Peter Dag & Friends

2/18/11

Is it going to happen again?

In 2007-2008 the economy slowed down and then plunged into a recession when the price of gas rose to $3.11.

The price of gas keeps rising thanks to cheap money (click on the chart to enlarge it). Is history going to repeat itself?

This pattern is bad news for commodities and good news for bonds, eventually --if you believe in the business cycle. Time will tell. Something to watch closely.

George Dagnino, PhD
Editor, The Peter Dag Portfolio. Since 1977
Ranked second best gold timer 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.

2/17/11

Interesting.

Some of you may already be familiar with the economic law called “the tragedy of the commons,” but for those of you who are not, I shall explain it to you. The tragedy of the commons refers to a dilemma arising from the situation in which multiple individuals, acting independently and rationally consulting their own self-interest, will ultimately deplete a shared limited resource even when it is clear that it is not in anyone’s long-term interest for this to happen. I would argue the tragedy of the commons receives far too little attention as a rational explanation for the cancerous expansion of the State. For what is the State other than people looting each others’ private property in a zero sum game of resource redistribution? The tragedy of the commons gives us a rational basis for the consistent and constant expansion of the coercively funded democratic State and why that expansion always leads to the destruction of society.

It fits my theory of "power groups". For more click here.

George Dagnino, PhD
Editor, The Peter Dag Portfolio. Since 1977
Ranked second best gold timer 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.

Interesting pattern

The market is slowly improving today.

JNK is up. Good. But LQD is stronger than JNK. Is LQD trying to tells us that the slower growth in the leading indicators is actually worth noting?

George Dagnino, PhD
Editor, The Peter Dag Portfolio. Since 1977
Ranked second best gold timer 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.

Bearish news?

Producer prices were up 9.6% at annual rate, up 3.6% y/y. Consumer prices are up 1.5% y/y. In other words, prices of materials needed by producer is rising faster than prices charged by producers.

If the input costs for a company are rising more than the prices it gets at final sale, it is squeezing earnings. Is the market ingoring it?

Investing decisions, in my humble opinion, have to be made on what is happening now. We know one day profits will slow down or decline. We know one day short-term interest rates will rise. We know one day inflation will rise. We know one day the Fed will start tightening.

But this is not what is happenng now.

George Dagnino, PhD
Editor, The Peter Dag Portfolio. Since 1977
Ranked second best gold timer 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.

2/16/11

Observations

The education budget. The government is planning to spend more money on education. I do not believe money will improve people’s education.

I love teaching. I like to challenge the minds of young people. I love the sense of accomplishment that comes from knowing that I planted a small seed. I know most of my students will always appreciate what I have done for them. Sometimes in spite of themselves.

I taught at several colleges and universities. The standards of my teaching depended on the policies of the institution and on the feedback of the institution’s administration and of the students. I had to adjust accordingly. But I usually started by stretching the students’ minds. Then I relaxed my standards to meet the requirements.

Every professor knows that money does not dictate his or her level of teaching. For the same amount of money I can have high or low standards in my class. It is the particular market of an institution that dictates my level of teaching. My main job is to mold the minds of the students, to explore with them ways of thinking about the subject being taught.

Why do we continue to throw money at education, falsely believing that technology will solve the problem? Different teaching standards impact the level of thinking. Teaching is not about making statements about absolute truth. What matters is to explore how to logically connect ideas to create new thought processes, to devise new paths of action.

Money is not necessary to achieve these objectives. It takes hard work, high standards, and a commitment on the part of the students and instructor to work together.

There is no alternative to achieving high standards. It takes a lot of work. And sometimes this does not become practical because sports and part-time jobs are a priority that students and parents do not want to change.

Unfortunately it takes time to learn, to practice the mind. As a friend and mentor used to tell me when I was facing a difficulty: George, no one said it was going to be easy. Persistence and determination to learn will improve the education of our students. Not money.

The issues are standards and the willingness of the community to achieve them. We need to convince students and their parents that the achievement of high standards is a personal choice. Government money has nothing to do with it.

(This Observations appeared in the 4-23-2001 issue of The Peter Dag Portfolio)

2/15/11

Do you see the pattern?

Market weak. Commodities weak. JNK weak. LQD strong. This is an important pattern and is not happening by chance. It is important if you use business cycle techniques to develop your investment strategy.

2/14/11

The age of unrest

(CNN) -- The unrest spreading through North Africa and the Middle East has reached the Persian Gulf nation of Bahrain, where at least three police officers and one demonstrator have been injured in clashes, the state new agency reported Monday.

The poor people of this world are revolting to achieve better living conditions. Can their new leaders really achieve this feat which could not be reached for centuries?

Commodities

Feb. 14 (Bloomberg) -- Snowfalls in China’s major wheat- growing regions failed to ease a drought, a government agency said. Wheat prices climbed to the highest level since August 2008 in Chicago and to a record in Zhengzhou.

The global economy is very strong and strengthening. Commodities -- from copper to wheat -- have been rising because of strong demand. The weather does not have anything to do with their fundamental trend. If the economy weakens, even if the weather is horrible, wheat will decline.

2/13/11

Thought of the day

There is a lot of emotion about the growth of the global economy and the cost of food. It sounds like prices are growing at an unusually fast pace.

Well, I checked the performance of DBA (ETF: agriculturals) and XLI (ETF: industrial companies). Both asset classes have been growing at the same pace.

My point is that often people get excited by the performance of some sectors while others are doing as well, if not better. I always compare the historical price of what I want to buy with that of SPY and check its volatility and relative performance. Yes, volatility has to get into the equation as well.

2/11/11

Observations

Humans and animals. There are many differences between humans and animals. At least, we like to believe there are.

After all, we create great monuments, paintings, buildings reflecting marvelous ingenuity, and exquisite music. Above all, we have creativity, the capability of conceiving and making new things. And if this is not enough, my friends tell me that what makes us really different is that we have a soul. Of course, no one has ever seen my soul, but they tell me I have one, and I have to believe them. My uncle once told me the soul is a poetic invention needed to convince us we are different.

Every time I look at an animal, I never fail to be amazed how much they look like us. They have two eyes, two ears, a digestive system (input, output, and everything in between), a reproductive system, limbs for locomotion, and above all, a brain. Who knows, they may even believe they have a soul that makes them different from us.

But there is more. I was fortunate to have a tall pine tree in front of the bedroom. In two out of three years a couple of blue jays decided that a branch of this pine was just fine to build their nest. And so they did after careful inspection of the surroundings and making sure the spot was protected from intruders.

Every morning, as I changed to go to work, I looked at their activities. First, they built the nest. It was amazing how carefully they chose the material. Strong on the outside of the nest, softer as they moved toward the inside. Eventually the nest had to be approved by the female (does it ring a bell?). So, she went and pressed with her feet and body against the walls of the nest to make it fit her size. It took quite a long time.

One day the female laid the eggs and for a few weeks the male was circling around the nest, very carefully, trying not to be followed. He brought the food to his companion. I was ready to go to work to do exactly the same thing. Eventually the young blue jays were born. The mother was absolutely obsessed with keeping them warm, constantly moving to achieve this purpose. In the meantime the male was going around getting food for the growing family.

One day, the nest became too small for the mother and the two blue jays. It was time to move on. The mother, using her beak, pushed the two young blue jays out of the nest. They had to learn how to survive. Does it sound familiar?

They screamed as they fell from branch to branch. Eventually they hit the ground. The risks were high. A cat could come along. Welcome to the jungle. But eventually they made it. One day I saw four blue jays fly away.

They did in just a few weeks what humans achieve with their families in several years. The blue jays did it at a much faster pace, with less fanfare.

I am amazed how the concepts of life, family, managing its growth, survival, role of male and female, mother and father, are exactly the same—in humans and animals. There are a few nuances, of course, but we like to believe they are important because they make us feel different from “animals”. Really?

(This Observations appeared in the 2/19/2001 issue of The Peter Dag Portfolio)