Peter Dag & Friends

9/30/09

Bad news

News. The Institute for Supply Management’s gauge of business activity in the Chicago area slipped to 46.1 in September, lower than the reading of 52 estimated by economists.

U.S. private employers cut a larger than expected 254,000 jobs in September, though this was less than a revised 277,000 jobs lost in August, a report by ADP Employer Services said today.

The weakness in the manufacturing sector was a surprise and Wall Street did not like it. Employment, meanwhile, remains dismal.

I am also paying attention to the weakness of the dollar and commodities. Are we in the process of a double dip? It would be bad news for earnings.

To find out more about my in depth view of the markets and my strategy just visit our website https://www.peterdag.com/ where you can review 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.

George Dagnino, PhD
Editor, since 1977
Ranked No. 1 market timer by Timer Digest

The bulls are still in control. But for how long?

The bulls are still in control. The market remains above the important red trendline (click on the chart to enlarge it).

The time to worry is when the S&P 500 index drops below the trendline. It might trigger an important pause in this relentless move.

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

George Dagnino, PhD
Editor, since 1977
Ranked No. 1 market timer by Timer Digest

9/29/09

Two opposing views

Sept. 29 (Bloomberg) -- The steepest rally in the Standard & Poor’s 500 Index since the 1930s is restoring Byron Wien’s reputation as a stock picker.

Wien, hired by Blackstone Group LP last month, said he’s keeping his January forecast for a 33 percent annual gain in the benchmark index for U.S. equities, implying a 13 percent advance from yesterday’s close.

NEW YORK (Reuters) - The U.S. economy faces an increasing risk of stalled growth in 2010, the chief executive of top bond fund Pimco said on Friday, adding that rallies in the equity and bond markets have outpaced economic trends.

The summer rally in equity markets and lower-quality bonds has outpaced what is warranted on the basis of forward-looking indicators for demand, revenue, profits and credit flows, El-Erian said.

My point. Two of the smartest people see the world in very different ways. I look at the trend in commodities and it does not seem commodities are soaring. Gold is back down below $1000. Crude is sharply lower at $67. The CRB index is below the June peak. Historically earnings and commodities are closely related.

Of course, I hope Mr. Wien is right. He usually is.

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

George Dagnino, PhD
Editor, since 1977
Ranked No. 1 market timer by Timer Digest

9/28/09

The business cycle works

In a slow economy, with the Fed easing and the yield curve unusually steep, you should see financials outperforming commodity-driven stocks and technology.

This is exacly what has happened today (click on the chart to enlarge it). Insurance (KIE), financial (XLF, IXG) stocks have outperformed commodity-driven (XLB) and tecnology (XLK) stocks.

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

George Dagnino, PhD
Editor, since 1977
Ranked No. 1 market timer by Timer Digest

9/27/09

My gut feeling?

My gut feeling? The country is confused. The press is confused. What are the priorities? We seem to chase all sorts of issues instead of handling growth and employment and creating wealth. It looks like we want to redistribute the wealth created in the past. Too many goals all at once. Is the country rudderless?

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

George Dagnino, PhD
Editor, since 1977
Ranked No. 1 market timer by Timer Digest

Is this just the beginning?

News. China announced that it would look into alleged dumping of U.S. auto and chicken products on Sept. 13, two days after President Barack Obama imposed tariffs on imports of tires from the Asian nation. The U.S.’ move was in response to a so-called safeguard petition filed to protect U.S. producers.

Is this the beginning of a trade war? Are we protecting (supposedly) jobs by getting into this kind of policies? It is just ludicrous. We are all going to pay if we start a protectionist war. The tire makers, the chicken producers, and all of us. This is a dangerous path that we are following to show that we are doing something about it. What?

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

George Dagnino, PhD
Editor, since 1977
Ranked No. 1 market timer by Timer Digest

9/25/09

A warning sign?

The trendline on this graph goes from the July bottom of the S&P 500 to the recent position (click on the graph to enlarge it). This trendline spans about 3 months and is becoming an important one.

What does it mean? It means that we might experience a painful correction if the market drops below this trendline. My rule of thumb is that the length of the trendline is related to the severity of the correction.

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

George Dagnino, PhD
Editor, since 1977
Ranked No. 1 market timer by Timer Digest

9/24/09

Double dip?

Today copper, crude oil, gold, and all commodity averages are tumbling.

It looks like commodities want to go down. We need to watch this trend very closely because commodities, all of them, are very sensitive to business growth. And business growth drives profits -- the lifeblood of the stock market.

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

George Dagnino, PhD
Editor, since 1977
Ranked No. 1 market timer by Timer Digest

9/23/09

I hope to be wrong!

I sincerely hope to be wrong.

The decline of the dollar (click on the graph to enlarge it) is simply vicious. It is trying to tell us something --something unpleasant is ahead of us.

The dollar peaked in 2004 anticipating slower growth in corporate profits, a sharp recession, and the financial debacle of 2007-200?. What is it trying to anticipate this time? Be careful. Hedge some of your long positions -- just in case the market corrects sharply.

The real problem is that our leaders are ignoring it because they do not know what to do.

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

George Dagnino, PhD
Editor, since 1977
Ranked No. 1 market timer by Timer Digest

Faber is right

Faber is right. What he said on Bloomberg (click here) repeats what I have been -- repeatedly -- writing in this blog.

The decline of the dollar is a symptom of our loss of competitiveness and possibly higher inflation in the future. It is wrong to think that a declining dollar will cause inflation. It is the other way around! The prospect of higher inflation, reflected by lower productivity, is causing the dollar to decline.

The origin of inflation is credit growing faster than GDP. This is what has happened in the past two years. Inflation will come. But it is too early to worry right now. Stay tuned.

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

George Dagnino, PhD
Editor, since 1977
Ranked No. 1 market timer by Timer Digest