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The Intelligent Trader's - Long and Short of It
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From: Robert A. Christy Editor/Publisher, ‘The Intelligent Trader’ http://www.christyinvestments.com http://www.intelligent-trader.com
Date: September 2, 2008
This weeks’ ‘Long and Short of It’
Bullish Percent numbers:
BPNYSE Xs @ 50% OFFENSE BPOTC Xs @ 42% OFFENSE BPSP500 Xs @ 54% OFFENSE
It’s finally Labor Day and on Wall Street that means everyone not fired or laid off is back at work on Tuesday. Depending on your perspective, this is either good or bad.
Stocks
The numbers have us on OFFENSE and looking to put more money to work. The Republican Convention started Monday as Hurricane Gustav rolls through the Gulf of Mexico. Not much has changed in the past couple of weeks. Sector field position is improving and the normal ebbs and flows of summer are quickly coming to an end. If Wall Street is looking for bonuses this year, they will need to make up some ground in the ensuing weeks.
Right now, the Strategic Long/Short portfolio has 16 holdings. Of those, I am looking to unload about 5 of them. I’d like to add 10 new names over the next week or so. The market on a year to date basis has been one of the most treacherous that I have ever seen, but we are holding our own. I think the next 4 months will be telling.
Currencies
Note: I am opening the FOREX pooled account this month and have room for 1 or 2 investors. If you have an interest in making an investment in the currency market, just send me an email and I will get in touch with you. (Forex is about the only investment this year that is working)
We start September still short the CAD/JPY cross. In English, this means that I am short the Canadian dollar and long the Japanese Yen. We have a pretty decent profit and I might close this position today or tomorrow depending on the hurricane situation.
GDP Nonsense
The Commerce Department reported the other day that gross domestic product rose at an annual rate of 3.3% last quarter, which was well north of the initial estimate of 1.9%.
Before I jump headfirst into the euphoria, I want to say this – this is an environment where there’s going to be a lot of head fakes on both the upside and the downside.
In the 4th quarter last year, we need to remind ourselves that the reports were positive before the revisions showed that the economy was actually contracting. (I sound like John Kerry)
As a trader with an economics degree, I have a problem with government numbers because they never add up. The only real trend is that we are stuck with a lot of unreliable numbers. All of the numbers that are being reported are nominal numbers. Why not use the real GDP number?
Real GDP is Nominal GDP minus inflation. This is the truest measure of where we are economically. The problem is that you can’t get elected using real numbers.
Nominal GDP last quarter was 4.6% and overall inflation was 4.2%. Since I am proficient at “new math”, the real GDP number is just 0.4%. But, if you substitute core Personal Consumption Expenditures (PCE) price index, which strips out non-essential things like food and energy prices, the inflation rate was only 2.1%, the new real GDP number of just 2.4%.
I have no idea how they come up with 3.3%. I guess I’ll just have to wait on the revisions.
Economic News this Week
The first week of September is a dream week for economists. Most of the major numbers are reported which gives people something to do for most of the month.
On Tuesday, we have the ISM Manufacturing Index which is a composite diffusion index of national conditions in the manufacturing sector, at 10:00 am, ET, along with the U.S. Construction Spending, also at 10:00 am, ET. If the Institute for Supply Management Index shows a reading below 50, that would indicate economic contraction.
On Wednesday, we have the ADP, Automatic Data Processing Employment Report, a preliminary estimate that could help to predict the monthly non-farm payrolls, at 8:15 am, ET. U.S. Factory Orders, representing the dollar level of new factory orders for both durable and nondurable goods, at 10:00 am, ET, and the EIA -- Energy Information Administration Weekly Oil Inventories, at 10:30 am, ET.
Thursday’s spotlight events are the Bank of England's Interest Rate Decision at 7:00 am, ET, and the European Central Bank's Interest Rate Decision at 7:45 am, ET. No rate changes are expected from both of these central banks. If there are changes, expect the markets (especially the dollar) to be quite erratic.
At 8:30 am, we get the U.S. Weekly Jobless Claims and the U.S. Non-farm Productivity/Labor Costs Index which measures the growth of labor efficiency in producing the economy's goods and services.
European Central Bank President Jean-Claude Trichet's is expected to give a speech at 8:30 am, ET. This will be at the press conference following the ECB Governing Council's interest rate decision. Just like we do here, the language of the statement will be very closely watched for any hints of future changes in the ECB's monetary policy.
This sets the stage for the 10:00 am release of the U.S. ISM Non-Manufacturing Index of economic conditions in industries like agriculture, mining, construction, transportation, communications, wholesale trade and retail trade.
The trading week concludes with its main spotlight economic event -- the U.S. Non-Farm Payrolls and Employment Situation Report, one of the most important indicators of economic health, measuring the number of new jobs created. The release is scheduled for 8:30 am, ET, along with the U.S. Unemployment Rate and Average Hourly Earnings.
Politics
As one convention closes and the other opens, it is undeniably clear that neither of the two contenders for president understands the concept of a free market economy. Commodity guru Jim Roger’s says that, "neither one of these guys understands what's going on”. “They don't understand currency markets, economies and they don't understand the world," Rogers said. "Both of them are going to cause us more problems than they're going to solve." No kidding.
On Thursday, Democratic nominee Sen. Barack Obama pledged to reverse the economic failures and blamed the Republicans for the poor shape of the U.S. economy. Anyone with a lick of common sense knows that this is not the case.
Rogers added during a CNBC interview that "he's (Obama) talking about spending a lot of money … I don't consider that very good, going deeper into debt. The United States is already the largest debtor nation in the history of the world. I'm not sure that that's going to solve anything," he said.
On Friday, McCain chose Alaska Gov. Sarah Palin as his running mate. I’ve got to say that I did not see this coming. I was sure it was either Pawlenty (Minn.) or Jindal (LA). I knew it was going to be a governor, but this was really out of the blue.
McCain is sticking with his maverick image with this pick. I just wish that I could have been standing beside Hillary when this announcement was made. Her reaction had to be something in the “nuclear” range.
I am breaking this week up into a couple of different pieces. I have something to say about House Speaker Nancy Pelosi’s inattention to our oil situation and a couple of strategies from our Offensive Playbook that you may want to consider.
That’s about it for now. Let me here from you if you have any questions.
Robert Christy
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 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@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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