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From: Robert A. Christy
Editor/Publisher, ‘The Intelligent
Trader’
http://www.christyinvestments.com
http://www.intelligent-trader.com
Date: August 19, 2008
This weeks’ ‘Long and Short of It’.
Bullish Percent numbers:
BPNYSE Xs @
44% OFFENSE
BPOTC Xs @ 36%
OFFENSE
BPSP500 Xs @ 48%
OFFENSE
The numbers are hanging in there even
though it sure does not feel like it. We are still on Offense across the
board and we are stepping lightly trying to avoid the major calamity.
The thing to note here is our indicators are reflecting the exact
opposite of what you are seeing on TV and in the newspaper.
The key to success in this market is to
be in the right place at the right time. Two things jumped out at me
this weekend when I was reviewing the playbook.
First, the ishares MSCI Index Fund (EFA)
flashed a Relative Strength Sell Signal late last week. This is the
first sell signal we have seen in this index in 5 years. This suggests
that our market will outperform global and international securities.
Second, the Financial Sector has moved to
positive for the first time in 4 years.
The news coming out this morning is a tad
bleak.
US Producer Prices Surge
More than Estimate
Prices paid to U.S. producers rose twice
as much as economists had forecast in July. This reflects the jump in
energy and commodity costs that we experienced last month.
The 1.2 percent increase in the producer
price index followed a 1.8 percent increase the prior month, the Labor
Department said today in Washington. Costs were up the most in 27 years
from a year before. Core prices that exclude fuel and food rose 0.7
percent after a 0.2 percent gain in June.
Oil prices have dropped 21 percent since
the start of last month, copper is down 15 percent and corn has dropped
14 percent, helping ease the cost pressures on companies. Federal
Reserve officials anticipate the economic slowdown along with
stabilizing commodity costs will help contain inflation. I won’t hold my
breath on this one.
US
Housing Starts hit 17 year low
Builders in the U.S. started on the
fewest houses in 17 years in July, signaling the residential-
construction slump will continue to hurt economic growth. The 11 percent
decrease to an annual rate of 965,000, the lowest since March 1991,
followed a 1.084 million pace the prior month, the Commerce Department
said today in Washington. July's level was higher than economists
anticipated. Building permits which is a signal of future construction
also fell.
The report will reinforce concern that
stricter lending rules, rising borrowing costs, falling property values
and record foreclosures will further depress home sales and cause
builders to keep retrenching. Housing, job losses and the credit crisis
may weaken the economy for the rest of this year and into 2009.
Just some thoughts
The market got whacked pretty
good yesterday. Leading the surge down was Fannie Mae and Freddie Mae.
Who in their right mind still owns this stuff? In fact, who still owns
anything related to the mortgage industry? We have a choice – I choose
not to own toxic waste!
Just a couple of notes on
this fiasco.
-
This whole mess got started because
the media and congress were rattling their sabers over the lack of
mortgages being offered to people with bad credit, limited incomes
and poor job histories. So, loans were made, and now you see what
happened. If the mortgage market had been left to operate without
the threats of government interference things would have been quite
a bit different.
-
In 1999 only about 62% of privately
owned homes carried a mortgage. Not sure what the figure is today,
but my guess is that it is a good deal higher. According to the
latest numbers that I saw, 97% of those mortgages are up to date.
These are not in default. That means that when you hear all the
bleating about the mortgage crisis you could be talking about less
than 2% of all privately owned homes. If only 2 out of every 100 are
having a problem, is this really a crisis?
-
How many people who own a home should
really be renting?
-
This is a never ending cycle – in a
few years you're going to hear the minions in congress and the media
together with some liberal "activist" groups griping about the lack
of available mortgages for people with bad credit, limited incomes
and poor job histories ... and this whole mess will get cranked up
again
Russia is still in Georgia. What has me
scared about this is how they started the attack. The started by taking
out their lines of communication (standard fare) and took down the
internet. They basically crashed their servers. Cyber-hackers attacked
first, practically crippling that part of the world.
Think about this – how much of your life
is tied to the computer and the internet? If someone chooses to attack
us, the point of entry is going to be your computer terminal. As for me,
I am scared – very scared as to what this portends. (for the record – I
have already written to my representatives in both the House and Senate
about this)
I read through the transcripts of the
Presidential sit down that occurred with Rev. Rick Warren on Saturday
night. I had plans, so I did not watch it, but CNN has the transcripts
on their site. I won’t elaborate on my thoughts, but suffice it to say
that it makes for some interesting reading.
More good reading was in the New York
Times Magazine on Sunday. The article was about noted economist Dr.
Nouriel Roubini. If you have time, you may want to grab this article and
give it a read. Roubini is known as Dr. Doom. I have read his forecasts
for several years and he is an excellent counterpoint to the perma-bulls
on Wall Street. He is not conventional and does not blindly rely on
models to make his decisions. He uses common sense which is not found in
great quantities in academia. I use his forecasts for a lot of my worst
case scenarios.
My next diatribe will be out in a couple
of days. I am going to talk quite a bit about forex or foreign exchange
and why you should consider it in light of what is happening today. If I
am right, this market is going to be more important to your investment
success in the years ahead. I’ll tell you why I have 25% of my portfolio
in currencies and you can draw your own conclusions from there.
Intelligent Trader subscribers should be
on the lookout for two new names this week. I will post those late
Tuesday or Wednesday.
That’s about it for now. Let me here from
you if you have any questions.
Robert Christy
The Intelligent Trader
P.S. Are you interested in trading along
side me? There are 2 ways to do so. The first way is through my stock
trading service, The Intelligent Trader. For just $249 you get a front
row seat and the chance to get up close and personal with the market.
Just click to learn more. The other way is through my dynamic forex
trading service. If you have an interest in trading and/or learning
about forex, just send me an email. In your email, please let me know
when would the best time to get in touch with you.
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
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column represent a specific recommendation to buy or sell stocks. Mr.
Christy appreciates your feedback and invites you to send it to
rac@intelligent-trader.com .
Robert Christy
The Intelligent Trader
c/o The Christy Investment Group
P.O. Box 625
Alpharetta, GA 30009-0625
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© Copyright 2008 Robert A. Christy
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