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Monthly Archives: December 2010

Our 2011 Prognostication…

It should be obvious from the factors we present herein, that merely extrapolating continued earnings growth and the stock market making gains in 2011 like it did in 2010 is overly simplistic and foolish. Yet, at the end of the day, this is essentially what Wall St is suggesting. Naturally, we see things a little differently. The range of outcomes for the broad US […] Read the rest of this entry »

2011 Wall St Prognostication

Every year at this time of year, Barron’s magazine interviews several of the most respect Wall St analysts for their prognostication for the year to come. They have a terrible record, but it sells copy. More importantly, it keeps the great unwashed (individual investors) in the game of perpetually expecting the stock market to rise. The common themes are that every year, Wall St […] Read the rest of this entry »

China raised interest rates again.

Looks like the Santa rally is coming to a close. Tomorrow, markets will be open. They’ll treat the most recent interest rate rise in China like a lump of coal in their Christmas stocking. This will be the second time this month the PBOC has taken an action to drain liquidity from the banking system. This time it came in the form of raising […] Read the rest of this entry »

China Wildcard. Will they buy US or European bonds?

It is a pretty good bet that the European banking system will melt down in the first half of 2011. That is unless someone with a pot of cash can ride to their rescue. Enter China… • China will trade roughly $0.5T with the EU this year. More than anywhere else. • in the past few months, Chinese officials toured Europe and spent a […] Read the rest of this entry »

Technical Analysis: Correction Imminent

In a previous letter we provided insight into technical analysis and some indicators we follow. This note serves to provide insight into another indicator – the OEX put/call ratio. It also amalgamates the impact of current readings from several indicators into a broad investment call: correction imminent. Part 1: OEX Put/ Call Ratio This indicator is the ratio of the number of short (put) […] Read the rest of this entry »

Technical Analysis: Advisor Sentiment

Advisor sentiment is another technical indicator. This metric provides comparisons of the proportion of advisors that are optimistic (bulls), versus pessimistic (bears). • The % of bulls is high — over 50%. (graph with red & blue lines below)                   • and when the bulls – bears spread is greater than 30%. (graph with black line […] Read the rest of this entry »

Technical Analysis example: RSI

It is no secret that we focus most of our time & efforts on fundamental economic data. But we also give some consideration to technical attributes because sometimes technical indicators help provide insight into market tops & bottoms. A company called Investors Intelligence produces several technical indicators, and has been doing this since the 1950s. Relative Strength Indicator (RSI) RSI is a momentum indicator […] Read the rest of this entry »

Why is China using the airbags more than the ABS brakes to slow the economy ?

Modern cars are equipped with airbags and ABS brakes as standard features. The ABS system helps us maintain control of the car under heavy braking, and the airbag helps reduce the damage to the most important part (the occupants) when collision occurs.  It is clear that Chinese authorities are searching for an effective ABS system in the form of short term interest rate hikes […] Read the rest of this entry »

PIIGS cause Great Depression 2.0

OK, try this on. The Great Depression began with the US stock market crash in 1929.  But the depression truly became great when a financial system melt-down in Europe happened 2 years later. That’s a familiar script. The recent US financial system meltdown culminated with Lehman Brothers failing in September 2008. It is now two years later, and the banking system in Europe is […] Read the rest of this entry »

Will the bond market let us extend the Bush tax cuts?

Well, we’re going to get everything we could want from a taxes perspective (in the newly proposed 2011 tax regime): A 2-year extension of the Bush tax cuts –for everyone. Deficits be dammed. A 13 month extension on emergency unemployment benefits Social security taxes are lowered from 6.2% to 4.2% –for employees, not business owners! The low tax rates on dividends and long term […] Read the rest of this entry »