010 

Weakness in the US continued this week as economic reports continued to show that the slowdown in the United States continued into July. US markets rebounded off of oversold levels earlier in the week to stage a nice rally into the weekend. The 10,000 level on the Dow is providing significant support to the market along with 2100 on the NASDAQ.

AAII released very negative Investor Sentiment numbers which portend a contrarian rally.

Existing home sales plummeted to record lows and inventories surged to new highs. The second wave of defaults are now starting. It is going to be interesting to see if the additional houses coming to market are from banks, the gray market, or new foreclosures.

If the bulk of the new supply is coming from banks it is a good sign as bad loans are being dealt with in a constructive manner. The gray market would be bad for the economy in the short term but good in the long term. As gray market properties come to market it would be a signal that investors who were attempting to ride out the cycle have become exasperated and thrown in the towel. Investors

2nd Quarter GDP was revised lower to 1.6% but still came in above estimates. The primary cause was a jump in imports as Chinese firms took advantage of an export subsidy that expired in July by pushing product out the door to the United States and elsewhere around the world.

German 2nd Quarter GDP showed that Europe’s largest economy is beginning to pick up steam as exports, housing, and consumption all showed solid growth despite the weak conditions across Europe.

I mentioned a week or so ago that the inclusion of the statement by Hoenig at the end of the FOMC meeting would make the minutes of the August 10th meeting an interesting read. The Wall Street Journal reported that 7 of the 17 top Federal Reserve officials had reservations about purchasing US Treasuries making the upcoming minutes a must read.

Next week:

Monday – European Economic, Business, and Consumer confidence for August
Tuesday – Canadian 2nd Quarter GDP, Chicago PMI, and minutes from FOMC meeting
Wednesday – China manufacturing PMI, US ISM
Thursday – Europe 2nd Quarter GDP, US Factory Orders
Friday – US August Unemployment 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.

Hindenburg Confirmation and Political Comment Friday, Aug 20 2010 

For readers wondering about my political views, I am an independent voter with conservative leanings. When looking at politics in the context of investment decisions I place the political news in a box and set my personal feelings to the side in order to look at the political machinations with a clear eye and mind while searching for how it will affect the markets. With the invisible hand becoming more pronounced in the Treasury markets it helps to understand and watch how things unfold rather than letting something negatively color your viewpoints and potentially ruin a trade. Politics and investing are like oil and water, they do not mix well and it helps to keep both separated. When they do mix watch how they settle and let Mr. Market do the talking.

Today’s drop on weak economic news triggered the first confirmation of the Hindenburg Omen. The 10 week moving average is still rising, the McClellan Oscillator turned negative, New Highs were above the minimum level and the New Lows just barely beat the minimum of 69 new lows by 1 with 70 New Lows on the day. Both New Highs and New Lows were above the minimum and the New Highs were not twice the New Lows.

While the Hindenburg Omen does not guarantee a stock market crash the closer they signals are together and the number of signals should send a warning to investors. That said, I will repeat what I said earlier this week:

“While a Hindenburg Omen does not mean the market will crash it is a signal that a fat tail event may be approaching in terms of a market pullback.

It is not my belief that we are heading for a second stock market crash but investors should tighten stops on long positions and/or hedge long positions until the danger passes.

The underlying market weakness following Wednesday’s drop combined with weak economic reports should give investors pause. The inability of the market to move higher indicates a lack of buyers as investors seem to be waiting on the sidelines.

Now there is good news to report. This drop, should it occur, would put in a major low for the four year Presidential cycle leading to a solid rally into 2011. In other words, protect your long positions and get your cash ready to allocate so you can buy at the bottom.”

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.

2010 Mid year commentary – Investment Thoughts Thursday, Jul 22 2010 

It was my mantra at the beginning of the year that long-term investors should stay in cash and wait for attractive buying opportunities to come along.

Price-earnings ratios are once again becoming attractive. While they may seem high and nowhere near lows that sparked past bull markets investors would be wise to begin putting together lists of favorite stocks and begin monitoring prices in anticipation of putting cash to work.

We may take 6 months to a year to find a bottom but for investors it is better to well prepared in the event a buying opportunity comes along.

At this moment, we are in a stock pickers market and you should act accordingly.

Globally, markets will likely take their cues from the US and investors should proceed with caution.

Until the US government makes a serious effort to reign in spending investors should have money in Gold and Silver as a hedge against currency debasement and loss of purchasing power relative to the world.

Gold should move to new highs later this year but will likely see some sideways to lower trading action in the near term as we move through the historically weak summer period.

Gold stocks are less attractive to me. They should be trading higher based on a higher gold price but there are some factors restraining stock prices.

First, you have rising costs at mines partly related to the depreciation of the dollar. While we point to the USD Index, the truth is over 50% of the Index is made up of the Euro and I believe approximately 90% is European currencies with little or no exposure to Asia and South America.

Second, gold stocks are aggressively acquiring the remaining low hanging fruit in the exploration area, in many cases with stock. The problem with these transactions is the effect of dilution since the acquired assets have zero revenues.

Personally, I am waiting for a bit of a pullback to the 1175-1150 area with an absolute floor at 1065.

Investors in gold equities should slide down the exploration curve, as there appears to be value at the far low end in the prospecting and drilling areas.

Silver is attractive at the current price but given its volatility relative to Gold and the chance for Gold to pull back, Silver may trade lower over the short-term.

In fact, Silver is completing a very rough and ugly head and shoulders pattern leading me to believe that we may see some weakness in the coming weeks and months.

If commodities in general pull back over fears of a slowing economy both Gold and Silver will find any potential gains limited.

Canadian banks are showing value but again prices may get cheaper over the next six months. The TSX looks oversold as do most Canadian banks.

Asian economies look to continue their recovery and growth. A slowdown in the Chinese economy will defuse talk of a large currency appreciation. Non-correlated Asian markets should do well over the second half of the year but I expect problems in the US to overshadow the growth story and mute any potential large gains.

Stock prices in China and Hong Kong should continue to struggle as IPO’s and bond sales are absorbed.

Avoid South American equity markets over the near term as the difficulties facing individual countries may spill over into neighboring countries causing problems. Some of the problems include the reconstruction efforts in Chile, government and trade problems coming out of Argentina, and a Brazilian economy firing on all cylinders.

While the oil spill in the Gulf continues to provide tremendous amounts of speculation on the ultimate size of liability for BP there are some factors to consider.

Did Exxon go out of business after the Valdez spill? No.

Did any of the cigarette companies go out of business after the government settlement? No.

Does BP have attractive assets worldwide? Yes.

Will they survive? Yes.

No doubt, there will be additional regulation, massive fines, and increased scrutiny over oil and gas operations in the Gulf, Alaska, and all over the lower 48 states but the industry will survive and move forward for the future. As a high-risk investment, BP does look attractive under $30 but remember that this is a high-risk investment. The stock could trade lower if the broader market moves lower over the second half of the year.

***Disclosure note: I own BP stock in my personal account. This is not an endorsement to buy or sell nor should it be taken as such.***

The recent decline was due to portfolio window dressing as I noticed that Gold and certain Asian markets where I trade (which are up for the year) held up and saw buying as the US market (which is down) fell as portfolio managers rushed to tweak portfolios ahead of the mid-year reports.

The rally last week in the US was not met with a similar rally in the markets I follow which, in addition to weak volume, leads me to be very cautious.

It is my opinion that we are still in a topping formation and look to see lower markets through the end of the year with the major indices ending up down for the year.

Personally, I am putting together a buy list of stocks with good dividend yields and earning bases and plan on waiting for the right moment to allocate capital.

In the coming weeks and months I will expand more upon the themes touched on during the first and second parts of my commentary.

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.

2010 Investment Thoughts – What I said back in January Monday, Jul 19 2010 

2010 Investment Thoughts
Note and partial disclaimer: My thoughts are not my personal views (politics especially) but how I see
the world unfolding based on the past year and historical trends. My personal views often clash with
my investing views but as I learned long ago, you should not invest with your emotions but rather
invest with conviction based on what is actually happening in the market.
Interest Rates and Currencies
The decision by Australia to raise interest rates is important in that Australia and to a larger extent Asia
will lead the rate raising cycle. Quantitative easing and economic stimulus packages in Asia will be
eased back in the coming 12 months in order to prevent potential asset bubbles down the road.
This is an important step in the decoupling of Asian economies from US and European markets.
Capital market flows have already shifted to Hong Kong as evidenced by the tremendous IPO volume.
No longer do Asian companies need to do a primary IPO in New York as there is sufficient capital
available in Hong Kong and Shanghai to allow for a single IPO in Hong Kong alone.
Going forward INTER-Asian trade will become more important than INTRA-Asian trade and
companies which provide the necessary goods and services will be the winners in the next Asian bull
market.
All of this should have a neutral effect on the USD Index since only the Japanese Yen is included
within the US Index so exchange movements between the USD and other Asian currencies will have
more effect individually than on the USD Index as a whole.
As a point of reference, the Euro makes up 57.6% of the USD Index and the Japanese Yen makes up
13.6%. No other Asian currency has representation and South America has no representation in the
Index.
This obscures the collapse of the dollar, as dollar depreciation will be greatest against emerging market
economies.
US interest rates will not rise in 2010 due to the Congressional elections later in 2010 and the massive
quantitative easing programs still in place. It would not be surprising to see no interest rate increases
before the end of 2011.
Given the amount of debt issued by the US Government this year to fund the budget deficit, combined
with the removal of funding caps on Fannie Mae and Freddie Mac there is no possible way for the
Federal Reserve to raise interest rates without considerably adding to the budget deficit.
If three month interest rates were to rise from the current 9 basis points to 100 basis points what would
that do for the overall interest expense on Treasury debt? Simple example but it drives home a point on
why interest rates cannot rise.
Anyone that trades the Gold and Silver markets knows that when the government is involved as an
invisible hand it makes the market inefficient and obscures the real value over time. The same is
happening now with the US Treasury Yield curve and MBS markets where the Federal Reserve is
buying securities.
The USD will bottom out again around 70 and test the long-term support. The question will be the
response from Central Banks around the world. A retest of long-term support is not bad as support
levels need to be retested in order to build an effective base.
The real story could be coming out of the IBAC countries (India, Brazil, Australia, and China). These
countries have for the most part sidestepped the global recession and have resumed a growth track.
Please note that the IBAC countries have no representation in the USD Index, which as I mentioned
earlier, obscures the depreciation of the US Dollar against global currencies.
I tend to believe that we will begin to see a slow round of interest rate increases across the IBAC
countries and Asia as they end their quantitative easing programs and return rates to normalized levels.
Will the story of 2010 be a decoupling between IBAC + Asia versus Europe + US?
Could the next story be an emerging carry trade where you short US Treasuries and go long Australian
bonds?
Equity Markets
I guess we have to ask ourselves what the drivers will be in 2010. The market appears to be forming a
distribution top which would likely lead to a downturn sometime in 2010. We had massive quantitative
easing, an expected recovery, government stimulus, and a retraction of mark-to-market to drive us from
the March lows. Now we need a new story to push the market higher.
We could see one final move higher but I am worried about the BULL-BEAR data. There is a distinct
lack of bears and an overabundance of bulls. Sometimes this data takes months to play out in terms of
a correction but I think we will see a significant correction sometime before the end of 2010. In fact,
the stock market charts remind me of the 1970’s.
The Dow and S&P appear to be forming distribution tops. Be cautious if you are putting new money
into the market.
I expect the ultimate top to come at a point in time where Gold and Silver are blazing to new highs, the
Federal Reserve announces an end to quantitative easing, and the US Dollar retests its 2008 lows. This
may not happen all at the same time but happen over a period of weeks or a month or so.
The consumer could be the story in 2010 but in order for that to happen we are going to need to see
increased consumer confidence, which will come from businesses resuming the hiring of employees,
which will come from an increase in business confidence.
Non-performing loans continue to cause problems in the US banking sector. In fact, financial stocks
remind me of post crash Internet stocks. Some recovered all of their losses 10 years later but ask the
shareholders of stocks like Microsoft, Cisco, Yahoo, and Intel about their 10-year returns.
There are values but you should not be buying now for a buy-and-hold strategy. If you are trying to
capture the last 10% of a move where you missed the first 70-80% you are better off staying off to the
side and wait for another 70-80% move to come along.
As financial stocks go, so goes the US markets and overseas markets will likely follow.
Growth in employment will determine consumer demand and GDP growth going forward in 2010.
Even if we see a significant drop in unemployment consumers will be cautious for a year until they feel
more comfortable about their futures.
As the US recovers and consumers begin to spend, however the trade balance will weaken as
consumers resume their appetite for foreign made goods.
Buffett buying Burlington Northern is a vote towards much higher oil prices over the next decade.
Remember his comment about the high cost of hauling freight by truck as opposed to rail. Truck costs
rise by a 3:1 ratio over rail due to high gasoline prices.
Stock markets and Gold are likely to top out at the time qualitative easing ends leading to a bear market
that will take everything down by 20%. This will lead to the final bottom before prices begin to head
higher.
Agriculture stocks will continue to do well but you need to search for value. Potash, Monsanto,
Caterpillar, and Deere are safe plays with low returns. The real story lies in the vertically companies
which actually grow, package, and resell their crops to the public. Difficult plays but fantastic gains
last year.
There is still value in these names if you are willing to do your homework.
This is a time to consider drug stocks as the beginning of the next great twenty-year bull market but
there are some very important dark swans not being noticed by Mr. Market that may destroy the
industry in a similar manner to how Philip Morris was hit with class action lawsuits.
It is too early to call the winners and losers in the healthcare bill but any bill that favors Big Pharma
will discourage innovation and necessary industry changes. It now costs more than $1 billion dollars to
bring a drug to market and the process needs to be reformed on both sides (pharma and FDA) if the
industry is expected to grow and meet the demands from an ever increasing aging global population the
process of bringing new drugs to market needs meaningful reform.
Finally, if one goes back to look at decennial statistics years ending in 0 and the early part of the decade
tend to do worse than later years. I have attached two charts from thechartstore.com to put this into
perspective.
Canada’s banking sector could not be stronger. They do face a significant problem which is directly
related to their success and that is an overabundance of equity. As we go forward, it will be difficult to
maintain strong ROE and ROA ratios.
Canadian banks have a couple of choices here. Loosen lending standards and increase risk or return
capital to shareholders in the form of dividends and buybacks. Moving along the current track will lead
to decay and lower returns.
Asian markets have rolled over and yet to recover to their prior highs. I want to see the HSI move to
new highs and begin to lead Asia higher before I consider getting bullish on Asia.
If I had to put myself on the spot, I would be long Gold and Silver through the first quarter at which
point I would switch to Short ETF’s. Oil and Natural gas stocks are interesting especially those stocks
with nice dividends to provide a cushion to a potential decline.
Investors should take a long look at increasing the dividend yield on their portfolio and lowering their
portfolio beta.
Someone buying for a longer-term horizon should really stay on the sidelines for at least a year.
Global Politics
Regional conflicts will flare up in early 2010 around the world. We are already seeing this with an
increased focus on activities in Yemen.
With the close proximity to Somalia, you can expect a greater focus on ship piracy as the world
attempts to find a solution to this regional hot spot.
Sovereign problems are likely to be a non-story in the case of Greece and California. We know the
problems and have known about them for some time now. Unless there is a major surprise, it is likely
that they have little effect on the markets. Talk of the EU collapsing to me is now like ‘The Little Boy
Who Cried Wolf’. Every year there are whispers but will anything ever happen? The cost of an EU
collapse will far outweigh the costs from the housing collapse due to the savings businesses have
realized from tariffs, currencies, etc.
California has been a basket case for at least a decade now and will continue to muddle through as they
have done in the past.
The average loss for a sitting President’s party in the House during his first set of elections is 28 seats.
Look for Democrats to lose a couple of seats in the Senate and somewhere near the average in the
House.
The Republicans have a number of problems hindering their progress.
First, the Republicans have a very weak bench and will struggle to field a full field of candidates. In
2008, the Republican Party was looking for candidates who could fund their own campaign. This is
not a roadmap for success in any election.
Secondly, the Democrats have an almost 5:1 cash advantage in terms of House races. This advantage is
significant and used to defend young Democrats who will face significant challenges in close races.
Finally, NY-23 provided a glimpse into the fractures, divides, and problems within the Republican
Party.
The Republican Party is undergoing an ideological fight for the future of the party similar to what the
Democrats went through after the 2004 elections. The question is will the next head of the party pull
them towards the center similar to Howard Dean after he ascended in 2004 or farther to the right in
advance of 2012.
The party needs to move towards the center and away from the far right if they intend on winning back
the White House in 2012.
Precious Metals and Commodities
Big run in Gold and Silver through the first quarter of 2010. As the year goes on, we turn towards
supply issues with new mines like Penasquito coming online.
If you go back to 2000 and look at a Gold chart, you will notice that Gold tends to move in a 12-18
month consolidation followed by a 6-9 month move up. We are currently in the uptrend and it should
last for another 3-6 months.
For those bearish about gold here is something to consider. The Comex has authorized participants to
deliver GLD shares in the place of physical Gold if a participant requests physical delivery.
Copper is in a seasonal uptrend that usually lasts through the end of the first quarter. Long-term
investors should avoid going long copper right now.
Oil will continue to trade along in opposition to the US Dollar index. As the US Dollar index moves
lower oil should move higher but at some point next year, more than likely in conjunction with
increased worries about the strength of the US economic recovery and a bottom in the US Dollar index.
Natural Gas is moving higher as inventories move lower but should turn around as move into summer
and inventories are replenished. A cold US winter is helping the price.
Base metals are likely to disappoint after a strong 2009. Inventories continue to rise along with prices
which will encourage questionable projects to come back online which should add to supply. If the
market heads lower base metals will be pulled lower.
Sugar had a very good run in 2009. I continue to be long the few publicly traded sugar stocks but
worry about 2010 as the leaders in one year tend to lag the next.
Avoid Argentina mining stocks until the political climate clears.
Real Estate
Canada’s real estate market reminds me of the US in 2003-04. How the banking system reacts to an
oversupply of capital will determine the future course of Canada’s real estate market.
The US real estate market will continue to be constrained by a significant amount of inventory
overhang, Option ARM’s resets, and weak commercial real estate markets. This weakness should
persist for a few more years.
Economic Growth
Slow growth in the USA as the economy continues to adjust to the new environment.
MZM and M2 growth is disinflationary and coming down to normalized levels, which is a very good
sign as it signals a coming end to quantitative easing.
The Federal Reserve cannot begin to wind down its balance sheet until they first end the purchases of
fixed income instruments.
When the balance sheet begins to shrink additional monies will move into the system in the form of
released collateral. When the Federal Reserve started taking toxic assets onto its balance sheet it
required banks to put up collateral and when those toxic assets are sold the collateral will be released.
Downward revisions to 3rd quarter US GDP foreshadow a weak recovery during 2010 and raise the
possibility of a double dip recession if government spending slows before the consumer is ready to take
over the slack.
The continuing obfuscation of US government statistics makes me question the strength of the potential
recovery. From the birth-death model in employment, lack of accurate housing data in CPI, the double
counting home sales, and lack of accurate data on the budget deficit one should question the numbers
coming out of Washington.
Watch how the market reacts to news. There is a difference between how the market should react and
how it actually does react.
Why has the 2009-10 US budget not yet been officially passed and signed into law? Check Wikipedia.
David Urban
davecurban@gmail.com
davecurban@yahoo.com
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.