THE GRANVILLE MARKET LETTER
P.O. Drawer 413006, Kansas City, MO 64141.
1 year, 46 issues, $250. www.GranvilleLetter.com.
Joseph Granville: "Market bears have a dismal record as to how to read the market. Falling for the popular notion in March that the world was coming to an end, almost without exception they all said to buy gold. Not knowing how to correctly read the stock market, they all missed the March 9th Dow bottom at 6547.05. In the face of what they saw as a hopeless economic dilemma, the Dow has risen almost 2000 points. Not to be deterred from what they believe is a certain near-term new high in the price of gold, that belief based on what they see as a certain collapse in the dollar, ruinous inflation, rising bond yields, and a comparison with the German 1923 hyperinflation. But since they completely missed the significance of the March 9th Dow low, what makes them think that they are correct in how they are now reading the gold chart?
I am betting on a strong market dead ahead and a strong summer. Crude oil seen headed for 75.00 a barrel. Still worried about gold."
INSIIDE TRACK
P.O. Box 2252, Naperville, IL 60567.
Monthly, 1 year, $179. www.insiidetrack.com.
Overview for longer-term investors
Eric Hadik: "Stock Indices confirmed their March 6th cycle low and could see another multi-month rally after June 19th.
Interest Rates (opposite of Bond direction) - Interest rates could work a little higher into mid-2009 (watch June 2009) but maintain the potential for a downward trend into mid-2010.
Gold & Silver - Long-term uptrends in Gold & Silver remain intact but a wide range of consolidation could be seen until mid-2010.
Dollar - Long-term trend down and expected to enter a new wave lower in 2010. This could carry the Dollar down into Major, long-term cycles in 2013. In the interim, expect consolidation with the potential of a new rally after June 2009.
Crude Oil - Long-term trend up. Energy markets fulfilled projected drop from July 2008 cycle high to Jan. 2009 cycle low and have been projected to rebound into July 2009.
Commodities - Long-term trend neutral and closely linked (inversely) to Dollar. A new rally is taking hold but could see an initial peak in the coming month."
The Peter Dag PORTFOLIO STRATEGY & MANAGEMENT
65 Lakefront Dr., Akron, OH 44319.
1 year, 24 issues, $389. www.peterdag.com.
Conservative investment posture
George Dagnino: "The market needs a well-deserved period of consolidation. Financial risk is still too high to conclude there are no more problems ahead. A conservative investment posture is recommended in this climate.
Commodities are responding to improving conditions, especially in the merging countries. The increases in commodity prices is broad and does not reflect current business trends. Commodities rise when business activity strengthens and grows, not when it is contracting as it is now.
High-grade bonds. Treasury bonds could be at the end of the correction. Summer months are favorable for Treasury bonds.
Low-grade bonds. High-yield bonds are close to a period of consolidation. They remain, however, a solid long-term investment."
THE YAMAMOTO FORECAST
P.O Box 573, Kahului, HI 96733.
Monthly, 1 year, $350.
Irwin Yamamoto: "In the Fall of 2009, you'll be hearing about the next financial landmine - commercial real estate defaults. For the current year, $270.5 billion in commercial property loans are due. Between 2010 - 2013, $1 trillion in these types of loans will mature.
These properties tend to possess mortgages of five years or ten years. The loans originating from 1999-2007, are coming up for refinancing. The terrible business backdrop and the tight-credit conditions make refinancing extremely difficult, if not improbable.
Warning signs of an impending disaster exist. Delinquency rates shot up 1.8 percent in the month of March. The figure is more than four times than the level from a year ago. Some industry experts see two of every three commercial mortgages not being repaid. Furthermore, refinancing won't be available for those kinds of projects.
Moody's Economy.com anticipates $375 billion in losses on the $3.5 trillion in commercial mortgage loans and securities outstanding. The failures have started. In April, General Growth Properties - the second biggest mall developer in the United states, filed for bankruptcy protection.
Wall Street has not factored in the upcoming commercial real estate defaults. There's another time bomb waiting to explode."
INVESTOR'S EDGE
774 Mays Blvd., Ste. 10, Incline Village, NV 89451.
Monthly, 1 year, $149. E-subscription, 1, year, $99. www.stanfordwealth.com.
Joseph Shaefer: "I can no longer find pockets of value in which to invest. When I fun out of investments that offer value for my investing dollar, I conclude it is one of those rare occasions when I do better for myself and our clients by seeking cash equivalents and initiating short positions. It may seem "dangerous" to "fight the tape" but it is far more dangerous to follow the rest of the lemmings over a cliff."
THE INTELLIGENT FUND INVESTOR
795 Sharon Dr., Ste 226, N. Olmstead, OH 44145.
Monthly, 1 year, $279.
Dr. Gary Harloff: "We believe we are in a new bull market and that the March 2009 lows will not be revisited. Thank you treasury and congress for all the bank bail out money.
We think the recession will officially end in the fourth quarter 2009 time period. We recently published our new math model of 32 past business cycles: "U.S. Business Cycle Math Qualification" by Harloff and Eacott. It is available at www.harloffcapital.com/articles.html.
Our absolute momentum HVI values, indicate that large caps should beat small cap stocks. We also find that large cap value beats large cap growth stocks. The Nasdaq HVI value is close to zero indicating a coasting phase as mentioned above. Financials, semiconductors, and utilities have negative HVI values indicating these sectors are weak. Precious metals and oil are strong sectors. Emerging markets and Europe are also very good country markets. The US dollar is weak and should be avoided. This is consistent with the high momentum of US 10 and 30-year bond yields. These bonds should be avoided and may be shorted at this time.
We continue to have buys on S&P500 and NDX indexes, and a continued buy on gold/precious metals. Our gold gains since our last buy signal on 11/21/08 is 70.49%. We have a continued buy signal for bond yields, i.e. short bonds."
THE PERSONAL CAPITALIST
6911 S. 66th east Ave., Ste. 301, Tulsa, OK 74133.
1 year, 24 issues, $195.
Is new bull market finally underway?
Sean Christian: "We continue to believe that the Dow can retake the 10,000 level this year.
We could even see the 12,000 level if everything falls in line just right.
We remain very concerned that the stimulus and money creation will lead to long term inflation. Initially we expect to see inflation running in the 3-5% range. Eventually, however, it may move above 6%. It is likely that policymakers will hesitate to withdraw the liquidity, especially if the unemployment rate remains high. This will be a major dilemma and will likely result in the Fed monetizing the debt, keeping inflation at accelerated levels. Our other concern is that an increasing amount of the economy is being absorbed by government. This suggests the need to keep an increasing portion of investments outside the U.S.
Our long-term concern has to do with all of the government stimulus added to the economy. There is no doubt that this will eventually prove inflationary. In fact, the markets are beginning to anticipate the coming inflation and are acting accordingly. That is why we have seen the recent gains in oil, gold, and copper. It also explains the potential in fertilizer agriculture stocks."
THE MAJOR TRENDS
published for clients of Sadoff Investment Management
250 West Coventry Ct., Ste. 19, Milwaukee, WI 53217. www.sadoffinvestments.com.
Ronald Sadoff: "The recent stock market advance has interpreted all the recent news as very bullish. However an in depth analysis reveals differing interpretations.
Let's start with the bank stress test. It was designed to build confidence and clam the battered financial markets. The administration forecasted the top banks need to raise $75 billion in additional capital. Yet the International Monetary Fund has estimated that U.S. banks will need $275 billion more. Also the new liberal and relaxed "mark to market" accounting rules (banks no longer are required to assess the value of their assets based upon current market prices) paper over troubled assets and make the banks' financials look significantly better.
Another area of dispute: the Federal reserve estimates the two year losses in sub prime mortgages will be, at worst, 28%. Meanwhile Fannie Mae's portfolio losses for sub prime loans experienced losses of 68% during the first quarter.
The stock market rallied upon the recent monthly job loss, better than estimated number of 539,000. Not so fast. The actual private sector job loss was 611,000. The government added 72,000 temporary hires in preparation for the 2010 census which resulted in the 539,000 number. In addition previous monthly estimates for unemployment were revised upwards. The more accurate gauge of unemployment includes workers that have part time jobs because they can't find full time employment. Also the unemployed looking for work more than one year no longer count as unemployed. Add back these two categories and the more reflective unemployment level approximates 15.8%. Understand the economy needs to create 125,000 jobs each months just to keep up with population growth. The total job lost for the year equals more than 2.6 million.
Yes, the overall credit crunch is improving. Unfortunately other signs of trouble are escalating. For example, credit card losses are skyrocketing (there is a direct correlation between rising unemployment and climbing delinquencies in credit card payments). Meanwhile consumer credit availability is more restricted. This will cause consumer spending to weaken. In the past consumer spending was stimulated by easy credit and rising asset values.
Commercial real estate is undergoing a waterfall decline. Vacancy rates are rising, rents are declining and property values are tumbling. The famous John Hancock Tower in Boston just sold at a foreclosure auction for $660 million. It was purchased in 2006 for $1.3 billion. In addition, the rating agency, Standard & Poor's, predicts that many commercial mortgage backed securities will be downgraded. Credit conditions in commercial real estate can best be described as awful.
The stock market has also rallied upon better than estimated corporate earnings. However most of the improvement occurred because of cost cutting while total revenue has fallen short. In addition areas of weakness include consumer spending, capital expenditures and commercial real estate. These three areas account for 80% of the economy.
In summary, the risk is that the two month dynamic stock market advance incorrectly interpreted the glass as half full."
THE CHARTIST
P.O. Box 758, Seal Beach, CA 90740.
1 year, 17 issues, $200. www.thechartist.com.
Climbing the Wall of Worry
Dan Sullivan: "Stocks often climb a "wall of worry," especially at the beginning of a new bull market. During these "recovery" periods, the major newspapers and financial press continue to focus on the negatives, and anxiety and uncertainty remain high amongst investors.
Understandably, investors are nervous and rightfully so. But the stock market is a discounting mechanism. It anticipates future events and reacts usually well ahead of the general public and the financial press. One of the most famous illustrations of this phenomenon is the August 13, 1979 Business Week cover proclaiming: "The Death of Equities. How inflation is destroying the stock market." Of course, as we all know, that was a prelude to one of the greatest bull market runs in the history of the 1980s and 1990s.
During the early stages of bull markets, many investors will remain on the sidelines. They have a preconceived idea of where the market will go and will cite any number of economic concerns, as well as the warnings of CNBC pundits, to support their bearish case. Don't get us wrong; they might be right, but if history is any guide, the great majority of investors who were badly mauled during the bear market will not commit even a portion of their capital until it is much too late. As Martin Zweig states in his book, Winning on Wall Street, "As the bull market proceeds and the rally fails to give way to a major decline, many investors find themselves shut out. Slowly they begin to believe that the move might be for real, and the thinking is, 'I'll buy on the next decline.' The problem is that the declines are never large enough to make people feel comfortable about buying. That's because there are too many bears on the sidelines eager to get in."
The obvious question is: Have we just completed another rally within an ongoing bear market, or are we now in the early stages of a bull market that has risen phoenix-like from the March lows? There is no denying that the rally has been most impressive. Since the March 9th lows through May 8th, the benchmark Standard & Poor's 500 index surged 37.4%, which is a spectacular move in only ten weeks. When the rally started, the S&P 500 was 49.5% under its 200-day moving average. As this is written, it is 6.2% under its 200-day line. It should be noted that the four previous rallies of 12%, 7.4%, 18%, and 24% all ended in failure.
Many analysts contend that the market has gotten ahead of itself and at the very least there will be a subsequent test of the March lows. We just don't know. We are encouraged that the A/D ratio flashed a rare buy signal, and thus far the market is performing exactly as it has after previous signals going all the way back to 1949; however, our long-term models, although greatly improved, have not given an all-clear. Thus, we feel that the best course of action at this time is a partial commitment with our stop-loss strategy firmly in place."
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-- JUNE 2009