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.