Peter Dag & Friends

1/29/12

We keep kicking the can

(Der Spiegel) - It's German Chancellor Angela Merkel's pet project -- a new European Union fiscal pact to ensure members' budgetary discipline through stricter controls. But European legal experts have doubts about its viability, while critics say there are more important issues at hand.

Behind financial crises there are budget deficits. Behind budget deficits there are trade deficits. Behind trade deficits there is poor productivity growth. Behind poor productivity growth there are large and intrusive governments. Behind large governments there are powerful power groups and weak leaders.

It is a tragedy! A serious one.

More details in my The Peter Dag Portfolio , in Dag's Exclusive Market Alert, and my free educational videos on http://www.peterdag.com/.

George Dagnino, PhD
Editor, The Peter Dag Portfolio. Since 1977
2009 Market Timer of the Year by Timer Digest

To find out more about my in depth views of the markets and my strategy just visit our website https://www.peterdag.com/ where you can subscribe to The Peter Dag Portfolio. You can also call me at 1-800-833-2782 to discuss your specific investment portfolio.

Disclaimer.The content on this site is provided as general information only and should not be taken as investment advice nor is it a recommendation to buy or sell any financial instrument. Actions you undertake as a consequence of any analysis, opinion or advertisement on this site are your sole responsibility.

1/28/12

Food for thought

(Source: Hoisington Quarterly Review and Outlook). Studies suggest the government expenditure multiplier is zero to slightly negative. Increased deficit spending does appear to provide a modest lift to GDP for three to five quarters, depending upon the initial conditions of the economy. However, following this small, transitory gain, deficit spending actually retards GDP growth and the economy returns to its starting point at the end of about twelve quarters.

....the Trustees of Social Security and Medicare have calculated that the present value of unfunded liabilities of these two programs totals $59.1 trillion. Additionally, there have been tabulations that all federal government liabilities, including those of Medicaid, veterans and other defense obligations, pension liabilities of government employees, and additional federal programs total $200 trillion at present cost.

...Gerald P. O'Driscoll Jr. of the Cato Institute and a former Dallas Fed Vice President said the Federal Reserve is engaged in a bailout of European banks under the guise of what the Fed terms "a temporary U.S. dollar liquidity swap arrangement." Dr. O'Driscoll indicates the Fed and ECB are engaged in this roundabout transaction since each needs a "fig leaf" because the Fed does not want it known that the Fed's balance sheet is being made available to foreign banks.

All this is conducive to very slow growth in the coming years. It is essential to have these type of input in your investment plans and strategies.

More details in my The Peter Dag Portfolio , in Dag's Exclusive Market Alert, and my free educational videos on http://www.peterdag.com/.

George Dagnino, PhD
Editor, The Peter Dag Portfolio. Since 1977
2009 Market Timer of the Year by Timer Digest

To find out more about my in depth views of the markets and my strategy just visit our website https://www.peterdag.com/ where you can subscribe to The Peter Dag Portfolio. You can also call me at 1-800-833-2782 to discuss your specific investment portfolio.

1/27/12

More about big governments

(Bloomberg) - Fitch Ratings cut the credit ratings of Italy, Spain and three other euro-area countries, saying they lack financing flexibility in the face of the regional debt crisis.

Italy, the euro area’s third-largest economy, was cut two levels to A- from A+. The rating on Spain was also lowered two notches, to A from AA-. Ratings on Belgium, Slovenian and Cyprus were also lowered, while Ireland’s rating was maintained.

This is what happens to countries that believe government should protect special industries/interests and think they have all the solutions.

More details in my The Peter Dag Portfolio , in Dag's Exclusive Market Alert, and my free educational videos on http://www.peterdag.com/.

George Dagnino, PhD
Editor, The Peter Dag Portfolio. Since 1977
2009 Market Timer of the Year by Timer Digest

To find out more about my in depth views of the markets and my strategy just visit our website https://www.peterdag.com/ where you can subscribe to The Peter Dag Portfolio. You can also call me at 1-800-833-2782 to discuss your specific investment portfolio.

The real European issue

I have been writing at least since 2003 that the difference in productivity among the European countries is the main reason for the failure of their union.

This chart (click on the chart to enlarge it) shows the difference in unit labor costs (labor costs adjusted for the productivity of each country) of several European countries (Source: Macronomics). The countries in trouble have high unit labor costs.

High unit labor costs reflect low productivity. Which translates into trade deficits. Which translates into financial problems for the country. The same analysis, by the way, applies to the states in the US and the US as a country in the world economy. The size of the problems of any country/state depends on its level of productivity.

Again, the European problems derive from the huge productivity differentials between countries. No central bank in this world can fix this problem.

More details in my The Peter Dag Portfolio , in Dag's Exclusive Market Alert, and my free educational videos on http://www.peterdag.com/.

George Dagnino, PhD
Editor, The Peter Dag Portfolio. Since 1977
2009 Market Timer of the Year by Timer Digest

To find out more about my in depth views of the markets and my strategy just visit our website https://www.peterdag.com/ where you can subscribe to The Peter Dag Portfolio. You can also call me at 1-800-833-2782 to discuss your specific investment portfolio.

1/26/12

Thought of the day

The only way to replenish depleted pension funds, to solve the problems of failing banks and the intellectual corruption of political policies is to print money.

Print, print, print.

Stocks are soaring. Volatility is declining, confirming the decline in financial risk.

And the small savers are being punished with zero percent return on their savings.

More details in my The Peter Dag Portfolio , in Dag's Exclusive Market Alert, and my free educational videos on http://www.peterdag.com/.

George Dagnino, PhD
Editor, The Peter Dag Portfolio. Since 1977
2009 Market Timer of the Year by Timer Digest

To find out more about my in depth views of the markets and my strategy just visit our website https://www.peterdag.com/ where you can subscribe to The Peter Dag Portfolio. You can also call me at 1-800-833-2782 to discuss your specific investment portfolio.

1/25/12

I am not convinced.

By keeping interest rates at zero percent the Fed is trying to revive the economy by helping the profitability of the banking system (carry trade).

But what happened to the class of people Mr. Obama wants to help? All of us need income. Do interest rates close to zero really help the "working class".

If people do not have a job, they really do not care that interest rates are zero percent. They need income.

What is the trade off? It looks like the priority is to help the banks. Is this the right policy?

More details in my The Peter Dag Portfolio , in Dag's Exclusive Market Alert, and my free educational videos on http://www.peterdag.com/.

George Dagnino, PhD
Editor, The Peter Dag Portfolio. Since 1977
2009 Market Timer of the Year by Timer Digest

To find out more about my in depth views of the markets and my strategy just visit our website https://www.peterdag.com/ where you can subscribe to The Peter Dag Portfolio. You can also call me at 1-800-833-2782 to discuss your specific investment portfolio.

Technical patterns

From 1125 in October the S&P 500 rose to 1314 yesterday.

What caught my attention has been the trading range from early 2011 to August 2011. The market traded for many months between 1275 and 1350. This range may represent major resistance. In other words, stocks will have to do a lot of "work" before moving above it.

No one really knows. But it is an interesting pattern to keep in mind in the next few months.

Our technical and financial risk indicators will tell us which way stocks will break.

More details in my The Peter Dag Portfolio , in Dag's Exclusive Market Alert, and my free educational videos on http://www.peterdag.com/.

George Dagnino, PhD
Editor, The Peter Dag Portfolio. Since 1977
2009 Market Timer of the Year by Timer Digest

To find out more about my in depth views of the markets and my strategy just visit our website https://www.peterdag.com/ where you can subscribe to The Peter Dag Portfolio. You can also call me at 1-800-833-2782 to discuss your specific investment portfolio.

1/24/12

Interesting pattern

It is a wild thought, but...

It looks like the bond vigilantes have been going after the bonds of countries with deteriorating debt situation. Even Germany has not been immune.

Could it be -- could it be -- that they are going to come to the USA? If so yields may be going up quite a bit. They already seem to have bottomed. Could it be due to seasonality (see previous post) or something more fundamental?

Of course, TBF will benefit from this.

This is not a recommendation, of course. But my subscribers know what I think about this.

More details in my The Peter Dag Portfolio , in Dag's Exclusive Market Alert, and my free educational videos on http://www.peterdag.com/.

George Dagnino, PhD
Editor, The Peter Dag Portfolio. Since 1977
2009 Market Timer of the Year by Timer Digest

To find out more about my in depth views of the markets and my strategy just visit our website https://www.peterdag.com/ where you can subscribe to The Peter Dag Portfolio. You can also call me at 1-800-833-2782 to discuss your specific investment portfolio.

1/23/12

Seasonality

Long stocks.
Short bonds.
Long commodities.
Long gold.

See my videos on seasonality on YouYube and here.

More details in my The Peter Dag Portfolio , in Dag's Exclusive Market Alert, and my free educational videos on http://www.peterdag.com/.

George Dagnino, PhD
Editor, The Peter Dag Portfolio. Since 1977
2009 Market Timer of the Year by Timer Digest

To find out more about my in depth views of the markets and my strategy just visit our website https://www.peterdag.com/ where you can subscribe to The Peter Dag Portfolio. You can also call me at 1-800-833-2782 to discuss your specific investment portfolio.

1/21/12

Observations

I spend my day analyzing markets. Looking at hundreds of graphs. Trying to identify relationships between financial and economic variables. It is a lot of fun. However, it is exhausting.

Several years ago, as an escape from my world, I began to look at how the mind controls the body. I discovered Qigong. The next step was to read about Zen. Then Taoism, Confucianism, and Buddhism. I found myself deep into the world of philosophy.

Such books as “God” by A. Waugh and “A History of God” by K. Armstrong gave me a sense of history on how the idea of God evolved through time. They explain the role of philosophers in shaping our understanding of the world and our thought process.

“Sophie’s World” by J. Gaarder is the history of philosophy in a novel form. It is easy to read. It gives a review of the main philosophers since the Greek thinkers.

The bibliography of these books is a good source of new readings and new areas of investigation. It took thousands of years for us to think about the world the way we do now. Thinking has evolved.

When I go to Rome I buy several philosophy books (in Italian, of course) that are known to be controversial because they provide a different perspective on what we believe. Bertrand Russell is clearly one of them.

Now I am reading Nietzsche. The book is “The Anti-Christ”. It is written in a violent style. Nietzsche strongly disapproves how the church is giving hope to the poor by convincing them they will enter God’s Kingdom. This is a lie, according to him, because no one has ever seen this so-called kingdom. The church should give them the tools to fight reality and improve their status instead of subjugating them using the concept of sin, according to Nietzsche.

I like to talk about all these ideas with my friend SNS. He listens. He smiles. “It’s all mythology,” he concludes, sipping a cup of tea.

(This Observations appeared in the 3/10/2003 issue of The Peyer Dag Portfolio)

George Dagnino, PhD