• I’m just not overly bullish on anything short term but remain bullish on the USA in the medium term.
  •  The long run is another story for another time, but the “Long-Long” run is a world of renewed US manufacturing, new technological innovation, and effective North American Energy Independence.
  •  A major counter trend rally in Financials may have further to run; but financials will likely continue to regress to the mean of a smaller market weighting from their former excessive highs.
  •  Oil prices are likely coming down due to soft demand and rising supply, but deep sea drillers should remain busy & profitable. Natural Gas has probably not hit bottom.
  • Commodities remain under pressure with world wide economic slowdown and excess capacity. Watch “Dr. Copper” for signs that China is resuming its purchases.
  • Housing is bottoming but will require many years to fully turn.
  • The markets are priced for recovery and may become unsettled with problems lying underneath the surface such as:
    • Greece cannot possibly pay its debt
    •  Portugal is burdened with excessive private debt which ultimately threatens its overleveraged banks and threatens to strain government resources
    •  Spain has joined Greece & certain others in depression with 22% unemployment and 50% youth unemployment. Spanish yields are rising and Spain is too big to save.
    •  Italy is actually a much more prosperous country in better shape, but may be unable to withstand contagion from the others.
    •  Our “Super Mario Brother” Monti has less than one year to put reforms in place. He’s making many of the right moves; let’s see how long he can hold back the factions.
  •  Both of our famous Super Mario Brothers (the ECB’s Mario Draghi and PM Mario Monti) are keeping their fingers in the dyke; but we don’t know for how long. The path of our markets is critically dependent on the paths they choose & how long they can maintain a political consensus.
  •  If China can pull off a soft landing on its most recent move down, greater pain may be delayed until 2013 & possibly beyond. Its investment boom has to slow. Japan is heading toward a demographic-led debt deflation which governments always seem to answer with eventual inflation…
  •  The US should do much better than the rest of the world & would actually benefit from lower commodity prices if the rest of the world slowed. For this reason, I would keep my investments centered in the home front (but recognize that any decoupling will inevitably prove illusive).
  •  But watch out for the one-two punch of overstated seasonal strength in Nov-Dec-Jan-Feb & Even March which we’ve had to pay for with understated strength the past two summers (due to the distorted seasonal lows arising from the Nov-Dec-Jan-Feb-Mar 2008-09 financial panic); compounded by distortions from a warm winter.
  •  But never fear, Uncle Ben is here with his famous helicopter full of money to be dropped throughout the fruited plane! Inflation is tame so long as excess capacity and low monetary velocity are the rule. Inflation could return once monetary velocity perks up UNLESS the fed reigns in their balance sheet (raising interest rates so high that they thwart our ability to reign in our deficit, a problem that will accelerate the time when the dollar has to share the spotlight with other major currencies).
  •  In short, be careful. Of the four major investment classes (stocks, bonds, commodities, and Apple) I would have to be most bullish on Apple. This contrasts with Doug Kass who coined this term who has been prematurely bearish on Apple. His Nothing But Apple (“NBA”) market would be better classified as the another iteration of:
    •  the Nifty 50 in the late 1960s,
    • the New Nifty Fifty of the Late 1990s, and
    • the New-New Nifty 50 (which includes a handful of stocks in addition to Apple).
  • The same phenomenon happened in the late 1920s and just before the Panic of 1908. All ended in tears but all continued for much longer than the bears could ever imagine. But never forget that after tears comes renewal!
  • Pick the daisies while they are growing while storing up acorns for the winter! And never forget that after Winter comes Spring!



One Response to April 2012 Market Commentary – Points for Consideration

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