Peter Dag & Friends

5/14/10

One more thought

In 2008 the USA was in deep trouble. The people in charge acted quickly to tackle our financial problems.

The Europeans stood there saying they had not our problems. They were OK because their banking system was more conservative (read: exclusive and secretive).

What we are witnessing is the delayed reaction of the European ineptitude in reacting and tackling their problems.

I am not surprised!

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 subscribe to 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.

Not good

The market was down 2.3% at 12:24pm (click on the chart to enlarge it). Not a pretty picture.

The international community is reassessing the impact of a disintegrating Europe. So far the verdict is unfavorable. Why? Because the global economic strength is like a chain. It is as strong as the weakest link.

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 told you so

News. May 14 (Bloomberg) -- Former Federal Reserve Chairman Paul Volcker said he’s concerned that the euro area may break up after the Greek fiscal crisis that sparked an unprecedented bailout by the region’s members.

My point. I said it (and wrote about) as soon as the EU was created that it could not last. If you lived in Europe as long as I did you know that productivity differentials between European countries is so huge that some countries are bound to be crushed by the most productive ones.

This is exactly what is happening. Why invest in Spain or Greece or Portugal when you can have higher returns in the more efficient northern European countries? A country cannot survive of tourism alone.

Many years ago Milton Friedman said it very clearly that the European experiment was bound to fail. And it has failed.

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.

5/13/10

An intriguing picture

This picture on Reuters' website intrigued me.

I understand the meaning of it and the rage of the people for the BP spill. It is ugly and should not happen.

The reason it intrigued me because it reminded me the French Revolution (1789-1799), which ended with the coming of a dictatorship (Napoleon) because "the people", after gaining independence from the king, started killing each other.

What does it mean "power to the people"? Who are "the people"? Is it you and I? Or is it "them"? How would "the people" find more energy? Ethanol? An idea that makes a lot of money for the big corn producers and ruins engines.

Who is going to rule "the people"? Isn't Obama enough. This is also a soviet slogan. Does it mean there are no parties, just one political party .. "the people"? Do we want a dictatorship?

I am raising these questions because I was surprised that Reuters was intrigued enough by the slogan to place the picture on the home page of their website.

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.

Sell in May and go away

News from Reuters. A chief acolyte of the sell-in-May school is Jeff Hirsch, editor of the Stock Trader's Almanac. He has analyzed data from 1950 through 2008 and determined the following: In the years since then, the Dow Jones Industrial Average gained an average 7.3 percent for the November-through-April periods. Total returns during the May-through-October periods were barely positive, at 0.1 percent.History doesn't always repeat itself.

However, .....the sell-in-May axiom doesn't always hold true.

My view. Over the long term the finding is true. It is a warning sign that the markets may disappoint. They become a trader's environment during the summer months.

What happens in summer depends on valuations, monetary policy, direction of interest rates, the trend of financial risk, and unemployment claims.

Some years these trends are market friendly, and stocks rise in summer. When they are unfriendly, stocks decline. On balance, over the long term, the returns are close to zero.

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.

5/12/10

How come....

Some commodity indexes are close to the same levels as June 2009 (click on the chart to enlarge it).

If the global economy was really so strong, how come commodities have not been rising?

Food for thought.

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.

Like Greece

News. May 11 (Bloomberg) -- California Governor Arnold Schwarzenegger will seek “terrible cuts” to eliminate an $18.6 billion budget deficit facing the most-populous U.S. state through June 2011, his spokesman said.

My point. This is what happens when governments lack the leadership it takes to tell people what they can or cannot afford.

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.

5/11/10

Interesting chart patterns

Trading volume is grossly misunderstood. Why? The conventional wisdom believes strong markets have to rise with strong volume. I do not share this view. This is why.

The attached chart (click on the chart to enlarge it) shows the typical volume patterns useful for short-term and long-term investors.

Above average volume following a sharp rally signals distribution and a top formation.

Above average volume following a sharp decline signals the beginning of as bottom (accumulation, panic selling, "do not talk to me about investing anymore" type of sentiment).

The attached chart shows these two patterns quite clearly. My point? Watch for above average volume. It may signal a bottom or a top depending on the action of the market prior to soaring volume.

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.

5/10/10

This is not the way to run a ship,,,,

News. Governments of the 16 euro nations agreed today to lend as much as 750 billion euros ($959.4 billion) to the most-indebted countries. The European Central Bank said it will counter “severe tensions” in “certain” markets by purchasing government and private debt. Concerns that the Greek financial crisis will spread wiped $3.7 trillion from the value of global stock markets last week.

My point. The markets are driving monetary policy. The European "leaders" were talking and talking and talking until the markets tanked.

Finally they decided to come up with a "bold" plan. We bailed out banks. They are bailing out countries. The main common theme is to print money until the problem goes away.

Is this leadership?

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 told you so....

On my post of 5/3/10 I told you that markets love crises. Why?

Because when there is a crisis politicians react the only way they know. They print money.

They know that the only way to solve bank crises, municipalities problems due to unfunded pension funds and budgets deficits, country defaults, .... is to throw money at the problems.

They will keep printing money until soaring equity markets will replenish the coffers of the pension funds and bankrupt countries.

Enjoy until it lasts! You know as well as I do that they are engineering the next bubble. Oh, well, we will worry about it when we get there.

Yes, you are correct. It is a big scam!

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.