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From: Robert A. Christy
Editor/Publisher, ‘The Intelligent
Trader’
http://www.christyinvestments.com
http://www.intelligent-trader.com
Date: August 7, 2008
This weeks’ ‘Long and Short of It’.
First the Bullish Percent numbers:
BPNYSE
Xs @ 36% OFFENSE
BPOTC Xs @
30% OFFENSE
BPSP500 Xs @ 40%
OFFENSE
I started this piece last weekend and my
intention was to post it late on Sunday night. I’ve had something stuck
in my craw for the past couple of weeks and it has bubbled to the
surface in the past few days. I am really bothered by what is going on
in the world, more than ever. Between now and the end of the page, I am
going to get a lot off my chest.
As most of you know, I am a student of
economics. In fact, I have a degree in economics. I also have an MBA in
Finance and I am currently working toward my doctorate in either
economics or finance. My dissertation is a research piece on the
correlation (or lack of) of the price oil and the US stock market. My
basic premise is that the price of oil has a more direct impact on our
stock market than do corporate earnings.
The Stock Market
The words gloomy and malaise would be
great adjectives to describe the market over the past couple of weeks.
The good news is that market was little changed last week and has
advanced some this week. The problem is that new buying is not driving
the market, but rather institutional investors covering their short
positions.
We are on Offense statistically, but
psychologically I want to be on Defense. This market is a mess and from
a technical perspective, much needs to be done to right the ship.
Throwing money blindly into an abyss is a surefire way to lose it.
The smart thing to do here is to make
sure you’re stops are wide enough to not get tossed out of a position
that you want to own longer term. The key here is to make sure that you
have stops in place. Also, lag into your positions. I am using a 33%
threshold for new buys. I want to lag into and out of positions. The
reason is that between now and the election, anything might happen.
On the Sector Front, the numbers continue
to improve. The best sectors for new positions are: Drugs, Waste
Management, Non-Air Transports, and Real Estate.
The Economics
On the economic front, Goss Domestic
Product (GDP) rose less than expected and the unemployment rate rose to
5.7% Oil closed the week at $125.10 a barrel and has fallen below
$120.00. Economically, we are not in a recession, but every pundit has
taken to splitting hairs. Is the economy slowing? The answer is yes. Are
we in a recession? If we use the standard definition, two consecutive
quarters of negative growth, the answer is no.
Let the Games
Begin
The Olympics start tomorrow and I really
hope this thing comes off without a hitch. The Chinese are doing their
part by censoring the internet, arresting dissidents, and doing
everything possible to squelch any noise relating to human rights
issues. Mention Tibet in an interview and hand over your medal – enough
said.
I read somewhere that 5 athletes have
already failed their gender tests. I knew that they tested for drugs,
but gender?
As for the US teams, I wish them luck and
hope that politics stays out of it. I have said all year that I have a
bad feeling about these Olympics and nothing has happened to dampen
these concerns.
Intemperate
Thoughts
News out of Israel is that Olmert is
leaving in September. This is both good news and bad news. I’ll leave it
to you to figure out which is best.
Barack Obama who was dead set against
offshore drilling has changed his stance and says that he would consider
it. A man who stands for nothing will stand for anything.
McCain, not to be out left out, is
letting Obama set the tone for the election. If John McCain wants to be
President, he needs to take the fight to the Democrats and quit being
wishy-washy when it comes to what it would be like under a President
McCain. The best thing that he can do is to back his opponent into a
corner and make him fight his way out by making his policy outline known
to all.
Nancy Pelosi should be recalled or
impeached or both. Her actions this past Friday were a new low for the
Office of the Speaker of the House. Shutting down Congress without an up
or down vote on whether or not to drill for oil should be the final
straw. A majority of Americans want to end our dependence on foreign oil
imports. Her business is ‘the people’s business’ and to not pay heed to
this is anarchy. To say that I am totally disgusted with all of our
elected officials is an understatement.
T. Boone Pickens is onto something with
this wind power program. I haven’t seen the particulars, but we have a
number of names on the watch list dealing with wind power. It’s not wise
to bet against this 80 year old oilman.
Over the next few weeks, I am going to
delve into the Presidential election cycle from a market perspective. It
may be the last time that I get to do. I am troubled out this election.
I have said for months that the fireworks haven’t started and nothing is
settled.
McCain is 72. He is a maverick Republican
at best. His 5 years spent as a POW makes him a true hero, but what was
the exact toll that it took on him? Is he closer to 82? The GOP is a
fractured party and the presence of Bob Barr on the Libertarian ticket
will pull a lot of true conservatives that way. The GOP VP candidate has
better be one very qualified person. I don’t care if it’s a man or a
woman on the ticket. McCain’s choice of running mate may be one of the
most important in the history of the republic.
Obama, on the other hand, is running
something and it is more of a coronation than a campaign. As a policy
wonk, I have friends pretty high up in both parties. The Democrats (the
ones who really run the party) are truly scared to death of this guy. In
private, they will tell you he is a socialist and has no business being
at the front end of the ticket. His flip flops are par for the course
and have been so since his days in college. He is running to become
President of the most powerful nation on this earth. There are questions
as to whether or not he is up to the task.
To make matters worse, Hillary wants to
have her name placed into nomination at the convention. To many, this
will come as news. But remember this, she did not concede – she
suspended her campaign. By having her name placed into nomination, she
still believes that she can win this thing with a floor vote. This also
means that the Clinton’s are getting ready to use their nuclear option
and that is not good for Obama. The big question is this – what do the
Clinton’s know that the rest of us don’t. I know that I am dead wrong on
this but I am sticking to the knitting on this – I said many months ago
that Al Gore was the only Democrat that could bring the party together
and unify it. I will not be surprised if he leaves Denver with the
nomination.
What’s this all
mean for investors?
It means plenty and none of it is good.
We stand on the precipice of a dire world order. If anything out of the
ordinary happens, we will see Dow 8,000 before we see Dow 14,000. The
amount of capital that will be wiped out will be multi-generational.
This is why I am trading currencies. If
you haven’t looked into this area, I urge you to do so. I don’t jump up
and down about a whole lot, but when I do, I have a pretty good reason
to do so. I’ll talk more about this later, but if you don’t have an
understanding of this arena, send me an email and I’ll send you out the
handout that I give to clients. It’s a pretty good primer on the basics.
A last word on currencies – the action in
these markets, strongly suggests that something dire is on the horizon.
If you weren’t aware, the biggest investors in the currency markets are
sovereign governments, central banks, and the biggest institutions in
the world – this is what is known as the smart money.
Finally, Say it
Ain’t So.
For the first time ever, instant replay
will be used in baseball. Later in August, instant replay will be used
for the first time at the Little League World Series of all places.
That’s about it for now. Let me here from
you if you have any questions.
Robert Christy
The Intelligent Trader
P.S. Despite the sub-prime sell-off, the
credit crunch, and high oil prices, The Intelligent Trader continued to
deliver outstanding profits for subscribers in 2008. In 2007, we
finished the year up better than 17% --that's more than 3 times better
than the S&P 500 up only 5%. It’s been tough going so far this year, but
at the halfway point, we’re positive and the market isn’t. I’m looking
forward to the second half of 2008 with even higher expectations-despite
the risks most investors will face in the months ahead. If you’re not
yet a subscriber to The Intelligent Trader, I think you should give us a
try because I’m sure that will help your bottom line.
P.S.S.
Please fee free to forward this to your peers, friends and associates
you think would benefit from its contents. They will thank you for it -
and so will I!
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Robert Christy is a professional stock
trader, money manager, author and speaker. Mr. Christy is the President
CEO of Christy Investment Group, Ltd., a registered investment advisory
firm. He is also the Managing Partner and Portfolio Manager of Crabapple
Capital Group, LLC and the editor/publisher of The Intelligent Trader, a
subscription based long/short trading service. At the time of
publication, Mr. Christy may from time to time write about stocks in
which he, Christy Investment Group Ltd, Crabapple Capital Group, LLC or
The Intelligent Trader has a position. In such cases, appropriate
disclosure is made. Under no circumstances does the information in this
column represent a specific recommendation to buy or sell stocks. Mr.
Christy appreciates your feedback and invites you to send it to
rac@christyinvestments.com.
Robert Christy
The Intelligent Trader
c/o Christy Investment Group
P.O. Box
625
Alpharetta,
GA 30009-0625
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