Peter Dag & Friends: December 2009

12/31/09

Happy New Year!!! ....

... and thank you for following my ideas and comments.

It was a good year for me. I finished Top Market Timer for the year.

It means a lot to me because the market may be trading in a broad range in the next 1-2 years. For this reason I have been focusing in "honing" my technical indicators and improving their reliability. It looks like I am getting there.

2010 will be a challenging year and investors will need to be focused.

Again, thank you for following my blog and I am looking forward to seeing you as one of our regular subscribers to The Peter Dag Portfolio. I should add that as a subscriber you can call me any time at the 800 phone number.

Have a wonderful and prosperous 2010!!!!

George Dagnino, PhD
Editor, The Peter Dag Portfolio. Since 1977
Ranked Top Market Timer in 2009 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 review The Peter Dag Portfolio. You can also call me at 1-800-833-2782 to discuss your specific money management needs.

I will be happy to speak to your investment group on how the business cycle impacts investment strategies and the choice of asset classes.

Disclaimer. No material here constitutes "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.

12/30/09

The markets always win

News. Dec. 30 (Bloomberg) -- Montclair, New Jersey, where the median family income is almost twice the U.S. average, may have to shut one of its two libraries. The Newark suburb of Irvington is considering firing police officers.

The towns are bracing for the impact of state aid cuts, after Governor-elect Christopher Christie said he may slash spending by as much as 25 percent next year amid declining tax revenue

My point. Governments give away services of all types. They are very generous with our money. There is a point, however, when money runs out because it was not invested to make more money.

Governments transfer wealth from us to the bond holders. Eventually they are sucking from us all the money they can -- until there is no other alternative. The pendulum has to swing the other way. And services have to be taken out, cancelled, cut.

Yes, the markets always win. Governments can distribute income up to a point. If the services do not produce wealth (or do not help to produce wealth), they have to be terminated. Which ones? The fat, useless fat.

George Dagnino, PhD
Editor, The Peter Dag Portfolio. Since 1977
Ranked Top Market Timer in 2009 by Timer Digest

I will be happy to speak to your investment group on how the business cycle impacts investment strategies and the choice of asset classes.

12/27/09

Time to relax...

I love this performance of the Fandango. It is energetic and passionate. Bravo!

George Dagnino, PhD
Editor, The Peter Dag Portfolio. Since 1977
Ranked Top Market Timer in 2009 by Timer Digest

I will be happy to speak to your investment group on how the business cycle impacts investment strategies and the choice of asset classes.

12/25/09

An interesting Q&A to ponder

SPIEGEL: As chairman of the Economic Recovery Advisory Board, you advise President Barack Obama on how to prevent such a recurrence. Is he following your guidance?

Volcker: We have various working groups that work on and make recommendations on particular problems like retirement programs and social security. We made some recommendations on financial reforms, which were not accepted, but that is part of the game. The president is more eloquent than I can be on these issues. Getting it done as compared to talking about it is a problem, but we have some suggestions along that line.

My point. An interesting answer about this administration from a wise and loyal public servant. The complete interview can be read by clicking here.

George Dagnino, PhD
Editor, The Peter Dag Portfolio. Since 1977
Ranked Top Market Timer in 2009 by Timer Digest

I will be happy to speak to your investment group on how the business cycle impacts investment strategies and the choice of asset classes.

The importance of having a strong currency

News. The Dearborn, Mich., automaker said Wednesday that it expects to finalize the sale of Volvo to China's Geely Group early next year if financing and government approvals fall into place.

My point. A country with a strong currency will find it easy and profitable to buy assets of weak currency countries.

George Dagnino, PhD
Editor, The Peter Dag Portfolio. Since 1977
Ranked Top Market Timer in 2009 by Timer Digest

I will be happy to speak to your investment group on how the business cycle impacts investment strategies and the choice of asset classes.

12/24/09

Off-the-cuff

Any investment approach you follow is valid.

Let me explain. When you recognize you made a mistake, make a serious effort to find out why and how you made a mistake. And above all, do not forget it!

When you make a successful investment, ask yourself what you have done right. And above all, do not forget it!

Finally. Maintain your focus on your investment approach. Never tire to search how you can improve it by reviewing what you did right and what you did wrong in the past.

Merry Christmas!

George Dagnino, PhD
Editor, The Peter Dag Portfolio. Since 1977
Ranked Top Market Timer in 2009 by Timer Digest

I will be happy to speak to your investment group on how the business cycle impacts investment strategies and the choice of asset classes.

What worries me?

The latest reports show too many bullish investors.

This is the first important sign the market may be close to a period of consolidation.

This is just one measure of markets excess. But I do not like to rely on just one indicator. My long-term market forecasts use information about employment growth, financial risk, short-term interest rates, corporate bond yields, corporate profits, and growth in monetary aggregates. All this measures are closely related to the business cycle.

To predict the near term market outlook, I use the 4-month cycle and many technical indicators monitoring the progress of the market.

George Dagnino, PhD
Editor, The Peter Dag Portfolio. Since 1977
Ranked Top Market Timer in 2009 by Timer Digest

I will be happy to speak to your investment group on how the business cycle impacts investment strategies and the choice of asset classes.

12/22/09

A bullish trend

A very bullish trend.

The Nasdaq composite index is soaring (click on the graph to enlarge it). The index moved decisively above 2200, an important resistance level.

The long-term channel is heading higher. The short-term trendline is also rising. This is definitely a bullish configuration for the Nasdaq index.

George Dagnino, PhD
Editor, The Peter Dag Portfolio. Since 1977
Ranked Top Market Timer in 2009 by Timer Digest

I will be happy to speak to your investment group on how the business cycle impacts investment strategies and the choice of asset classes.

12/21/09

Double dip?

Nobel Prize winner Joseph Stiglitz sees a significant chance the U.S. economy will contract again in the second half of 2010, and urged the government to prepare a second stimulus package:

"The likelihood of this slowdown is very, very high. There is a significant chance that the number will be in the negative range," said Stiglitz, a professor at Columbia University.

George Dagnino, PhD
Editor, The Peter Dag Portfolio. Since 1977
Ranked Top Market Timer in 2009 by Timer Digest

I will be happy to speak to your investment group on how the business cycle impacts investment strategies and the choice of asset classes.

Useful statistics

The S&P has increased an average of 1.5 percent during the seven trading days that start with Christmas Eve and end with the first two days in January since 1950. That's the widely recognized period for the Santa Claus rally, as first identified in 1972 by Stock Trader's Almanac founder Yale Hirsch.

Stocks went up in 12 of the last 15 of those year-end periods.

Think positive.

George Dagnino, PhD
Editor, The Peter Dag Portfolio. Since 1977
Ranked Top Market Timer in 2009 by Timer Digest

I will be happy to speak to your investment group on how the business cycle impacts investment strategies and the choice of asset classes.

They keep repeating the same mistake

News. One of the biggest challenges to ending the foreclosure crisis is this: A surprising number of homeowners who get their monthly payments reduced fall behind again within a year.

But nearly 40 percent of homeowners who had their monthly payments cut by 20 percent or more last year were delinquent again within a year, according to a report Monday from the Office of the Comptroller of the Currency and the Office of Thrift Supervision.

Comment. If one does not have the money there is little he/she can do to repay his/her debt. The good news is that the markets always win. This is the safest assumption investors should use when planning their investments.

George Dagnino, PhD
Editor, The Peter Dag Portfolio. Since 1977
Ranked Top Market Timer in 2009 by Timer Digest

I will be happy to speak to your investment group on how the business cycle impacts investment strategies and the choice of asset classes.

12/19/09

This is another example....

News (USA Today). Out of the depths of housing's worst downturn, smaller new homes are turning into a bright spot for some home builders.

The trend toward more compact new homes is being driven partly by the fact that more customers are first-time buyers who have less to spend.

My point. I have discussed this point many times. A weak dollar and soaring deficits point to our loss of purchasing power.

Translation. We cannot afford the things we used to enjoy. Homes are getting smaller. Cars are becoming more fuel efficient and smaller. Prices are rising beyond our reach.

This is the problem with great social programs. We have to pay more for them. Our income declines and we can afford fewer things. Our money goes to the government to pay the interest on the bonds the government has to float to implement the grandiose social ideas.

George Dagnino, PhD
Editor, The Peter Dag Portfolio. Since 1977
Ranked Top Market Timer in 2009 by Timer Digest

I will be happy to speak to your investment group on how the business cycle impacts investment strategies and the choice of asset classes.

Observations

It is interesting to talk to my friends on Sunday morning. We explore the problems of the world. We know it is a way to keep us challenged. Nothing will change. But we have fun doing it.

Nothing matters, the Taoists believe. There are two ways to read this sentence. One way of interpreting it is that whatever you do is inconsequential. What really matters is now. In Zen meditation, you can use this sentence and make it a koan, a riddle. Another koan? What is the sound of one hand clapping?

On Sunday, we bombard each other with jokes, medical, financial, economic, and political issues. Anything goes. SNS, for instance, is a firm believer fashion captures the mood of the people.

Why are hemlines rising? A recent article on the subject shows that when the economy crashes, hemlines fall and hide the knees. This is a sign our mood becomes more somber and fashion adapts by covering more of our body.

In a strong economy, however, people feel better, and hemlines rise, clothes becomes tighter and skimpier. And when people are euphoric the stock market peaks -- in the best of times. Stocks are anticipating a slower economy and weaker profits. This could be a reason why high hemlines are typically found at market tops.

I have another interpretation, based on economics, not on behavior. When the economy is strong, commodity prices, interest rates, and overall costs rise. Fashion designers concoct a skimpier fashion to minimize costs. Prices rise with rising commodities as they try to defend profitability. This is how they maintain their margins. This is also the time when the market peaks as commodities, inflation and interest rates rise in a strong economic environment. Classic bear market signals.

As the economy weakens, costs and raw materials decline. Designers entice us with more complex fashion and hemlines fall. And it is in the worst of times that the market bottoms.

What is the impact of sunspots on all this? I am working on it because they influence the economy. Do they?

George Dagnino, PhD
Editor, The Peter Dag Portfolio. Since 1977
Ranked Top Market Timer in 2009 by Timer Digest

I will be happy to speak to your investment group on how the business cycle impacts investment strategies and the choice of asset classes.

12/18/09

This is a positive trend

Good news. The transportation average broke on the upside an important resistance level (click on the chart to enlarge it).

Strong transportation stocks point to a robust economy. And this is good news for profits and stocks.

Note the volume pattern. Strong volume appears at tops and bottoms. Right now volume has no clear pattern. It may mean we will continue to see the continuation of the trend. Time will tell, of course.

I will be happy to speak to your investment group on how the business cycle impacts investment strategies and the choice of asset classes.

George Dagnino, PhD
Editor, The Peter Dag Portfolio. Since 1977
Ranked Top Market Timer in 2009 by Timer Digest

This is a problem

I do not like the fact that the bank index is going nowhere. Banks should be making a lot of money with short-term interest rates close to 0%.

Their stocks, however, remain in a dreadful downtrend (click on the chart to enlarge it).

I will be happy to speak to your investment group on how the business cycle impacts investment strategies and the choice of asset classes.

George Dagnino, PhD
Editor, The Peter Dag Portfolio. Since 1977
Ranked Top Market Timer in 2009 by Timer Digest

12/6/09

Time to charge my batteries

It is time to take a few days off. Time to charge my batteries in a totally different place. I will continue to follow the markets, of course. This is my passion.

This is a good seasonal period for the markets. The first quarter, however, is typically a nasty one for stocks.

Time will tell, of course.

I will be happy to speak to your investment group on how the business cycle impacts investment strategies and the choice of asset classes.

George Dagnino, PhD
Editor, The Peter Dag Portfolio. Since 1977
Ranked Top Market Timer in 2009 by Timer Digest

12/5/09

The nonsensical attraction of gold

The chart shows the gains of the ETF GLD (gold) since March -- the market bottom (click on the chart to enlarge it).

The ETF for global financial stocks, REITs, and metals have outperformed GLD by a huge margin.

My point. Do not get too emotional about gold. You should treat gold as another commodity.

I will be happy to speak to your investment group on how the business cycle impacts investment strategies and the choice of asset classes.

George Dagnino, PhD
Editor, The Peter Dag Portfolio. Since 1977
Ranked Top Market Timer in 2009 by Timer Digest

12/4/09

An interesting pattern

The S&P 500 is struggling around 1100 (click on the chart to enlarge it). An interesting pattern caught my attention.

The S&P 500 is hitting 1100 and volume is increasing. Pressure is building up under the 1100 level. The possible outcome is that the market will explode on the upside.

Something to watch closely.

I will be happy to speak to your investment group on how the business cycle impacts investment strategies and the choice of asset classes.

George Dagnino, PhD
Editor, The Peter Dag Portfolio. Since 1977
Ranked Top Market Timer in 2009 by Timer Digest

Employment and the economy

Employment was almost unchanged. The unemployment rate declined to 10.0% from 10.2%.

Employment will continue to rise if industrial production improves in the coming months (click on the chart to enlarge it). Note: the change in industrial production leads the change in employment.

I will be happy to speak to your investment group on how the business cycle impacts investment strategies and the choice of asset classes.

George Dagnino, PhD
Editor, The Peter Dag Portfolio. Since 1977
Ranked Top Market Timer in 2009 by Timer Digest

12/3/09

Encouraging news!

News. The Obama administration's No. 1 job right now is to rev up economic growth and get companies to start creating jobs again, Treasury Secretary Timothy Geithner said Thursday.

My comment. Didn't they know that this was the real problem? Why did we spend so much time and energy and money on health care and all other programs? Why not focusing from the start (11 months ago) on creating jobs since we knew from the beginning we were in deep economic trouble? I am really confused!

I will be happy to speak to your investment group on how the business cycle impacts investment strategies and the choice of asset classes.

George Dagnino, PhD
Editor, The Peter Dag Portfolio. Since 1977
Ranked Top Market Timer in 2009 by Timer Digest

The reappointment of Bernanke

If they were so smart, why are we in a mess and we go from crisis to crisis?

If they are so smart, how come the market is not voting for them? Instead stocks are sitting at the same levels as 11 years ago (click on the chart to enlarge it)!

I get the feeling they are under pressure to do something because the country is beginning to feel disappointed (click here),

I will be happy to speak to your investment group on how the business cycle impacts investment strategies and the choice of asset classes.

George Dagnino, PhD
Editor, The Peter Dag Portfolio. Since 1977
Ranked Top Market Timer in 2009 by Timer Digest

12/2/09

Good news

Good news. The bank index is strengthening (click on the graph to enlarge it). This is an important development for the market, as I have mentioned several times.

I will be happy to speak to your investment group on how the business cycle impacts investment strategies and the choice of asset classes.

George Dagnino, PhD
Editor, The Peter Dag Portfolio. Since 1977
Ranked Top Market Timer in 2009 by Timer Digest

12/1/09

Just one of our indicators

This is one of the many indicators we review for our subscribers of The Peter Dag Portfolio.

This gauge turned bearish in summer 2007 and became bullish in March 2009 (click on the chart to enlarge it). It is still positive and will signal caution when it declines from current levels.

I will be happy to speak to your investment group on how the business cycle impacts investment strategies and the choice of asset classes.

George Dagnino, PhD
Editor, The Peter Dag Portfolio. Since 1977
Ranked Top Market Timer in 2009 by Timer Digest

Is it difficult to fix?

News. President Barack Obama's top economic adviser said on Monday that tackling high U.S. unemployment was vital but the problem would take time to fix.

Suggestion. What about giving business an incentive to hire?

I will be happy to speak to your investment group on how the business cycle impacts investment strategies and the choice of asset classes.

George Dagnino, PhD
Editor, The Peter Dag Portfolio. Since 1977
Ranked Top Market Timer in 2009 by Timer Digest

Reminder

The trend is up until proven otherwise (click on the chart to enlarge it).

It is a simple idea I learned years ago. It kept me out of trouble many times.

I will be happy to speak to your investment group on how the business cycle impacts investment strategies and the choice of asset classes.

George Dagnino, PhD
Editor, The Peter Dag Portfolio. Since 1977
Ranked Top Market Timer in 2009 by Timer Digest