The financial orgy is global

Asian money market rates dropped after South Korea unveiled the region's largest bank rescue and Hong Kong and Australia pumped cash into the financial system. (Bloomberg)

Money is being printed aggressively around the globe. The financial intervention is so intense and widespread that it will eventually cause the desired effects in the near term...and another bubble in the long term.

More, much more when you subscribe to The Peter Dag Portfolio by going to https://www.peterdag.com/.

George Dagnino, PhD
Editor, The Peter Dag Portfolio
Since 1977

The business cycle is alive and well

This is how things work. I am absolutely convinced.

1. Inflation rises.
2. Consumers make less money after inflation and stop buying.
3. The economy slows down.
4. Commodities decline because of slower demand.
5. Inflation declines because of lower commodities.
6. Consumers' purchasing power increases because of lower commodities like crude oil and inflation. They increase their purchases.
7. The economy improves.

Where are we in this sequence of events? Inflation may have peaked (click on graph to enlarge), as I have been expecting. If I am right, then we are in phase 5. above.

A slow economy and declining inflation requires a specific investment strategy in asset classes doing well during such times.

More, much more when you subscribe to The Peter Dag Portfolio by going to https://www.peterdag.com/.

George Dagnino, PhD
Editor, The Peter Dag Portfolio
Since 1977

Does history repeat itself?

“We have reached a critical point,” John Maynard Keynes wrote in March 1933. “We can ... see clearly the gulf to which our present path is leading.” If governments did not take action, “we must expect the progressive breakdown of the existing structure of contract and instruments of indebtedness, accompanied by the utter discredit of orthodox leadership in finance and government, with what ultimate outcome we cannot predict.”

Bottom line. Expect huge government spending in infrastructure projects or anything putting money in the economy and providing jobs! Another level of government intervention is waiting for us.

More, much more when you subscribe to The Peter Dag Portfolio by going to https://www.peterdag.com/.

George Dagnino, PhD
Editor, The Peter Dag Portfolio
Since 1977

Investment ideas

Do you want to outperform the averages? Do not diversify. Invest in a few investment themes. These strategies should be consistent with the type of business cycle we are experiencing. Commodity driven investments, for instance, are attractive only when the economy is strong. Then select the best stocks within these sectors.

If you diversify across many stock sectors, you are bound to perform like the averages, or worse.

More, much more when you subscribe to The Peter Dag Portfolio by going to https://www.peterdag.com/.

George Dagnino, PhD
Editor, The Peter Dag Portfolio
Since 1977

Money is flowing...big times!

The Federal Reserve's direct loans to commercial banks rose to a record $101.9 billion yesterday versus $98.1 billion a week earlier as still-high money market rates encouraged more borrowing from the lender of last resort.

Borrowing by securities firms through the Fed's Primary Dealer Credit Facility totaled $133.9 billion, up from $123 billion, the central bank said today in its weekly report.

Bottom line. Enjoy. The next project is going to be deflating the bubble we are creating now. And so....we move from bubble to bubble. And then you wonder why the dollar has been weak for four years.

More, much more when you subscribe to The Peter Dag Portfolio by going to https://www.peterdag.com/.

George Dagnino, PhD
Editor, The Peter Dag Portfolio
Since 1977

Today's markets

The business cycle is alive and well. This is what happened today.

--- Production....weak.
--- Inflation....declining
--- Dollar ....mixed
--- Stocks....broadly strong
--- Commodities...weak
--- Bonds....weak

Bottom line. The strong sectors are those strong in a weak economic environment. Commodities are weak because of the slow growth. Weak commodities are causing inflation to decline. What happened to the nonsense about China and its economic growth? The global business cycle is perfectly synchronized.

A final thought. We are doing all we can to set the groundwork for the next bubble.

More, much more when you subscribe to The Peter Dag Portfolio by going to https://www.peterdag.com/.

George Dagnino, PhD
Editor, The Peter Dag Portfolio
Since 1977

A ray of hope!

This proprietary indicator is turning up (click on graph to enlarge). This trend is very promising. An increase above the blue line is a confirmation the trend of the market is up. Stay tuned.

More, much more when you subscribe to The Peter Dag Portfolio by going to https://www.peterdag.com/.

George Dagnino, PhD
Editor, The Peter Dag Portfolio
Since 1977

Incredible!!!

The growth of the monetary base is going off the chart (click on chart to enlarge). This is very good news. Forget about what they say. Watch what they are doing. And they are injecting msssive, let me repeat, massive quantity of money in the banking system.

This is very bullish for the financial markets. Eventually.

More, much more when you subscribe to The Peter Dag Portfolio by going to https://www.peterdag.com/.

George Dagnino, PhD
Editor, The Peter Dag Portfolio
Since 1977

It does not make sense

Investors agonizing over a faltering economy sent the stock market plunging all over again Wednesday after a stream of disheartening data convinced Wall Street that a recession, if not already here, is inevitable. The market's despair propelled the Dow Jones industrials down 733 points to their second-largest point loss ever, and the major indexes all lost at least 7 percent (Source: AP).

Nonsense. The markets are too smart. We are experiencing panic. Or something else. Only the markets know. Eventually our indicators will turn up, and this will be the time to be aggressive buyers.

More, much more when you subscribe to The Peter Dag Portfolio by going to https://www.peterdag.com/.

George Dagnino, PhD
Editor, The Peter Dag Portfolio
Since 1977

The most important investment tool ....now

The most important investment tool in the current market environment is a process or model to assess risk. Investment timing rules are not perfect, but are critical in today's markets.

They provide you with an objective and unemotional way to assess the upside potential or downside risk of the markets. As I said, they are not perfect, but they are a must in a market swinging more than 2% in either direction in a single day.

I use them, and quite frankly I found them useful. They help me navigating today's environment. Long-term investing has failed as a long-term strategy with the market at the same levels as May 2002 and February 1998.

Do you remember when Bogle, the former chairman of Vanguard, was selling the idea of index funds? In the last 10 years you would have achieved 0% return. You could have done much better by keeping your money in money market funds.

This is the reason investors should use timing models. If they are too complicated for you, then you should seriously think buying only Treasury bonds from the government (www.treasurydirect.gov) (not bond mutual funds).

More, much more when you subscribe to The Peter Dag Portfolio by going to https://www.peterdag.com/.

George Dagnino, PhD
Editor, The Peter Dag Portfolio
Since 1977