Peter Dag & Friends: June 2011

6/30/11

My concern?

What is bothering me is that commodities keep declining (click on the chart to enlarge it).

The history of the business cycle shows that commodities decline when the economy slows down.

If this is true, this trend may have important implications for profits, risk assets, and bond prices.

To find out more about the strategy I recommend based on these trends I am inviting you to subscribe to The Peter Dag Portfolio by clicking here.

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.

Greece and beyond

(Source: BBC, Bloomberg, Der Spiegel)Greek Prime Minister George Papandreou won approval for his 78 billion euro ($113 billion) package of budget cuts and asset sales aimed at meeting European aid requirements and will face a second vote on the implementation of the plan today. Data today may show European consumer prices climbed in June, fueling the prospects of an interest-rate increase next week, while South Korea said industrial production rebounded from a seven-month low.

Reuters is publishing pictures of police clashing with protesters during an anti-austerity rally in Athens, as protesters attempt to block streets leading to the parliament.

A new plan by French banks could lead to a breakthrough in efforts to create a second bailout for debt-stricken Greece after German banks also signaled their willingness to participate. German Finance Minister Wolfgang Schäuble has reportedly scheduled meetings with the country's top bankers to discuss the scheme.

This is what happened and what will happen. In a nutshell.

The banks gave money to the Greek politicians.

The Greek politicians gave the money to the citizens and used it for their pet projects.

The Greeks forgot that they had to pay the interest on the money given to them by the German, French, .... banks.

They went to the beach drinking ouzo and having fun.

Now they are asked to give the money they spent and do not have anymore....so they protest in the streets.

Who is at fault? Everybody! The banks because they lent money to a country that could not pay them back. They knew that.

The politicians because they gave to the people benefits that they could not afford. But they gave them to be re-elected.

The people because they asked for benefits that did not make any economic sense.

Who is going to pay? The people, of course. They will be taxed and benefits will be cut. And they will feel much poorer because all the money they received was fake money anyway.

The result? The banks will own Greece.

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.

6/27/11

The business cycle works

U.S. consumer spending was unchanged in May for the first time in almost a year, likely reflecting a plunge in auto sales, according to a government report on Monday, that also showed a build-up in underlying inflation pressures. (Source:CNBC)

Rising inflation and commodities have reduced consumers' purchasing power.

Now consumers are spending less .....until inflation and commodities decline enough to improve consumers' purchasing power.

This is the reason we are having a slowdown.

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.

Observations

Our European friends. What happened? Did we do anything wrong? I just do not understand them anymore. Or maybe I do, and I am afraid of the answer.

What I am referring to is how the world, and especially our European friends and allies, reacted to our response to the 9/11 attack. What did they expect? That we bring flowers to Afghanistan as a sign of peace and love, and slap their hands in one of their caves while sharing with them a puff of their delicious opium? (The Europeans cherish to give flowers to political leaders).

My dear European friends, you do not have a clue of what happened in this country and how deeply we have been wounded. This was an outrageous attack of war! Thousands of innocent people have died. A wonderful city and a country are still shocked and trying to recover from the rage and the pain of what happened on that dreadful day.

The Europeans reacted as if what they saw was a Hollywood production. The difference is that this time real people were paying the price. The blood in the streets was ours. The fear and rage we felt was ours. A country confused and ready to go to war was real. The tears were real. The economic collapse was real. The desolation of New York with most buildings proudly showing the American flag was real. Police and National Guard patrolling the streets as if the city was under siege were real.

Do they understand why we all display our flag on cars, trucks, and homes? We are all sticking together, ready to fight. What do they know about these feelings? The younger generation never had them. Never.

Some said it was an American conspiracy to gain control of the Middle East. Others suggested we did it to protect our energy interests in the region. They forget that their energy source is the one we try to protect. Others protested we were killing innocent civilians. Others suggested we should have approached the issue from a diplomatic viewpoint. My point, from the sense I have from how our European friends reacted, is that they do not have a clue of what really happened to this country.

Maybe this is another way of putting their heads in the sand and move on, trying to ignore the fact that when there is a problem around the world it is always Uncle Sam that comes to the rescue. See, for instance, what happened in the Balkans. Meanwhile they keep bickering on how to make the European Union even bigger.

The deep, hidden resentment they have against us is because they know they will never become the type of economic, military, and financial powerhouse we are. They are too wrapped up in their socialist ideas geared to protect the producer and not the consumer, with their sclerotic business system that produces a 10% unemployment rate.

The only exception to this sad state of affairs is the marvelous response of the English people, ready to go to war with us. With all their forces and training, ready to fight and get their hands dirty, while the other Europeans, with all their incapacity and unwillingness to act, try to pass judgment on what really should be done.

I would have liked to see more enthusiasm and compassion from our European friends. Too bad!

(This Observations appeared in the 12/10/01 of The Peter Dag Portfolio)

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.

6/26/11

Listening to the markets

The chart shows recent trends in various commodity indices. The message of commodities is loud and clear (click on the chart to enlarge it).

Commodities (and bond yields) are sinking. The message? The economy is weakening in a serious way. Why? Because commodities are very sensitive to economic conditions.

Their decline spells bad news for the economy and employment.

Is the Fed ready for QE3?

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 markets always win

Last week's dramatic decision by the US administration to strongarm the IEA into releasing strategic petroleum reserves (of which the US would account for 30 million barrels, or half of the total), is nothing but yet another example of the hobbled and incredibly short-sighted thinking that permeates every corner of the Obama administration. (Source: Zero Hedge)

This is another example of the false illusion of political and monetary leaders to believe they have the power to control the markets.

Commodities and bond yields are tumbling because the economy is in serious trouble.

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.

6/23/11

Early morning thought of the day

Bad news.

The market is down 1.4%. Are the markets blackmailing the Fed. Are the US and European markets trying to force the Fed into a some kind of QE3?

I am going to rely on my indicators.

To find out what they are saying I am inviting you to subscribe to The Peter Dag Portfolio.

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.

6/22/11

Bad news for the President

Fewer than a quarter of people see signs of improvement in the economy, and two-thirds say they believe the country is on the wrong track overall, according to a Bloomberg National Poll conducted June 17-20.

By a 44 percent to 34 percent margin, Americans say they believe they are worse off than when President Barack Obama took office in early 2009, when the U.S. was in the depths of a recession compounded by the September 2008 financial crisis and the economy was losing as many as 820,000 jobs a month. (Source: Bloomberg)

There is no question these are very unusual times. It looks like the world fell in a black hole at the same time. One problem after another. My guess is that it will take a lot of time to fix our problems.

The danger is that people start believing that is the government that must solve our issues. They forget that education, hard work and saving for the future is the only way to self reliance.

Otherwise it is the old socialist formula. And we know the tragic results when there is too much reliance on the state.

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.

6/21/11

Tecnical patterns

Oh well, as I noticed in previous notes. It looks like 1280-1260 is an interesting support range. Let's hope so.

Is the S&P 500 going to race to 1320-1340?

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.

Good news and bad news

Did commodities peak (click on the chart showing several commodity indices to enlarge it)?

Good news. If they did, this is good news for inflation. purchasing power -- in due time -- will increase. Consumers will buy more. The economy will strengthen.

Bad news. The decline in commodities mean the economy is slowing down. This is bad news for employment.

Do you see the trade? More on The Peter Dag Portfolio. Subscribe now!

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.

Thought of the day

This is a crazy idea. No one will ever agree. This is the reason we will experience slow growth for a long time.

Do we want to rejuvenate the economy? Do we want to stimulate the animal spirit of this country and make it the way it used to be?

Break down all the large corporations! Concentration of power has always been a main constraint to economic growth in any country.

As I said, it will never happen. And this is the reason we are following the same path of Greece, Ireland, Spain, Portugal,.....

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.

6/20/11

Opening markets

All asset classes are weak. And when everything is down, bond prices are firm. This time is no exception.

Are the markets trying to force Bernanke's hand? I would not be surprised if they will.

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.

6/19/11

About commodities

June 20 (Bloomberg) -- Funds reduced bullish bets on commodity prices for the first time in four weeks as Greek’s debt crisis spurred speculation that global growth will decline, curbing demand for raw materials.

Oil declined for a second day in New York on speculation a weakening global economy and Greece’s debt crisis will lead to lower fuel demand.

Make no mistake about it. The economy strengthens....commodities rise.

The economy weakens....commodities decline.

If you are a serious investors keep in mind that weather and seasonality and famine around the world may have little or no impact on the trend of commodities.

For more details you are invited to subscribe to The Peter Dag Portfolio.

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.

Good news and bad news

The put-call ratio has reached unusual heights. What does it mean?

Many investors are looking for protection by buying puts (shorting the market). Two implications.

1. Excessive fear is bullish. The market is known to make the majority wrong.
2. This level of fear is seen after the market has had a major decline. But we did not have seen one yet. Does it mean the market is still vulnerable?

This is one gauge we follow closely as well as many other proprietary indicators. We invite you to review them in each issue of The Peter Dag Portfolio. Why not subscribe now?

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.

Everybody is guilty

A crumbling government, protests on the streets of Athens and ongoing European disagreement on another bailout package: Greece's debt crisis is on the verge of spiralling out of control. German commentators say that the country's politicians have failed their people.(Source: Der Spiegel)

Everybody is guilty.

The people, because they asked too many social programs that they did not deserve.

The politicians, because they gave too much to the Greek people, knowing full well they did not deserve it because they were not producing the wealth to repay the loans.

The bankers, because they knew what was going on. Yet they gave the money to the politicians to finance the grotesque Greek social programs.

The problem is that who will have to pay, eventually, is the Greek middle class.

Make no mistake about it. What has been happening in Greece has been happening here too. This is the reason for the catastrophic decline of the dollar since 2004.

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.

6/18/11

Thought of the day

The S&P 500 lost 0.88% since April 1, 1999.

The point? Long-term investing is a fallacious concept. Long-term does not exist. It is an easy selling pitch for those who do not want to work hard to find out how to invest their money.

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.

6/17/11

Some thoughts from Robert Reich

He is a good, solid thinker. We may not agree with him, but here are some thoughts worth listening to. Just click here

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.

6/16/11

Observations

Dealing with risk

Investors I meet around the country have a common trait. They always talk about buying or selling when they ask about their investments. “Should I buy stock XYZ?” “Should I sell stock ABC?” These are the typical issues. In other words, the investment decisions are seen in terms of buy-sell, attractive-unattractive.

Unfortunately we do not live in a yes-no kind of investment world. The nature of the financial markets changes every day. Every day new information becomes available affecting particular stocks and particular assets. What I am trying to say is that risk changes gradually and continuously.

Risk can be looked at as the probability of making money in the current environment. As risk rises, the probability of making money decreases. On the other hand, when risk decreases, the probability of making money increases.

As far as equity investing is concerned, risk rises when the economy strengthens thanks to generous injections of liquidity orchestrated by the Fed. Commodities and short-term interest rates bottom and begin to rise. Inflation is not an issue, but it will be. This was the environment from late 1998 (low risk) to mid 2000 (when risk reached its peak).

As risk falls, the probability of making money steadily increases. The economic and financial environment becomes the mirror image of the one discussed above. The economy weakens, and analysts begin to raise issues such as soft-landing, V-shaped, or W-shaped recession. Commodities and short-term interest rates decline. Inflation subsides, disappearing from the financial radar screen. In the current financial cycle, risk has been declining steadily since early this year and is now very close to a bottom.

What should investors do as the probability of making money changes? The answer is provided by the way poker players play the game. The players always compute in their head the odds of making money. As the game evolves, the odds change, and their bets are always related to those odds. If they believe they are going to win, they gradually increase their bets. On the other hand, if the odds of winning decline, they bet more cautiously and might even fold.

Investors play the same strategy game. They should gradually adjust the exposure to the stock market depending on the odds they have of making money.

(This Observation appeared in the issue of 11/26/01 of The Peter Dag Portfolio)

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.

Question

President Barack Obama warned Tuesday there could be another global financial crisis if the U.S. Congress fails to raise the national debt ceiling. (Source: CNBC)

Instead of campaining around the US and in Puerto Rico and telling us things we know, what is he doing about it? He should lead not Biden.

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.

Thoughts about commodities

All major commodities peaked in April-May. Gold has a different pattern but almost the same return as other commodities ytd.

The point? All commodities show the same turning points at major tops or bottoms.

Why? They are all driven by the same force -- the business cycle.

What about the weather? Nonsense. Just noise.

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.

6/15/11

Thought of the day

Most observers, including myself, feel absolutely fearful, lost, uncertain, lost about what is going on in the markets, in Europe, in China, just about everywhere.

Then I asked myself -- George wait a minute. What are you doing? Isn't this what happens when the market is close to a bottom? You called the top on May 8. Be confident. You will call the bottom correctly. Keep the faith. These are the kind of situations when the smart people make money.

More on 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.

Inflation and the economy

The Labor Department says the Consumer Price Index rose 0.2 percent in May. That's down from April's 0.4 percent increase. Food costs rose 0.4 percent. But energy costs fell 1 percent, the first drop in nearly a year.

In the past 12 months, consumer prices have increased 3.6 percent, the biggest gain since October 2008.

Business cycle history shows quite clearly the higher inflation goes, the more pronounced is the next economic slowdown.

Why? Because of the damage to the consumers' purchasing power.

More details on The Peter Dag Portfolio. Subscribe now by clicking here.

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.

Greece on sale

June 15 (Bloomberg) -- Prime Minister George Papandreou vowed in 2009 to scrap an agreement to sell a stake in Greece’s biggest phone company in a bid to get elected.

This month, forced to raise cash, Greece triggered an option to sell 10 percent of Hellenic Telecommunications Organization SA, known as OTE, to Deutsche Telekom AG. The price: less than one-third of what Europe’s largest phone company paid for shares when it last bought OTE stock in 2009.

.... and the buyer is Germany.

The problem for the Greeks is that now the Germans are going to make them work the Teutonic way, not the Hellenic style.

What would Plato say?

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.

They cannot decide

June 15 (Bloomberg) -- Greek prospects darkened as European bickering risked delaying the next rescue payment and defections from allies weakened Prime Minister George Papandreou.

An emergency session of euro-area finance chiefs in Brussels yesterday failed to break a deadlock on how to enroll investors in a second bailout without triggering a default, casting doubt on funds due from the International Monetary Fund next month.

They talk. They meet. They talk. And they meet again. But nothing is being done.

Politicians are only able to give money away to win votes. They cannot make the tough decisions, however, because there are too many vested interests.

I have said for years that the European Union cannot work. Why? Productivity differentials between countries are too wide. Money will flow to the most productive countries (Northern Europe) and suck away wealth from the unproductive ones.

This is exactly what is happening. I have been there. I lived there. I know how the Italians, Greeks, and Spaniards think. Their culture. Their philosphy of life. But they cannot compete against the Northern European. They are too dfferent.

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.

6/14/11

The meaning of recent data

How to put the growth rate of recent data into perspective.

1. Sales, income, production, employment rise.
2. Commodities, inflation, interest rates rise (because of the stronger economy).
3. Consumers' purchasing power declines (because of rising inflation and interest rates).
4. Sales, income, production, employment decline (because of declining consumers' purchasing power).
5. Commodities, inflation, interest rates decline (because of the slowdown in the economy).
6. Consumer purchasing power rises (because of the decline in inflation and interest rates).
7. Go to 1.

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.

6/13/11

Some loose thoughts on deficits and inflation

Every day for months you hear how inflation is going to soar and bond yields will jump to amazing new highs.

Fine, I understand the rationale. But let me give you another way to look at the issue.

1. Deficits are transfer of wealth from workers to the bondholders.
2. Workers get squeezed.
3. Income collapses once Obama and Bernanke stop giving money away.
4. The economy grows slowly.
5. Inflation cannot rise because the strapped workers will buy less as prices rise, thus sending the economy is a major recession again.
6. Yields cannot rise because they follow the trend of inflation.
7. The case could be made that yields have to decline to the point people can afford to borrow again, which is a level much lower than it is now.
8. Only then will the economy stabilize.

In other words, the deficits are strangling us. In these conditions inflation and long-term rates cannot rise.

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.

Europe is heading toward a break up

June 13 (Bloomberg) -- Greece had its credit rating cut three levels by Standard & Poor’s, which branded the nation with the world’s lowest debt grade and said a restructuring looks “increasingly likely.”

The move to CCC from B reflects “our view that there is a significantly higher likelihood of one or more defaults,” S&P said in a statement today.

Yields are soaring in all European countries in financial danger. Exceptions: yields in Germany, UK and Switzerland are declining.

The countries in Europe are so many cultural and work ethic differences that it is impossible they can coexist.

Maybe this is the reason why the equity markets are so concerned. More details in the next issue of The Peter dag Portfolio. Subscribe now!

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.

6/12/11

Reminder

Large government deficits represent a huge transfer of wealth from us to the bondholders who financed the debt.

I believe this is the major reason for the rising income inequality in any country where this happens.

Furthermore, as wealth becomes increasingly more concentrated in the hands of fewer and fewer power groups, the economy starts growing more slowly. This phenomenon is quite clear in most European countries and Middle East. It is beginning to happen to us as well.

There is no way of escaping this simple yet universal law.

What should a sensible investment strategy be under these conditions? This issue will be discussed in detail beginning with today's Market Update and the following issues of The Peter Dag Portfolio. Why not subscribe now and find out what our indicators are saying? Just click here.

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.

6/10/11

10:56 am S&P 500 1274.84

The market declined below 1280 again. Heading for 1260?

It could be the botom of this ugly correction because stocks are already at oversold levels.

Time will tell. Subscribe now and check the latest reading of our indicators this Sunday on 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.

Thought of the day

Could it be that the American workers are becoming the "new immigrants"?

Companies may soon recognize that there is a large labor force totally not utilized ready to give up some benefits to get a job. It would make our manufacturers more competitive in the global markets.

The outcome could be a renaissance of American manufacturing.

Let's hope so.

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.

6/9/11

You buy bonds for capital appreciation

As you might gather from my recent posts, I am a huge treasury bull who thinks long rates are heading lower, possibly even the 10yr to 2%.(Economic Musings)

The current yield is 2.98%. If yields go down to 2% you can expect a capital gain of approximately at least 25%. Not bad for investing in bonds.

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

It looks like the market has decided that 1280 is a good support level. It is going to be interesting to see if it holds until October.

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.

6/8/11

Ugly opening

It looks like the market wants to re-test the 1280-1260 range. We are back to the early January levels.

Bonds are holding up as they should in a down market. Copper is very weak. It looks like the business cycle is definitely downshifting ... for now.

Exciting market if you are ready for it. On 5/8 we gave a sell signal to our subscribers.

Is the market close to a bottom? Why not subscribe to The Peter Dag Portfolio ans see what we think.

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.

6/7/11

New resistance level?

June 7 (Bloomberg) -- U.S. stocks fell for a fifth day, the longest drop for the Standard & Poor’s 500 Index in 11 months, and Treasuries erased losses as Federal Reserve Chairman Ben S. Bernanke gave no sign he is planning new stimulus efforts to bolster the weakening economy.

Is the 1300 level for the S&P 500 becoming resistance? Bernanke's comment may have nothing to do with the market reversal.

Time will tell, of course.

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.

An interesting market indicator

This is one of the most important fundamental indicators we have developed to understand the direction of the market (click on the chart to enlarge it).

Note how the market goes nowhere when our financial risk indicator is rising and rallies strongly when financial risk declines. We went back to 1955, and it seems to be working just fine.

You should not be excessively exposed to the market if its trend is moving higher.

You will find this chart updated regularly in The Peter Dag Portfolio. Just go to www.peterdag.com and subscribe. Of course ... past performance does not guarantee future results.

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 bears look back. The bulls look forward.

Investors’ psychology is fascinating. They react to what is happening. If the environment, as depicted by the press, is dismal, they panic. Emotions take over. Decisions are made to avoid stress, not to take advantage of opportunities.

Major market bottoms have always taken place in the worst of times. Economic failures of entire regions of the globe (as in 1997 in Asia, Latin America, and Russia), bank failures in the US (as in the 1970s and in the early 1990s), recessions and sluggish economic conditions, and special events such as concerns about the Y2K, have all been exceptional buy opportunities.

The majority of investors have a sense that bad times are associated with bear markets. What they fail to recognize is that markets move ahead of economic and financial conditions. The stock market (S&P 500) peaked in 1999 when liquidity began to grow more slowly. The economy slowed down in 2000-2001 because of decreasing liquidity. The market anticipated current conditions.

My point is that to be bearish because the economy is weak is like driving while looking in a rear view mirror. On the other hand, bullish investors know that the stock market and liquidity rise ahead of improving economic conditions. Their eyes are fixed on the developments that will create a favorable economic environment. Liquidity and stocks anticipate the “good times”.

You can rest assured that the next bull market will be almost over by the time the bears realize the economy is booming. They believe, mistakenly, that good times are associated with bull markets and will buy aggressively at the top.

Investment opportunities arise when there is a smell of panic and people are confused. You need to convince yourself that right now everything is being done in Washington to stimulate the economy. Taxes are cut. Spending is rising. Interest rates are reduced aggressively. Liquidity is soaring. The majority of investors are still afraid of what is happening (because they look back).

Everything that is happening, every little piece of information, points to a desperate effort to make the economy boom again. There is no doubt in my mind that this is the time to be aggressive and be fully invested. You have to look forward.

(These Obsevations appeared in the 11-12-01 issue of The Peter Dag Portfolio)

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.

6/6/11

Market patterns

Markets around the world are heading lower.

Japan was a big loser, dropping nearly 1.2%.

Germany is off modestly, down 0.16%. France is off 0.43%. Spain's IBEX is getting whacked, currently down about 0.89%.

Commodities down.

Major markets bottoms and tops are synchronized. Make no mistake about it.

Contra trend? LQD.

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

The S&P 500 sank below 1300.

Is 1280-1260 the next major support?

My subscribers should rely on what I wrote in the last issue of The Peter Dag Portfolio.

Shouldn't you subscribe too to The Peter Dag Portfolio and find out?

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.

6/4/11

Growth and bond yields

[Americans]lost confidence in the actions that were designed to build confidence and restore growth --namely, near-zero overnight interest rates, the bailout of the financial system, a weakening dollar, and stimulus measures that add to the federal budget deficit and the national debt.

The latest downer: Housing prices in 20 big U.S. metropolitan areas fell in March to their lowest level since 2003, according to the S&P/Case-Shiller Index released on May 31. Source: Bloomberg.

I know this idea is not a mainstream idea. Countries with a high concentration of power grow slowly.

I have seen this movie already in Italy and in Europe. It could very well be we are seeing it in the US. I really hope to be wrong.

The gurus should realize that bond yields cannot rise much if the economy is doomed to grow slowly.

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.

6/3/11

Technical patterns

1300 for the S&P 500 is an important support level.

The next one? 1275.

Today the S&P 500 close: 1300.16.

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.

From a CNBC correpondent in Greece

The people do not understand what is happening. They do not get it.

It is not the people. It is the Greek leadership that has failed to explain the problem to the people. "We have run out of money. We promised too much and we followed the wrong policies. The outcome is that we did not generate the wealth to pay for our debt."

Is Washington making the same mistake. It is not the union, the teachers, health care, social security. It is the whole system that needs to be re-designed.

Will it happen? Let's hope so.

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.

Concentration of power is a chronic economic depressant

In a sweeping indictment of Italy’s economic and social record over the past decade, Mario Draghi, its departing central bank governor, has attacked the failure of successive governments to implement reforms and root out the “vested interests oppressing the country”. Source: FT

To those who follow my writings. I know Italy very well and my writings have been inspired by my experience there.

The “vested interests” mentioned by Mr. Draghi are what I call power groups. The concentration of economic and political power is strangling Italy. It has strangled Ireland, Portugal, Spain, Greece, Lybia, Egypt, Tunisia, Syria, Yemen, USSR, …...

My very humble opinion is that we are witnessing the same process here. Why do I say this? Because concentration of power leads to chronic slow economic growth and income inequality.

I was in Italy at the time when there was a big discussion on the budget. They call it “finanziaria” over there. I could not find in any newspaper what were the issues.

The people did not have a clue what was going on. I asked but no one knew. The newspapers reported only the bickering between various political personalities. People realized that new taxes were on the way.

But you can rest assured of one thing. The “vested interests” mentioned by Mr. Draghi were going to have a preferential treatment – as the oil companies in this country.

We are blessed in the USA because we know what is going on.

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.

6/2/11

This is why we are doomed

To my subscribers.

I have been writing why states are doomed to decadence and corruption. It is about the survival of the strongest power groups.

We all want to cut the size of the government ... as long as they cut your benefits and tax loopholes and special treatments. Not mine.

Like GM, we rather sink with the ship than give up our benefits. It is human. I understand it.

This is why we need strong leadership in Washington to set the tone of what the issues are. The problem is that our leaders will never be re-elected if they do.

And this is why we are doomed.

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.