Expect a poor fourth quarter. The first quarter of 2009 will also be very slow, according to Dr. Wyss, chief economist at Standard & Poor.
This forecast has important implications on which sectors will outperform the market.
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George Dagnino, PhD
Editor, The Peter Dag Portfolio
Since 1977
The fire which gutted Rome in 64 A.D. could not possibly have been Nero's doing; at the time it broke out, Nero was at his villa in Antium 30 mi. away. Besides, the violin wasn't even invented until the 16th century, although in some versions of the tale Nero plays a lute or lyre.
We seem to enjoy, however, the glamor of the VP nominations and the TV nonsense associated with it.
Incomes, meanwhile, dropped 0.7 percent, the first decrease since August 2005, reflecting the end of the rebates, after a 0.1 percent gain the prior month. Adjusted for inflation, spending plunged 0.4 percent, the biggest drop in four years.
Price-adjusted purchases of durable goods, such as autos, furniture, and other long-lasting items, dropped 1.6 percent. Spending on non-durable goods decreased 0.9 percent, and services, which account for almost 60 percent of all outlays, were unchanged.
Rising unemployment, falling stock and house prices and stricter lending rules ``were viewed as pointing towards weak growth in personal consumption expenditures during the second half of 2008,'' minutes of the Fed's Aug. 5 meeting released this week showed.
Is the country and our leaders aware that Rome is burning?
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George Dagnino, PhD
Editor, The Peter Dag Portfolio
Since 1977
My friends have given up on the market. They are fed up with losing money. They have decided to stay on the sideline and wait. I am not sure what they are waiting for. How are they going to decide when to pull the trigger and join the dance? They did not act at the top. Who says they will be able to pull the trigger at the bottom? They know better. Or so they think.
I do not want to make fun of these investors. Absolutely not. The main reason is to make them think.
If you are committed to managing your money, you cannot afford to give up. You cannot afford to leave the table because you will have to spend the time to figure out the new players and what game they are playing when you go back to the game.
This is the key word: “game”. Investing is like a sport game, a card game, a business game. You are trying to make money. You are trying to win so that you increase your winnings and ultimately your capital.
The point, however, is that others, including myself, have the same objective – to increase their capital. And the only way to do it is to take it away from you. In other words, you are playing against all of us. I am playing against all of you.
Investing is a two-person game – you against all of us, you against the market. Winning at any game, especially the investment game, requires concentration. It requires playing the game and building up the psychological stamina to hang on, especially when you get tired.
Losing money should not depress you and force you to leave the table. If you leave, you will never be able to catch up with those who did not leave. You have to have a process that allows you to ride the exciting as well as the depressing phases of the market. Losing money should not scare you. You cannot play a game when you are scared to lose. You refine your game by playing it, to improve your techniques. But you need to have a discipline. Discipline is what you need to profit in a big way when the band finally starts playing.
More, much more when you subscribe to The Peter Dag Portfolio on https://www.peterdag.com/.
George Dagnino, PhD
Editor, The Peter Dag Portfolio
Since 1977
Commodities are at an important support level (see chart, click to enlarge). They are oversold and may be holding up at these levels. Their strength, however, may have a negative impact on the financials and the overall market.
This is an important asset class and it offers great profit opportunities.
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George Dagnino, PhD
Editor, The Peter Dag Portfolio
Since 1977
Small cap stocks are outperforming the market (ETF: IWM). This is not unusual according to some research.
There are other sectors, of course, such as financials, insurance, aerospace and defense, health care services, and a few others.
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George Dagnino, PhD
Editor, The Peter Dag Portfolio
Since 1977
Do you agree with this? Wouldn't this send the market into a free fall? Hamezi Analytics report: High Short Interest in Financials tells us the worst of Credit Crunch is ahead of us and it is not fully priced in yet. Remember this is the season: CEOs, regulators and politicians will try to prop up the stocks so they can concentrate on the General Election. We will hear some good announcements designed to push the stock prices up. Don't be fooled. The problem remains in the Credit Markets. Get More Defensive.
Answer. They could be right. But they could be wrong. I rely on my indicators. And when they tell me to sell, I will sell. So far, they have been right, and I am "long". I cannot ignore them.
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George Dagnino, PhD
Editor, The Peter Dag Portfolio
Since 1977
Coal, by far (click chart to enlarge). Up 32% over one month, up 22% over 3 months, up 63% over 6 months, and up 105% over 12 months.
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George Dagnino, PhD
Editor, The Peter Dag Portfolio
Since 1977
......... When will we see “the light at the end of the tunnel” on these adjustments? Let’s consider the magnitude of existing imbalances and extrapolate recent trends. Over time, house prices and their rental equivalent value should generally converge. From the mid-1990s through 2005, home prices soared above a measure of rental equivalence. With the dramatic declines in the Case-Shiller index, prices remain approximately 14 per cent above a measure of rental equivalence. At their recent pace of decline, by year-end, national home prices will have fallen a total of nearly 30 per cent and be close to rental equivalence. This expected decline would involve larger declines in the problem regions.
Similarly, even without a pick up in new home sales, by year-end, the inventory of unsold new homes will have receded toward their long-run average. Construction has already begun to decline at a moderating pace, and with inventories approaching manageable levels, new construction will stop falling round year-end. The story is different for existing homes: although further price declines are expected to boost purchases, trimming undesired inventories will take longer.
As these trends unfold, the widespread uncertainty about future home prices will begin to dissipate. Although prices likely will fall further into 2009, trough levels will be closer in sight and expectations will converge toward more modest further declines. This lifting of widespread uncertainty and fears of further dramatic declines will have pervasive implications for financial markets and beleaguered financial institutions..........
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George Dagnino, PhD
Editor, The Peter Dag Portfolio
Since 1977
Europe is heading into a recession from which it will struggle to recover, while America may have got away with a relatively minor economic contraction from which it may rebound sooner than expected.
Take, for an overall picture of activity in the “real economy”, last month's chart from the Institute for Supply Management in the US and compare them with eurozone purchasing managers' index.
On both sides of the Atlantic, business is difficult, beset by higher costs, uncertain demand, inflation worries and fear of further nasty surprises in financial markets.
But in the US, the manufacturing PMI has held remarkably steady through the turbulence, with only short dips below the 50 per cent equilibrium level it is registering. The sector is adding jobs, and, at 54 per cent, export orders are healthy.
More, much more when you subscribe to The Peter Dag Portfolio on https://www.peterdag.com/.
George Dagnino, PhD
Editor, The Peter Dag Portfolio
Since 1977
Congress if thinking of bailing out Detroit after bailing out Freddie Mac and Fannie Mae.
We are gradually nationalizing major sectors of the economy. What is happening to us? My sense is that we are desperately ignoring we have to regroup and consider the fact that we are not generating the wealth we used to produce. Yet, we do not want to give up what we are accustomed to use.
The country is downshifting in a painful way. We look at the government for the ultimate answer. The only thing they can do is to print more money and give us the illusion we still have the standard of living we used to have.
The bottom line is that we are losing gradually and steadily our freedoms with every new bailout. What is amazing is that no one is asking how we are going to pay for it. My answer? More inflation, as in the 1970s. It is a form of hidden tax everyone seems to accept.
George Dagnino, PhD
Editor, The Peter Dag Portfolio
Since 1977
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