July 17th Edition

Good Morning All,

As we come to the close of the fourth week of the summer that never was in eastern Canada , my arc nears completion. Yet despite such local issues, all has not been lost, because during this same extended time period, markets have been given the room to consolidate their March to June index gains of 40 plus percent by giving back a little, thereby setting the stage for the next leg up.

David Nichols of "The Fractal Market Report" has suggested that the turn which began this week will take the S&P 500 to at least 1060 by early September. I have subscribed to this report for several years and have been made painfully aware of its shortcomings as well as its victories, proving once again that market panaceas are either short-lived or non-existent; with that caveat in mind I will state my agreement with his projections based on both technical and fundamental information.

Early last week this letter posited the belief that markets would rally off the 888 S&P number; we were early by several days and 13 points. This week began with a boom and its current rise has yet to be seriously tested. Yesterday's mixed morning action turned positive in the early afternoon when a new rally was triggered by economist Nouriel Roubini's statement that the recession's end was in sight. Roubini is not everyman's economist; he is one of the few that called the disaster early and predicted its depth. When an economic bear turns bullish, one must take notice.

Also helping the bullish case has been the spate of positive earnings reports, particularly among financials and techs. I have been beating the drum for both these many months, having stated over and over that we have been granted a generational opportunity. We may no longer be at its outset, but we remain in its midst with many miles to go before it exhausts itself. Do not miss it again. Refer to my previous selections if you really need ideas.

Commentary:

This last week has proven very difficult for a diaspora of Montreal-based investors with the revelation that a local funds administrator has disappeared with 50 million or more of widows’ and orphans’ cash. I grew up across the lane from Earl Jones (our minor version of Bernie Madoff) in Montreal’s NDG district; our mothers had morning coffee together for 25 years and even our summer cottages were only 15 minutes apart. The names of many of the victims are familiar even though I have not seen most for many years so I will not venture to criticize their naïveté. Years ago I worked at the same brokerage firm as David Walsh, he of BRE-X fame, and had inherited many of his retail accounts when he left the business to strike it rich. These are not the kind of names one would like to drop in polite company and I do so only to draw attention to the character issue of the people with whom one deals. It is of great importance to know such things. I will finish this prologue to my book (just kidding) with this observation. Both Earl and David began their business careers at Trust Companies, neither had University educations which may or may not matter....because Bernie did.

July 7

Good Morning All,

Although markets continued their now five-week long struggle to find direction yesterday, some encouraging signs were seen at day's end, when stocks rallied off their near-term support lows on the S&P 500. The recently established trading range between 888 (the 200 day) and 930 (the formidable breakout point), may have just experienced its last downside test. A close above the latter number could lead to significant gains through September.

In Toronto , the oils and base metal stocks have given back recent gains as U.S. dollar strength has compromised the commodity trade. This too should change quite quickly as the CDN dollar appears to be very oversold. Financials, on the other hand, have retained their resilience, having once again proven the comparative stability of our more regulated system versus that of our neighbour. Banks are like sports events and back alleys...they require referees and policing.

A breakout above the aforementioned 930 will float most ships, but techs and biotechs will still lead. Geron, among others recommended last November at half its present price, continues to spark my interest. (yes I own it)

Commentary

With respect to the political events of this past weekend, it is time once again for people of goodwill all around the world to pause for a moment, drop to their knees and thank whoever or whatever they believe that we are not living under a McCain/ Palin administration. For those who are not believers in any specific entity, thank the American voters. Me anwhile Barack better have another talk with Joe who is yards smarter than Sarah barracuda, but at times just as mouthy.

It is time too for Americans to stop bashing our Medicare system until they commission a poll here asking Canadians if they would exchange systems. One particular silly claim is that of having to deal with bureaucrats. I have had a number of dealings over the years with our much maligned system and have never once spoken to a government representative...the doctors do that. I have however had to deal with insurance company clerks for my private company plan. Just private bureaucrats in America ...there is a difference?

June 23, 2009

Good Morning All,

Commentary:

Although the adage "all politics is local" has been attributed by the late Democrat Tip O'Neill to his equally late father, it has since been incorporated into the reportage of all party campaigns; be they state, federal or municipal in nature. Until recently, however, it had never occurred to an American national leader that this theorem also applied to countries, as it has taken over a century of failed U.S. interventions to finally produce a counter policy that might work in Iran.

The criticism of Obama's reticence to become actively involved in the current situation in Iran has come from the usual political and otherwise uninformed sources, a monologue that is at once galling and laughable, considering the incredible mess these same individuals have most recently made of U.S. foreign relations. Worse still are the reporters whose consistent failure to ask the most obvious of questions; such as "what would you propose we do that would make a POSITIVE difference?"

The answer to the Iranian question will be best answered by the Iranian people, who just happen to have some recent experience in regard to revolutions having kicked out the last American puppet 30 years ago. Maybe this time they will get the "change part" right and finally throw off the yoke of fundamentalism. Meanwhile it is quite something to watch the Christian fundamentalists in America and their fellow travellers on the wacky right, scream for a defeat of the conservative leadership in Tehran. Once again, "politics is local", let's keep it that way. Twitter your support if you like but remember that democracy imposed from without... is just another form of tyranny.

Markets

We appear to have reached an impasse during June with several weeks of trendless trading, or non trading were the truth to be known. I am disappointed with the current failure to move toward my early July goal of a 1050 plus S&P 500 as this present market condition may now prevent a summer of leisure. The ancient market truism has once again reared its ego busting head "you may be able to predict the time or the level, but never both together". We will watch carefully over the next few hours or days to see whether the S&P will visit 840 or stage my desired rebound past 945. The themes of techs, biotechs, potash etc remain intact. Commodity stocks have given up 20 to 30% of their recent gains and should once again be under accumulation.

June 3rd Edition

Good Morning All,

The market closed last week with an important advance above the S&P 500 resistance level of 915 and continued this bullish mode Monday with a confirmation outburst over 940. The consolidation we witnessed yesterday is likely to continue through Thursday as the technicals prepare for a much sharper breakout toward our early summer target near 1100. This latest push may also be holding back until Air Force One has successfully cleared Middle East air space on its way to the 65th D-Day ceremonies on June 6th.

The Market has proven once again that it is discounting mechanism as final news of the GM bankruptcy came in the face of a 200-plus point Dow Jones advance. Naysayers continue to abound, and this too confirms our belief in our oft-stated adage that bulls are long stock and are therefore potential sellers, while bears are loaded with cash and will one day be buyers. The power of this phenomenon is compounded by those "short the market" that will once again be squeezed by week's end.

The two small-cap oil sands selections we posted Monday are respectively and respectably up 12 and 39%. This is just too easy to go on without pause... forever, so watch the technicals and get ready to take profits in early July when our near-term target is hit.

In the meantime we are working on an idea for a GOP fundraiser to be held in Yankee stadium; it would include Cheney, Rove, Limbaugh, Rummy, Ann Coulter, and others. It could involve waterboarding and other such Abu Ghraib practices, during which a running tote board would provide scrolling odds based on who would break first. We are open to suggestions on who would best act as the Master of Ceremonies. So far Al Gore and Hillary are among the choices...in leather.

June 1st Edition

Good Morning All,

For the superstitious among you, today marks the beginning of week 13 of the recovery rally. This "generational" opportunity has already brought abundant gains to those who had the courage and wisdom to realign their portfolios in what were very scary times, and although this has been a plus 30% index runup, (far more for many individual stocks), the best may be yet to come.

It appears that everything, excepting GM and the U.S dollar, have enjoyed the most recent ride, with the commodity trade leading last week's surge on the back of the aforementioned dollar weakness. Oil prices appear to have comfortably settled above the 50$ support level and now seem prepared for a run at 75$. This upsurge has brought the oil sands back into play, lending new credibility to some of our old picks in the group. BQI on the AMEX and BCF on the TSX both trade around a buck and have recently raised cash, Petrobank at 36$ remains the class of the bunch. Gold is for everyone, look at MMC.UN 6.70 as a conservative entry.....many more.

Friday's close above 915 on the S&P 500 should signal our much vaunted "blow off" rally toward 1100. We will monitor the progress, even as we trepidatiously view Obama's venture to Cairo later this week.

Dick Cheney has recently been making far too many headlines in his quest to criticize the Obama administration while making a positive case for his own doings, and although I believe he has every right to speak out in his defence, I would prefer that he be forced to do so in a court of law, after being charged with a laundry list of constitutional offences...including sedition.

...and on the subject of right wing, libertarian nonsense, it is a joy to watch the squirming of CNBC commentators and their chosen guests as they continue to critique every move the Obama team makes, cringing with despair on market up days...of which there have been many late.

May 20 Edition

Good Morning All,

ReGenesis:

...and so it was written that the value of the investment spectrum would rise for eight weeks and upon the ninth week of its generational adventure...it would rest.

It now appears that this market run reached a short term peak on May 7, the date of the "bank stress test" announcement. It would also seem likely that the sideways movement that predominated week 10 has acted as a refuelling stop for the next upward surge, so even though all the evidence is not yet in, a close above 920 on the S&P 500 would go along way toward reassuring this observor that the "go away in May" theory will be abrogated in 2009.

This eleventh week began with a furious upsurge that has since spent a day of recollection (the TSX was closed Monday, so yesterday was catch-up). In Asia, markets have also shown resilience, with India rising nearly 20% in two days. The ICCI bank (symbol IBN) has now tripled since mid March. In America the tech stocks, which had led the post-November recovery, took a much-needed break in week eight before showing some life late last week. So as previously mentioned...let's look for the confirmation as we are once again on the cusp of change. ..."

and chapters could turn into books"...
Jimmy again.

May 13th

Good Morning All,

Nine and a half weeks have passed since the March rally began, and after a really good run to the upside many stocks and the broad indexes are looking a little peaked. The tech sector (my particular favourite) has been undergoing some serious profit taking since the end of week eight, while agriculture and biotech stocks have continued to soar. Joining them, since the announcement of the bank stress tests of last week, have been a number of smaller bank operations and regional entities: CNB, COOP, FITB, SUPR and RF to name a few.

Many investors have remained on the sidelines throughout the rally as their disbelief in markets has been coloured by their reading of current economic headlines. I will not argue the point with the doomsters, beyond mentioning that stock and commodity markets traded to all time highs during 2007 in the face of dire long-term predictions by a few who knew that housing prices had peaked in 2005, and that bank asset statements were fundamentally flawed. It would appear to this observer that a 14,000 DOW or TSX was far riskier than the 6,500 levels we so recently visited. Now we are listening to the many....who don't know dick.

I have written of a five- to eight-week rally that would go away in May for a little while before it resumed its upward course to a 1050-1150 S&P mid-summer high. We have now passed the eight week window and a sideways correction has taken hold; the question before us "is how long will this last and how deep will the move be?" This conundrum cannot be answered with great conviction based on fundamentals at this stage, so we will have to fall back on technicals. For this I will rely on moving averages and David Nichols' "Fractal Report" wherein he states that a breaking close below 893 on the S&P500 would create a short term sell signal. I think this could take us to the 790 level, thereby recreating yet another generational opportunity. If, on the other hand, markets hold and then trade above 930 on this index, the race upward will resume and the momentum trade will be bullish.

Commentary to come at another time.

"If I could just get it on paper, I'd tell you what I think I did." Jimmy Buffett