Market Focus: Aug 11

On August 12, 2011, in Market Perspective, by admin

Our main focus is on the US multinationals which should bounce here after an almost perfect technically 61.8% retracement in the S&Ps gains. We began bargain hunting, buying back other names. Concerted worldwide stimulus suggests that everything should bounce here. Also lock in some nice yields with MLPs. Tuesday’s Franco-German summit should keep the bears at bay until then. I would love to be a true long term investor, but our “Contained Depression” has many more years to run. Think Japan. I still predict that the term, Great Recession will fade from history as we gradually come to recognize that we are in a long term deleveraging cycle after the Great Debt Supercycle. Martin Barnes who coined the phrase has recently said that it has much farther to run (up to perhaps another 5 years). I basically agree with him (unfortunately).

The key to watch is the extent of movement toward any fiscal union and whether the Europeans. If the Europeans can stop the contagion, an immediate recession might still be avoided. If the ECB follows with a series of baby steps, the recession spreads from Europe to the US. Whenever the recession hits, we will not be ready (due to too much debt, too high of structural unemployment and a 1937 mentality that almost ensures a downturn by 2013 if not 2012. We need high-multiplier infrastructure spending to replace proliferating bureaucracies. The rest of the country will be held back by oppressive regulation so long as Washington DC remains a boom town.

Gold has finally gone parabolic & is finally beginning to take on characteristics of a true bubble. (While I think it’s going much, much higher, today’s announcement of a higher margin requirement suggests near price term weakness in gold). Money coming out of GLD & other gold names is funneling into equities.

Unless we suddenly get some grown-ups in Washington, expect further weakness down the road. I see no political will for sane infrastructure spending to absorb 2 million unemployed construction workers. Meanwhile, the government is handcuffing the private sector with restraints from the NLRB, EPA, and bureaucrats licking their chops over Dodd-Frank and ObamaCare. And with PayGo, the possibility of repatriation of oversees profits is virtually non-existent (the pols will have the “pay for” the $80 billion it would cost to allow Microsoft, Apple and others to bring home their cash to invest in the USA. With Obama determined to double-tax repatriated profits, the new investment will be in Vancouver, China, Singapore.




7 Responses to Market Focus: Aug 11

  1. Tibbie says:

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