Peter Dag & Friends: September 2010

9/29/10

It is crazy

I was watching the news on Bloomberg TV about the strikes and revolt in Europe.

People are burning cars, red flags are flying, windows are crashed. It is a sense of revolt or, should I say, revolution.

This is the end of the line. This is happening. These are not wild guesses.

Why no one explains. Why no one educates. Why no one cares!

Power groups have asked. Politicians have given without considering the consequences. Their objective is to remain in power. To control the wealth of the country.

Now things are unraveling. Do we understand what is happening? It is absolutely crazy no one explains that governments cannot give if people do not produce the wealth to pay for it.

Borrowing is not the answer because the markets always win. And they are. They always will. But the people do not know. They need to know. Who has the courage to explain?

George Dagnino, PhD
Editor, The Peter Dag Portfolio. Since 1977
Ranked best market timer in the 12 and 6 months ending 8/20/10 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.

The markets always win

Sept. 29 (Bloomberg) -- Spanish workers disrupted transport and television broadcasts in the first general strike in eight years as demonstrators marched in a dozen European cities against government spending cuts.

More than 100,000 protesters descended on Brussels before a meeting between union members and European Commission President Jose Barroso, organizers said. In Athens, rail, communications and port workers struck. Police in Dublin made an arrest after a truck damaged the front gates of the parliament building.

My view. The markets always win. The politicians give us what we want so that they can stay in power. But if we do not produce the wealth to pay for the nice programs we receive, the markets force us to give the money back (cut the programs).

People protest. But they did not deserve the lavish gifts in the first place. No one is at fault. It is just human greed at work to achieve wealth and power.

The pendulum is swinging back.

George Dagnino, PhD
Editor, The Peter Dag Portfolio. Since 1977
Ranked best market timer in the 12 and 6 months ending 8/20/10 by Timer Digest

9/28/10

Depressing news from the Financial Times

The Conference Board today released its monthly report on consumer confidence, showing a plunge in September from 53.2 to 48.5, its lowest level since February. Meanwhile, the Business Roundtable also published its quarterly CEO outlook, and many American business executives expressed caution about hiring and investing.

Bond spreads reached 453bp for Ireland and 441bp for Portugal in trading today - higher than Greek bond spreads were in late April, just before they headed toward 800bp.

More fuel on the flames of the “currency war” from Brazil: Henrique Meirelles, its central bank governor, warned on Tuesday that his country “is not going to pay the price” for economic imbalances driving forex markets

This is terrible news. Confidence is sagging in the USA. Serious credit problems in Europe. Currency issues in Latin America and Asia.

With all these crises the market has to go up. Central banks will have to keep printing money to keep the global economy afloat. Let's hope so.

George Dagnino, PhD
Editor, The Peter Dag Portfolio. Since 1977
Ranked best market timer in the 12 and 6 months ending 8/20/10 by Timer Digest

My students made fun of me when ...

... I was saying that all prices move in the same direction and at the same rate (eventually).

This chart proves my point (click on the chart to enlarge it). Gold and agricultural commodities are moving up. It is not the weather or some stupid idea concocted by Wall Street. Prices of all commodities are rising. Copper, gold, wheat, corn,.... it is not China, or the weather. They are not rising all at the same time, but they will keep rising. Until when?

The answer to this question is given in a simple way in the recent issue of The Peter Dag Portfolio.

George Dagnino, PhD
Editor, The Peter Dag Portfolio. Since 1977
Ranked best market timer in the 12 and 6 months ending 8/20/10 by Timer Digest

Food for thought

Forget about all the hysteria about gold.

Gold is a commodity. GLD (ETF for gold) is the best proxy for a commodity index.

GLD is rising like all other commodity indexes because of the easy monetary policy of the global central banks.

George Dagnino, PhD
Editor, The Peter Dag Portfolio. Since 1977
Ranked best market timer in the 12 and 6 months ending 8/20/10 by Timer Digest

European financial problems

News. Irish bond yields rose to a record against German bunds yesterday and Portugal’s borrowing costs also increased as the countries struggled to rein in their budget deficits. Reports today are forecast to show declines in German prices, French spending and U.S. consumer confidence.

It looks like the problems in Europe are far from being solved. This is still an issue overhanging the markets.

George Dagnino, PhD

Editor, The Peter Dag Portfolio. Since 1977

Ranked best market timer in the 12 and 6 months ending 8/20/10 by Timer Digest

9/27/10

Food for thought

Milton Friedman's question. Where does the government get the money it spends on roads?

From us, of course. Can therefore the government create demand? Stimulate the economy?

They favor some power groups relative to others. They take money from some to give to others. Does this public intervention create growth?

Milton Friedman did not think so.

George Dagnino, PhD
Editor, The Peter Dag Portfolio. Since 1977
Ranked best market timer in the 12 and 6 months ending 8/20/10 by Timer Digest

9/26/10

Observations

I enjoy traveling by train in Europe. I was in Venice—for business, of course—and I needed to go to Rome. A 300-mile trip. If I were in the US, I would have chosen to travel by air without hesitation. Renting a car in Italy is expensive. Besides, gasoline prices are outrageous in Europe. The train was the best option.

In just 4 and a half hours I went from Venice to downtown Rome. The trip was fast at close to 100 miles an hour. They are now designing trains that would travel at 350 kilometers per hour (220 miles per hour). The train was very comfortable, clean, and the wide windows allowed me to see the picturesque Italian countryside. The train was flying, cushioned by the latest technologies. And the price was right—less than 100 dollars.

I know what you are thinking—the socialist regimes in Europe are subsidizing trains and most infrastructures. I agree with you. However, we in the US are not much different from the Europeans.

We spend a lot of money on building freeways, which are mostly inadequate. Studies have been made suggesting that increasing road capacity does not alleviate traffic jams. Yet, federal and state governments continue to build new ones and widen old ones.

Gasoline prices are the lowest in the world in order to encourage us to travel by car. In other words, the car industry is heavily subsidized in more ways than one. In the US, cars have been chosen as the main mode of transportation, while trains have been chosen in Europe.

Airline delays are a common fact. When I fly, I leave early, knowing I might miss my connections due to the long, frustrating delays.

Yet, when we talk about trains in the US we become “free market” fanatics. There is no doubt that the government must subsidize this mode of public transportation. However, think about the advantages. At 200 miles per hour one can travel 400 miles in just two hours, downtown to downtown. At this speed and comfort trains would become great competition to cars and airlines. There is no need to wait at the airport for connections to downtown, baggage claims, lost suitcases, etc.

Why don’t we encourage this mode of transportation? My guess is that there is too much pressure on keeping things the way they are. The airline and auto industry enjoy the many benefits of a monopoly with the protection of our government and in the name of “free market”.

(This "Observations" appeared in the 2/5/01 issue of The Peter Dag Portfolio)

George Dagnino, PhD
Editor, The Peter Dag Portfolio. Since 1977
Ranked best market timer in the 12 and 6 months ending 8/20/10 by Timer Digest

9/25/10

More government oversight

News. As gold tops $1,300 an ounce, lawmakers in Washington are aiming to ensure that consumers don't get trounced by bad gold deals.

A House bill would arm consumers with more information about gold trading. Gold dealers' sales representatives would have to disclose to consumers the purchase price, melt value and the resale value of the coin or bullion they are buying.

My point. What aboout corn, copper, ethanol, .....? Our protectors in action. Don't you feel safer?

George Dagnino, PhD
Editor, The Peter Dag Portfolio. Since 1977
Ranked best market timer in the 12 and 6 months ending 8/20/10 by Timer Digest

9/24/10

Up, up, and away?

The S&P 500 moved above the 1120 resistance level (click on the graph to enlarge it). It could very well be that my post of 9/21 is correct.

Someone else believes it is possible. Just click here.

George Dagnino, PhD
Editor, The Peter Dag Portfolio. Since 1977
Ranked best market timer in the 12 and 6 months ending 8/20/10 by Timer Digest

9/23/10

Not a pretty picture

This is a very weak expansion (click on the chart to enlarge it). If you want to call it this way.

George Dagnino, PhD
Editor, The Peter Dag Portfolio. Since 1977
Ranked best market timer in the 12 and 6 months ending 8/20/10 by Timer Digest

News from Ireland

News. Ireland failed to emerge from recession after its economy contracted in the second quarter, putting further pressure on the country’s government to deal with its struggling banks. The Central Statistics Office said on Thursday that gross domestic product fell by 1.2 per cent in the three months to the end of June. This compares with growth of 2.2 per cent in the first quarter.

My point. Credit crises cause dismal economic conditions. It happens to small and big economies.

George Dagnino, PhD
Editor, The Peter Dag Portfolio. Since 1977
Ranked best market timer in the 12 and 6 months ending 8/20/10 by Timer Digest

Technical patterns

The S&P 500 may have broken above 1120 (click on the chart to enlarge it). This is good news. 1120 is an important resistance level.

What bothers me is that such breaks are usually accompanied by much higher volume. It is not happening.

George Dagnino, PhD
Editor, The Peter Dag Portfolio. Since 1977
Ranked best market timer in the 12 and 6 months ending 8/20/10 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.

9/22/10

A different view. Some thoughts on the players of the current crisis.

...and now read this artiole. Just click here.

George Dagnino, PhD
Editor, The Peter Dag Portfolio. Since 1977
Ranked best market timer in the 12 and 6 months ending 8/20/10 by Timer Digest

9/21/10

So?

News from FT. The Federal Reserve’s latest monetary policy statement has just been released, and the signal seems to be that the central bank is gearing up for another round of quantitative easing.

Whereas at the last meeting on August 10 officials simply said they would employ their tools “as necessary” to promote economic recovery and price stability, they went further this time, saying the Fed was “prepared to provide additional accommodation if needed”.

My point. I guess they are ready to print more money even if the banks are going to keep it at the Fed. Stocks and bonds, however, seem to like the idea. Oops, I forgot, and gold.

George Dagnino, PhD
Editor, The Peter Dag Portfolio. Since 1977
Ranked best market timer in the 12 and 6 months ending 8/20/10 by Timer Digest

Don't you feel good now that we have it? Shouldn't we be worrying about more important issues?

News. WASHINGTON — The woman President Barack Obama has installed to set up a new consumer protection agency says she won't back down in the face of business resistance.

Obama named Warren a special adviser last week and tasked her with setting up the new agency to look out for consumers in their dealings with banks, mortgage companies and other financial institutions.

My point. This kind of ideas are dangerous because they sound like "us" against "them". It is a challenge to the common sense of the American people.

George Dagnino, PhD
Editor, The Peter Dag Portfolio. Since 1977
Ranked best market timer in the 12 and 6 months ending 8/20/10 by Timer Digest

What makes this country great

We talk about the problems. Economic problems. Social problems. Financial problems. The issues eventually surface and people talk about them. Businessmen make suggestions and recommendations.

What really impressed me in these 40 years in this country is that eventually common sense prevails. People have it. People know what it is.

In Italy and other countries in Europe the newspapers are full of articles about the positioning of various politicians. But you do not know what the issues are. You do not know what they are planning to do. It is always about "coalitions". But the populace does not know if their leaders are solving the problems of the country. My Italian friends across the pond know what I mean.

Maybe the best way to control the people is to keep people ignorant on the issues facing the country.

Not here. Not in the USA. This is a major advantage we have. Do not forget it. Make sure they listen to you.

George Dagnino, PhD
Editor, The Peter Dag Portfolio. Since 1977
Ranked best market timer in the 12 and 6 months ending 8/20/10 by Timer Digest

The market has to go up .....

News. As its investment portfolio was losing nearly a quarter of its value, the country's largest public pension fund doled out six-figure bonuses and substantial raises to its top employees, an analysis by The Associated Press has found.

CalPERS' plunging value came as stock values tumbled around the world, the state's economy suffered its worst decline in decades and basic state services faced severe budget cuts.

My point. Maybe, just maybe, the market has to go up to save all the deeply under water and lavish state pension funds.

Do not fight the Fed. Do not fight easy money.

Have a good day!

George Dagnino, PhD
Editor, The Peter Dag Portfolio. Since 1977
Ranked best market timer in the 12 and 6 months ending 8/20/10 by Timer Digest

9/20/10

More technical patterns

What I find really fascinating is that many stocks, sectors, indices are all struggling to go through multi-month resistance levels.

The CRB index is one of these markets. It has reached a major resistance level (click on the chart to to enlarge it.)

George Dagnino, PhD
Editor, The Peter Dag Portfolio. Since 1977
Ranked best market timer in the 12 and 6 months ending 8/20/10 by Timer Digest

Technical patterns

The S&P 500 broke decisively through the 1120 resistance level (click on the chart to enlarge it).

It could be an important change in the momentum for the market. The bank index has also shown signs of life. But volume was low. Usually, important breaks take place with strong and above average volume.

Stocks could keep rising with low volume, however. Then, as in April, volume will pick up and the market reach a top.

This is a typical pattern. Important bottoms and tops are flagged by above average volume.

IWM, the Russell 200 index of small cap stocks, is still below the June and July peaks in spite of today 2.78% gain.

As usual, we will follow these developments with our proprietary indicators in The Peter Dag Portfolio.

George Dagnino, PhD
Editor, The Peter Dag Portfolio. Since 1977
Ranked best market timer in the 12 and 6 months ending 8/20/10 by Timer Digest

Off the cuff

The market has been rising with very low volume.

Why? Where are the big players? Are they waiting for the market to rise and then start selling? I hope not. This rally is great.

GLD and JNK are very strong ...with everything else.

George Dagnino, PhD
Editor, The Peter Dag Portfolio. Since 1977
Ranked best market timer in the 12 and 6 months ending 8/20/10 by Timer Digest

9/19/10

Interesting comments by El-Erian

From FT. Market measures of risk for peripheral European countries (Greece, Ireland, Portugal and Spain) are at or near danger levels… despite exceptional support from the ECB, EU and IMF, and despite the implementation of adjustment measures on the part of some.

The failure to reduce risk spreads means that the public sector bailout is not working. Rather than provide assurances of better times ahead and, thus, encourage new investments, ECB/EU/IMF support funding is being used by existing investors to exit their exposures to the most vulnerable peripheral European countries.

My point. If he is right about European credit risk "near danger levels' we may have volatile markets in the next few weeks.

Time will tell.

George Dagnino, PhD
Editor, The Peter Dag Portfolio. Since 1977
Ranked best market timer in the 12 and 6 months ending 8/20/10 by Timer Digest

Food for thought

Do you realize that...

... the market finished in 1982 where it was in 1969?

... the market rose at a torrid pace from 1982 to 1998?

,,, the market is now close to were it was in 1998?

In other words, since 1969 (last 41 years) the market went up in only 16 years!

What is the lesson? Flexibility in managing your money. This will be the subject of my next book. Meanwhile, you can keep track of my thoughts on the subject in The Peter Dag Portfolio.

Have a nice week-end.

George Dagnino, PhD
Editor, The Peter Dag Portfolio. Since 1977
Ranked best market timer in the 12 and 6 months ending 8/20/10 by Timer Digest

9/18/10

Observations

Deep inside me I am a gambler. I played roulette in Europe regularly. I used to play at least eight hours each time I went to the casino. I stopped after several months, and I was still ahead.

Entrepreneurs are professional gamblers. They find an opportunity, they evaluate the odds of making a fair return, and then they play the game. It is a difficult, highly intellectual and complex game. They are wealthy because the game requires many skills.

I watched with intense interest the latest “deal” of my friend SNS. He recognized an opportunity and moved quickly to take advantage of it, with all its complexities. He knew the steps. He honed them in a special program at Harvard. This is what he did.

His gut feelings told him he had to buy a small plaza, totally ignored by the owners. Buying was not simple. Lawyers, negotiations, city regulations, accountants, architects, financing – many activities to coordinate. Just to get started. Then decide: go or not go.

Initially he thought to lease the stores. The business concept, however, changed. The plaza had to become a “happening.” The marketing aspect of the deal evolved.
The plaza appeal had to be food stores. Barbecue ribs, an upscale wine bar, a café, a regular bar. Things became much more complicated. It had to be a cultural happening. New businesses will come later.

Sculptures adorn the sidewalk. A gigantic yellow sunflower dominates the entrance. A real touch of class.

The storeowners had to be enticed to rent. SNS went on a selling spree to sell the concept. New deals, new opportunities, new people. The plaza, meanwhile, was slowly being renovated.

SNS continued to perform a balancing act: attract the appropriate businesses, provide an artistic décor, go to trade shows to understand the businesses he invested in, financial objectives. Stress and mental power.

His vision will produce unique returns. Only a real entrepreneur could have achieved this exclusive feat.

(This Observations appeared on the 1/23/06 issue of The Peter Dag Portfolio).

George Dagnino, PhD
Editor, The Peter Dag Portfolio. Since 1977
Ranked best market timer in the 12 and 6 months ending 8/20/10 by Timer Digest

9/17/10

You must listen to this conversation

This is a fascinating conversation and exchange of ideas. Click here to listen to this debate.

The people in the debate are very smart and exchanging some very smart ideas. The implications of what they are saying are important for all of us in the management of our money.

Relax, listen carefully, and read between the lines. Carefully.

George Dagnino, PhD
Editor, The Peter Dag Portfolio. Since 1977
Ranked best market timer in the 12 and 6 months ending 8/20/10 by Timer Digest

9/16/10

The market is not convinced about the financial health of the banking system.

This is an "ugly" chart (click on the chart to enlarge it).

Gold broke on the upside (see previous post). The bank index, however, keeps sagging.

Are the two trends related?

George Dagnino, PhD
Editor, The Peter Dag Portfolio. Since 1977
Ranked best market timer in the 12 and 6 months ending 8/20/10 by Timer Digest

Technical patterns

Gold has broken above an important resistance level (click on the chart to enlarge it).

It looks like the trend for the precious metal is up.

I noticed that many sectors, including the overall market, are still struggling to move above the June and August highs. Will they follow the same pattern as gold?

Let's hope so.

George Dagnino, PhD
Editor, The Peter Dag Portfolio. Since 1977
Ranked best market timer in the 12 and 6 months ending 8/20/10 by Timer Digest

9/14/10

For your info

....., nearly every September since 1917 (except 1954, 1964, 1968 and 1973) has had a correction with an average loss of 4.5%. As the market trends closer to the upper end of its trading range, near resistance, and signs of an overbought market continue to strengthen, the likelihood of a typical September correction is also increasing.

These comments were taken from an article by Hirsh $ Mistal. Click here to read the complete study.

George Dagnino, PhD
Editor, The Peter Dag Portfolio. Since 1977
Ranked best market timer in the 12 and 6 months ending 8/20/10 by Timer Digest

An interesting article by Amity Shlaes

Opinion. "A high quality, economically sensible tax cut. That’s the impression Barack Obama wants to convey about the business investment tax-credit plan the president announced last week."

"In reality, Obama’s idea isn’t such a noble idea. Because the investment tax credit has been around in different forms since the 1950s, it’s possible to examine the record. When you do, you find not great success but uneven performance."

My Point. Politics as usual. Power groups against power groups. Some win, some lose.

To read the complete article by Amity Shlaes click here.

George Dagnino, PhD
Editor, The Peter Dag Portfolio. Since 1977
Ranked best market timer in the 12 and 6 months ending 8/20/10 by Timer Digest

Interesting

News. NEW YORK -- NEW YORK (MarketWatch) -- The Federal Reserve Bank of New York said on Monday that it will buyback about $27 billion in Treasury debt through early October as part of officials' pledge to reinvest cash from maturing mortgage-backed securities and housing agency debt back into the bond market to support the economic recovery. The Fed has purchased $17.6 billion in Treasurys since announcing its plan a month ago, when it said it would buy about $18 billion, according to Morgan Stanley. After the announcement, the broader bond market remained higher, pushing yields down. Yields on 10-year notes fell 5 basis points to 2.75%.

My point. Printing money is usually good news.

George Dagnino, PhD
Editor, The Peter Dag Portfolio. Since 1977
Ranked best market timer in the 12 and 6 months ending 8/20/10 by Timer Digest

9/13/10

Technical patterns

And now?

We showed this chart several times in the past few weeks (click on the chart to enlarge it).

The S&P 500 has been trading between 1040 and 1120 since May. Is the market ready to break on the upside?

Check our indicators in The Peter Dag Portfolio.

George Dagnino, PhD
Editor, The Peter Dag Portfolio. Since 1977
Ranked best market timer in the 12 and 6 months ending 8/20/10 by Timer Digest

Finally!

News. As lawmakers return from a month-long break this week, Democrats aim to pass their small-business bill out of the Senate by the end of the week and send it to the House for final approval.

My point. It took two years for Congress to finally realize that the health of small business has been and is vital for our country. It looks like finally they are listening.

If business is not healthy it cannot generate the wealth to pay for the great social programs we all seem to like.

Could this event be bullish for the market?

George Dagnino, PhD
Editor, The Peter Dag Portfolio. Since 1977
Ranked best market timer in the 12 and 6 months ending 8/20/10 by Timer Digest

9/12/10

Observations

I would like to propose a toast to all of you, my readers and my clients. You see, I love my job, I love the pressure, I love the idea that it is my decisions and my views that count.

I do not have to rely on anyone. I am it. It is like when I used to play tennis championships. I had to figure out how to win.

I work in a large room, with large windows on three sides and with the view of a lake. Seven anthurium plants constantly grow wonderful red flowers.

I would like to salute some special and unique people I knew.

Peter, the ultimate classy salesman, asked me many years ago to talk to his clients about investing. Then he moved to Colorado. He and his wife, a handsome couple, were often on magazines advertising retirement resorts. He called often. We skied together the glorious mountains of Vail and Summit. Managing his money was an honor.

Rich gave me the responsibility to manage $4 billion and to propose the strategy for $3 billion corporate debt. He trusted me and relied on me after I proved I deserved it. He was gentle and shrewd. But he never failed to make me feel comfortable when I had to make tough decisions. He often let bankers know I was “the brain”.

John was a gentle intellectual who enjoyed good food. How to forget the 3 hour lunches we had at the Black Pearl in Newport, RI? I went to see him often to discuss his portfolio. We clicked. We decided to meet in Rome, so I could show him where I grew up. He showed me the restaurants he knew so well. What a treat! It was great fun….just three days. John, Lagavulin is a great scotch!

The client I remember with great affection is Mr. B, a businessman from Michigan. He called me weekly to find out his balances. He wanted to know my strategy and what I was planning to do. We talked about business and the outlook for the economy and how it could affect his business. At the end of the conversation he used to tell me with his hoarse voice: ”OK kid, keep up the good work.” How can you not love the old man.

I salute you all. Thank you for your trust.

(This "Observations" appeared in the issue of 1/21/08 of The Peter Dag Portfolio.

George Dagnino, PhD
Editor, The Peter Dag Portfolio. Since 1977
Ranked best market timer in the 12 and 6 months ending 8/20/10 by Timer Digest

Interesting data

Always interesting data from Birinyi (click here)

It looks like the odds, according to the data, favor a firm September (click on the chart to enlarge it).

George Dagnino, PhD
Editor, The Peter Dag Portfolio. Since 1977
Ranked best market timer in the 12 and 6 months ending 8/20/10 by Timer Digest

9/10/10

Global slowdown?

9/9/2010 - The world economic recovery may be slowing faster than previously anticipated, according the OECD’s latest Interim Economic Assessment. Growth in the Group of Seven countries is expected to be around 1½ per cent on an annualized basis in the second half of 2010 compared with the previous estimate of around 2½ per cent in the OECD’s May Economic Outlook.

My view.The global economy is not out of the woods yet. China is too small to have any impact.

These trends are probably going to have a profound impact on the asset allocation of long-term investors.

George Dagnino, PhD
Editor, The Peter Dag Portfolio. Since 1977
Ranked best market timer in the 12 and 6 months ending 8/20/10 by Timer Digest

9/9/10

Technical patterns

The market keeps trading between two important levels: 1040-1120 (click on the chart to enlarge it).

The S&P 500 is now close to 1120. What's next?

George Dagnino, PhD
Editor, The Peter Dag Portfolio. Since 1977
Ranked best market timer in the 12 and 6 months ending 8/20/10 by Timer Digest

A honest answer

From an article by Kenneth Rogoff. The honest answer – but one that few voters want to hear – is that there is no magic bullet. It took more than a decade to dig today’s hole, and climbing out of it will take a while, too. As Carmen Reinhart and I warned in our 2009 book on the 800-year history of financial crises (with the ironic title “This Time is Different”), slow, protracted recovery with sustained high unemployment is the norm in the aftermath of a deep financial crisis.

My point. In spite of all the stimulus plans touted by the Administration and all the campaign rhetoric, my sense is that the economy will have to heal slowly. We have to recognize that we cannot spend more than we make. The markets will force us to embrace the idea that an educated society is the best solution to our long-term concerns.

George Dagnino, PhD
Editor, The Peter Dag Portfolio. Since 1977
Ranked best market timer in the 12 and 6 months ending 8/20/10 by Timer Digest

Mixed signals

News. Sept. 8 (Bloomberg) -- The Federal Reserve said the U.S. economy maintained its expansion while showing “widespread signs of a deceleration” in mid-July through the end of August, according to a survey by 12 regional Fed banks.

My point. Will the Fed be forced to print more money in spite of what is happening in Congress? It may even be good news for stocks.

George Dagnino, PhD
Editor, The Peter Dag Portfolio. Since 1977
Ranked best market timer in the 12 and 6 months ending 8/20/10 by Timer Digest

9/7/10

Observations

I wanted to write about more serene subjects. The markets in Asia, however, are sagging sharply and many thoughts are crossing my mind and I decided to write them down on this ML King day.

What comes to mind are those friends and professionals who think that the best strategy is “buy and hold”. It is easy to implement and does not require much work. It is great when the market rises.

Now that the global markets are plunging and their capital has eroded they have doubts about the validity of this strategy. Of course they can average down or use some other nonsensical approach. But where is the money coming from to average down?
Now they have to deal with two factors: reducing risk (or volatility of returns) and raising cash. They are two facets of the same coin.

The next issue investors have to deal with is the strong belief that the stocks they purchase will rise forever. Maybe.

In 2000 I lost clients because I dared to sell stocks of companies such as Cisco, Enron, and a host of glamorous technology stocks.

Now, most investors believe that commodities are bound to rise forever, that food is becoming a scarce resource, that ethanol will save us from Opec’s monopoly, and that foreign markets will continue to outperform the US market.

If you have a good reason to buy you must also have a solid reason to sell. My point is that prices do not go up on a straight line and assets that are strong today such as technology in the 1990s and commodities in the 2000s will correct if the conditions that made them appreciate change. And they are changing right now.

I believe economic and credit conditions and the severity of turning points dictate which assets outperform. When we make money we forget that managing risk should be our concern and that the choice of assets changes with the changes in business cycle and credit conditions. Mental flexibility is the name of the game.

(This Observations was orginally published in The Peter Dag Portfolio on 2/4/08)

George Dagnino, PhD
Editor, The Peter Dag Portfolio. Since 1977
Ranked best market timer in the 12 and 6 months ending 8/20/10 by Timer Digest

Smile...it may be a rough September

How to use iPad
1) Remove iPad from packaging. Emit long "Oooooohhhh".
2) Turn iPad on and show it to others. All say "Oooooohhhh".
3) Put iPad down and get back to work.
4) When new person comes, repeat step 2-3 ad infinitum.
5) When everyone has seen iPad, put it in cupboard.

Things you can't do with iPad
1) Make phone calls
2) Make carrier pigeon calls
3) Get a girlfriend
4) Fit it in any pocket currently made by clothing manufacturers around the world

Things you can do with iPad
1) Toss it in your Crumpler bag as you ride your Vespa to a local café to meet your graphic designer/actor friends. Show them your latest short film which is totally going to get into Sundance and finally let you escape from your job in advertising.
2) Watch TV and surf the web when trapped under a heavy object and unable to get to your iPhone or TV.
3) TBA

Frequently Asked Questions
1) Why is it so big?
So many of our customers have told us that they love the portability of iPhone but that whenever they use it to watch video or play games they can't actually see anything. That's why we made iPad.
2) Why is it so small?
So many of our customers have told us that they love the clarity and sharpness of AppleTV but that they can't carry it around in a really really big pocket. That's why we made iPad.
3) But what if there aren't videos and applications that are too big for iPhone and too small for AppleTV?
So many of our customers will buy anything that Apple makes, even if they don't need it. That's why we made iPad.
4) Am I a nerd?
No, you are a wanker. Nerds still use PCs because they like to use Linux.
5) Can I call Apple a bunch of greedy c%$*s in an iPhone app?
No you can't, our system will automatically replace your letters with %$*.
6) Is Steve Jobs the Antichrist?
No, the Antichrist owns shares in Microsoft and cannot work for us due to a conflict of interest.
7) Is this question 7?
Yes.
8) Can I read books on iPad?
In theory yes, but most people who are tech-savvy enough to use iPad no longer read books.
9) Can I make calls on iPad?
No, iPad is like an iPhone, but it can't make calls. So it is like having an iPhone with Optus.
10) So it's just like iPod touch?
No, it's bigger in two ways - size and price.
11) Do people frequently ask you "Is this question 7"?
No.

(Source: click here)

It is not over

News. Sept. 6 (Bloomberg) -- Greece still faces a “substantial” default risk as insolvency prevents the nation from repaying its debt when its bailout program expires in three years, Pacific Investment Management Co. fund manager Andrew Bosomworth said.

It look like we are not yet out of the woods. Something to keep in mind. There is is still substantial risk. Ireland is next, according to the bond market.

George Dagnino, PhD
Editor, The Peter Dag Portfolio. Since 1977
Ranked best market timer in the 12 and 6 months ending 8/20/10 by Timer Digest