Peter Dag & Friends: January 2010

1/31/10

Food for thought

What are commodities telling us?

All the main commodity averages are showing little or no progress since last June (click on the chart to enlarge it).

The lack of strength in the commodity complex may be telling us the global economy is not as strong as suggested by the official statistics.

Does this mean lack of inflation (deflation?) is in the cards?

What are the implications for profits and equity prices?

George Dagnino, PhD
Editor, The Peter Dag Portfolio. Since 1977
Ranked Top Market Timer in 2009 and 2010 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.

News. Wall Street recorded its worst monthly losses for a year as investors shrugged off a surprise jump in the rate of US economic growth.

My point. The stock market is a leading indicator. It looks forward, not back. A protracted correction in the market signals the economy is likely to slow down.

Did you notice the weakness of the commodities? They may confirm the implications of the market.

Stay tuned.

George Dagnino, PhD
Editor, The Peter Dag Portfolio. Since 1977
Ranked Top Market Timer in 2009 and 2010 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.

1/28/10

Food for thought

Metal and mining stocks have been sliding in the past two weeks, down 20% (click on the chart to enlarge it.

Another bearish sign is that they violated on the downside an important trendline. Does this mean the economy will not be as strong as some expect?

George Dagnino, PhD
Editor, The Peter Dag Portfolio. Since 1977
Ranked Top Market Timer in 2009 and 2010 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.

1/27/10

Financial stocks

I like to watch support levels and trading ranges (click on the chart to enlarge it).

When stocks break below an important support levels, the odds favor the continuation of the trend on the downside.

Financial stocks are at a critical juncture, as shown on the chart. An interesting pattern to watch closely.

George Dagnino, PhD
Editor, The Peter Dag Portfolio. Since 1977
Ranked Top Market Timer in 2009 and 2010 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.

A new sense of priorities

News.WASHINGTON (AP) — A politically shaken White House promised Sunday a sharper focus on jobs and the economy, but key advisers were less sure-footed on health care reform. They took a wait-and-see approach as the dust settles from the punishing loss of the late Edward M. Kennedy's Senate seat.

My point. They keep talking. They keep promising.

George Dagnino, PhD
Editor, The Peter Dag Portfolio. Since 1977
Ranked Top Market Timer in 2009 and 2010 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.

1/26/10

The markets always win

News. State governments from Rhode Island to California have run up estimated pension-fund losses of $865.1 billion, forcing some to cut benefits for new hires. Assets for 109 state funds declined 37 percent to $1.46 trillion over the 14 months ended Dec. 16, according to the Center for Retirement Research at Boston College.

My point.People ask. Politicians give. They like the power and prestige. After all, it is not their money. Eventually money is not enough to pay the generous promises. We forgot to produce the wealth to pay for all those benefits. It does not matter what we think or what is our political color. The markets always win.

George Dagnino, PhD
Editor, The Peter Dag Portfolio. Since 1977
Ranked Top Market Timer in 2009 and 2010 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.

Something to think about

Foreign markets did not act well yesterday in spite of the 23.88 point increase in the Dow (click on the table to enlarge it).

Volatility is moving higher and the market is close to important support levels.

Is it time to be careful?

George Dagnino, PhD
Editor, The Peter Dag Portfolio. Since 1977
Ranked Top Market Timer in 2009 and 2010 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.

1/25/10

The market is at an important juncure

The enclose chart shows the graph of the S&P 500 since last September (click on the chart to enlarge it).

The market has declined to important support levels. A violation on the downside of these levels suggests the market could decline at least another 5%.

Is a new downtrend developing? 77% of the investors believe this administration is anti-business. Will they keep selling to change Mr. Obama's policies? Stay tuned.

George Dagnino, PhD
Editor, The Peter Dag Portfolio. Since 1977
Ranked Top Market Timer in 2009 and 2010 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.

1/24/10

Boccherini's fandango...a brilliant execution

Time to relax and enjoy!

George Dagnino, PhD
Editor, The Peter Dag Portfolio. Since 1977
Ranked Top Market Timer in 2009 and 2010 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.

Just in case you missed his article

George Dagnino, PhD
Editor, The Peter Dag Portfolio. Since 1977
Ranked Top Market Timer in 2009 and 2010 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.

1/23/10

They promised too much

State governments have vastly underfunded public pensions. Here is the abstract to a new NBER paper, The Intergenerational Transfer of Public Pension Promises by Novy-Marx and Rauh.

The value of pension promises already made by US state governments will grow to approximately $7.9 trillion in 15 years. We study investment strategies of state pension plans and estimate the distribution of future funding outcomes. We conservatively predict a 50% chance of aggregate underfunding greater than $750 billion and a 25% chance of at least $1.75 trillion (in 2005 dollars). Adjusting for risk, the true intergenerational transfer is substantially larger. Insuring both taxpayers against funding deficits and plan participants against benefit reductions would cost almost $2 trillion today, even though governments portray state pensions as almost fully funded.

Time to pay for the great promises they made. People ask. Politicians give. Let someone else solve the problems we create.

But now is the time to pay. And there is not enough money. The solution is selling more bonds. And you and I have to pay the interest on the bonds to the bond holders.

We lose purchasing power and they will have to cut the great services and the great pensions they promised.

The lesson we are learning is that we have to pay for the services and benefts we want. They are not "free". It just cannot be good news for the economy. Let's keep our fingers crossed.

George Dagnino, PhD
Editor, The Peter Dag Portfolio. Since 1977
Ranked Top Market Timer in 2009 and 2010 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.

1/22/10

The bearish trend continues

The bearish trend in gold continues (click on the chart to enlarge it).

The same trend is visible in other metals, suggesting there is a close correlation between the two markets.

George Dagnino, PhD
Editor, The Peter Dag Portfolio. Since 1977
Ranked Top Market Timer in 2009 and 2010 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.

1/21/10

A must read....From a smart businessman and thinker who voted for Obama

Mortimer B. Zuckerman is chairman and editor in chief of U.S. News & World Report and publisher of the New York Daily News. He is also the co-founder and chairman of Boston Properties Inc. He is a trustee of the Council on Foreign Relations, the Washington Institute for Near East Studies, and the International Institute of Strategic Studies.

He's Done Everything Wrong by Mort Zuckerman

Obama punted on the economy and reversed the fortunes of the Democrats in 365 days.

He’s misjudged the character of the country in his whole approach. There’s the saying, “It’s the economy, stupid.” He didn’t get it. He was determined somehow or other to adopt a whole new agenda. He didn’t address the main issue.

This health-care plan is going to be a fiscal disaster for the country. Most of the country wanted to deal with costs, not expansion of coverage. This is going to raise costs dramatically.

In the campaign, he said he would change politics as usual. He did change them. It’s now worse than it was. I’ve now seen the kind of buying off of politicians that I’ve never seen before. It’s politically corrupt and it’s starting at the top. It’s revolting.

Five states got deals on health care—one of them was Harry Reid’s. It is disgusting, just disgusting. I’ve never seen anything like it. The unions just got them to drop the tax on Cadillac plans in the health-care bill. It was pure union politics. They just went along with it. It’s a bizarre form of political corruption. It’s bribery. I suppose they could say, that’s the system. He was supposed to change it or try to change it.

Even that is not the worst part. He could have said, “I know. I promised these things, but let me try to do them one at a time.” You want to deal with health care? Fine. Issue No. 1 with health care was the cost. You know I think it was 37 percent or 33 who were worried about coverage. Fine, I wrote an editorial to this effect. Focus on cost-containment first. But he’s trying to boil the ocean, trying to do too much. This is not leadership.

Obama’s ability to connect with voters is what launched him. But what has surprised me is how he has failed to connect with the voters since he’s been in office. He’s had so much overexposure. You have to be selective. He was doing five Sunday shows. How many press conferences? And now people stop listening to him. The fact is he had 49.5 million listeners to first speech on the economy. On Medicare, he had 24 million. He’s lost his audience. He has not rallied public opinion. He has plunged in the polls more than any other political figure since we’ve been using polls. He’s done everything wrong. Well, not everything, but the major things.

I don’t consider it a triumph. I consider it a disaster.

One business leader said to me, “In the Clinton administration, the policy people were at the center, and the political people were on the sideline. In the Obama administration, the political people are at the center, and the policy people are on the sidelines.”

I’m very disappointed. We endorsed him. I voted for him. I supported him publicly and privately.

I hope there are changes. I think he’s already laid in huge problems for the country. The fiscal program was a disaster. You have to get the money as quickly as possible into the economy. They didn’t do that. By end of the first year, only one-third of the money was spent. Why is that?

He should have jammed a stimulus plan into Congress and said, “This is it. No changes. Don’t give me that bullshit. We have a national emergency.” Instead they turned it over to Harry Reid and Nancy Pelosi who can run circles around him.

It’s very sad. It’s really sad.

He’s improved America’s image in the world. He absolutely did. But you have to translate that into something. Let me tell you what a major leader said to me recently. “We are convinced,” he said, “that he is not strong enough to confront his enemy. We are concerned,” he said “that he is not strong to support his friends.”

The political leadership of the world is very, very dismayed. He better turn it around. The Democrats are going to get killed in this election. Jesus, looks what’s happening in Massachusetts.

It’s really interesting because he had brilliant, brilliant political instincts during the campaign. I don’t know what has happened to them. His appointments present somebody who has a lot to learn about how government works. He better get some very talented businesspeople who know how to implement things. It’s unbelievable. Everybody says so. You can’t believe how dismayed people are. That’s why he’s plunging in the polls.

I can’t predict things two years from now, but if he continues on the downward spiral he is on, he won’t be reelected. In the meantime, the Democrats have recreated the Republican Party. And when I say Democrats, I mean the Obama administration. In the generic vote, the Democrats were ahead something like 52 to 30. They are now behind the Republicans 48 to 44 in the last poll. Nobody has ever seen anything that dramatic.

1/20/10

A bearish trend for gold

I follow closely the trend of gold (ETF: GLD).

Gold is now in a downtrend -- as long as the trendline is heading down (click on the chart to enlarge it). I noticed several days ago how the strong volume as gold was spiking signalled a period of consolidation for the metal.

George Dagnino, PhD
Editor, The Peter Dag Portfolio. Since 1977
Ranked Top Market Timer in 2009 and 2010 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.

Thought of the day

The trend of the market is going to tell us what is in store for the rest of the year for the economy.

Continued weakness in stocks anticipates a not-so-rosy economic environment. In this instance, investors should change investment strategy.

George Dagnino, PhD
Editor, The Peter Dag Portfolio. Since 1977
Ranked Top Market Timer in 2009 and 2010 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.

Is Europe in trouble?

The Euro (click on the chart to enlarge it) is sinking ... badly. Greece, the UK, Spain, Italy have serious budget issues to resolve.

I always maintained that low productivity countries cannot unite with high productivity ones. The low productivity countries are bound to be crushed as capital flees the low productivity countries and goes to high productivity ones.

The Euro is being seriously challenged. Is it time for new currencies such as the SDR?

George Dagnino, PhD
Editor, The Peter Dag Portfolio. Since 1977
Ranked Top Market Timer in 2009 and 2010 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.

Something to think about

News. Jan. 20 (Bloomberg) -- Republican Scott Brown won a U.S. Senate seat in Massachusetts in a political upset that imperils health-care legislation in Congress and sends a warning to President Barack Obama and Democrats ahead of November’s midterm elections.

My Point. The American people are smart. They understand what is going on. And they have spoken.

George Dagnino, PhD
Editor, The Peter Dag Portfolio. Since 1977
Ranked Top Market Timer in 2009 and 2010 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.

1/17/10

Always interesting research by Birinyi

Interesting data from Ticker Sense.

The odds favor a rising market in 2010 (click on the chart to enlarge it).

George Dagnino, PhD
Editor, The Peter Dag Portfolio. Since 1977
Ranked Top Market Timer in 2009 and 2010 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.

For short-term traders only

Trades to ponder for near-term investors who like the fast lane.

---- Shorting the market.
---- Sell gold.
---- Sell XME (metals and mining ETF).

These markets look tired. There might be an opportunity to buy at lower prices in the next few weeks.

George Dagnino, PhD
Editor, The Peter Dag Portfolio. Since 1977
Ranked Top Market Timer in 2009 and 2010 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.

1/16/10

A sinking feeling

From recent comments by seasoned economist Gluskin Sheff’s David Rosenberg. The problem is that all this fiscal largesse, intervention and incursion cannot go on indefinitely because there are limits to what the taxpaying public will support in terms of policy. Trying to get people to buy a home when the homeownership rate is still well above the long run average; trying to spur auto consumption when 20% of the households in the U.S.A. are already a three-car family — these policies aimed at reviving a defunct cycle of over consumption is starting to be viewed as a colossal waste of taxpayer money.

He has been cautious for a long time. But he makes sense. These are not normal times and few people have the experience of dealing with them. The sad part of the story is that the people who can afford the least are those who really pay the price.

George Dagnino, PhD
Editor, The Peter Dag Portfolio. Since 1977
Ranked Top Market Timer in 2009 and 2010 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 happened?

News (Dec. 3, 2009). President Obama says he heard “terrific ideas” from the nation’s top corporate executives, economists and union leaders at a White House forum Thursday designed to find ways to put unemployed Americans back to work.

“Digging ourselves out of this hole will not be easy, “ Obama told the estimated 130 participants in closing remarks. “Generating the kind of economic growth that leads to the kind of hiring that gets our employee base back to where it was will be hard and will take a lot of work.”

My point. It sounded like a great idea. What happened? After a year in Washington, our leaders seem to be worried about many other projects. We have a "Haiti" in our hands here at home. But we seem to be worried about bonuses and finding new ways to raise taxes. As I said, I am confused.

George Dagnino, PhD
Editor, The Peter Dag Portfolio. Since 1977
Ranked Top Market Timer in 2009 and 2010 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.

1/14/10

Observations

What kind of world are we facing? There is no doubt we are implementing social and economic structures similar to most European countries with the bureaucracy playing an increasingly dominant role.

Social programs are a laudable effort. Karl Marx encouraged the idea that the people (read: governments) should have more say in allocating resources.

We forget, however, that without an economy capable of producing wealth, the system is bound to collapse. This was the weak point of Karl Marx’s philosophy.

Who is going to produce the wealth the government wants to redistribute? Tax receipts are collapsing. We need to borrow. Borrowing implies issuing bonds and interest payments associated with it.

You and I have to pay the interest on the bonds. The outcome is an immense transfer of wealth from us to the bondholders. The government is just an intermediary. The impact is a lower standard of living and slower economic growth. The outcome is that the growth of our economy and income will decline, while Asia and Latin America achieve more status.

We will experience spurts of growth as government stimulus has its effect and inventories are increased. This is what is happening now. Commodities are responding accordingly.

The business cycle will dominate, however, because the markets always win. The model on page 5 will keep us up to date about the rise of inflation, interest rates, and commodities. Eventually the feedback will take place. The increase in inflation and interest rates will force business to be more cautious. The economy slows down. Interest rates and inflation decline. And business becomes more optimistic again.

My point is that market forces will always prevail. The business cycle, with its reliable relationships between production, commodities, interest rates, and inflation will not change because they depend on decisions made by people and based on market conditions.

George Dagnino, PhD
Editor, The Peter Dag Portfolio. Since 1977
Ranked Top Market Timer in 2009 and 2010 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.

I do not understand

News. Jan. 14 (Bloomberg) -- President Barack Obama said the levy he wants to impose on as many as 50 large financial firms is aimed at getting back “every single dime” that taxpayers put in to bailing out those companies.

Slowly and steadily. It sounds like an afterthought. First TARP. Then bonuses. Then regulation. Now bank levies.

It just does not sound right. Why did not they think about the complete package of penalties at the time of the bailout?

Meanwhile, big banks too bis to fail are bigger. Am I missing something?

George Dagnino, PhD
Editor, The Peter Dag Portfolio. Since 1977
Ranked Top Market Timer in 2009 and 2010 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.

1/13/10

SOMETHING YOU SHOULD KNOW

I hear a lot of nonsense about gold.

Gold is a commodity. Make no mistake about it. When commodities are strong, gold goes up. When commodities decline, gold sinks.

Check the enclosed chart (click on the chart to enlarge it). XME (ETF for metals) outperformed gold (ETF GLD for gold) by a huge margin. And I mean huge.

And please, avoid gold coins, unless you are an expert coin collector. I spare you with the details.

If you believe in a strong economy and inflation, gold (GLD) is not the right investment.

George Dagnino, PhD
Editor, The Peter Dag Portfolio. Since 1977
Ranked Top Market Timer in 2009 and 2010 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.

1/12/10

I am still watching the banks

The bank index had a great run since November. The market followed and jumped 11%.

It is difficult for the market to rise without the participation of the banks. The risk is that the bank index is close to a major resistance level (click on the chart to enlarge it) following its 11% gain.

The next few weeks should be interesting. As usual, time will tell.

George Dagnino, PhD
Editor, The Peter Dag Portfolio. Since 1977
Ranked Top Market Timer in 2009 and 2010 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.

1/9/10

Quotes from smart investors

Mr. Chanos. China’s hyperstimulated economy is headed for a crash, rather than the sustained boom that most economists predict. Its surging real estate sector, buoyed by a flood of speculative capital, looks like “Dubai times 1,000 — or worse,” he frets. He even suspects that Beijing is cooking its books, faking, among other things, its eye-popping growth rates of more than 8 percent.

Bill Gross. "The output gap and the core inflation rate is probably heading downward for the next 12 to 24 months. If that’s the case and if unemployment stays close to 10 percent, then there’s no reason for the Fed to begin to raise interest rates."

Byron Wien. "Because it is significantly undervalued on a purchasing power parity basis, the dollar rallies against the yen and the euro. It exceeds 100 on the yen and the euro drops below $1.30 as the long slide of the greenback is interrupted. Longer term prospects remain uncertain."

Byron Wien. An advance in stocks in the first half will give way to losses as the S&P 500 drops as low as 1,000 before finishing 2010 where it began. As real economic growth climbs toward 5 percent, the Federal Reserve will start boosting interest rates in the second quarter, pushing its target for overnight loans between banks to 2 percent.

George Dagnino, PhD
Editor, The Peter Dag Portfolio. Since 1977
Ranked Top Market Timer in 2009 and 2010 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.

1/8/10

Interesting comments from a famous economist

News. Jan. 8 (Bloomberg) -- Barack Obama ran for president on the promise of “Change We Can Believe In.”

When it comes to the financial crisis, he has instead “only slightly rearranged the deck chairs on the Titanic,” writes Joseph E. Stiglitz in “Freefall,” his unsparing new account of the meltdown and its aftermath.

Stiglitz, a Nobel Prize-winning economist, is perhaps the closest thing we have to John Maynard Keynes.

My point. We have bigger banks, more government, soaring deficits, more wars (Yemen) and an economic still on the brink of disaster. Was this the change we were promised and hope for?

George Dagnino, PhD
Editor, The Peter Dag Portfolio. Since 1977
Ranked Top Market Timer in 2009 and 2010 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.

1/7/10

Bullish signs?

This chart (click on the chart to enlarge it) shows a superb bullish configuration (as we mentioned several times in past posts).

The bank index is strong, very strong. It closed up 2.61% today in a mixed market. What is impressive is that it remains well above a rising trendline and broke on the upside a declining one.

The broad market needs the strength of the financials for the next leg up. Let's hope so.

George Dagnino, PhD
Editor, The Peter Dag Portfolio. Since 1977
Ranked Top Market Timer in 2009 and 2010 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.

1/6/10

Europe's problems

Greece, Italy, Spain, the UK and other countries in Europe have huge fiscal problems. These problems cannot be solved any time soon.

The problems of these countries derive from their low productivity when compared, say, to that of Germany. The high productivity country is bound to crash the low productivity countries in a monetary union.

In the old days, Greece, the UK, and Italy would have devalued their currencies. This is how markets work. Now, however, they cannot do it. The UK might have to do it and forget about its intentions of "belonging" to Europe.

Milton Friedman predicted the EMU will collapse. If not, the price to be paid by the low productivity countries will be huge. See what is happening in the countries listed above.

The US faces, in a much minor scale, the same issues. Ohio, for instance, is a weak dollar area when compared to NY or CT. This is the reason why Ohioans find these states so expensive.

We cannot escape the markets. They always win. A low productivity state or country with its high social costs and low productivity and low income generating industries is bound to pay the price for its inefficiencies.

George Dagnino, PhD
Editor, The Peter Dag Portfolio. Since 1977
Ranked Top Market Timer in 2009 and 2010 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.

1/5/10

A bullish trend

This chart shows a bullish trend (click on the chart to enlarge it).

Rising commodities have been the backbone of the bull market in 2003 and now. I am watching their trend carefully.

George Dagnino, PhD
Editor, The Peter Dag Portfolio. Since 1977
Ranked Top Market Timer in 2009 and 2010 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.

It is coming

News. Dec. 31 (Bloomberg) -- Li Nan has real estate fever. A 27- year-old steel trader at China Minmetals, a state-owned commodities company, Li lives with his parents in a cramped 700- square-foot apartment in west Beijing.

Li originally planned to buy his own place when he got married, but after watching Beijing real estate prices soar, he has been spending all his free time searching for an apartment. If he finds the right place -- preferably a two-bedroom in the historic Dongcheng quarter, near the city center -- he hopes to buy immediately. Act now, he figures, or live with Mom and Dad forever. In the last 12 months such apartments have doubled or tripled in price, to about $400 per square foot.

My point. It could take China on its knees. Yes, the world still has a few more problems to solve.

I do not want to sound bearish. Just realistic. Pointing the facts.

George Dagnino, PhD
Editor, The Peter Dag Portfolio. Since 1977
Ranked Top Market Timer in 2009 and 2010 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.

We are not out of the woods yet

Newws. Jan. 4 (Bloomberg) -- Homeowners with the best credit are the next big risk for the U.S. housing market.

An increase in mortgage defaults among prime borrowers in 2009 is likely to accelerate this year, slowing the real estate recovery even as Americans become more optimistic about the economy, said Robert Shiller and Karl Case, the economists who created the S&P/Case-Shiller Home Price Index.

My point. We are still living in a bubble economy. We need to play the game carefully, very carefully.

George Dagnino, PhD
Editor, The Peter Dag Portfolio. Since 1977
Ranked Top Market Timer in 2009 and 2010 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.

1/4/10

Confused -- where do we stop?

Hillary Clinton:"Yemen is a threat to regional stability".

We are in Iraq, Afghanistan, Pakistan, and now Yemen. I am really confused. Please help me understand.

The Bush doctrine was that if they are a threat they are our enemies. It looks like this administration is adopting the same doctrine. When and where do we stop?

What happened to putting people to work? Do you remember when they met last month tying to figure out how to create jobs?

It looks like a rising market makes us forget all these "mundane" issues.

Enjoy!

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.

A bullish pattern

Excellent start of the year.

I watch the bank index (click on the chart to enlarge it) to check whether or not banks are solving their problems. If they do, it should be a bullish sign for the markets and the economy.

I have shown this chart before. The trend lines suggest the path of minimum resistance for the bank index is up. This is a very bullish sign -- if it continues.

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.

1/2/10

Gold -- interesting patterns

The chart of gold offers interesting price-volume patterns (click on the graph to enlarge it).

The first pattern. Bottoms took place on low volume -- a sign investors lost their appetite for the metal (see green arrows).

This second pattern is typically followed by a strong rise in prices, ending with a spike accompanied by above average volume close to the market top (see red arrows).

This price-volume action does not necessarily mean gold is about to collapse. It could suggest gold is entering a period of consolidation of several months -- as it happened from March 2008 to August 2009.

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.