Peter Dag & Friends

3/31/10

Managing demographics in China

Is China being forced to change the one child per family policy they started in 1978?

The Chinese population is becoming older and China is bound to slow down around 2030 because of the decreasing role of the "big spenders" (age group 40-50 year old).

They understand their predicament all too well. So, they might change their one child policy so that today's newborn can replace the decline in spending due to the aging of the "big spenders".

Very clever indeed .. if true.

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

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I will be happy to speak to your investment group on how the business cycle impacts investment strategies and the choice of asset classes.

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This is the problem with large deficits

News. March 31 (Bloomberg) -- Greece may pay about 13 billion euros ($17.5 billion) more in interest on the debt it sells this year than it would have if yields had stayed at their pre-crisis levels relative to Germany’s, according to data compiled by Bloomberg and Credit Agricole Corporate and Investment Bank.

My view. This is the problem with large deficits. Not inflation, as I wrote several times in the past. The interest to the bond holders has to be paid. Who is going to pay it? The populace, of course. How? From the their own pockets.

The outcome is even lower standard of living and depressed purchasing power.

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.

3/30/10

Interesting volume pattern

Volume can tell you a lot about the direction of the market.

Gold, for instance, spiked in January with strong volume. It was a sign gold had to rest for a protracted period of time. And it did.

Strong volume is bullish when it happens at the end of a correction. It is bearish if it jumps at the end of a rally.

What caught my attention has been the sharp rise in volume in XLF (the financial ETF)(click on the chart to enlarge it). It is too early to say for sure. But strong volume and no action in the price after a strong move it is not good news.

This pattern should be watched closely because it may have repercussions on the overall market.

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.

Let's hope he is right.

News. ALEXANDRIA, Va. — President Obama signed legislation on Tuesday to expand college access for millions of young Americans by revamping the federal student loan program.

The new law will eliminate fees paid to private banks to act as intermediaries in providing loans to college students and use much of the nearly $68 billion in savings over 11 years to expand Pell grants and make it easier for students to repay outstanding loans after graduating. The law also invests $2 billion in community colleges over the next four years to provide education and career training programs to workers eligible for trade adjustment aid after dislocation in their industries.

My point. The government is increasing its reach. Housing. Healthcare. Autos. Now student loans.

The government is going to do a lot of good things for us. They all seem to be good ideas. Somehow I still think that all this lending is going to make us poorer. We work to pay interest to the banks or to the government (mortgages, cars, student loans, interest on the deficits, and taxes).

I hope they know what they are doing. Another thing that is bothering me is that our income is not growing. How do we pay for all this?

Hopefully Washington knows what needs to be done.

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.

3/29/10

Wait a minute....let's not jump to conclusions

News. Consumer spending up 0.3% last month. Disposable personal income down 0.4% in January and flat (0.0%) in February (after inflation, of course).

My reaction. Now, I would like to know where is the good news? Why is everybody so excited? We are spending but we are not making any money.

I do not think this situation can last too long. I guess I am too pessimistic.

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.

3/28/10

And the winner is ....

Healthcare. A lot of confusion about what will and will not do.

Socialized medicine. Possibly. The government is likely to gain more power. It is getting bigger and bigger. Is it good or bad for business?

Time will tell. Time and the markets have a knack for uncovering the wrongs and the rights of government decisions. See what happened to the housing sector, Ginnie Mae and Freddie Mac.

What is interesting, I think, is that in spite of all this talk about socialized medicine, the insurance companies (ETF: KIE) have been one of the strongest sectors since February (click on the chart to enlarge it).

Are they the real winners?

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.

3/27/10

Time to pay the piper

News. BRUSSELS (AP) — German Chancellor Angela Merkel praised a hard-won deal to rescue heavily indebted Greece from its financial woes, insisting Friday that it will steady the wobbly euro and showed that Europe could cope with the crisis despite having asked the International Monetary Fund to join in on a bailout package.

My point.The Greeks, like GM workers, thought they had it made. Ask, get great benefits, defying the low of economic gravity.

Now the time has come to pay the piper. The banks and other bondholders will have to be payed a huge interest bill. The Greeks will have to pay. The wealth and comfort they achieved has to be payed back. Like for GM and other companies, it is going to be painful.

This is the problem with big deficits. They tell how much money will have to paid to the piper. The bondholders, that is.

Brace yourself. All the benefits we were given, are going to be taken away slowly. Either through higher inflation or higher taxes, or both. The piper has to be paid.

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.

Most attractive commodities?

Most commodity charts show erratic price movement. Most of them are weak. (I still think commodities are telling us the economy may not be as strong as the official statistics seem to suggest.)

These graphs show the trend in copper and platinum (click on the graph to enlarge it). They seem the most attractive ones. (Source: Bespoke Investment Group).

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.

3/25/10

I am confused

I am confused about Cramer's forecasts.

Before the passage of the healthcare bill he was recommending to sell because....not important.

Now, after a major market reversal, he is recommending to buy the dips. Who are the people in his audience? How can they follow what he is talking about? Is this how people invest their money? Incredible!

I am confused. Are you?

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.

Interesting reversal

Interesting reversal.

Market very strong: 1.03% at 1:00pm. Then...big time reversal.
Dollar finished strong
S&P 500 down .17%
Transportation down .63%
Bank stocks down .09%
Utilities down .64%
Gold at a support level
CRB down .60%
Metals and mining down a huge 3.46%
Energy stocks down a sharp 1.68%

Is this a top?

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.