The Laurel Comment

IMPORTANT MESSAGE

2009-12-11T09:17:00.002-05:00

The Laurel Comment has moved. Letters may now be found at: http://thecoppcomment.blogspot.com/

December 3rd Edition

2009-12-03T08:37:00.000-05:00

Good Morning All,

Last week's Dubai Incident has since proven to be yet another blip on the markets' bullish trendline. Despite warnings of it being the kickoff to a series imminent sovereign debt failures in emerging markets, the smart money took advantage of the "never one cockroach" theorists penchant for historical matchups as it once again trapped the short sellers.

In market parlance, there have long been allusions to bull traps and bear traps; yet what I find interesting these days, is my recently developed theory that what we are now dealing with are ideologue traps, whereby the practicing libertarians and other assorted Wall Street Republicans who desperately pine for a failure of all things Obama, keep getting their respective heads handed to them. For those who doubt the validity of the foregoing, just spend a few days watching CNBC, while paying particular attention to the ubiquitous Dennis Gartman whose role as an expert interviewee belies the performance of his hedge fund launched at the bottom of the market last March. During one of the greatest advances in market history, he has actually posted negative returns; and as for the once reliable Art Cashin, this newly minted permabear (circa 2008) keeps referring to some geopolitical event that will destroy the indexes and the economy. One might be striven to believe that he has tossed out his charts and bought into Nostradamus' musings.

Today we will begin with up markets that will be paying close attention to the Bernanke hearings, while being encouraged by the job summit and the increasingly bullish trendline. The march to 1200 S&P 500 continues.

Commentary

As many long time readers of this letter are aware, the writer holds an unabashed liberal bias on most issues, a view that is somewhat tempered by his hearty pragmatic belief that the doable is more important than the wishful. He is also an admirerer of intellectual curiosity, provided that it is not stifled by too much rigor. He also maintains a healthy distaste for all things ideological; but enough of this third person crap.

Today's treatise includes only a brief mention of Tiger Woods' philanderings, after all "let he who.....cast the first stone" or someting like that. No, today I wish to discuss our other person of colour icon, Barack Obama. What I do believe is important, is the success of the Obama Presidency and its most important initiatives; and how it continues to move both America and the world forward toward a better and more rational understanding of themselves and their increasingly interactive future roles.

It would appear to most sane observors, that the only good thing to come out of the Bush Administration was the situation that created the Obama possibility. The world cannot waste this opportunity. This is not to suggest that criticism Obama be taken from the table, but more simply stated that some political slack needs to be cut if we as a world are to move to a better place. The doable outweighs the dreamable and the time line on an Afghan withdrawal remains an escape route.

" He that troubleth his own house shall inherit the wind "
Proverbs

Bill Copp
Montreal,Canada
December 3 2009
laurelcommentblog
514 795 8450

November 24th Edition

2009-11-24T10:19:00.002-05:00

Good Morning All,

Markets resumed their two steps forward, one step back routine last week as they once again assailed the previously attained heights of 1100 on the S&P 500, only to give back this hallowed ground through the late weakness inspired by options expiry on Friday last.

Once again the issue for the bears has been the low volume of the advances, while the bulls, among whom I must number myself, remain confused about the effect of the "flash trading" and "dark pool" trades.

What we do know for certain is that a vast horde of late money remains uninvested at this juncture. With this in mind, we have put forth the belief on more than one occasion that a large volume "blow off" rally still awaits us; a rally that may have a temporary pause around December 10th, followed by a renewal after Christmas that moves our favourite average toward 1300 in early March.

Commodities have maintained their royal status during the recent run-up, with gold racing to new nominal highs. Some weeks ago, this letter suggested that the new gold bubble could stretch prices beyond 3000 dollars per ounce. This trade idea is gaining both momentum and credibility at once. The bandwagon has yet to fill up, and even when it does, further hook ups will become available. Rightly or wrongly, this is how markets work. If you don't believe me, read a Nasdaq chart from 1999 to March 2000; or more recently check the ascent/descent of housing prices.

Commentary

Only in America, you say!

Well so it would seem, as Sarah Barracuda's musings heads to the top of the best sellers lists, liberals everywhere wonder whether anyone buying the book can actually read. Oh, strike this nasty statement, it is just the jealous reaction of the yet-to-be-published.

But seriously folks (I like to get folksy at times), how is it that the very people who are most responsible for the present economic crisis can get away with organizing, funding and leading the "Tea Party" movement, a series of gatherings that are mostly attended by their victims, who lustily cheer them on when they ascribe blame for the state of America, to the people who are trying to fix the problems. Worse still, how do a bunch of insurance company lobbyists convince the people they are in the business of screwing, that a much cheaper and universally available government option is bad for them.

Truly a case of dumb and dumber.

"The ceremony of innocence is drowned;
The best lack all conviction, while the worst
Are full of passionate intensity."
W.B. Yeats from "The Second Coming"

Bill Copp
Montreal , Canada
November 24, 2009
laurelcommentblog
5147958450

November 17th Edition

2009-11-17T09:32:00.001-05:00

Good Morning All,

After a collectively corrective end to October and a further bout of profit-taking in the early part of the new month, markets have staged a strong and broad-based rally. Much of the information source material we choose to rely on for our own comfort has pointed to these few days as being high energy ones. This observation, when translated to present market levels, indicates that this 1100 area on the S&P 500 represents a catalytic point in regard to future performance. In short, we are about to see either a corrective drop from what might be a double top; or a regenerative surge toward my long-held S&P 500 target of 1200, and quite possibly beyond. Naturally, it is the latter case that has our predictive backing.

There has been much discussion in the market place on the subject of enhanced computer trading as it appears in the form of dark pools and flash trading. The subject matter is far too complicated to discuss here, but for those interested in an in-depth analysis, Google awaits. For purposes of this letter it may be sufficient to know that somebody, or manybodies, are getting screwed by these unregulated practices, and that a fewbodies are making out like the bandits they are. This phenomenon has also affected reported NYSE volume, which to my knowledge, does not reflect these abundant trades, thereby making some technical analysis redundant. If anyone can enlighten me on how these cumulative volumes are reported, I would be most interested in hearing from you.

Look for a soft opening today followed by a resumption of the uptrend.

Commentary

The Sunday NYT had a story titled "Naming the '00's", as in the Gay Nineties, Roaring Twenties et al. My suggestion was to simply call them the Idiot Years, a phrase that may be grammatically, or even grammatically incorrect...but that's part of the point, is it not.

And finally, in regard to the recent retirement party, due to the venue and the various comings and goings, we never got around to the speech-making. For those interested, I offer the following observations.

Many of you are aware that the author Mordecai Richler spent a good deal of time at Winnie's on Crescent Street where he was known by some as the resident curmudgeon. During the eight years since his passing I have tried to assume (there has been some competition), not his literary mantle, but the more easily attainable one of resident curmudgeon. May I also add that the recent filming of Mordecai's last novel "Barney's Version" has inspired me to consider a scandalous take on the brokerage industry...hmmmm, how about Billy's Version.

Bill CoppMontreal ,
CanadaNovember 17, 2009
laurelcommentblogspot
514 795 8450

November 10th Edition

2009-11-10T16:05:00.001-05:00

Good Morning All,

Last week at this time, we hinted at the possibility of a Tuesday turnaround in markets, but in a copp out which was quite out of character, we came up short of actually committing to it. Instead we offered the quiet reassurance that the upward trend remained intact and would renew itself no later than mid month. Well my dears, the week that was, proved to be a rather good one for the bulls, bringing markets back to, and in some cases, beyond their former recovery highs making today yet an important flex point for markets.

Ideally, bulls should hope for some early morning profit taking to be absorbed in advance of a moderate confirmation of the week's considerable achievements. Sector performances will also be an important marking point as new highs in gold, copper and other commodities are likely to come under some profit taking pressure sooner rather than later. It is thought by most observers that U.S. dollar weakness is the commodity price generator, so keep an eye on our own resource based currency for clues. Either way, this China trade is likely to be on for some time to come. The simplest way to play this is not through Asian stocks but through our own resource based companies. Mining and oil stocks are ripe for takeover by cash rich internationals and sovereign entities. Even the forest product ne'er do wells are drawing interest. Check out Domtar's trading range par example, while you continue to collect Norbord in Canada and Louisiana Pacific in the U.S.; respectively 13ish and under 7.

A few weeks ago we wrote of gold as being the next bubble, due to the ease with which it can be manipulated. As long time readers of this letter are aware, I am a cynical bull on this subject, having recommended its purchase around the 350$ level some 5 or 6 years ago. My then original target of 1000$ has since been exceeded and I expect my second level of 1500$ soon will be. As most investors are aware these are nominal dollar prices when related to all time highs reached in the early 80's, which are closer to 2300$ when adjusted for inflation. I was not kidding when I recently targeted prices well in excess of 3000$... if the bubble theory proves out. Just remember however, that you cannot eat gold, live in it or make love to it...at least not in a normal way.

Commentary

It is not their recent Gubnatorial victories that should delight the Republican Party, but the loss of their 100 year old Congressional seat in upstate New York. The crazies that occupy the right wing of the GOP who are bent on taking over the entire shooting match, just had a refresher course on how moronic they can be. Moderate Republicans and adult Americans everywhere can rejoice in this defeat of the lunatic fringe led by Palin, Limbaugh and the denizens at Fox network.

On the other hand, Democrats may have cynically wished for such a takeover, as they are all too well aware that only 20 % of the public is actually certifiable and by definition...unelectable.

…or as Bobby Kennedy used to say "20% of the people will be against everything, all of the time"

Bill Copp
Montreal, Canada
November 10, 2009
laurelcommentblog

November 3rd Edition

2009-11-04T13:22:00.000-05:00

Good Morning All,

There is little doubt that our predicted rocket launch toward 1200 on the S&P 500 has been somewhat delayed by the market's abandonment of the high ground that was taken some 10 trading sessions ago. Although the extreme volatility that has typified recent activity has made many investors quite nervous about future trends, it is our belief that the November correction we called for a few weeks ago...has simply come early. One of the major reasons for this late October swoon, and its carry-over into this week, may be attributed to the annual event that has influenced price action for many years. October is year-end for many fund managers, and it is their portfolio adjustments that have led to the triple digit up-and-down moves which have made markets so raucus of late.

We are not so sure that we want to call for a turnaround Tuesday this morning, but we will venture to state that the up trend remains intact, and that the flight toward 1200 S&P and beyond will resume by mid month at the latest. If David Nichols of Fractal Markets is correct, we should see this bullish resumption last through early March, whereupon a seasonal pullback may present itself... from much higher numbers. In short, this week's market has created yet another opportunity for those who have missed the enormous March/October gains, to get on board for the next four months, or five years if they are patient.

Commentary

Some of you may have seen the documentary "Life After People" which premiered on the History channel in January 2008 and has recently replayed. The film explores the idea of what would happen to the Earth, its environment and its structures,for months, years and centuries after people are gone. Interesting as the theme may be, I was struck by the parallel that might be drawn to the present situation in the Middle East . What would happen if all the foreign occupiers were withdrawn? Or worse still, what will happen if they are not?

In essence, people and politics do make a difference; but in the vast realm of time, it is both brief and fleeting by nature, and often, very destructive.

"And everybody praised the Duke,
Who this great fight did win.
But what good came of it at last?
Quoth little Peterkin.
'Why that I cannot tell,' said he,'
But 'twas a famous victory.'

Robert Southey

Bill Copp
Montreal , Canada
November 3 2009
laurelcommentblog

October 21st Edition

2009-10-22T12:33:00.001-04:00

Good Morning All,

Markets bivouacked yesterday, taking a much needed respite from their collective march toward higher levels. As readers of this letter are well aware, we like to use the S&P 500 to mark the overall progress of world indices. With this in mind, please note that our projected short-term target of 1200 now appears to be well within reach. This much vaunted event should occur during the first week of November, at which point we would advise traders to step back for a time, or at least until a more definitive pattern emerges. Longer-term investors may wish to stay aboard for the longer journey, which will likely end some five or six years from now; as that is the average length of the modern business cycle...boom to bust.

There continue to be a number of positive fundamental signs indicating that the economy is staging a solid recovery; some now even believe that an upswing of major proportion is looming. Please google ECRI for its economic take on the world. Earnings have also added a much needed boon to the market's positive nature, as roughly 73% have come in ahead of expectation thus far in the reporting season. It is once again notable that the "libertarians" who hold most of the microphones at CNBC are still bearish, and that their idols on Wall Street who brought us much of the debacle in the first place, remain skeptical of all things Obama. It is indeed curious to watch and listen to the most verbally patriotic Americans literally embrace the hope that he and the Democrats will fail in their efforts to stabilize the country that many of their ilk have so willfully destroyed. Remember where we were a year ago and think once again of how the world may have fared under a McCain-Palin administration.

Also of interest was a recent report showing that average home prices in London, England have reached all-time highs, exceeding the previous record set in November 2007. I don't think this represents the outset of a new housing bubble, although similar such growth in Asia may prove to be a longer-term problem. In short, there will be another bubble in some sector, somewhere...but it is too early for it to burst. Gold, an exceedingly rare and rather useless commodity, is showing all the signs of becoming just such a candidate; if so it will likely top out well above 3000$ per ounce, a very long way from here.

In the meantime, refer to my potash stock list of last November, pick up some of my previous gold selections and be aware that China, BHP Billiton and others are hunting acquisitions...even uranium is making a comeback.

Commentary Now that a little time has passed and the brow beating nastiness over Obama's Nobel prize has subsided, I would like to reflect upon what I thought then and now.

The United States , and by proxy, the world, has recently moved from a posture that celebrated war and hubris under Bush-Cheney toward a cerebration of peace and diplomacy led by Barrack Obama. This act of hope alone...is worth the award.Sometimes, what you do is not as important as what you provoke or inspire others to feel. Affect is often the prologue to effect, and we have travelled a great distance in one bold step...that is what the Nobel committee recognized and America , through this gesture has once again resumed its role as World Leader.

"Some see things as they are, and ask why; others dream things that never were, and ask, why not?

The above is a familiar Shaw quote made famous by Ted Kennedy eulogizing his brother Bobby. Bill CoppMontreal , CanadaOctober 21 2009laurelcommentblogspot

October 7th Edition

2009-10-07T13:35:00.001-04:00

Good Morning All,

It looks pretty much as if we had our wishes fulfilled with yesterday's round the world market performance. It is worth noting that this positive action came on the heels of an early 4th quarter correction (window undressing?) which had followed an abnormally strong September. Alcoa, one of our early recovery favourites, will kick off earnings reporting season after the close. Since it has had a recent analyst upgrade, one must think the prospects are good for a bullish announcement. Intel reports next Tuesday, but the serious influx will occur during the week of the 19th.

So I guess the question now, is not about a 10,000 Dow Jones, which is less than a couple of good trading days away, but one of how far, how soon? For this prognostication I will refer to my summer long held view that once past 1060 on the S&P 500, market momentum would accelerate buying through to 1200. This is rarely a straight line occurence, but dip buying continues to be the pattern in force.

Gold and the U.S. dollar are now more firmly linked than ever, a truth also seen of oil and other commodities. The trends, until broken are all up; excepting the greenback.

I have been accumulating stock in the company described in the link below since the spring. It is a microcap, sure enough, and may seem to be a silly investment to some; that is until you think of those who recommended AIG at 60$ or....Nortel over 100$. This is a nanotech, a theme that will dominate the years to come. Enjoy the sites, buy the paint or the stock, symbol INTK pink sheets.

Bill Copp
Montreal, Canada
October 7 2009
laurelcommentblogspot

http://www.nansulate.com/nanoblog/

October 6, 2009

2009-10-06T17:30:00.001-04:00

Good Morning All,

Due to inclement market conditions the rocket launch to higher market highs that was predicted in this letter a few weeks ago has been delayed, not aborted. Although yesterday's 100 point plus rally was a good start toward stabilization from the recent mild correction, I am always wary of "Tuesday turnarounds", so let's see if we can put in a solid all day performance before I give the green light to the 1200 S&P 500 target that I believe is in sight for this often devestating month.

No one need be surprised by the constant berating of all things Obama by the lunatic right, nor should they be particularly distressed by the no idea nasty opposition that has been emanating from the rest of the Republicans. What is difficult to stomach is the nit picking criticisms that have become the new mantra for many moderates. It is indeed strange how quickly people seem to have forgotten how we got here, both economically and militarily. These crises did not appear on inauguration day, in the case of deregulation, it began with the Reagan administration; and as for the wars in the Middle East, we may thank the Bush regime's ignorance and hubris for creating this ongoing waste of lives and of treasure. In short they will not be fixed overnight, a statement that should require little repetition.

Meanwhile the dogs of war appear to be gearing up the media for an escalation of the insane war in Afghanistan. This is where I part company with many of Obama's concessions to the war's advocates. There will be no victory here, history has taught us so. With a massive infusion of men and arms, it may be possible to obtain the appearance of stability for a short while, but in the end few of the "on the ground dynamics" will have changed.

There have been many intelligent columns written on this and other issues; one such observation by E J Dionne follows.

Yes Alice, newspapers still exist. " and the seasons go round and round
and the painted ponies go up and down"
The Circle Game by Joni Mitchell

Bill Copp
Montreal, Canada
October 6 2009
laurelcommentblogspot

No Rush to Escalate
By E.J. Dionne Jr.
Monday, October 5, 2009
At a White House dinner with a group of historians at the beginning of the summer, Robert Dallek, a shrewd student of both the Kennedy and Johnson administrations, offered a chilling comment to President Obama. "In my judgment," he recalls saying, "war kills off great reform movements." The American record is pretty clear: World War I brought the Progressive Era to a close. When Franklin D. Roosevelt was waging World War II, he was candid in saying that "Dr. New Deal" had given way to "Dr. Win the War." Korea ended Harry Truman's Fair Deal, and Vietnam brought Lyndon Johnson's Great Society to an abrupt halt. Dallek is not a pacifist, and he does not pretend that his observation settles the question against war in every case. Of the four he mentioned, I think World War II and Korea were certainly necessary fights. But Dallek's point helps explain why Obama is right to have grave qualms about an extended commitment of many more American troops to Afghanistan. Obama was elected not to escalate a war but to end one. The change and hope he promised did not involve a vast new campaign to transform Afghanistan. It's easy to get enraged over the mess in Afghanistan and with the voices insisting that Obama has no choice but to remedy it by going big and going long. Too many of those who say that Obama is obligated to step up the pace in Afghanistan spent the Bush presidency neglecting that war because their main interest was in waging a new one in Iraq. In his recent report to the president, Gen. Stanley A. McChrystal, the top U.S. commander in Afghanistan, noted repeatedly that the effort there had been "under-resourced." It sure would have been nice if we had settled Afghanistan before beating the drums of war in Iraq. It's also enraging that those who insist on offsetting every penny spent to expand health coverage would never ask the Congressional Budget Office to score the costs of McChrystal's strategy. For the uninsured, they propose fiscal prudence. For war, they offer profligacy. Yet rage is a poor guide to policy. The truth is that Obama has only bad choices in Afghanistan. Obama has said over and over that the war in Afghanistan, unlike the war in Iraq, is necessary. "We are in Afghanistan to confront a common enemy that threatens the United States, our friends and our allies," he declared in March. He cannot walk away from that. But while his March speech was sweeping in certain ways, he defined a limited core objective. "I want the American people to understand that we have a clear and focused goal," he said, "to disrupt, dismantle and defeat al-Qaeda in Pakistan and Afghanistan, and to prevent their return to either country in the future." These are the words that will give Obama room to reconsider his policy. McChrystal argued that the full counterinsurgency strategy he proposes demands that we "elevate the importance of governance" in Afghanistan, and, to his credit, he is brutally frank about its current dismal state. He writes of "the crisis of popular confidence that springs from the weakness of [Afghan government] institutions, the unpunished abuse of power by corrupt officials and power brokers, a widespread sense of political disenfranchisement, and a long-standing lack of economic opportunity." That doesn't even take into account the fraud involved in President Hamid Karzai's reelection. Is this a situation in which Obama should commit tens of thousands more troops for a lengthy war? Should it surprise us that some administration officials are asking why it is that al-Qaeda has weakened even as the Taliban has grown stronger? These skeptics now question whether routing the Taliban is actually essential to Obama's core goal of defeating al-Qaeda. There's a jelling conventional wisdom that if Obama doesn't go all in with McChrystal's strategy, he is admitting defeat and backing away from his earlier pledges. Those who want him to commit now are impatient for a decision. Obama should resist both their impatience and their criticism of his search for an alternative strategy. The last thing he should do is rush into a new set of obligations in Afghanistan that would come to define his presidency more than any victory he wins on health care. Those most eager for a bigger war have little interest in Obama's quest for domestic reform. As he ponders his options, theirs are not the voices he should worry about.

September 16th Edition

2009-09-16T10:30:00.001-04:00

Good Morning All,

The S&P 500 closed above 1050 last night. This powerful advance has led Asian and European markets higher in what North Americans refer to as "overnight trading". Our often-expressed initial target of 1060 will likely be exceeded at the opening bell, and after allowing for some momentary profit taking, markets should begin their march toward 1200. This will not be a long trek; it will more closely resemble a rocket launch. It is my belief that the little duckies have successfully aligned themselves in conjunction with interstellar activity, sunspots, phases of the moon and any number of Nostradamus' predictions to set the stage for a sharp, strong advance into early October.

Actually folks, I don't really believe that markets act in either an orderly or a random manner; and I certainly don't believe that forces unknown to us have any influence on market behavior (unless of course we are talking about rogue bankers). What I do give credence to is my oft-stated view that bears hold cash they must invest, and that bulls hold stocks they must one day sell. The only question to be asked is; how many are in each group? The answer, as posited in my previous treatise, is thus: the bears who have missed the 50% market gains that were triggered in March must now spend their cash, and they will do so in a hurry. So enjoy the ride and be ready to depart the scene as we approach either 1200 or the second week of October.

Although traders must remain nimble, longer-term investors may rest assured that the five year up cycle has begun in earnest. The signal may have been given by the recent renewed interest in stalwarts such as GE and Alcoa. The tech rally is still game one but own some commodity based stocks including gold. Many have been mentioned in previous letters at much lower prices.

September 1st Edition

2009-09-01T09:10:00.001-04:00

Good Morning All,

Although markets closed out August with somewhat less than an august robustness, it should be noted that the final numbers still added a sixth month to the recovery rally. Bulls appear to be somewhat worried by the recent volatility in China, while bears, particularly those of an ideological bent, rant on about deficits and bailouts, something they seemed less concerned with when the Bush-Cheney regime was creating both the trillion-dollar war for oil and the deregulatory grounds for the bank debacle.

This letter has been bullish since late October of last year, which for many, though not all, sectors, was a tad too early. But then again we were calling for the end of the world in mid 2006, months before the May 07 peak in bank stocks and the October crash that followed. Time, however, passes rather quickly and the worst things in the world are never permanent. Depressions, recessions and wars each end in time, at least for most "civilized" partners. It has been my view that we were offered a multi-generational opportunity at the end of last year, one which became even greater by March 2009. Some of you might remember the stock lists I first published in late November and added to as the months went on. Should you wish to see them again...ask.

Markets will either correct soon from 1060 S&P 500, or in early October from 1200 plus. Be confident in the future, but remain nimble.

Commentary

The nutbars in America have been out in full force these last months as the demagogic right continues to rally their intellectually-challenged minions in opposition to all things Obama. Health care has been the main focus of much of this insanity as many of the uninsured, the barely insured and the already government insured have marched to the tune of the INSURANCE companies and other assorted lobby groups. Reminds one of the P.T. Barnum dictum "there's a sucker born every minute"...or a customer.

I am also reminded, anecdotally, of a story told to me by a friend, who while visiting Florida last winter was confronted by another resident of his complex with a statement on Canadian medicare. "So you are a Canadian", he stated, "yes", Paul proudly replied. "So you have that medicare, where you have to wait for treatment" he continued. "Well", Paul quietly observed, "I guess we do have to wait for some things, but I have never met anyone who lost their house over it".

To this story may I add my humble suggestions to the American health care debate. Why not just expand the existing Medicare and Medicaid programs, by dropping the age eligibility on the former first to 60 from 65, and then gradually make it inclusive of 55 and 50 year olds. For the latter, which presently covers 40 million of America 's poor, why not just double the maximum income requirement. This could be expensive, but cost savings would accrue from the limits paid on drugs and treatments which are now part of the existing programs. The government could, at the same time, pass "tort reform" wherein caps could be placed on lawsuit settlements, much as they presently are by insurance companies. So much for a life, a lung, a leg, a liver or a linguini. This would stop the unreasonable settlement scam wherein some chain-smoking, wife-beating, child abuser who has spent a life chasing down an unending series of six-packs with shots of bad bourbon, from receiving gazillion-dollar awards for having the wrong diabetic leg amputated...at the expense to entire system.

August 26th

2009-08-26T10:03:00.001-04:00

Good Morning All,

Positive market activity this week has continued to validate our view that stocks are headed higher over the coming weeks with our initial target of 1060 S&P 500 likely to act only as a resting point along the way to 1200. Although there is much bearish talk about the danger inherent in the low volumes that have accompanied this summer rise, the contrarian in me is assured that large volume days and big market moves are yet to come. When this happens, we will enjoy the "blow off" rally that will set up the fall, but that fall will take place from a much higher plateau.

Ted Kennedy's death should remind us all of the history behind the drive for Medicare. It should also be a time to further debunk the myth of Reaganism by remembering that the late idol of the right cut his political teeth opposing its enactment. It is ironic now to watch elderly Reaganites expressing personal terror of having it "messed with". August 26Bill Copp As usual...Paul Krugman, not the CNBC libertarians...is spot on.

August 24, 2009
Op-Ed Columnist
All the President’s Zombies
By PAUL KRUGMAN

The debate over the “public option” in health care has been dismaying in many ways. Perhaps the most depressing aspect for progressives, however, has been the extent to which opponents of greater choice in health care have gained traction — in Congress, if not with the broader public — simply by repeating, over and over again, that the public option would be, horrors, a government program.Washington , it seems, is still ruled by Reaganism — by an ideology that says government intervention is always bad, and leaving the private sector to its own devices is always good.Call me naïve, but I actually hoped that the failure of Reaganism in practice would kill it. It turns out, however, to be a zombie doctrine: even though it should be dead, it keeps on coming.Let’s talk for a moment about why the age of Reagan should be over.First of all, even before the current crisis Reaganomics had failed to deliver what it promised. Remember how lower taxes on high incomes and deregulation that unleashed the “magic of the marketplace” were supposed to lead to dramatically better outcomes for everyone? Well, it didn’t happen.To be sure, the wealthy benefited enormously: the real incomes of the top .01 percent of Americans rose sevenfold between 1980 and 2007. But the real income of the median family rose only 22 percent, less than a third its growth over the previous 27 years. Moreover, most of whatever gains ordinary Americans achieved came during the Clinton years. President George W. Bush, who had the distinction of being the first Reaganite president to also have a fully Republican Congress, also had the distinction of presiding over the first administration since Herbert Hoover in which the typical family failed to see any significant income gains.And then there’s the small matter of the worst recession since the 1930s. There’s a lot to be said about the financial disaster of the last two years, but the short version is simple: politicians in the thrall of Reaganite ideology dismantled the New Deal regulations that had prevented banking crises for half a century, believing that financial markets could take care of themselves. The effect was to make the financial system vulnerable to a 1930s-style crisis — and the crisis came. “We have always known that heedless self-interest was bad morals,” said Franklin Delano Roosevelt in 1937. “We know now that it is bad economics.” And last year we learned that lesson all over again.Or did we? The astonishing thing about the current political scene is the extent to which nothing has changed.The debate over the public option has, as I said, been depressing in its inanity. Opponents of the option — not just Republicans, but Democrats like Senator Kent Conrad and Senator Ben Nelson — have offered no coherent arguments against it. Mr. Nelson has warned ominously that if the option were available, Americans would choose it over private insurance — which he treats as a self-evidently bad thing, rather than as what should happen if the government plan was, in fact, better than what private insurers offer.But it’s much the same on other fronts. Efforts to strengthen bank regulation appear to be losing steam, as opponents of reform declare that more regulation would lead to less financial innovation — this just months after the wonders of innovation brought our financial system to the edge of collapse, a collapse that was averted only with huge infusions of taxpayer funds.So why won’t these zombie ideas die?Part of the answer is that there’s a lot of money behind them. “It is difficult to get a man to understand something,” said Upton Sinclair, “when his salary” — or, I would add, his campaign contributions — “depend upon his not understanding it.” In particular, vast amounts of insurance industry money have been flowing to obstructionist Democrats like Mr. Nelson and Senator Max Baucus, whose Gang of Six negotiations have been a crucial roadblock to legislation.But some of the blame also must rest with President Obama, who famously praised Reagan during the Democratic primary, and hasn’t used the bully pulpit to confront government-is-bad fundamentalism. That’s ironic, in a way, since a large part of what made Reagan so effective, for better or for worse, was the fact that he sought to change America ’s thinking as well as its tax code.How will this all work out? I don’t know. But it’s hard to avoid the sense that a crucial opportunity is being missed, that we’re at what should be a turning point but are failing to make the turn.•

August 24 2009

2009-08-24T09:44:00.001-04:00

Good Morning All,

After passing the 1000 mark on the S&P 500 early in the month, markets spent the middle part of August in a push me-pull me mode, one that ended last week when the bull side of the investment argument emerged victorious. As this letter has iterated in more than one printing, we believe that this important "benchmark" index will close above 1060 by early September or maybe, early Tuesday. The question of where to next now becomes even more important to those who have come late to this once in a multi-generation banquet. Many of these aforementioned folk, nonbelievers if you will, are still awaiting the arrival of Armageddon or worse, and are thereby holding cash. They may well be right...someday. Meanwhile it may be of greater significance to try to map out a market future rather than an economic one.

If Dave Nichols of the Fractal Report is correct, markets could rise beyond the September cutoff of 1060-1100 to reach a 1250 crescendo early in October. This would nicely coincide with my penchant for a blow off, throw-in-the-towel rally that would culminate in an October currency crisis. The stategy at hand would entail dating some of your favourite stocks as opposed to marrying them. Even though I remain positive about the next five years, markets are shaping up for a somewhat normal year with the potential for a mid to late October crash/correction. Should such a cleansing occur, it would offer both solace and opportunity to permabears on the one hand and alert bulls on the other. The third hand belongs to those who have it firmly emplaced, along with their heads, somewhere in their personal anatomy.

Commentary

The "New Colossus" is a poem by Emma Lazarus whose famous words are etched into the Statue of Liberty - you know the ones..."give us your poor, your tired, your huddled masses...". What it failed to say was give us your mean-spirited and your incredibly stupid, in order that a future America will be able to populate its airwaves with demagogues, its evangelical churches with morons and one of its political parties with the greedy and the disingenuous.

The late Bobby Kennedy was fond of saying that "20% of the people are against everything, all of the time". This homily has since taken on even greater meaning during the health care debate, or should I say rants, wherein a bunch of crazy white people are running around in support of the insurance companies that either just creamed them with unconscionable premiums or took away their coverage. One often repeated anecdote tells of the elder genius who told one town hall meeting to keep the government's hands off his MEDICARE. Crazier still was the Arizona meeting during which one bright light had an assault rifle strapped to his back, shocking the civilized world when we learned that his act was perfectly legal in that state. The first thing I listen for each morning is no news... on an attempt on the President's life.

August 11th Edition

2009-08-11T10:40:00.001-04:00

Good Morning All,

The S&P 500 held above its newly acquired recovery high of 1000 plus yesterday, despite a bout of early week profit-taking. The question now before us is no longer about 1075 by early September, but rather, how much sooner and how much higher? The Fed will meet over the next two days and will not likely change anything or affect markets one way or another. This market is about momentum and unused cash, and until the latter has been somewhat exhausted, the momentum will continue to drive prices upward. Favourite groups are still those I noted last November/December although many other sectors have since joined the fray. Stem cell stocks and other small biotechs have enjoyed a strong summer and I suggest you refer to my list. Opaxa, another stock I own and follow, rose over 400% on Friday after announcing a deal with Novartis. There are many similar buyouts in the offing, as this multi generational opportunity plays out.

I reiterate the opinion that this is shaping up to be a normal autumn prefaced by the current summer rally. Serious profit-taking may make the latter weeks of September fearsome...so be nimble of mind and remember the real lesson of these past two years. Market direction is the only thing you need to know, and for most of us the long term is in sight.

Commentary

The town hall meetings on health care now taking place in the United States have brought much of the Republican leadership to the depths of depravity. Mob rule is a very scary social condition at any time, but when it is encouraged, not just by the Rush Limbaugh assholes of America but by many in elected positions, it can be doubly dangerous. Much of what is going on may even border on sedition. As a Canadian who is well versed through experience in the plusses and shortfalls of our Medicare system, I find the constant misrepresentation of the plan both repulsive and insulting. I am also fearful for America and for the safety of its first adult President in many, many years. This is all beginning to look like an old western movie, you know, the one where the bad rich guy stirs up the lynch mob. Essentially this debate is about the non-inclusive insurance company bureaucrats versus the government bureaucrats. Weirdly, many of those opposing the health care initiative have no insurance themselves. Let's hope that there is a Hollywood ending to the script.

On a more practical front, it would seem that the combination of anti-Sotomayor votes and this continued assault on sanity and conservative principles will further isolate the GOP. Just Google Sarah Palin's comments on health care and as you do, wonder what might have been...I shudder still.

And finally, for all you conservatives out there who disagree with the foregoing...reread Edmund Burke.

Bill Copp
Montreal , Canada
August 11, 2009

July 27, 2009

2009-07-28T16:04:00.001-04:00

Good Morning All,

Markets have now put more than two weeks into the third stage of the recovery rally which began last November; yes I know that lower index lows were made in March, but the process, in my view, really began with the post Obama election decline and subsequent recovery, when stocks in the tech sector traded at "silly" price points.

Investors who bought tech, biotech and agro stocks at that time (refer to my list) fared rather well. Those who missed this first down play were offered a long intermission during the month of February wherein they could assuage their fears through a look at even greater opportunities as banks, oils and other commodities joined the across-the-board rally that followed the aforementioned March lows. This upswing lasted through early June with indexes putting on 40% gains, while many individual stocks doubled or even tripled during this brief period...and then in the face of rising bearish sentiment, the July rally began in earnest.

We often write of "market adages" in this space and we are once more reminded of the two that make up the traders creed; don't fight the tape and don't fight the Fed. The first of these is not all that complicated; it simply means that momentum in any direction will carry prices higher or lower than anyone rationally expects...until it is broken. The second posits the case that lower interest rates and an active printing press will eventually spur economic recovery, a condition that is long preceded by higher stock prices.

The initial recovery from the lows was a reaction by bargain hunters to advantage themselves of those investors who allowed late-in-the-day panic and threats of armageddon to color their judgement. The March wave corrected many of the "silly" price inequities mentioned earlier, while the July explosion has been fed by earnings reports that have come in well above expectation (please refer to June comments). So the question now is...what comes next?

The fuel that bull markets run on are cash and fear, both of which are in plentiful supply. Tops are made when the cash is spent and euphoria has replaced dread. We are nowhere near that point, but we may be in for a refreshing pause as early as this week. Use it to buy in advance of the next major upleg that should take the S&P 500 above 1200 by early September, after which we might experience a more serious and traditional early autumn decline.

Commentary

In America , the Republicans continue to test the borders of sanity as their opposition to the Sottomayor nomination and their embrace of the intellectually-challenged ex-Governor of Alaska so aptly illustrates. Aside from their lock on hypocrisy, they are stupidly throwing away the Hispanic vote along with that of the moderately intelligent...third party anyone?

In Montreal , Earl Jones (our mini Madoff) was arrested yesterday. I suspect that the dollar amounts lost will be much less than the media has estimated. If he had stolen 50 or 100 million, he'd be outta here. Not much comfort to the victims although Registered accounts may still be intact.

July 17th Edition

2009-07-17T10:23:00.001-04:00

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

2009-07-07T16:28:00.001-04:00

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

2009-06-23T11:34:00.001-04:00

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

2009-06-03T10:33:00.000-04:00

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

2009-06-01T11:07:00.000-04:00

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

2009-05-20T10:43:00.000-04:00

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

2009-05-13T09:35:00.002-04:00

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

May 7 2009

2009-05-07T12:17:00.001-04:00

Good Morning All,

Markets have continued to soar well past the breakout number of S&P 870 and brought us closer to yet another resistance level in the 940's. The release of the delayed "stress test" results will take place at the close of business today and this much discussed news may well be used as an excuse for profit taking. Contrarily it may also be used as a starting point for my much vaunted "blow off" rally. The question will be answered shortly, so we will watch today's action with great interest.

As readers are aware, the enclosed list was first published last November/December but it is not a complete view of my suggestions. There have been and continue to be countless other plays, the most important of which are sector ETF's. In the U.S. the FAS and FAZ best represent the bull and bear financials, while the TNA and TZA accomplish the same thing for the small caps.

Commentary

Just a brief mention on the Rove/Cheney view that torture was not just an acceptable practice but an effective one. In the post WW ll period, the Nuremberg trials did not try privates and non-commissioned officers; they went after those who developed and orchestrated the policies of the" holocaust". We are not suggesting that the deeds are similar, even though 4 million displaced Iraqis might disagree; we simply wish to point out that the only people doing time for the crimes in Abu Ghraib and other locations have been the foot soldiers. Those who rewrote the U.S. Constitution have gotten off scot free.

One of the worst decisions ever made by an American President was Gerry Ford's pardon of Richard Nixon; this pardon did not heal America; the wound it left has since festered into the manifestations most recently seen in the Bush administration...we can do anything we like because we will be pardoned....This is precisely why Obama needs to convene a bipartisan investigative committee....this present "reverse Nuremberg" must not be allowed to continue.

And while I am on my anti-libertarian rant...what is wrong with the fact that the wealthiest 2% of Americans pay 80% of the income tax collected; after all they own 80% of the wealth. See the list below and you may join them.

May 4 edition

2009-05-04T12:30:00.004-04:00

Good Morning All,

Commentary

Just pretend for a moment that you had been taking a vacation on the proverbial planet of choice these past ten years, and upon returning you opened the Wall Street Journal and tuned in your new flat screen TV to CNBC or the Fox News Network. Wow, you would have to think....what kind of moron is this Obama guy. In just a little over 100 days he has not only destroyed the world economy, he has set about persecuting hard working, innocent, underpaid BANKERS and fully competent auto executives. Worse still, he is running up huge deficits and blaming the previous administration for his "inherited" problems. And soon he might even convene an investigative committee on the conduct of something called "the war on terror".

I am aware that most of the people who bother to read this letter are not members of the extreme right, although some of you poor souls may remain Republican apologists; nor would I suspect that many of you subscribe to the absurdities of libertarianism, an ideology that ranks behind anarchism in my less than humble view. With this in mind, let us appreciate the dilemma that faces those who must wield power within America and upon the international stage. Let us also understand that it will not be failed ideology (oxymoron) that will provide new and vital solutions to this unique situation...but a pragmatic application of high intellect and good judgement.

Markets

There is no such thing as a single market bottom. Techs and Agri stocks had theirs way back in November, whereas mines, oils, banks, materials and other sectors appear to have found depth at various times during the first quarter of this year. Indexes, on the other hand, seem to have put it all together on March 9th, the point from which our now eight week old rally began.

So as we enter week nine and the month of May, it might be wise to retrieve caution from the wind. There remains a strong likelihood that Friday's close above 875 on the S&P 500 could lead to a fast acceleration toward 950 before Thursday's "bank stress announcement", but a STRAIGHT run to my summer target between 1050 and 1150 seems less probable. Discipline suggests a few weeks of "go away in May" declines should take hold late this week or early next. Low volumes are fast becoming an issue and require monitoring.

"Life and ink, they run out at the same time, or so said my old friend the squid" Jimmy Buffett

April 28th Edition

2009-04-28T11:01:00.001-04:00

Good Morning All,

Just when we thought that a certain species had left Washington and parts of Wall Street, it appears their progeny has surfaced in the form of a nasty 'flu bug. Thusly (sic) we began week eight of the tremendous post disaster upswing, one which many have incidentally dismissed as "just a rally in a bear market". Call it what you will, I have enjoyed this generational opportunity and I hope that at least some of you have participated either through my suggestions or those of your own derivation.

Although I do not pretend to be either a medical doctor or virologist, I can still count and read, leading me to conclude (hopefully I might add) that ten days from now the news networks will be otherwise occupied. As for the market effect of the "swine 'flu", cynic that I am, I believe it has provided yet another trading opportunity. We shall begin the day in a downward path and look towards a Tuesday turnaround as we head toward the government release of the stress tests on May 4. Techs continue to lead the way, look for the S&P 500 to broach 1020 by summer, after a May pullback.

April 20th Edition

2009-04-20T12:39:00.000-04:00

Good Morning All,

During the heady pre inauguration days, I promised you a broad market rally that would last five to eight weeks and would be led by the technology sector. Well as things turned out, the predicted rally did not immediately make itself present, as the February pullback quickly proved by taking indexes significantly lower. It was only after this fear and loathing of all things investment related returned, that markets prepared themselves for the delayed upswing. On March 9th the fun began and the first week of the move took many by surprise. After four weeks, pundits were reporting that this had been the strongest such move since 1933; and after six weeks, the most powerful since 1938. For all but the "historically challenged" it need not be noted that these past events took place during the "Great Depression".

As we now enter week seven of our suggested time frame, it may be time to review what prompted the move and to question its strength and sustainability. First and foremost we must repeat the oldest of market truisms. "when everyone is bearish it means they have already sold and hold cash, when everyone is bullish, they hold stock and little cash". The former are potential buyers, the latter will one day be sellers. Remember also, that CASH is never a permanent, or even a near permanent position for investment managers.

Secondly, the market was waiting for a resolution to the "bad bank" problem; the government actions for which proved to be the March catalyst. These were the conditions that turned market sentiment and the follow-through of weeks two and three provided the all important momentum change. So what now?

As we begin week seven, the same old worries seem to be resurfacing, even though earnings reports have been less onerous than most thought. If it can be said that the fear of "systemic risk", ie. the bank failures, has been either mitigated or eliminated by time and timely actions on the part of government agencies....then the only thing left to worry about is a recession, and frankly speaking ...recessions do end. Thus today's early decline, or rout if you like, is most probably a serious bout of profit taking after the six week, nearly uninterrupted, runup. It may prove to be more than that but don't look for a retest of the old lows because we have come a long way. A careful view might be to step aside until the smoke clears, a more adventurous one might involve staying around for a blow off rally up to 1020 S&P 500.

Fear not , I will not reprint my stock list today...although you might wish to refer to it.

Commentary:

The recent media attention given to Iran, North Korea, Cuba and Venezuela would be humerous if it were not so serious to the radical right. NONE of these countries pose a threat to the United States. The combined might of China, Japan, Europe, Russia and the United States will oppose any perceived aggression of which the worst of them may dream. President Obama has taken great steps towards unifying this alliance of the powerful; and will be so accredited by history.

The most present danger to America and its President lies not from without.....but from within.

April 1st Edition

2009-04-01T15:15:00.000-04:00

Good Morning All,

.....and welcome to Financial Fool's Day, you know, the one wherein the G20 leaders all meet to figure out who or what, and is or was, responsible for the mess we are in. Few of these present guys were present at the creation of our collective idiocy but fewer still were alert enough to either speak up or act as the debacle unwound. Either way, it is now up to their collective courage and intellect to solve the current problem and more important still, to put in place, proper and enforceable regulations that will (touch wood or G.W.'s head) prevent a future collapse from occurring....well at least diminish the chances of such.

Although there will be much finger pointing during the days to come, little of this activity will be of consequence; what will be important is the "collective" recognition that there are, and will forever be, people in every generation who believe in the creed so aptly stated in the 1987 movie Wall Street that "greed is good". I use this quote not just because it rings so very well, but also because it wonderfully captures the essence of the much ballyhooed "Reagan Revolution", a time during which the seeds of our crisis were sown. The Reagan legacy was all about smaller government and deregulation....the market place, Republicans believed then and continue to espouse now, is the solution to every problem, as it will level the playing field for all, creating prosperity across the globe. Ah the joys of trickle down economics.. eh !

I continue to abuse myself by spending far too much time watching the ideologues on CNBC, and despite the now famous send up by comedian, cum political commentator Jon Stewart, they remain largely unabashed by such criticism. One of theirs' and Wall Street's most interesting rants seems to surround the concept that Main Street, the Democrats and a number of other newly ordained populists are indulging themselves in a form of class warfare. Wow, what a concept that would be....or come to think of it...isn't that precisely what these guys have been waging against the disappearing middle class, lo these many years.

Markets finally staged my long predicted three week rally and after a Monday pause for recollection, moved up on Tuesday. We may spend a little time in the new trading range but the mid term bias should be upward, despite bad economic news and the coming earnings data. When markets go up in the face of bad news, they are showing a clear sign of seller exhaustion. This may only be a "bear market rally" but as history shows, these events can be both broad ranging and profitable. Intel (under 15) yields 3.8% and has no financial problems while Alcoa at sevenish has many, but trades for nearly nothing at these levels.

There are now web sites that proclaim "let the revolution begin" a sure sign of the times. I will however stick to my more moderate mantra; "let's get on with the renaissance".

March 19th 2009

2009-03-19T12:02:00.000-04:00

Good Morning All, Markets have had a rather interesting couple of weeks, ones during which they have largely ignored the drumbeat of current negative economic newsin favour of a more macro view of what might be, once the troubles have past. It is at times such as these, as I mentioned in a previous letter, that I have often quoted Yeats' poem "The Second Coming", please look it up if you have not already done so. I have also used past crises to remind readers of the tide of history; and to point out the leaps of human progress that followed such momentous events. Sticking to more modern history, I have most often cited the prospects for gain which followed the Napoleonic Wars when the Industrial Revolution began in earnest; the end of the U.S. Civil War, a period dominated by railways, steel and robber barons; the boom that brought the automobile and the airplane after the Great War later to be known as WW l; or the new science of computers and jet travel that arrived amidst the many innovations that gained prominence during the decades of which we have each been a part. In short, we the human race, are much smarter and much more resourceful than we occasionally appear.

It is also at times such as these that our true natures and spirit become more evident, a time when we discover the fiber from which we are made. Dichotomous as it may seem, there has lately been a rise in volunteership and stranger still, this aroused spirit of giving is most often found among the young and the old and among those who can least afford the luxury of giving. This is not a world populated by the Rick Santellis or the Rush Limbaughs but by the ordinary folk who have been stirred to action because they recognize their own stake in the future world, be it for themselves, their issue or humankind, resides with the good of all. Sadly there are those among us, mostly in their middle years, whose concern is less about "doing good" than "doing well". These are, of course, the careerists who blame everyone else for the bumps in their road to nowhere. There are among them the ranters and the suers, opportunists who seek to gain during hard times at the expense of others. It has been said that we can learn a great deal about someone's character at a poker table or on a golf course; to this I would add....or times such as these.

I could go on about history and humankind's ability to thrust great individuals and leadership to the fore, just when they are most needed, but I won't because you will think I am hyping Barack again....oh okay I am.

On a less serious note, I have once again included my 25 stock suggestions first published in late November and early December 2008. The gains in many of them have been quite striking and although the list is far from being either complete or exclusive, it does embody a practical example of what really has been happening in recent weeks and what will likely occur in the years before us. I have no idea whether any of you have yet advantaged yourselves of this generational opportunity, but I hope you have, as it has been little my way of giving.

Let the renaissance continue.

March 10th Edition

2009-03-10T11:26:00.000-04:00

Good Morning All,

I don't normally address you all in this manner but since I am somewhat compelled, for business reasons and the lack of an alternative, to spend much of my day with CNBC in the background, I thought you might enjoy Jon Stewart's take on the collection of smug, self serving, right wing blowhards who dominate the commentary and choose the interviewees. This network now challenges FOX news for leadership in the realm of idiot supremacy.Please open the attached....or don't.

http://www.youtube.com/watch?v=yJObWmN-x9I

March 10th Edition

2009-03-10T10:08:00.001-04:00

Good Morning All,

Welcome to another week of gloom and doom…..or renewal and reward if you should so choose. Of course this is not really a choice one might make without significant amounts of fear and trepidation, but the latter option may deserve some consideration at this juncture, even though the economy appears to be going to hell in something larger than a hand basket.

The major market indexes have continued their headlong plunge these past weeks despite my rosier predictions and despite the underlying strength of my favourite sectors: tech, stem cells, agribusiness and gold. It may also be noted at this time that major indexes reflect the banks, the AIG’s and the General Electrics. At some point down the road some of these stocks will be replaced in the DOW and the S&P 500 by other less encumbered companies. A few may disappear through nationalization or outright bankruptcy. Interestingly enough, it may also be said that a further drop in the aforementioned can hardly bring much more distress to these egregious levels as the number zero is no longer distant.

The crux of our current dilemma resides in the foundation of our economic system, ergo the private banks and the Central Banks that provide the currency, liquidity and security with which we buy and sell goods and services. Economics 101 teaches us one principle upon which both the left and right agree. The Velocity of Money is not simply a reflection of our economic well-being but the integral component of its health. The present decline in the rate at which money travels around the economy is largely responsible for the “seizing up” of lending and therefore spending. The cause of this diminishment of lending and confidence has been well documented, the solution is less clear.

Many on either side of the issue believe that the initial answer lies with the creation of a bad bank that would take up the toxic assets that were originally produced by the money center banks and brokerages that have recently undergone shareholder destruction (as opposed to management destruction whose suffering appears to have been mitigated somewhat through their non recouped bonuses), Further to this many wish to combine this basket approach with a change in the “mark to market accounting rules”. It is believed that many toxic assets are actually worth more than their presently assessed value, and that less distressed last trade prices would immediately improve bank balance sheets. Look for a form of this to come about in the coming week or weeks; it will not be called nationalization in America but it will quack like it. This event will send markets much higher.

Over the past 30 years America has seen CEO salaries rise from 42 times that of the average hourly wage earner to 364 times while peaking at over 500 times a few years ago. This destruction of the middle class has had a disastrous effect upon U.S. savings and long term consumer spending, the latter of which has largely been funded by credit card excesses and the phony housing equity boom. The United States has funded its last ten years of growth on such credit expansion, and the plug has since been pulled. History provides many examples of nations wherein 80%, or more, of the wealth, is held by 2% of the population. Think South America or Russia in recent times. Oligarchies such as these always end badly, either through collapse or revolution or evolution. It has been suggested that the policies of Franklin Roosevelt brought about such peaceful evolution during another troubling era. It is now hoped that the policies of the Barack Obama administration may bring about a similar conclusion.

Despite the now famous Rick Santelli rant on CNBC, it was not Joe the pizza delivery guy or Joe the bogus plumber or even Joe the house flipper that caused this mess. It was mortgage lenders, the investment bankers and the bond desks that scooped billions of yet to be repaid commission dollars that were happily responsible. Remember always “to follow the money” and know that Wall Street believes that greed is good and that Republican cant still repeats the mantra, “trickle down works”….but for whom.

February 27 Edition

2009-02-27T14:10:00.001-05:00

Good Morning All,
The markets can't seem to muster a serious bear rally despite their highly oversold condition; and it is still all about the banks. The Obama budget is out and as "Slate" stated, "he put the money where his mouth is"; and much to the disdain of the CNBC commentators and their chosen guests, he has largely kept his campaign promises. It should be remembered at this time that it was not Dems who got us here, it was the GOP and Wall Street greed. The complaints from the right about the Obama budget are many, but essentially the most discussed concerns are related to taxation changes for the top 2% of Americans, and to a limited degree, the top 5%. None of the contentious items have been explained in detail on any of the complaining networks. In fact, when a talking head interviews a like minded guest, they speak of the tax rise from 35 to 39.5% as if this were going to destroy America's entreprenurial spirit. Think about it; some really smart guy or gal is now going to choose "welfare" over working because they have to pay an additional 4500 dollars on every 100,000 they earn over 250k. Not bloody likely. The other bugbears include the mortgage and charitable deduction clauses in the proposal. Again, these are presented on business television as if they have been totally eliminated, when in fact they have been reduced for people in the 33% plus tax bracket from the present deduction, to 28% in both cases. Example; 1000 dollars of mortgage interest or charitable donation is presently deductible at your tax rate. Under the new tax law, it will be 280 dollars per thousand versus the former 330 or 350 dollars. In Canada we have no mortgage interest deduction and a much better housing market, not to mention a much lower deficit. And once more, let's remember that this is the top 5% of American earners at 33% and the top 2% above that level. There are 300 million citizens of the United States....you do the math. America is greatly in need of some tough love and strong leadership, it is also in need of a little sacrifice and a lot less greedy whining from the already wealthy, not to mention the Trumps of the world. This morning's defacto bank nationalization may well signal a short term end to that crisis, the fat lady is warming up.

February 24 Edition

2009-02-24T11:37:00.002-05:00

Good Morning All,

Markets continue to be ruled by the banking crisis, and in America, the Wall Street analysts, pundits, practitioners and knee jerk ideologues remain concerned, if not incensed with the word nationalization. The administration also appears fearful of using the "N" word, even as it effectively puts it into practice. In a bid for greater clarification I would humbly suggest that the President incorporate the following phrase into this evening's important address to this worried nation. First used by our own MacKenzie King in W.W.ll and later paraphrased by the new leader of Canada's Liberal party, it would sound something like this; "nationalization if necessary, but not necessarily nationalization".

Markets have been extremely noisy of late and I am not sure that they are truly reflecting the future potential of the world economy. They are certainly reflecting the nation's fears, almost to the point of exploitation. At this moment we may be looking at a generational opportunity.....or the beginning of the end of the world as we have known it. Being of the belief that the world is at a far more advanced place than at any time in history, I find myself in the former, more optimistic camp. It is usually during times such as these that I quote W.B.Yeats' first verse of his poem "The Second Coming" but in lieu of space I will ask those of you who care enough, look it up. Times are tough, but they have been much tougher many times before, times when we were not quite as smart, or quite as civilized.

Stop listening, for a moment, to the people who got us into this mess, and start paying heed to the ones who will get us out of it.

February 23, 2009

2009-02-23T11:14:00.001-05:00

Good Morning All,

Well the bad news, at least for me, is that my most recent letter which called for a market rally last week, not only fell on deaf ears but on fully plugged ones. The good news is that although some stocks may go to zero, the market itself will not, and as indexes fall to lower levels it becomes increasingly clear that we cannot continue the descent at present rates for seven more weeks. So as we begin the second month of the "fix it" Presidency we can look for a relief rally of some sort, the sustainability of which will be dependent on the reception given the Obama budget and the quasi nationalization of CitiGroup and Bank of America.

I am still in southern Florida where the class system of America is as visual as it gets. Interestingly though, it appears that the gap between the super wealthy and the much larger group, which is quickly beginning to include almost everyone else and is growing wider by the day, may not include attitude...fear and anger have been mutualized. The sense of hope that was ignited by the Obama victory has been somewhat mitigated by the attack dogs on the right who appear to control the business networks, Fox news and talk radio. It will be a sad day for us all if we lose the print media one day down the road where someone may well rant, but they can not scream.

The President, through all this, has remained calm, adult, personable and patient. His fault lies, in my opinion, in trying too hard in his quest to broaden the tent by appealing to his opponents' better instincts....my advice, stop, because as Gertrude Stein famously said about Oakland; "there is no there, there".

This niceness may of course be part of a grander plan, the one in which our Machiavellian Prince Barack practices the art of bait and switch, by giving them enough rope from which they may collectively swing.

It is necessary at this time, for Obama to show strong and unyielding leadership, leadership that purveys a sense of hope and a promise of renewal. He is more than capable of so doing and this crucial week is likely to bring new impetus to the great plan; or as I prefer to call it...the renaissance.

Meanwhile, even my late November, early December selections took a drubbing and although most remain somewhat higher than their outset prices, they are significantly below their peak prices....opportunity knocks.

January 31st 2009 Editon

2009-02-03T15:50:00.002-05:00

Good Morning All,

The following article was brought to my attention by one of you (thanks for the feedback Phil). I thought it described one of the many areas in which the enormous potential of stem cell research can be brought to bear. As many of investors are fast becoming aware, markets are forward looking instruments, and what could be more forward looking than owning some of the companies that are engaged in the scientific investigation of new and better solutions to the world's ills. The Obama Presidency has kicked off an entire new and growing interest in such progress, as recent price appreciation in this sector has proven. It is my belief that many of these companies will be successful while others will fail, so as I wrote last November, "own a basket" and trade within it. I have added two additions to my list and yes I do own all or some of them.

In my opinion, the President's attempts to reach out to the Republicans have failed and it is now time for him to move on. He stated in his inaugural address that it was time to "dust ourselves off"; well if I may be so bold...it is time for the President to dust off the GOP.

January 30, 3009 Edition

2009-01-30T12:09:00.001-05:00

Good Morning All,

The world has now entered the post Bush era, a time during which we shall see much in the way of change, both in America and around the world. The first of what I hope will be many Obama years began a little over a week ago, and already we have seen the implementation of many important actions of both a macro and micro nature, the most empowering of which have been the initial steps taken toward the return of constitutional practice and the "rule of law".

Despite yesterday's market decline, amidst an endless stream of terrible economic news, the major indexes staged their best recovery week since the first days of 2009; and no, folks, none of this activity had anything to do with the hodgepodge of proposals laid out in the Harper budget, the silliest of which was the home renovation idea. As I understand it, a new bureaucracy will be created to return some money to people who spend $10,000 on home-work. Well I, of course, don't personally know anyone who has paid their fix-it man or general contractor sous table, but I have heard stories of such tsk tsk goings on. If stimulation is what Harper or Iggy are looking for, why not just simply cut the GST/PST sales tax on building products for one year; and while they are at it, do the same thing for the automotive industry and home furnishings. Simple is often better.

The Obama stimulus package will be passed by the Senate in what I hope will be an enhanced form that does not include more useless tax cuts. These GOP guys had better begin to realize that they lost the election because their silly mantra of tax cuts for the already wealthy, trickle down, and deregulate were a major part of the problem and are thereby not the solution. Demanding dividend tax credits and capital gains exemptions at this "such a time" is patent nonsense. An extension of retroactive capital loss claims makes infinitely greater sense and would be April, impactive.

The stem cell stocks jumped again yesterday, and underneath the broader indexes, the mid and small cap companies have fared much better than the blue chips. We are entering a new era wherein science will be a dominant theme; one in which research and development will hold sway over ideological claptrap and religious cant. The Captain of this recently launched ship of state has said so and I believe his word. I also believe that his devotion to common sense solutions will bring much needed confidence to a world and a nation in dire need of intelligent, adult leadership.

This is not a time for fear but for bold action, investments included.

January 23, 2009 Edition

2009-01-23T11:24:00.001-05:00

Good Morning All,

Congressional Republicans have continued their grandstanding this week through the delay of several cabinet appointments that will happen anyway. I do not oppose due diligence in any area, but it does appear to this observor that delaying, or, as it were, holding up the Eric Holder appointment to the office of Attorney General is a little over the top, particularly when one considers the tenure and practices of Alberto Gonzales. President Obama stated in his speech that it was time to put away childish things...it is long past time.

Geron Corporation, one of my stem cell recommendations of November last, is up strongly this morning on news that the FDA has approved the first human clinical trial of embryonic stem cell therapy. It is likely no coincidence that this has occurred in the post inauguration days. Others in the group are moving in sympathy and will each trade much higher over the coming weeks. Please consult my list for names and google the story.

January 22, 2009 Edition

2009-01-22T10:45:00.001-05:00

Good Morning All,

Okay, all long term Obama fans and recent converts, you can breathe now, because George really is gone, and the tide of common sense that went out with his arrival eight seemingly interminable years ago has begun its return to America, bringing with it both a sense of hope and an opportunity for renewal. As the new President has warned on an increasingly frequent basis, the times ahead will not be easy; nor will the solutions to the past travesty of mistaken and misapplied policies be simple or perfect in either their design or their implementation. Yet what we do know for certain is that the United States and the world will be far better served by this adult leader and his pragmatic cabinet than ever we were by the collection of self-serving ideologues they have replaced.

Today should see the final important cabinet approvals that will include the woebegotten Treasury Secretary Timothy Geithner, who received an important endorsement from Paul Volcker the excellent Fed Chairman who preceded the highly overrated Alan Greenspan. Whatever Timothy may have done (how could someone named Timothy be bad), his credentials on Wall Street are Triple A, for whatever that is worth these days. Assessing the value of such things, at least on a short term basis, was easy, even for the GOP, who have realized that this is no time to pick a fight with the the incoming missile of public popularity that has swelled for all things Obama. Markets began to reflect this wave of confidence yesterday as they combined with good news from IBM and some significant insider buying in the beleagured banks to post recovery gains, the continuation of which I would expect to see over the coming weeks as we approach the 1150 S&P 500 target this letter projected last November. Yes I know I said it would occur by mid to late January, but I also cautioned that "getting both the number and the day right" was an improbable task. We now need to close strongly above 860 for this thrust to achieve technical approval, a level that may be forthcoming today.

The world economy is not likely to show signs of recovery for some time to come as they await the return of open and liquid credit markets. It has been noted here that the LIBOR rate and the attendant TED SPREAD have shown signs of improvement in recent weeks, and that these are important monitors of the velocity of money, a term that should enjoy increasing analysis in the popular press; google all of the above for your Economics 101 course... you know, the one that Bush failed. Markets, however, as this letter so often reiterates, are predictors of the future, and express the buying or selling, not of past Christmas ghosts but of future realities...so get out of your present malaise and look forward.

In Canada next week's budget should offer both fiscal stimulus and a possible retreatment of the income trust issue. Look to these latter gifts (maybe for your tax free accounts) and to my favourite Canadian infrastructure company Aecon around $10.50 up from $6 in November. Investment banking is coming off its worst year in recent history so look for a ton of new issue product and a spate of merger and acquisition activity. GMP.UN in the low 5's will be a slam dunk beneficiary of such largesse. And just one more point....Barack's Chief of Staff Rahm Emmanuel is set to become a household name in the coming years but it won't be in the same way that H.R. Halediman or John Erlichman's was. Oh, and I nearly forgot...own some gold shares.

January 20, 2009 Edition

2009-01-20T09:41:00.002-05:00

Good Morning All,

As there is little new I can add to the overwhelmingly thorough coverage of this most important inauguration week, I will instead reflect upon the points of change which I believe to be most important. Since I took my first tentative steps toward the possibility of an Obama Presidency in a letter I wrote away back in the fall of 2007, much has come about, both to Obama and to the America that dared to embrace him, and although in these closing days it appears to be all about one man, it has also become evident through time that this dream has grown to be increasingly inclusive of the caring and hopeful people who may not have supported or voted for him, or even voted at all.

This change of which everyone speaks is not just transitional. It is transformational, for whatever happens henceforth, nothing will ever be remotely the same in American or, dare I say, global politics. The change in Washington and in America is one in which pragmatism will replace the strictures of ideology, where ideas and curiosity will overpower the rote of Republican cant, and where the solutions to the complex problems of the world will be addressed with knowledge and thoughtfulness, not just the simple reactions of tax cuts, deregulation and military might that have gotten us to this present place of enormous danger.

The going, as Barack and the rest of us are wont to repeat, will be difficult and "the climb will be steep" but we have collectively taken a step back from the abyss and and have begun the ascent. Were I a person of religious faith I would indeed offer a prayer for both his safety and our future, metaphorically I suppose I already have.Let the renaissance begin.

January 15, 2009 Edition

2009-01-15T09:59:00.001-05:00

Good Morning All,

Investor bids on world markets have all but disappeared over the past six days, leading this short term bull toward an internal debate over the question as to whether I am totally wrong (impossible), or temporarily mistaken about the timing of my prognostications. Ahh it would be unhindered peace and progress, t'were it not for the quandaries this life is wont to present to our world of fun and frolic.

One answer to the present dilemma may reside within the lessons taught to each of us through the exercise of life and living. If, for a moment, we can chase back in time to our early days when we were first introduced to the realities of the David and Goliath world that would become our existence, you know (as Caroline Kennedy might say), the years in which we began to understand whether we were going to be freedom fighters, nasty bullies or simple tribespeople. For my part I was an early Darwinist who quickly realized that my survival and prosperity resided not with my physical skills, but with the agility of my tongue and its ability to sway (or as some critics might suggest) manipulate potential opponents through minduse. To carry the story a little further and thereby get to the point of this seemingly strange metaphorical diversion, permit me, for a sentence or two, to dwell upon the physics lesson first learned in Sunday School.

As a child I was not one disposed to the abuse, torture or murder of small animals and feathered creatures nor do I believe that I ever owned or operated a slingshot, but I was an observant little fellow who quickly grasped the aforementioned principle behind David's weapon of mass destruction. Elasticity by its very nature must be stretched before its power can be released, and the farther the pull back the greater the forward thrust will be. Markets, similar to the underestimated slingshot are presently enjoying such a pullback and they are aimed not just at the ceiling but o'er the roof. Realistically though, we must remain aware of an even more important law of physics...gravity.

Short term problems with a couple of Barack's cabinet appointments will soon be overcome as the holdup appears to based more upon opposition posturing than it does on substance. Meanwhile things continue to look very bleak on the economic front just as do the prospects for sanity in the Middle East. There is little good news about these days excepting the comforting thought that we are about to deal with the Reagan legacy of deregulation and the inherited Bush debacle of everything, instead of simply living with the seemingly interminable mess. Despite all of this, it is not whether we get an Obama rally it is when and I suspect that we are due, if not today, then very soon after.

On another Barack watch note, it was interesting that he invited a number of conservative media types to dinner on Tuesday evening. Yesterday morning, Larry Kudlow, the extremely annoying, ideological boor who is given far too much air time on the increasingly absurd CNBC business network was absolutely ecstatic over the meeting, gushing on about Obama as if he were some sort of ......may I say it....Messiah. This from cable television's most reactionary conservative. If Barack can win these guys over with pragmatic posings or supposings....well he reminds me of that little boy who realized his personal strengths at an early age. Just get the job done son.

January 13, 2009 Edition

2009-01-13T12:24:00.001-05:00

Good Morning All,

Markets have not had an up day since last Tuesday when the latest 20% plus rally reached overbought proportions. This serious surge, which began off the November 20th lows, appears to have contained more than just an index advance, as its final weeks included some interesting moves among the mid and small cap stocks. So now we have seen a double Autumn bottom followed by a rally, followed by a bout of profit taking...so what is next.

It is very difficult at this juncture to make a great case for a major economic recovery any time soon, so we won't. We will however note that in all previous modern world recessions or depressions neither China nor India was a major player, a situation that lends itself to a serious view that it indeed may be different this time. We would also wish to make much of several other important indicators, ones that have been discussed in previous letters and monitored by yours truly and thousands of others. First let us note that the TED SPREAD has recently fallen under 100 basis points after having reached 364 following the Lehman debacle. LIBOR has dropped under 1% as well, its lowest level in years. Without getting into the details, it is sufficient to suggest that credit markets are loosening, the first and most important step on the way to recovery. On the international front the noticeable drop in the U.S. trade deficit and the rise in its Canadian counterpart can be easily explained...think energy. Meanwhile though the Baltic Dry Index that monitors shipping has risen sharply from its October lows. Okay, so before I put many more of you to sleep let's get to the guts of the issue at hand.

For those of us with exceptionally strong stomachs who watched the final Bush press conference yesterday and likely had a number of different reactions, these were mine. Revulsion, not pity for a man who should never have been allowed to hold a serious public office. An ignorant, incurious asshole who doesn't yet understand what he never understood. A man-boy who presided over the worst administration in American history and still believes that historians will exonerate him. From deregulation to Iraq to Katrina and the devastated world economy this moron knows no shame and feels little remorse for the mess he has left behind. Not for the economic terror we are now experiencin', not for the millions of dead, maimed and displaced Iraqis whose lives were imperiled, and not even for the American regular soldiers and reservists who will spend the rest of their lives with missing body parts or fractured minds. I am filled with disgust when I think that neither he nor his cronies nor his puppet masters will ever spend a moment in Abu Ghraib....not even a week of soft time at a country club prison.

In March of 1933 Franklin Roosevelt and the people were so invested with confidence and hope that a major market rally ensued. Next week another sea change will take place in America and I would expect not less but more of a positive public reaction, because if changing a George Bush for a Barack Obama cannot inspire an American revival, I don't know what can. Let the Renaissance begin.

January 8, 2009 Edition

2009-01-08T11:15:00.000-05:00

Good Morning All,

Way back in November after markets had given in to the 20% pre election rally, this letter suggested that a year end rally would see indexes recover as much as 50% of their 2008 losses. So far, so good as the move, which has been largely made in the past 10 days or so, has seen a 20% pick up. We have now reached the crisis point in the market rise, the point at which the big money will decide whether they are more afraid of being out or being in. What we know for sure is that the intensely watched credit markets have shown some positive signs of late with the TED spread now receding to levels not seen since the summer. Once again it bears repeating that the stock market and the economy are two distinct entities which rarely if ever operate in tandem. The economy is a mess and is unlikely to show significant improvement for at least two quarters; the question at this juncture is to decide how deep the discounting of bad news has already been and at what level will the market trade in order to find its present fair future value. And always, always remember the lesson recently revisited that markets, stocks, bonds and commodities will always exceed the highest or lowest of expectations by a factor of X plus 10.

There has been much concern of late that the great expectation of the Obama Presidency has been overdone and some are worried that the stimulus package will be delayed or watered down to the point of ineffectiveness. What has been set up here is a classic battle between the largely Republican Freidman school of monetarism and the fiscally conscious Keynsian Democrats. To describe this confrontation as simply as possible you must return to your Economics 101 textbook, (likely written by Paul Samuelson) which defines the terms if not the politics. The Republicans are a one mantra party that ostensibly believes that everything can be solved by cutting taxes and cutting spending, while maintaining a tight control over the money supply. Well folks, one out of three is all they have ever mustered and yes it is the tax cuts to the already wealthy. As for spending and a conservative monetary policy, this has been the party that has twice debased the currency as it recorded the highest deficits in history under Reagan in the 80's and Bush ll in the recent decade. There is little doubt now that Obama will exceed his predecessors' records but the bulk of his problems are hereditary. We now need a massive fiscal stimulus of epic proportion, let us hope that he does not waver in the face of right wing nonsense.

If the market reverses off its early retreat we can watch out for this hope rally becoming a panic rally. They can happen too you know.

New Year's Eve Edition

2008-12-31T10:31:00.000-05:00

Good Morning All,

I don't believe there is much left to say about the past year that has not already been either mumbled in one's sleep or screamed from a rooftop, so let's move on to the coming battle for safety and sanity in 2009.

On January 20th the world will finally be rid of George W. Bush and the last remaining puppet masters that have surrounded and managed this forlorn Presidency. There could be no better time for a positive beginning and by all appearances, no better emerging leader than Barack Obama, for it is at these watershed moments in history that such dramatic change is not just necessary but demanded. The words and themes of the seemingly endless election campaign were all about change and as the days and weeks became months, the problems in America grew worse and the global economy which had appeared to be coasting... collapsed, bringing not simply urgency to the fore, but desperation. Now Barack will inherit all of the above, including the cobbled together bandaid solutions of what had become the Paulson/Bernanke administration.

The words to look for in 2009 have already been tossed about and they include infrastructure and trade protection, the former being a positive, while the latter looms as a potential menace. It does not however appear that Obama wishes to revisit the Smoot-Hawley tariff bill of the 1930's, nor does it seem that labour is in any position to make unreasonable demands. Regulation will likely be another hot topic and a rescindment of the Gramm-Leach-Bliley Act coupled with the reinactment of the Glass-Stegall legislation that separated banking and investment banking is likely. Look also for an increased emphasis on international cooperation and a move forward on the DOHA trade talks.

Tax loss selling for Canadians ended last week, today it will end for American tax recipients (as opposed to payers) for there will be little in the way of capital gains entering government coffers this year. With this final lifting of much selling pressure comes the opportunity of a major rally over the coming weeks wherein market indexes are set to put in their best performance of the coming year. I fully expect index gains of 20 to 30 per cent before January ends along with individual stock doubles, triples and more among the more junior issues, particularly within the beaten down tech, biotech and commodity sectors. We should see 1100 to 1200 on the S&P 500 (presently 890) and equivalent gains across the board. This will all happen very quickly and will be over before most of you have mustered up the courage to join in the fray. You can if brave enough, make your entire year in these few weeks.

There are several trillion dollars sitting in 0 interest T Bills that will be put to work during this period and this probablity, combined with the 500 billion dollar energy cut at the pump and furnace, and the aforementioned relief from selling pressure make this prediction a logical one....that and a bit of history.

A happier year to all

December 22nd Edition

2008-12-23T12:05:00.001-05:00

Good Morning All,

As there appears to be a veritable dearth of earth shaking news to report or comment upon at the moment, I will only seek to remind you of the obvious and the understated. This is the beginning of the holiday season and the end of the tax loss selling that accompanies year end. In 28 years of writing this letter in one form or another, I do not believe I have ever either quoted or paraphrased the present Queen of England. Now, as so many others have likely noted, may be the time to do so, as this past year has surely topped all others in recent times as being the true annus horribilus. Yet, as many on the Obama team have stated, "we must not waste this opportunity to bring change" and I would humbly suggest that this national goal of the future President become both that of the world and of ourselves.

Permit me to once again iterate the following; market indexes have traded 40 to 50 % off their highs of either early 2008 in the case of Canada or October 2007 most everywhere else. Commodity prices from metals to energy to food have fallen much farther. The financial, and thereby the currency world is in turmoil while the physical world is less safe than it was eight years ago. So by the numbers, all of the above are definitivly cheaper and therefore better buys than they were 40 or 70 per cent higher. There are of course remaining pitfalls and potential failures and yes, just maybe the expectations lent to the incoming administration are wildly inflated. But just maybe they are not.

I have often thought that 1968 was a pivotal year in 20th century history with the deaths of Robert Kennedy and Martin Luther King being crucial to the rebirth of Richard Nixon. The Nixon effect was a powerful one and it did not end with Watergate because his legacy went on to include, not just the tragedy of Vietnam but the advancement of the careers of Rumsfeld, Cheney and George Bush the Elder without whom there would have been no George the younger. The Ford pardon of tricky Dick also had far more important and long lasting effects than first thought for it essentially led to excesses of the outgoing administration whose members have always felt protected from prosecution or even impeachment by this rule of precedent and during the next few weeks we are likely to see much evidence to support this arguement.

Sometime ago I wrote of an interesting way of regarding the passage of time by comparing times past to the present in terms of their relativity. This is sometimes known as the farther now nearer then phenomena and since everyone is talking and thinking depression, let's do the math. Choosing our pivotal year of 1968, first think of where you were, if you were a were at the time, and subtract 38 years.....ta dah the start of the Great Depression. Now flash forward to our present circumstance and note that we are 40 years from the outset of the Nixon era. You can have fun or fear in doing this with a lot of stuff, but for history buffs such as I, it does seem to bring some perspective to life and to its brevity.

Happy Holidays to all.

December 16th Edition

2008-12-16T11:51:00.002-05:00

Good Morning All,

The Federal Reserve will make yet another attempt to stimulate the U.S. economy this afternoon through cutting rates to their lowest level on record. This is not bad news, but it has been, and is being, positively discounted in markets as we write. The more important good news in our view is the recent decline in the LIBOR and TED Spread numbers, an indicator of loosening credit markets. Meanwhile the reverberations of one man's scam continue to echo around the worlds of both banking and private investing, much to the devastation of some and to the amazement of many.

Futures and European markets are once again rising in the face of other not so good news, and later today GE will give guidance, news that will catch the momentary interest of mavens far and near. In the end, what will really matter in the post tax loss selling period will be the perception of where the economic numbers will be in quarter three of 2009, this, and the need for money managers to earn their keep is what will drive markets higher over the near term. These guys can only get paid for conserving capital if markets are going down, not when they are rising 10% per month. The herd will once again begin to move and at the first whiff of water they will start a stampede.

Paul Krugman, the recent Nobel recipient, wrote yesterday of Angela Merkel's intransigence in the face of a failing German economy. This is something we have also been concerned with for some time as well, due to the lack of cohesiveness of the European Community in this time of crisis. There are a number of things we don't need to see happen at this juncture and political posturing in front of an election is surely one of them. This is yet another situation that bears watching, as the tipping point is still evident.

December 15th Edition

2008-12-15T11:46:00.000-05:00

Good Morning All,

World markets are in the process of digesting last week's two major news events as it now appears that the probable auto bailout is outweighing the 'Madoff 50 billion dollar scandal". In the end this latter occurrence may well prove to be of less importance than the former even though the amount at stake here is three times as large. The Madoff affair has once again proven that even the world's largest banks (who appear to have been among the biggest victims) have no business handling huge pools of investment capital; just maybe they ought to stick to what they do best, lending and charging usurious transaction fees.

Challenging the copious number of possible winners in this year of the tragic comedy is the George Bush appearance in Iraq where he was not welcomed with open arms but with freshly unshod feet. This shoe throwing is apparently among the greatest of Islamic insults and strangely front runs the none too soon end to the American occupation of Iraq. After what may be a final cost of one or three trillion dollars (depends on what you include) this inane exercise in out of mind hubris will have been responsible for the displacement of 4.5 million Iraqis and the deaths of several hundred thousand others. It will have taken the lives of over 4000 "coalition" troops and permanently maimed many more. Remember forever that this deed was done in the wake of 9/11 and under the ostensible rationale of a search for "weapons of mass destruction". Remember also how quickly the lessons of Vietnam were sacrificed on the altar of self serving ideology. And while you are once again mulling all this crap, think about how 19 of the 21 September terrorists were Saudis, and that none were Iraqis or Afghanis. Remember as well the next time you hear a CNBC or Fox News tirade that the United Nations inspectors were right and that U.S. intelligence knew it. All this to replace a Sunni dictator with a Shia strongman who may become......?

The Federal Reserve meets today and tomorrow but it doesn't really matter, the real key to ending the deflationary fears are reflationary policies. So far the banks have all the money they need and they are keeping it, the thought most current among those in the investment community is that the neo Keynsians in the incoming administration will force the banks to lend the wads of fiat currency presently in their possession. This will spark an economic recovery but it will also lead to much higher inflation as the year goes on. We have lately seen evidence of this in the dollar weakness/gold strength trade, one that is likely to continue gaining attention. Hedge in precious metal or precious metal stocks for the coming year.

And finally for today the good news is that markets continue to fare reasonably well in the face of really awful news. LIBOR is well below two as is the TED spread. This is telling us that credit markets are finally beginning to loosen up. This, combined with a declining VIX or volatility index, is of major importance.

And finally, finally for all the Barack fans out there....Google Corrigan Brothers Obama and tune in to their Irish ditty;"there's no one as Irish as Barack Obama"

December 12th Edition

2008-12-12T09:21:00.001-05:00

Good Morning All,

The presumptive failure of the Senate's ability to pass auto bailout legislation led U.S. markets lower yesterday and last night's resolution of the fact has negatively impacted world markets during our overnight trading hours. This failure, or victory for those who opposed the funding, has also diminished the U.S. dollar and had a lowering effect on oil prices despite the OPEC production cuts and the technicals that were leading that commodity trade higher.

Whether you are for or against the auto bailout it is interesting to place the dollar amount in perspective and link it to the short and long term job risks. The alternative bankruptcy option appears to be the popular solution for many business and economic observers, none of whom are auto suppliers who would be left holding the debt. Okay so let's see; the U.S. government has been spending between 10 and 15 billion per month on the inane war efforts in Iraq and Afghanistan while AIG and CitiGroup have already been in receipt of amounts 10 times as large as the initial 14 billion at stake here and they are still paying bonuses to senior management. The list of banks and bankers goes on and on and on.

So who is to blame here? Well the most popular whipping boy among opponents appears to be, surprise, the workers themselves and the UAW leadership. And of course they share the blame, along with the American auto and other executives who are (unlike their Japanese counterparts) paid in excess of 10 times the average labourer's wage. So the difference as best I can figure is about 14$ per hour based on salary and benefits. It does not of course take into account the tax and other concessions given to foreign car makers by Tennessee or Alabama or wherever. It should also be noted that the UAW has not said no to negotiating downward, it has simply refused to sign a blank cheque.

The ball is now in George Bush's court as the Whitehouse can, if it wishes, order the money up from the TARP which is still sitting on the much of its unspent treasury funds. The Republicans have now essentially conceded the rust belt states for the foreseeable future but the mostly abandoned outgoing President still has his legacy to worry about. Just think how far a little love will go for this guy no matter what the source. Detroit can count on these funds, maybe before you read this.

Further to Wall Street's problems has been the disclosure of former NASDAQ Chairman and Advisory Broker owner Bernard Madoff's 50 billion dollar Ponzi scheme wherein he appears to have blown a lot of very rich people's money.As has been said about a lot of this year's goings on "You couldn't make this stuff up".

Look for a market recovery later if Bush comes through.

Obama Worked to Distance Self From Blagojevich Early On

By Eli SaslowWashington Post Staff WriterFriday, December 12, 2008; A01

Like every other politician in Illinois, Gov. Rod Blagojevich waited for Barack Obama's call this summer. He told colleagues that he expected a speaking role at the 2008 Democratic National Convention, a nice bit of payback for being the first governor to endorse the senator from Illinois in his campaign for president. By showing off a connection to Obama in Denver, Blagojevich hoped to repair his own diminished reputation.

Obama's campaign made speaking offers to the Illinois treasurer, the comptroller, the attorney general and a Chicago city clerk. Sen. Richard J. Durbin (Ill.) was asked to introduce Obama on the convention's final night; Rep. Jesse L. Jackson Jr. (Ill.) was told he would speak on television during prime time. Finally, fed up and embarrassed that he still had heard nothing, Blagojevich joked to a crowd at the Illinois State Fair that, yes, he also had been asked to speak -- at 4 a.m., in a Denver area men's bathroom.

Long before federal prosecutors charged Blagojevich with bribery this week, Obama had worked to distance himself from his home-state governor. The two men have not talked for more than a year, colleagues said, save for a requisite handshake at a funeral or public event. Blagojevich rarely campaigned for Obama and never stumped with him. The governor arrived late at the Democratic convention and skipped Obama's victory-night celebration at Chicago's Grant Park.
Even though they often occupied the same political space -- two young lawyers in Chicago, two power brokers in Springfield, two ambitious men who coveted the presidency -- Obama and Blagojevich never warmed to each other, Illinois politicians said. They sometimes used each other to propel their own careers but privately acted like rivals. Blagojevich considered Obama naive and pretentious and dismissed his success as "good luck." Obama disparaged Blagojevich for what he viewed as his combativeness, his disorganization and his habit of arriving at official events half an hour late.

Under different circumstances, friends said, Obama might have derived some satisfaction from seeing Blagojevich handcuffed for allegedly trying to sell off Obama's vacated Senate seat to the highest bidder. But, only six weeks after Obama won the presidency by casting himself as a reformer, the Blagojevich scandal is a jarring reminder that Obama's political origins are in a city and state long tainted by corruption.

Blagojevich was elected in 2002 as a reform governor, but he has faced a series of investigations and charges of ethical irregularities ever since.

"Obama saw this coming, and he was very cautious about not having dealings with the governor for quite some time," said Abner Mikva, a former congressman and appeals court judge who was Obama's political mentor in Chicago. "The governor was perhaps the only American public officeholder who didn't speak at the convention, and that wasn't by accident. He's politically poisonous. You don't get through Chicago like Barack Obama did unless you know how to avoid people like that."

But Obama and Blagojevich shared pieces of the Chicago political network, which is why this has been an uncomfortable week for Obama's presidential transition team. Senior adviser David Axelrod once advised Blagojevich. Antoin "Tony" Rezko, a developer who was convicted in June of fraud and money laundering, raised money for both men. Robert Blackwell Jr., a longtime Obama friend, served on Blagojevich's gubernatorial transition team. Blagojevich appointed one of Obama's closest confidants, Eric Whitaker, as director of the Illinois Department of Public Health.

The president-elect's connection to Blagojevich is emblematic of his political rise in Chicago. Obama had contact with corruption, but rarely firsthand. He relied on the establishment when he needed it, but he maintained enough distance to cast himself as an outsider.

"Few people I've ever known have as good a sense about who might end up getting you in trouble," said Denny Jacobs, a retired Illinois politician from East Moline who befriended Obama when they both served in the state Senate. "It's like a sixth sense. Chicago's a mess, and he was surrounded by it. But he knew the people that could drag you down and tarnish your image."
Even though they both began their careers in Chicago, Blagojevich and Obama operated on distinct tracks. Blagojevich, the son of a steelworker who was born in Serbia, grew up on the city's predominantly white North Side and rode a pair of buses with his mother to his first Chicago Cubs game. He married the daughter of a gritty, deal-making alderman and entered politics as an unapologetic product -- and representative -- of the Chicago Democratic machine. He drew support from the city's white middle class and was elected to the state legislature in 1992.

Obama, a transplant from Hawaii and New York City, moved into the progressive, integrated Hyde Park neighborhood and attended White Sox games on the South Side. In his campaign for state Senate, he cast himself as the righteous alternative to what he called "old-school politics" and pitched his case to a coalition of African Americans and Hyde Park's liberal upper class.
Obama and Blagojevich rarely interacted until Blagojevich ran for governor. Obama told his friends in Springfield that he was unimpressed by Blagojevich's résumé, and he tried to lobby his friend Durbin to enter the race before deciding to support Roland Burris in the Democratic primary.

"When Blagojevich beat me, I told Barack to get on board with him," Burris said. "It was kind of like swallowing his pride a little bit, because he didn't really see that they had anything in common."

About all Blagojevich and Obama shared was searing ambition, which is what occasionally brought them together. Obama recognized that a Democratic governor could help him pass legislation and build his résumé in anticipation of a U.S. Senate run, so he helped Blagojevich's campaign as an informal adviser. Once Blagojevich was elected, he and Obama formed an awkward, arranged marriage: Obama passed a steady succession of legislation and built his reputation as a power player in Springfield; Blagojevich signed the bills and took the center seat at celebratory news conferences.

It worked just fine, Springfield politicians said, until Obama started to eclipse Blagojevich as the rising star in Illinois politics. Blagojevich never endorsed Obama in his U.S. Senate bid in 2004, and he expressed a preference for two other Democratic candidates. On the campaign trail, Obama sometimes made a point to highlight his distance from Blagojevich and the rest of the administration. "Nobody sent me," he often told his crowds.

"The governor didn't offer his support, and to be honest, we didn't really ask for it," said Jim Cauley, a Kentucky native whom Obama hired to run his U.S. Senate campaign. "We weren't going to the old hall or chasing the county chairs. We wanted to show we weren't a part of that world."

While Obama prepared to deliver the keynote address at the 2004 Democratic National Convention, a speech that would launch him to stardom, Blagojevich was back in Springfield watching his own reputation dissolve. After a poor first term, he fought over the state budget with Democratic leaders before flying to Boston and arriving an hour late at a party held in his honor. The event was sparsely attended. Obama made only a brief appearance.
"We have one salvation, and that is Barack," Jacobs, the state senator, said at the time. "It probably knocks Blagojevich down a peg from the leadership chart."

Not long thereafter, Obama started cultivating Illinois leadership of his own. He mentored a basketball buddy, Alexi Giannoulias, and supported his run for state treasurer. He befriended Attorney General Lisa Madigan and Comptroller Daniel W. Hynes. On one night in August, Obama boosted the gubernatorial hopes of all three by inviting each to speak during the opening night of the Democratic convention. Blagojevich watched from his seat.

As Obama went on to win the presidency and his rift with the Illinois governor crystallized, Blagojevich grew increasingly desperate. In phone calls reported in the criminal complaint, he pined for a spot in the Obama administration. Maybe, the governor reasoned, he could let Obama pick his own Senate successor in exchange for a job as an ambassador or as secretary of health and human services. Or maybe Obama could set up Blagojevich's wife, Patricia, with a cushy, high-paid position on a corporate board.

But Blagojevich's solicitations went nowhere, and it became clear that Obama had abandoned him for good.
"They're not willing to give me anything but appreciation," the governor told his chief of staff, John Harris. "[Expletive] them."

Staff writer Peter Slevin in Chicago contributed to this report.

December 11th Edition

2008-12-11T09:39:00.001-05:00

Good Morning All,

World markets are mixed going into this morning's opening while oil is recovering and gold is stronger for yet another day. Despite today's spate of economic news having mostly met forecast expectations, futures have trended lower and will likely erase yesterday's modest New York gains in the early going. The indexes however do not always reveal the complete story as it has been interesting to note the recent recovery in some of the underlying sectors, particularly among techs and some commodity based stocks such as fertilizers. This bottoming process appears to be ongoing despite the forever bad news and the seasonal tax loss selling that continues to pervade market sentiment.

One positive sign has begun to emerge in the investment banking area as several successful stock issues have cleared in the past few weeks. The next important step in this area will be the reemergence of mergers and acquisitions, something that will tell us not only how cheap some companies are but it will provide us with a monitor on how healthy the credit markets will have become.

There is in life a large difference between confidence and arrogance, just as there is between wisdom and intelligence. When the former are present the next best attributes of great leadership are experience and good judgement. We are about to find out just how crucial these factors are because for eight long years the world has survived without them. Let us hope that we have now come to the end of the era of hubris and ideological rule before we will have run out of history.

December 10th Edition

2008-12-10T10:00:00.001-05:00

Good Morning All,

Yesterday may have been blogless here but it certainly wasn't snowless, at least not in beautiful Montreal and its environs. Markets too had a stormy day as profit taking and other stories assumed temporary precedent over their recent show of optimism.Things look a little better on both fronts this morning as the upward trend attempts to reestablish itself. We will continue to monitor the TED spread,( now two...ish versus five..ish), the LIBOR rate, the U.S dollar, and the technicals for signs of danger but right now the generally bad news seems to be enjoying a market discounting that is set to run through inauguration day.

The news out of Illinois may have added to the market concerns yesterday although Fox News must have had a field day. No one of a serious or patriotic nature would want anything to interrupt the Obama inspired hopes that have most recently pervaded the American pysche. It would seem that this creep of a Governor has already cleansed the President elect of any possible collusion by having referred to him on tape using the F word.

December 8th Edition

2008-12-08T09:47:00.001-05:00

Good Morning All,

Markets around the world were soaring as we slept here in North America and they were doing so on the back of a number of things, the most important of which was Friday's strong New York performance in reaction to the worst job numbers report in 34 years. This letter has stated more than once, and most recently on December 5th, that a market that rises in the face of bad news has found a base upon which to build. The worse the news, the more important the contrarian rally will become. We have just witnessed such a successful test at 818 on the S&P 500 slightly above our suggested support level of 815.

Adding to this good reaction to bad news market scenario was some actual good news as Barack announced plans for an Eisenhower-like stimulus package just as Congress appeared to reach a bailout agreement for the auto industry. China too has joined the spending fray as it now seems that stimulus will quickly replace my favourite candidate, the short-lived prorogue, as word of the year.

Infrastructure spending will not be limited to America or China as Governments around the world realize that bridges, roads, schools, hospitals and the sewer and water systems that supply them cannot be imported; better still both the workers employed and the companies employing them will be paying taxes. Beats the hell out of a 500 dollar cheque to individuals who will drive to Wal-Mart and boost the Asian economies and speaking of driving, think of how much of a tax cut the drop in gas prices is, about 400 billion I believe.

There will be no shortage of Canadian political news this week, beginning with a Quebec election and on through to the leadership change in the Federal Liberal party. A good week for both Charest and Ignatieff looms.

Look for a big week with 1025 S&P 500 in sight.

December 5th Edition

2008-12-05T09:46:00.001-05:00

Good Morning All,

The much anticipated November U.S. employment figures were released this morning, and they were well beyond the consensus call, but not too far removed from the whisper number. Yesterday's late day, low volume sell-off was likely symptomatic of these rumours thereby discounting the actual news in advance. We are now about to see, on this important trading day, whether the markets bend to this news or rally in the face of it. The initial movement will reflect the former while we await a hold around 815 on the S&P 500.

Fed Chairman Bernanke's fearful comments did nothing to reassure markets either as his "deer in the headlights" look has become increasingly unsettling. It is once again interesting to point out that one of the few apparently calm and confident people at this juncture is the President elect; fortunately for all of us, his name is Obama and not McCain.

In Canada, parliament will now be prorogued until the end of January at which time a budget will be presented and voted upon. What I would like to know is why we have to wait so long for something that can be composed in days. Budgets come from behind doors one, two or three as they either raise taxes or cut them, print money or constrain spending, this need not be a long drawn out process. It seems simple to this writer: allot money to the provinces for infrastructure spending; as the dusty engineering plans already exist across the land. Let's get busy and make a deal sooner rather than later....and let's stop the divisive politics that raises the spectre of separatism while ignoring the more important threat of deflation. It is also time to prorogue the government's head in the sand attitude toward a stimulus package. I knew I could sneak that word in somehow.

December 4th Edition

2008-12-04T09:35:00.000-05:00

Good Morning All,

Markets in Canada continued to drift yesterday in front of the Harper address and a couple of bank earnings reports. New York on the other hand rose on some late day buying as December money was put to work. Heed must be paid to both the former and latter points made here because although the Canadian market might lag its U.S. counterpart by a few days due to our ongoing political crisis, the need to put money to work before year-end is a shared condition. Investment managers are not being paid fees to hold zero interest treasuries in the face of 20% weekly run-ups. Sometime soon they will have to stick more than one toe in the soup.

Rate cuts in Europe have so far done little to ease markets as the immediate reaction to these dramatic moves has been one of fear rather than relief as talk of the recession/deflation cycle getting out of control has held the greater weight this morning. As often stated in this rant, we must watch for a market that goes up in the face of bad news, and particularly for signs of one that fares well in the last hour of trading. Not silly folks, just history.

The Harper speech last night and the general tone adopted by the Conservatives over the past few days has been enlightening. It is almost as if Karl Rove had moved his operations to Canada where a new fear mongering campaign can drive a wedge between Canadians. Once more....agree or disagree with the coalition's actions, there is nothing illegal or immoral or even banana republic like about them. Furthermore, the Bloc Quebecois is a joke and it is not being made powerful by the Liberals and NDP but by the desperate attacks of the Conservatives. Read the agreement.

December 3rd Edition

2008-12-03T10:18:00.003-05:00

Good Morning All,

Not much special about yesterday's market activity except the S&P 500 did manage to close back up at the important 850 level. This morning's poor job claims numbers, the declines in Europe and the diminished guidance by Mr. BlackBerry have all served to lower today's expectations. However one day does not make a market or a week, up or down, so let us all stay tuned.

It is not surprising that Canadians are extremely divided over the latest political machinations in Ottawa. Harper supporters are rallying around the anti-separatiste banner while the Liberals and NDP are dismissing the Bloc's influence as a necessary evil in their bid to form a new government. The breakdown is as usual, mostly an east-west split, wherein the recently chastened Albertans are ripe for fuming due to the 100$ drop in oil prices. It is always a joy for this writer to bring up the point that neither Ralph Klein nor that province's citizenry ever put a drop of oil in the ground.

Whether you agree or disagree with the opposition's tactics or strategy here is opinion; the question involving the legality of the action or the precedent behind it is not. The British Parliamentary system has proven itself, despite its flaws, to be superior to any other form of democracy for several centuries, and if you don't believe that just take a look at the recent two year primary and election campaign in America even as you try to understand how a country can have a President-in-waiting for two and one half months. I could go on about how George Bush would never have survived one question period let alone eight years of them, but I digress.

The most interesting thing to come out of all this may not be a new government with a much needed stimulus plan, but the word prorogue, a far better candidate than paliniste for word of the year.

2008-12-02T09:36:00.002-05:00

Good Morning All,

A more contrite group of auto executives will meet with Congress once again today and it is likely that some deal or another will be forthcoming. Futures are up this morning as are European markets despite today's descent in Japan. This is Tuesday and some important numbers need to be surpassed and held by day's end if my call for a bullish two weeks is going to get started . Yesterday's huge decline in Toronto was typified by major losses in golds and oils; but that was really just the surface picture. Aside from the fact that this was a low volume sell-off both here and in New York, it would seem that profit taking played a large part in this activity. Petro Canada par example lost 4$ plus over the trading day, a large number until one considers that it had gained over 13$ during the previous five and it was one of many such trades.

The Canadian political situation would be laughable were the economic problems not so serious. Some may believe these latest opposition manoeuvres to be unnecessary and self serving while others are cheering them on. Allow me to make one point; Canada is in surplus and the present government does not believe that economic stimulus is needed. In the U.S where deficits have reached so far past historical records that they are close to unfathomable, stimulus will be increased under Obama, not diminished, and few, if any, economists oppose these scheduled expenditures. The risk of doing nothing in this deflating economy is far greater than the risk of growing larger deficits, or in our case, creating them.

Look for a close over 850 on the S&P 500 to confirm an advance of meaningful proportion.

December 1st Edition

2008-12-01T12:36:00.001-05:00

Good Morning All,

Markets will spend a good part of the day giving up some of last week's gains. This activity should evolve into an interesting process that sets up a turnaround Tuesday leading the way to significant early December gains. I would expect that the pre Christmas week will once again be typified by tax loss selling even though it would appear that many capitulators have already accomplished this task. If things go according to Hoyle, (and they rarely do), then a very opportune reentry into markets, particularly among small and mid caps, will take place during the pre year end holiday week. This upward movement will likely exhaust itself by inauguration day but it will be large in percentage gains.

The world as we now know it, appears to be experiencing a leadership gap, beginning with the lame duck Presidency of George Bush and extending through to the inaction of Germany's Angela Merkel and our own out of touch Cabinet in Ottawa. This vacuum of doingness, yes I know it is not a word, has lately been compounded by other world events from India to Thailand and the Gulf of Aden where a motley group of pirates continues to hold powerful nations and their interests at bay. These are each headline events just as the other major ongoing African wars appear not to be, but pay proper heed to the short term nature of their impact and look forward to a more structured and interactive globe just down the road. Meanwhile everything must be done to prevent any further deterioration in Pakistan-India relations. This, not Iraq, not Iran, not Israel is and always has been the world's most important and most dangerous potential battlefield. That's a lot of..... I's......for one sentence, so let's add another while we are on a roll.... Ignatieff....?

I have no idea what Harper has been thinking, so I must believe that he hasn't been.

November 28th Editon

2008-11-28T12:48:00.003-05:00

Good Morning All,

A recent letter to the New York Times once again reminded me of the simplicities inherent in the business cycle and how little attention most investors pay to its repeating truisms. Sparsely put, the cycle consists of five basic conditions that last varying lengths of time over a peak-to-trough period ranging from five to seven years; prosperity, crisis, liquidation, recession/depression and recovery. What sticks out here are the obvious questions of where are we now and which will we experience....recession or depression? My answer to this trick or tricky argument is that we have at this point witnessed the bulk of part three having seen part one disappear sometime ago, and that due to the fiat money flooding markets, the world will only suffer varying degrees of recession. Recovery in the economy may still be several quarters away but as so often stated here, markets will rise from the liquidation stage long before the GDP reflects a recovery.

Today is known as black Friday in America's retail business and for those of you unfamiliar with the term it means that strong sales take these enterprises from the red to the black for the year. Weak sales....well you can figure that no one expects great numbers in this area.

Worries in Europe and elsewhere have now turned from inflation to deflation making one wonder about the merits of economic or any other kind of forecasting including this writer's. So on the off chance that you remain skeptical of the latter's views, reread paragraph one and judge the state of the world for yourself by paying close attention to the things you know most about and then applying that knowledge to your thoughts on the future.

November 26th Edition

2008-11-26T10:31:00.000-05:00

Good Morning All,

This morning will effectively bring an end to the trading week as Americans begin to board planes and pack their cars for the annual Thanksgiving fest, thereby beginning a long weekend that is likely to include a different sort of dinner table conversation than that of recent years. To finish on a bright note, we have now had the markets up for three days running, including a two day record performance on Friday and Monday. Would it be so that a bottom has been made and that only good things lie ahead....we may only hope.

The Barack appointments will continue to be announced on through today with most of the important stuff likely to have been concluded by next week. It now appears that Robert Gates will be retained as Defence Secretary and this is seen as both a smart move and a conciliatory gesture by most observors although we are now beginning to see and hear a considerable amount of blowback from the left, particularly among those who want nothing short of a revolution. Gee whiz, I don't think that at my age I would go along with that solution but I would not mind seeing a street of lamp posts decorated with the likes of Rove, Cheney and the bank execs who have recently been seen leaving their bankrupt enterprises with large seven figure cheques in hand.....or as Richard Nixon aide John Ehrlichman once imagined the fate of his presumed enemies.....twisting in the wind.

And finally, after watching the Obama press conferences this week I was truly thankful that it was not John McCain and Sarah trailer trash that were hosting them.....wow, just think about that for a moment...okay wake up.

November 25th Edition

2008-11-26T10:29:00.000-05:00

Good Morning All,

World markets have taken kindly to the Fed's latest bailout news and to the announcements surrounding the incoming administration's economic team. More news on this and other Barack moves will be forthcoming over the next ten days or so, including the Hillary adoption.

Thanksgiving Day in the U.S. will dramatically shorten this important trading week, but maybe that's a good thing. A better thing may be a "no letter from Bill" Thursday and barring a compelling reason on Friday, as it too may draw a blank from this quarter.

It is interesting to note that the S&P 500 closed back up at its former support level of 850. According to David Nichols of the Fractal Report we should be looking for a monthly close over 944 if this latest move is to prove lasting. I have been calling for a recovery of as much as 50% of the index losses by Inauguration Day on January 20th for some time now and continue to maintain this positive outlook. History shows us how recoveries from major bear markets are their most swift during the early stages. The harder the fall the bigger the bounce so punters ought to take a good look the "tech notes" I sent yesterday. The same theory applies to groups of beaten down stocks in Canada, with the stated caveat that spreading the risk makes more sense than being right on the market or even the sector but wrong about your individual choice; ergo the ETF's so often discussed here. To wit, the Russell 400 Mid Cap, symbol MVV in the U.S. has risen from its new low of 15 made Friday morning to a 20.12 close last night. The 52 week high was over 90 so you can see that this game is not over.

The word I have most often used to describe the Obama team is adult, to this we might add the term professional as the structure of operations being created here appears so relatively sane that aside from being reassuring it is almost shocking to think of what the world has survived these last 8 years. So much so that the ever sexy George Bush now appears to have the most popular ass in America as nearly everyone wants to see the last of it as he boards his last helicopter ride from the WhiteHouse lawn.

November 24th Edition

2008-11-24T09:46:00.002-05:00

Good Morning All,

Friday's late day rally was obviously keyed off the Obama announcement of Tim Geithner as Treasury Secretary, this is a popular choice on both sides of the aisle and around the business world where support for the incoming President is growing exponentially...well seems like anyway. There will be some additional follow-through this morning during the leadup to Barack's noon hour press conference at which the formal "economic team" statements will come to light. So far, so good on the Obama front as slow and steady seems to be winning the race for public support reminding everyone in concrete terms of just how silly the present American system really is. The succession rules need to be changed before the mid term elections in 2010 and ten days post voting day seems to be a reasonable time allowance for the newly elected to take charge.

Most of us have either worked for or with incompetent managers during our careers and been observant of the failings of others in public life or in competing firms. One of the most consisitent measures I have noted over the years is found in the inverse relationship between various managers' confidence levels and the collection of toadies gathered around them. We know that George Bush was not the "decider" he thought he was and that had it not been for Ronald Reagan having chosen his father for the Vice Presidency in 1980, he would have remained an unsuccessful faux oilman. As history has already shown us, it was the Cheney, Rove, Rummie, Wolfowitz and oil business interests that were the real controllers of U.S. policy and that most everyone else were simply courtesans and sycophants with a similar ideological bent.

This Obama guy is quite visibly different; his no-nonsense approach to problems and appointments represents not just a refreshing change but a recognizable remaking of government business based on competence and pragmatism...a polar opposite of what has most recently gone before. Let us hope that this adult approach continues for the long life of his tenure because the world is sorely in need of it.

November 21st Edition

2008-11-21T10:14:00.001-05:00

Good Morning All,

By the look of overnight numbers in world markets and this morning's strong futures it would appear that I am not alone in thinking that yesterday's declines in stock prices were just plain silly. Yes I am aware of all the bad news and the problems that continue to beset the unaptly named "big three" auto companies, but I am also confident that a solution will be forthcoming and the result of these pending actions will be less onerous on the workforce, the companies and their suppliers than most are already discounting. I am not suggesting a buy on either GM or Ford here as there are so many less complicated giveaways too numerous to mention offered across the board. Time to act on the tax loss switches I mentioned in a previous letter as you can go back three years to recoup gains paid, and forward forever.

Yesterday's 700 point plus decline on the TSX does have a silver lining as it now means that 10 more days of such absurdity would take the market to zero and if anyone seriously thinks that is a likelihood, it is time to visit a gun shop.The oil and gas sector, once the darling of mutual and hedge fund investors seems to have discounted a complete abandonment of autumobiles and furnaces so either buy a wood lot or ignore the nonsense in favour of an energy ETF...or just PetroCanada.

The bottom may yet to be made and or tested but it is close enough to allow everyone to breathe again; and for the daring to move forward. The 1000 point back to back up days this letter predicted ten days ago should occur by next week.

I'm done....go Als Go

November 20th Edition

2008-11-20T11:28:00.002-05:00

Good Morning All,

"Once more into the breech, Dear Friends" or so spake Henry V and now Bill upon a different subject. Markets continued their disintegration yesterday and on into Asia and Europe today. There is no single reason for this latest attack, just a reaction to the compilation of the many man made problems that have infested the world's economies. It will be over when it is over and as I have written and spoken many times before...life will once again resume some form of normalcy.

I should mention however that the October intraday low on the Dow of 7882 will be in play today and as Art Cashin says we need more than just a bounce from this level. The equivalent S&P 500 number of importance is 775 which we last saw in 2002 and even worse, or better if you like, David Nichols of the Fractal Report points out that in real U.S. dollar terms the market is actually 30% lower now than it was then.

Oil is threatening to cross 50$ on the downside and now appears to be mirroring our July 15th call for a top of 150$. As so often learned and relearned in booms and busts ; stock and commodity prices will always exceed our greatest or worst expectations by an unknown factor of "N".....for nutty.

In times of war it is not the Generals who face the line of fire but the troops, the NCOs and the Junior officer corps. Similarly in times of economic crises it is not the creators of the debacle who suffer the wrath of the investor but the purveyors of the sometimes faulty product or advice who man the front lines of the investment business. This is a time to be worrying about the money you need, not the money you will be leaving in your estate, that will take care of itself with time. The real victims of the economic meltdown are not those who will continue to live a largely unaffected lifestyle but those middle aged workers or middle managers who have, or are about to, lose their jobs, their savings and their homes.... those with little prospect for renewing their careers when all this temporary nonsense is finally over.

We are now just that much closer to the end of the beginning.

Once more...should you consider this letter to be clutter .....please opt out by advising the undersigned.

November 19th Edition

2008-11-19T12:26:00.001-05:00

Good Morning All,

Once upon a time just a short while ago a 150 point upward move on the widely followed Dow Jones Average would have been cause for delight, if not celebration. Sadly, in today's rather volatile markets, it can at best be considered ho hum and at worst anemic. However, as this letter has far too often noted, markets are in search of both a bottom and a reason to put a final one in place. Although the process seems interminable at this juncture and the fear of it not happening palpable, it remains my view that such a turning point is not just inevitable it is close at hand. This is not to suggest that a healthy economy lies just around the corner but resides in a sense that the vast hordes of cash, presently locked away in treasuries and in banks, must be put to work before year end. The increase in the velocity of money will determine the power and the glory of this awakening as the interest in this most important economic factor becomes more reportable. Spend a moment revisiting Economics 101 by way of Google if you have forgotten its meaning.

Many of you must also remember the heady days when our Loonie briefly traded at 1.10 versus its U.S. counterpart and how crossborder shopping and southern vacations once more became affordable. You might also remember that at the same time your energy bill was going through the roof and that your U.S. stock portfolio was down despite the record level of the Dow Jones. A 40% move on the currency you live on versus the one you are invested in will do that; ask the people in Euroland. So this time around watch this trade as it has proven to be even more volatile than the markets and for Canadians that means watching or hedging in commodities.

The Budweiser takeover money got spent yesterday, we await today's driver.....and of course news about Detroit. No wonder the Lions are winless.

November 18 Edition

2008-11-18T10:41:00.001-05:00

Good morning all,

Markets held 850 on the S&P 500 yesterday despite another late day selloff. It is important at this juncture that we see a bounce off anything close to the 840 level as technically a higher low than we saw on Friday would be a bulllish sign. Surprisingly good earnings from Hewlett Packard are lifting the NASDAQ this morning, a much needed positive for the beleagured tech sector. Once again we must each be aware that 1480 on this index is a long way from the March 2000 high of 5100 plus and we don't expect to see that again; we are however, capable of envisioning a return to the 2800 number of last year. When things finally move to the upside the movement will be breathtaking. Buy the index ETF or Intel and Western Digital both of which are in the thirteens.

Take time now to look at capital loss strategies and think about switching within groups. Banks for banks , oils for oils , even royalty trusts and reits for similar issues. In this way you can book the loss without losing potential upside in the sector. The senior stocks move as a group with few exceptions, even better sell your CIBC and buy the bank ETF symbol XFN

November 17 Edition

2008-11-17T11:24:00.000-05:00

Good Morning All,

The opportunity to make a facile comment on these three days of market activity is too overwhelming to miss. To paraphrase a famous movie, Thursday's bullish reversal was the great, Friday's failure to follow through was the bad and today's premarket futures are looking ugly. Day one looked so technically perfect that even Art Cashin smelled a bottom, and then we had stink out Friday, a day that may not live in infamy but will certainly rank high in the annals of the most disappointing in this present cycle. Today is Monday and if we stick to our credo of largely ignoring action at the beginning and end of the week then so be it, after all turnaround Tuesday looms.

Although the G20 meetings, as expected, produced very little in the way of short term solutions they did something very important by setting a tone of cooperation in the post debacle world that now lies before us. Look for more on this theme after the inauguration on January 20th as the world decides to work together to repair itself. Don't however be so naive as to expect nirvana as this three, five or ten year spirit of unanimity will once again be overtaken by the next bubble. It has often been thus as what goes around comes around, sometimes in spades.

So let's all relax and watch this play out as we remember that nothing is forever....good or bad.

November 14th edition

2008-11-14T09:19:00.000-05:00

Good Morning All,

Another week of fear and loathing is about to enter the books and with a little bit of luck and a whole lot of optimism it just may finish with a positive tone. Yesterday we saw what was effectively a 900 point afternoon reversal move to the upside and although this wasn't quite the way I had perceived that our "back to back 1000 point days" would begin I guess I will enjoy the moment and anxiously await the outcome of today's adventure. The G20 meetings, largely ignored until now, are finally beginning to draw the media attention they deserve. Even though the final draft that will emanate from this historic event is unlikely to contain immediate short term solutions to our international crisis, the very concept of having the world's most important leaders (save one) present together in the same room, can only bode well for the future of cooperation, agreement and progress. The elephant not in the room is of course the President elect, although his support for such negotiation is already well known and his new kind of leadership a harbinger of future goodwill. Economists and historians now look back upon the first weeks of the July 1944 meetings of what would become the Bretton Woods Agreement as an historic turning point, I suspect that this too will one day be seen as such. Next on the agenda may be a Marshall Plan for America's middle class to complement the one the banks and top 5% of its citizenry have long been in receipt of during the Bush years.

Meanwhile at least three major wars are raging in Africa while the "West" runs around the Middle East chasing phantoms dressed in costumes, but more about that next week or whenever some semblance of calm returns to markets.

Futures are pointing to a down opening as more bad economic news has interrupted markets. Yesterday I suggested that we might watch to see if INTEL's stock price could rise in the face of bad earnings guidance...it did. Today the same may phenomena may be observed with Nokia and Sun Micro. As Art Cashin notes this morning, a successful retest of yesterday's reversal rally could well lead to a significant upward move. In my words, if we get some decent follow through today or early next week, those of you still left with a truck and a reverse gear ought to consider backing it up to the loading dock. Bear markets end long before the good news begins.

November 13th Edition

2008-11-13T10:34:00.000-05:00

Good morning All,

I am shocked, totally and absolutely amazed that Germany has fallen into recession and that U.S. retail sales are projected to be lower. Wow! an actual economic decline is now recognizeably upon us. Just kidding. Disturbing market moving data has transcended the world which brings us to the question as to which direction this continuing trail of bad news will take stocks over the next days, weeks and months.

Well unless it's different this time, and it never has been, the world economy will stage a recovery and our lives will return to normal; the only remaining quandary is when. As so often stated in this and most other letters of its kind "the market is a discounting mechanism that prices in the future, not the past" and that "this phenomena generally precedes change by six to nine months". This bear market, to the surprise of many, began in the Spring of 2007 with the topping out of the financial indexes. August of that year saw the first public disclosures of major internal paper problems and the market crashed; the subsequent rise to new highs in October '07 was a classic get out rally that was thinly based. In Toronto, our commodity heavy index kept rising through June of 2008 even while its financials were warning us of increasing disarray. The last three months have largely completed the cycle with everything now having been taken behind the woodshed more than a couple of times.

Markets teach the same principle over and over again; they will always move far above or far below rational expectation EVERY time, thereby lending credence to the terms "boom and bust". We are now witnessing a deeply oversold market that is in the process of testing the October lows. If this test proves to be successful we can look forward to a couple of back to back 1000 point up days. This does not mean that the economic numbers will not continue to deteriorate for some months or even quarters to come, it simply suggests that the market will be buying a 2009 recovery that will begin next summer. You may believe or disbelieve in the prospect for such good news but as you assess your position ask yourself what you thought in the Spring of this past year when TECK Cominco, now 6$ was trading at 52$....the list is endless and the examples are on our monthly statements.

The news ahead of us will be better than that which we are seeing today but what is really important is to watch what happens to stocks reporting bad news. Intel is one such example and is now trading at a 12 year low. If its stock price can digest their recent dire forecasts and trade higher, a major signal for a substantial tech rally will have been given.

November 12th Edition

2008-11-12T12:34:00.000-05:00

Good Morning All,

Markets are mixed to ugly around the world and are likely to remain so through the weekend meetings of the G20 in Washington.There is little of a concrete nature that will come from this event, at least not in the short term, but the sense that world leaders are talking to each other will be pervasive if not pursuasive. Unfortuneatly Obama and his economic team will not be attending because as the President elect has said there is "only one President at a time". The absurdity of the 10 week transition period from election to the assumption of office in America must be corrected as the danger of this anachronistic practice becomes ever more evident in these stressful times.

One idea that may find purchase at these meetings is the creation of a World Financial Organization mandated to write and enforce a set of international rules on supervision and regulation of financial transactions. Similar to other such organizations as the IMF and WTO its potential success will depend upon those who back it up. Bretton Woods ll this may not be but I expect that a new world order will arise from the ashes of this past decade just as one did in the aftermath of the Second Great War.

Markets are searching for a bottom and in my view we have already seen the woodshed, one more whipping out back of it may well be in the cards afterwhich we will burn the damn thing down. The greater the fear, the greater the resolve; we are not a collectively stupid mass of humanity and we will get out of this mess and be better for its having happened.

November 11 Edition

2008-11-11T10:30:00.000-05:00

Good Morning All,

Yesterday's promising start generated by news of the Asian stimulus package quickly rolled over into despair after further doubts about the viability of America's financial institutions. More money for AIG, AMEX having to become a bank and the ongoing disintegration of the automotive industry combined to set the tone for bad vibrations. Generally I believe that Mondays and Fridays should be ignored when volume is low and new news is not a huge issue. So don't sell the China story short because their 600 billion expenditure is very real and very important. Remember also that Washington won't be rebuilt in a day and neither will Wall Street, but construction has begun.

Each Remembrance Day should give us time to pause and think of the living as well as those who have gone on before. On that note I will begin with the former. If there is such a thing as a famous Canadian military historian my much older brother Terry fits the description. Terry returned from a research trip to Italy in October and underwent a successful bypass procedure from which he is recovering nicely. Many of his former students at Loyola, Concordia, McGill and Sir Wilfred Laurier remember him as their favourite history professor. Many Canadian veterans have also been rewarded by his interest in their personal histories, we wish him well.

Many of us have our own connections to the wars of this and the last century, as for myself I would like to mention my longtime friend Elizabeth Gallagher Tremblay who spent D Day in the middle of the North Atlantic on her way to overseas duty. My able associate, Jason Graves' grandfather Ernie Evans who survived 30 some missions as a tail gunner in World War ll, and to my own father Oswald Meredith who missed the big show due to a heart murmer caused by a childhood bout with rheumatic fever. I on the other hand have only been blessed by a lifelong addiction to romantic fever, something I may have been unable to experience had my Dad gone to war and there had been no I.

Watch oil for a break toward 50$ and the financials to start showing some stability. Once again....financials lead markets up and down. The down began 20 months ago which is a long time in market life.

"Two men look through the same bars, One sees the mud, one the stars"

Frederick Langbridge

November 10th Edition

2008-11-10T10:22:00.000-05:00

Good Morning All,

Markets are soaring around the world this morning due in part to the massive stimulus package in China. This is an across the board advance that includes everything but G.M., which has been downgraded to a target price of zero by one analyst. I say in part, because nothing on a global basis ever happens in a vacuum. My personal bias suggests that this is more a combination of the passage of time that has allowed for the massive liquidity injection to begin to work, the oversold condition of stock and commodity prices and the general uplift in confidence (read hope or relief) that has followed the election of Barack Obama. Never sell confidence short for it is the backbone of all economic progress, be it in currency, in lending or in the general condition of humankind; and such confidence is born of strong leadership and respectful international relationships.

The Premier of Quebec has followed on the heels of his Ottawa counterpart by calling an unnecessary election likely based on the party's fear of an economic meltdown. This is probably bullish news because even though Harper and Charest may be privy to inside economic information, I doubt their ability to call either market performance with any degree of agility. Contrarian that I am, I will take this as a good market indicator. Thankfully too, this election will be over in less than 30 days and it does not appear that the Quebecois are likely to vote against their own self interest in these times of trouble. As I have often said, governing Canada with its vast resources and underpopulated expanses is not a difficult task, except during those times when we have been threatened by separatism and internal mayhem. I do not believe that we are entering one of those.

It is no secret that there are a number of policy issues facing the Barack administration and for want of other subject matter I will attempt to humbly cite my view of the particulars over the coming days. The first and foremost issue at hand is the assemblage of today's team of the "best and brightest" and great promise has so far been shown in this regard. Remember it is all about judgement and I don't see a chance of there being any Sarah Palins in Obamalot.

Note, Stem cell stocks are soaring again on rumours of government support for research. Democrats equal small and mid cap stocks; R&D that means tech, alternative energy , bio science and infrastructure.

November 7th Edition

2008-11-07T09:28:00.000-05:00

Good Morning All,

I'll betcha a couple of hundred of them EEElectoral votes that I can name the capital of Africa and don't you worry China, your place in the North American Free Trade Agreement is secure. I wish this were an exaggeration and it may well be because one of Sarah's aides has assured everyone that McCain's campaign advisors are lying and that the Nieman Marcus dressed barracuda really does know that Africa is a continent and that South Africa is not just a region. I guess this brings new meaning to the "dumbing of America" syndrome of which we have each grown tired these past eight years. I would also hazard the thought that "executive experience" does not include the disciplines of high school geography, basic economics or current affairs. Sadly this probably means that we won't have Sarah to kick around anymore..... unless she gets the chance to appoint herself to the Senate or the Republican base is really stupid enough to entertain the prospect of her as a future leader. These revelations also tell us something about McCain's judgement and the blessing that a Barack victory has been to us all.

The Obama machine appears oiled and ready to go starting with the appointment of Rahm Emanuel as his Chief of Staff. A press conference today and news over the weekend to come will reveal more good stuff as we head into the all important G 20 meetings on the economy November 15th. We can rest assured that Obama's economic team will be in place by that time and that the likes of Paul Volker, Larry Summers and maybe Tim Geithner will be in attendance. It is not difficult to figure out that the light of interest will be shining on the incoming presence and not the outgoing dimness as the world convenes what is being referred to as Bretton Woods ll. I was going to do a piece on the history that surrounds this important subject area but "like" Iraq it will have to wait for time and space next week.

Employment numbers this morning are disastrous as were the revisions of the pre election data which makes you wonder what hanky panky might have been at work in this regard. Auto numbers and other earnings have also been frightening but remember that this is present and backward looking news, I am even willing to concede that not much is about to change for the better in the coming quarter but after that we may look ahead to much better news and goodness knows that stocks are a better buy now than they were last year when indexes were 6000 points higher and George Bush still had a year left to go in power.

November 6 Edition

2008-11-06T09:36:00.000-05:00

Good Morning All,

I am sure that many of you have either read or heard of the late David Halberstam's study of the Kennedy and Johnson Administrations entitled "The Best and the Brightest" first published in 1972. It is a book , as I remember it, that is both hopeful in its essence and tragic in its outcome, as it moves from the assembly of a very smart people team to the assassination of JFK and beyond to the devestating errors of the Vietnam War. Obama, unlike the present occupant of the WhiteHouse, is likely aware of all this important history, and through employing such knowledge as a template for his own administration it is not a stretch for us to believe that many of the mistakes made in that other time will be avoided in this one.

News on Barry's boys and girls will be forthcoming over these coming days as most stories have had Obama ahead of the curve for some time in this regard. We are dealing with a very different leader this time around, one who is in charge rather than one who has been put in place by agendized ideologues; and most importantly....one who is both lucid and informed. The Chief of Staff and Treasury Secretary appointments appear imminent, as well as a replacement at Homeland Security, Rahn Emmanuel and Timothy Geithner look set to fill the first two although there is no dearth of emminently qualified names being bandied about. What a refreshing change. Across the aisle it may be about former Republican Senators Lugar or Hegal, or even Colin Powell. Enough speculation for now however as what will be will be and it will be a vast improvement.

Markets took a much deeper breath yesterday than I had bargained for but what the hell, they were coming off an 18% pre election splurge and apullback was likely healthy. London cut rates by 150 beeps this A.M. and Europe by 50. LIBOR will tell the short term tale. We are headed for 1200 S&P soon from these 940 levels despite the bad economic news.

November 5, Edition

2008-11-06T09:32:00.000-05:00

Welcome back America, welcome back to the world and congratulations on a job well done. November 4 2008 will prove to be one of those dates that people look back upon many years from now and remember where they were on this special day. There were a number of memorable moments last night and for channel hopping political junkies such as I the list is long so I will cite only one of the less obvious. Jim Lehrer of PBS provided a whole new perspective on the night when he said, after a particularly long set, "we are going to take a break for a moment while I get a cup of tea and....ahem, tend to some other things"

This is day one of the transition process and not the Obama Presidency, a fault in the American system that needs to be corrected forthwith. This President elect has proven over the past 20 months that he is not just a great campaigner/orator but that he is a magnificent organizer, manager, listener and delegator; skills that will serve him and the world well in these coming days and years. Getting off to a good start is immensely important and by the weekend we should have a pretty good idea on just how this is all going to work and with whom, so everybody take a deep breath and enjoy the fresh air.

Markets are selling on news in Europe and futures are down in the early going in New York but don't be concerned too much by the Republican/economic numbers sell off, confidence is the foundation of stable markets and the world just received a huge injection of this magic serum. The Obama rally will continue, albeit with some abatement.

I don't know whether to write phew or WOW...so here's both

November 4, 2008 Edition

2008-11-04T09:36:00.000-05:00

History does not happen in a vacuum and certain events presage the arrival of others and influence our future course. Some of these are at the margin; think of how we each count the paths taken or not in our own lives whilst we spend our mature years wondering what might have been. Others are far more momentous in their impact on history as witnessed by the acts of individual leaders for better or worse, as well as many of the avoidable confrontations that have in their time, spun the world out of control and beyond civilized norms. Forty years ago, to employ one such example, during a time of conflagration and social evolution when most of this readership was at least alive if not in young adulthood, Bobby Kennedy and Martin Luther King Junior were assassinated thereby changing both change and the future course of history. Suffice to say that had Kennedy lived, there would have been no Watergate, no Nixon impeachment and a much earlier end to the war and the deaths in Vietnam. It is not difficult to look back and wonder about any number of such events but for the moment, live the moment for we are onlookers, some of us are even "deciders", present at this watershed occasion.

While the world is collectively holding its breath markets appear to be freshening up from east to west. We are about to enjoy the fourth movement of the first Obama symphony as indexes celebrate a new beginning. Look for a solid follow through this week despite the Republican bent of most Wall Streeters. Markets historically fare better under Democrats anyway and from these depressed levels it will be easier than usual.

One sour note this morning has the Republicans running attack ads on major networks proving once again that they just don't understand....or get it.

November 3 edition

2008-11-03T12:17:00.000-05:00

Good Morning All,

World markets have been mixed overnight as they appear to be underplaying the tensions of the coming two days. LIBOR has begun this week with the same positive tone it has exhibited over the last ten settings while the U.S. dollar has continued to lose ground against the Euro and Loonie, a not so surprising occurence considering the incredible gains it had made since summer. The first and most important tenet of financial markets is to provide a stable environment for trade, commerce and the settlement of transactions. In recent months as we are now all aware, the sense of potential failure of the system as described by the daily volatility in commodity, currency, stock and bond markets was palatable. This feeling has eased somewhat in recent days and confidence is once again returning to the economic arena.

The next few months should prove to be less testing and appreciably more enjoyable than the last quarter unless something untoward happens on election night. Imagine for a moment that Obama wins the popular vote by 10 million but loses in the Electoral College.....come to think of it...don't. Believe instead that Barack wins by more than 10 million votes and seals the deal with an Electoral College vote that exceeds the 270 required majority by more than 100, say 379. The Democrats also appear to be on target for Senate and House gains that will give them total control. This will be quite different than the post 1994 situation that Clinton found himself in when the GOP was in charge and harassment topped the agenda. We could go on here about Rawanda ,the Balkans and Monica but space thankfully prohibits us from expanding such rhetoric.

The Stem Cell sector have had a good runup since Thursday (40 plus per cent), the next few days will see them run much higher, but this a trade, not a buy and hold.

October 31 Edition

2008-11-03T12:15:00.000-05:00

Good Morning All,

It has been quite sometime since markets have enjoyed three consecutive updays so maybe we should get set for a little pullback today, at least in the morning. Japan lost 5% overnight and in years past this may have appeared to be important but considering that this decline is coming off a multi session rise of 26% we will accept it for something less so. The question now before us lies in dealing with how real the recent stabilization may be and how far the markets can progress from here.

The odds have it that the economy will likely see its worst performance in the final quarter of this year and the first of 2009. The market however is a discounting mechanism and has already begun to buy a second quarter flattening and a final half of next year recovery. It is our view that a rally through mid January will take the major indexes in Canada and the U.S. above 11,000 before giving in to fourth quarter earning news and guidance during that period. Between now and then we may also expect a slowing of the recent extreme volatility, so VIX watchers may wish to advantage themselves of this levelling out.

When it appeared that John Kerry was leading in the days running up to the 2004 election, stem cell stocks made fabulous gains until crashing with the Ohio voting machine outcome. Although this research has not been an issue in this election, I suspect that similar moves will take place this year as memories kick in. Traders and other assorted punters may wish to play the game; STEM, ASTM and GERN are three of many that soared back in the day.

Barack Obama's lead in both the overall polls and in key electoral states is large and growing, so instead of fretting all weekend over a Karl Rovian inspired result I am going to relax and accept the facts on the ground as I reassert my faith in the American people to overwhelmingly do the right thing. We will know very early just how big a sweep this can be as the results in Virginia and even little New Hampshire will presage the night's message. McCain must win both to have the barest chance of victory.

It has been quite a month and I don't know about you but I'm beat.

October 30th, 2008 Edition

2008-10-31T07:21:00.000-04:00

Good Morning All,

The extremely oversold condition of world markets that existed at the outset of this week is well on its way to a massive self correction. I have suggested more than once in recent days that a great downside crescendo would quickly be followed by a "jaw dropping" (in the words of Art Cashin) upside rally. Well the selling climax was not quite as dramatic or satisfying as we would have preferred, at least not in U.S. markets, but it certainly was in Asia and in Europe. It has also been historically severe in commodities, currencies and much of the Toronto stock exchange. This may also be seen as the pre Obama bounce by some of the more biased observors, a group to which I proudly belong. This rally now appears to be gaining legs and may well project to mid January (bumps along the way) when indexes should well have recovered 50% of their bear market losses. After this point or this date, remembering the rule that you may get one or the other right but never both, we will reconsider but first of all enjoy the ride.

My next career has clearly been set out as last night's speech by Barack was right on the Copp target of "vision talk". McCain was not even mentioned, this was a soppy but brilliant exploitation of America's feel good, feel hope sentiment. Cheers to Obama's staff and to the man himself for running a superb campaign from start to finish. Now if I were a religious person I would be in prayer.

October 29th, 2008 Edition

2008-10-31T07:20:00.000-04:00

Good Morning All,

Someone recently asked me when I thought the Dow Jones and TSX would trade back over 10,000, I replied November 5th, an answer that has since led me to wonder, considering yesterday's stunning reversal, whether I was being a touch too conservative. Well let us not get too carried away with the power of the recovery as it is still only one day old in North America and two around the world, after all we have seen this movie play as recently as October 12th and 13th. The positive and longer term take we have out of this action is that base for a greater move upwards is growing and that the breadth of this advance has put in place an extremely important building block. Look for today's rate cut by the FED to solidify markets by week's end after the initial rollercoaster ride it often encourages has subsided. This market may have begun to discount bad news and as a forward looking discounting mechanism...this is what it is supposed to do when it is about to change trend.

The Barack speech tonight does not have to be a game changer, it just has to be a good closer. These next few days are going to be nervous ones for many of us around the world and in America as the fear of a Karl Rove inspired upset interferes with our logic. Yes it should be a Democratic sweep, but if things were things and real was real....Al Gore not George Bush would have been President in 2001 and we would not have to talk about Iraq (someday soon) or deregulation concerns now.

A commodity price recovery has also begun and with it our loonie should return to the 85 cent level before your trips south.

Note: 79 years today since the crash of '29. Just a mean thought, not a serious one, to help start your day.

October 28th, 2008 Edition

2008-10-31T07:18:00.000-04:00

Good Morning All,

The late day disappearance of bids in Toronto may not have quite qualified as my projected capitulation but it may have to do because sometimes, as Robert Redford said in the movies, "life doesn't always work out the way you think it will". New York on the other hand was crescendoless as the relatively tiny fallback at day's end was unconvincing. All that being written, it is interesting to note that a "V" shaped market performance over the last pair of days in Asia may have provided us with the fuel required for a sustained rally in Europe and North America. Futures are much higher in New York at this time and promise a memorable opening. To this end I repeat our Art Cashin quote of last week, "when this market turns, the upside will be jaw dropping". No promises yet, but conditional hope that we may have arrived at the pre election rally date.

Barack Obama has reserved 30 minutes of air time tomorrow night and I expect a different type of speech than the standard fare with which we have all become fidgety. His campaign has been a masterfully executed exhibition of political acumen since its outset in Springfield Illinois a century ago, or so it would seem. The no panic serenity shown during the times of crisis with either Hillary, McCain or even during the Palin surge speaks well of both his character and his management skills given the fact that his original team remains in place and on target. So tomorrow night and through the weekend I believe we should look for the "vision thing" as opposed to a trash the opposition one, wherein Barack attempts to raise the bar on expectation, a message not just of change but of hope and the no nonsense actions of what it will take to achieve a better way.

On the other side it appears that the McCain Palin ticket is imploding as the infighting has brought the none too secret personal ambitions of Sarah barracuda to the fore. This is what McSurge gets for putting the campaign first, belieing his slogan to put the "country first". We are now about to see what happens to someone whose reach exceeds their grasp as the real Sarah emerges. I may appear to be out of line in some circles but the candidacy of this ego centric, vindictive witch has posed, and until election day will continue to pose a clear and present danger to both America and the world.

This busy week will end an incredible month. Tomorrow we are likely to top it off with a 50 basis point cut by the Federal Reserve and another rock and roll day. Perspective during times such as these isn't everything, to paraphrase Vince Lombardi, its the only thing.

October 27th, 2008 Edition

2008-10-27T09:39:00.000-04:00

Good Morning All,

The following thoughts may not be music to your ears but bear with the story for a moment because like all past market tales, it has a happy ending. Friday did not prove to be, as we opined, "the mother of all capitulations day" but to be fair we did give it until this week to occur, so let's compare the last two months of market devestation to the first movements of a Mannheim school symphony and today's worldwide declines to the fourth and final crescendo. Or even more heart rendering, how about an old Roy Orbison love song that begins in tears and builds to an echoing throb of victory "as the market turned and walked away with me". Okay so that wasn't quite the line but some literary license is surely allowable during times such as these.

On the positive side Bill Gross, reputedly the smartest bond guy around, said this morning that intervention is working and that he expects 3 month LIBOR to drop below 3% very soon. This is important news because recession or not, it must be seen that the solutions being put in place are having such an effect thereby limiting the potential of the coming economic horror show to something manageable.

As the calendar moves toward November 4th we can look forward to a pre election rally that will front run an Obama victory. It is also possible that markets can turn higher without an American capitulation day but it would be easier for all if such an event, no market how intimidating it looks at the time, would occur. This water drip torture is worse than a final shake out. The process continues.

October 24th Edition

2008-10-24T10:17:00.001-04:00

Good Morning All,

Well buckle your seat belts everyone and get ready to witness a major piece of history. World markets are down double digits (percentage wise) and S&P 500 futures are down limit and thereby closed through to the market opening. This scary scene may last part of the day, all day or even through to Tuesday morning but by the time it stops it will have discounted the end of the world. We have spoken of capitulation day before and even seen a few in our market lifetime, October 24 is shaping up to be the mother of such events. The good news is that it will soon be over and that the rebound, to quote floor trader Art Cashin, "will be jaw dropping". None of us can put a number or a time on the real bottom, we will just have to know it when we see it. Remember too that you don't have to catch the absolute low in order to win, nor do you have to be a hero. One week from now let's hope we are wondering what it was all about.

He who panics first, panics best. He who panics last is left holding a small empty bag. This is about markets ...not the economy. This transfer of wealth is not just from the middle class to the already wealthy but from the newly rich to the super rich...and more certainly to the cash rich sovereign funds. Be on the side of those who advantage themselves from such opportunity as this is not just a lifetime event we are witnessing but a centennial one.

Alan Greenspan finally admitted to being wrong yesterday and contritely acceded to complicity in the process. I hope he is not a jumper.

Better days ahead.

October 23, 2008 Edition

2008-10-23T09:37:00.000-04:00

Good Morning All,

Yesterday I called for a test of 900 on the S&P 500 and we got that plus some as the index cratered to the 875 level before staging a minor late day recovery. The rumour has it that a massive liquidation by two more failing hedge funds was largely responsible for the no bid low volume market within which this transfer of wealth took place. The real news of the day, month, year, decade remains the coincidental bursting of the easy credit and speculative commodity bubbles that have been ten or more years in the making, all of which plus some took place on Alan Greenspan's watch. Long time readers of this letter have been aware of my disenchantment with this highly overrated former FED chairman for many years beginning with his misplaced fears of inflation in 1994 that engineered the then biggest bond market collapse in history. Greenspan misspeaks again today.

The U.S. dollar strength against the EURO and the commodity currencies has continued to trade out of hand and is also likely related to hedge funds and fears of a EURO collapse. As with everything this is getting extremely overdone. Look for a big bounce through next week on the other side of this trade and a redeployment of U.S. cash hordes into undervalued equities. My favourite floor trader Art Cashin has reiterated that a resolution of markets to the upside is near even though he suggests that an interim rally today may well result in an early (next) week capitulation day. A daily market watch such as this letter has become will soon be unnecessary once things stabilize.....and they will.

So Sarah now believes, and I quote her, that "the election is in God's hands" which leads me to this morning's rant on the sensitive subject of religion. Why can't people just be kind, thoughtful, moral and generous without having to dress in silly costumes, worship mythical dieties, and quote badly documented historical treatises. If I personally had to choose a legend to have faith in it would be Arthur's Camelot and the wish that the spirit and hope generated some 48 years ago by another young President could be once again duplicated and that all those wanting to pray would do so ...for the safety of Barack and the unity of the world.

October 22nd, 2008 Edition

2008-10-22T15:08:00.000-04:00

Good Morning All,

Well so much for the quiet week I was hoping for although not promising as markets once again exhibited their recently adopted drama which began with an up Monday and a down Tuesday that willl continue this morning. I suppose all is not lost in our quest to put back to back positive weeks together as the day is young and the sense of fear is palpable. So let us look for a quick trip test down to 900 on the S&P 500 and a bounce from there.

On the good news side of the equation it now appears that credit markets are beginning to "thaw" as LIBOR has once again been set at much lower rates and the commercial paper market is active with lower yields. This is shaping up to be a memorable day.

The world economy has been hit with a macro problem that requires macro solutions some of which are presently on the table. The workability of these efforts is in process and the jury is still out. The one thing we do know for certain in these uncertain times is that new and intelligent leadership is required in Washington. To this end we do not need campaigners who appeal to America's lowest common denominator but to its highest ideals, none of which include phoney patriotism or bogus claims about Joe the unplumber's tax bill. Think for a moment about who is advising whom. On the McCain side we have Alan Greenspan who will deservedly receive much of the historical blame for the mess we are in, former Senator Phil Gramm a practicing deregulator and a host of supply side hacks left over from the greed school of business management. On the Obama side we have Paul Volker, the best Fed Chairman ever (even so considered by such right wing frantics as Dennis Gartman), Warren Buffett and the Larry Summers/Robert Rubin tandem that served the country so well under Clinton.

So Sarah thinks Barack is a socialist because he wants to "spread the wealth around" and that some parts of the country are more pro American than others. Hmmm sounds to me as if Barack's musings are more along the lines of Robin Hood or Jesus Christ than they are of Karl Marx, but how would I know....I have yet to be born again.

October 21, 2008 Edition

2008-10-21T11:12:00.000-04:00

Good Morning All,

Monday's solid market rise will give way to some expected early morning profit taking this morning and then we will see. There is really not too much new to write about in this regard as the market continues in its quest for stability. What we really want to see is not just a solid trading day but an entire week of steady gains and modest losses.

Earnings season remains with us for another few days and as we watch the results, guidance and downgrades we must remind ourselves of how wrong most analysts habitually are in getting things right. As veteran floor trader Art Cashin has been saying of late, "we are close to a resolution in regards to market direction". Trading in Apple after today's poor report, may well be a harbinger for the day and week should it turn around after an early decline. This is a discretionary consumer stock for all intents and purposes. And once again LIBOR is lower and the U.S. dollar is higher ....and this is a good thing.

The oil sector trade proved to be phenonemal as PetroCanada rose from under 23$ Thursday to 32$ yesterday. The levered energy index HEU moved from the low 4's to over 7$ during the same period as the Christmas tree was quickly cleared of gifts. Look for a check back here today and some follow through later in the week.

So the well read Sarah now thinks Barack is a a socialist, this coming from a person who has not only never subscribed to "The Economist" or any other major publication outside of "Field and Stream" but worse .... had never heard of it until her post Katie Couric interview briefing.

The Baghdad flight has been cancelled for the day due to time and space constraints.

October 20, 2008 Edition

2008-10-20T10:53:00.000-04:00

Good Morning All,

Markets are off to a good start this morning ,a condition that might last an hour or the entire week. This frothiness is mostly due to lower LIBOR rates and a diminished TED spread. On the international front it appears that China's growth has slowed to a meagre 9% ,although other economic numbers released over the weekend, such as lower inflation and wage growth, have shown improvement. As we should each know by now, Asian economic success is a major key to our own recovery, a tenet particularly applicable to a resource reliant nation such as Canada. The low for the market could well have been put in on the 10th of October and if this proves to be the case the next five to seven years will prove to be a pleasant investing experience. The surviving banks will make out like bandits as will the governments that own equity in them, so make them your priority while you remember that resources are finite and although they too will stage a short term recovery their real strength will be come later in the cycle. This is also a good time to improve the income side of your portfolio by purchasing beaten down income trusts, particularly in the oil and gas sector.

Barring something tragic or manufactured , Barack Obama now seems assured of winning the Presidency which he unfortuneatly will be unable to assume until mid January due to the silliest electoral rules in the modern world. But as often repeated here, markets are discounting mechanisms and they will be busy assessing the future as they quickly stow away the past. Mid cap and small cap stocks always do well under Democrats; and don't forget the stem cells stocks which soared when it appeared that Kerry was going to win in 2004.

Tomorrow we will be off to Iraq, well at least on paper.

The Copp Comment - October 17, 2008 Edition

2008-10-17T09:33:00.000-04:00

Good Morning All,

Yet another dull week in markets was typified yesterday by an 800 point afternoon rally in New York. The beaten down TSX, temporarily sleeping, managed only a late recovery measuring half that amount. Ho hum we wonder, what will today bring? More of the same would be a proper guess.

Some of you may have caught the joint appearance of McCain and Obama last night at the Alfred E Smith foundation dinner. It appears that John McCain finally had a victory on both the humour side and strangely on the serious side as well, when his final words at the podium seemed to reflect a more decent view of the campaign than we have become used to of late. It even sounded somewhat like a concession speech. Too bad the election isn't this coming Tuesday and the inauguration the following day because the conclusion to this event will go a long way toward reinvigorating America and reassuring the world whose minions rank among Obama's greatest supporters. Instead, due to an outdated constitutional practice we shall be stuck with George Bush and a lame duck congress until mid January.

Although this has been a particularly grinding week, better times lie shortly ahead as it must always be remembered that the markets are discounting mechanisms. I was reminded too of yet another market axiom last night during an enlightening interview with Jim Kinnear, the CEO of Pengrowth, on the Scully show seen on Vermont PBS, when he alluded to the two tenets of great companies and potential acquisitions...."cash and cash flow". There will be much such looking around in the mergers and acquistions world during the coming weeks and months.

The Copp Comment - October 16, 2008 Edition

2008-10-17T09:30:00.000-04:00

Good Morning All,

The market giveth and the market taketh away or so said the lord of volatility. In our letter of yesterday it was suggested that some profit taking off the early week's sudden and sizeable rise would be both normal and by definition...healthy. What was not expected was the breadth and depth of the decline as disintegrating hedge funds advantaged themselves of perceived market strength to get ahead the next spate of redemptions. To wit, the bottoming process is rarely a one day event and in circumstances as unusual as this, much to..ing and fro..ing is inevitable. I believe, for whatever it is worth, that the bottom-bottom is in and the tests of its validity will end before October does. Remember that anti biotics take more than a day to work.

The Canadian dollar has been extraordinarily weak this past month as its petro base appears to have disintegrated with the falling commodity prices. It may be time to convert any spare U.S. dollars you may have into buying Canadian banks and the incredibly oversold oil sector thereby benefiting from a rise in both. We repeat, PetroCanada is trading at 3 times earnings and yielding 3% effectively discounting its oil, gas, cash and real estate holdings to nothing. Others such as Encana and Imperial Oil are in similar straits. Aecon, an infrastructure play now 7$, has been irrationally beaten down likely due to mutual fund redemptions, remember how popular these thin market plays were a year or so ago.

Even though Asia encountered a train wreck overnight and Europe has been nervous, I would look for a serious rally to end the week, taking markets up to a positive finish.

If anyone seriously thinks that John McCain would make a better President than Barack Obama, they just aren't listening. More on politics tomorrow. Thank you all for your input, it is always welcome.

The Copp Comment - October 15th 2008 Edition

2008-10-17T09:28:00.000-04:00

Good Morning All,

Our wish list for the week appears to have been fulfilled and its only Wednesday as New York and Toronto markets respectively gained 950 and 1700 at their best Monday,Tuesday levels, not quite matching our plus 1000 and 2000 predictions of Monday morning but close enough considering the fact that we were likely alone in the world in suggesting such an explosion. These rises were naturally met with serious profit taking as both markets gave up some of their gains as the day wore on, a condition that will predominate today's trading as well. Although we also won our political wish as the Canadian electorate in its infinite wisdom prevented a Harper majority, I was still left to wonder how a plurality of my fellow citizens could vote for a bunch of Bush apologists who have likely become converted "Palinistas".

Initial reaction aside, the market judgement of the restoration package will be withheld for the near term as major investors watch LIBOR and the TED spread in order to monitor its "on the ground" effect. You need not pay too close attention to such intricacies as the indexes will quickly explain any good or bad news. The numbers will speak.

An article appearing in yesterday's New York Times by Tommy McCall described the performance of stock markets under Republican and Democrat administrations beginning in 1929. If you do not include the crash incumbent Herbert Hoover the business friendly Republicans had a plus 4.7% record versus a positive 8.9% for the "socialist pinko" Dems. If Hoover's 4 years are included the free enterprising GOP slips to a marginally positive 0.4 %. Don't bother working out the compounding effect of the comparison just google the chart.

Tonight's debate will likely be as dull as the others, barring a crash and burn performance by either candidate. Maybe its just because I am so strongly pro Barack that I have such a melancholic foreboding of these final campaign weeks or maybe I am justifiably fearful of nasty Republican tactics and redneck Joe Six Packs armed to the teeth and smitten by Sarah.

If any of you wish to opt out of this letter please advise, I shall try to remain unhurt by your choice.

The Copp Comment - October 14 Edition

2008-10-17T09:27:00.000-04:00

Good Morning All,

When it became evident over the weekend that the U.S. free marketers led by Hank Paulson were going to be dragged kicking and screaming into a quasi socialist solution to the banking crisis, stock markets in America joined their European counterparts in celebration of the revised plan. As discussed in yesterday's blog this Swedish inspired, U.K. generated solution is considered to be one that addresses the core of the problem rather than its excesses, the base of the inverted pyramid instead of its incomprehensible overhang. Gordon Brown, the British P.M. has been reborn.

We also predicted yesterday that a 1000 point up Dow day would evolve this week and that it would be accompanied by a 2000 point surge on the TSX. We got part one early and catch up in Toronto, after yesterday's Canadian holiday, may make this idea a morning "fait accompli". Japan also made history overnight as it too came off a market closure with a 14% rise. European indexes are up strongly for the second day in a row and New york futures are very powerful in the pre market. The natural rule here would be to sell into strength as the euphoria of the early going presumably turns back into malaise. We will have to watch how this plays out but I believe that a true bottom has been made and that our previous forecast of a 50% retracement of the one year losses is a minimum target by mid January. It could be somewhat greater as the ride back up will be led by banks and techs, sectors which have lately taken losses of huge magnitude. In Canada, the once overowned but now vastly oversold oil, gas and mining sectors should enjoy a major and immediate resurgence from recent lows but they will not be the lasting leaders of the "new" market, at least not until much later in 2009.

The choice for the Canadian electorate today is between tweedledum and tweedledee. It is our hope that the vote leaves us much the same as we were before this ridiculous election was called.In America the choice is of a far different nature and holds the promise for a renewed and better country.

The Copp Comment - October 13, 2008 Edition

2008-10-17T09:20:00.000-04:00

Good Morning All,

In Friday morning's letter I promised a positive end to a day that would start out with a depressing tone। A casual observor, or one locked solely into Canadian Markets may have thought that the promise was left undelivered....it was not, as a late day rally in New York took the Dow Jones from minus 500 to plus 300 in less than a Sarah Palin blink। Admittedly it did give up much of its new found trading momentum just a couple of "betchas" later but by then the saving grace nature of the activity had been gratefully established.

Europe, led by a U।K. solution based on a 1990's Swedish model whereby the various governments would guarantee interbank lending as well as deposits in exchange for equity effectively brought an end to 1980's Thatcherism and quite possibly the present crisis. The Swedish experience, although obviously based on a much smaller model, employed four per cent of that country's GDP most of which was recovered within ten years. America is still working out the structure of its recovery package with the appointment of a Neel Kashkari and his team of experts. A tough job indeed for this self styled free market Republican but a good deal more encouraging than the lunatic fringe led by Lou Dobbs who don't want Wall Streeters involved; one would suppose that unemployed grocery clerks and retired autoworkers should take up the baton and solve both the economic and the hyped immigration problems at the same time. Either way it will be very difficult for American "free marketers" to consider serious government equity participation but guess what...they will. Preferred shares and warrants a la Warren Buffett are the recipe.

What a day for credit markets to be closed in the U.S., while open in Europe. Canadian and Japanese stock and bond markets are also closed. This could lead to a major catch up day tomorrow if present price gains in Europe hold and U.S. stock markets keep or expand on the huge gains that futures are indicating. I believe that a 1000 point up day on the Dow is possible this week and a 2000 point one day TSX advance automatic if this should occur. We may not be out of the woods yet but when the leaves fall you can always get a better look at the forest.

Sorry, I cannot get enthused about our Canadian election as too much important stuff is going on elsewhere but I am all for minority government at this stage. In America John McCain is facing an important personal dilemma; he can either lose or win with his honour intact or he can endanger the future of America by allowing if not encouraging his minions to indulge in the politics of division.

The Copp Comment‏ - October 9, 2008 Edition

2008-10-17T09:18:00.000-04:00

Good Morning All,

Welcome to the Reagan legacy, you must remember now, how the free market would provide wealth and jobs for everyone if it could only be liberated from the bonds of REGULATION, how the eighties became known as the greed decade wherein business schools, then and since, placed their emphasis on courses about balance sheet alchemy in lieu of economic history and ethics. These are those years folks (as Sarah would say) but stop worrying about them because they will soon be over, the pendulum is swinging back toward a more sane world and we are truly headed toward positive change.We are also witnessing the end of the "oil Presidency" but even as we do oil stocks have overdiscounted the next week, let alone decade. I leave you one example; Petrocanada will trade at less than 3 times earnings this morning and that is a current balance sheet number that does not include its oil and gas reserves or any other assets. It is one among many. As someone said this morning , "if the market went down as it did yesterday for another 10 days it would be worth ZERO".Look for a two to five hundred down opening followed by a mid morning turnaround that runs to a positive close....hopefully on huge volume.

If any of you caught the McCain Wisconsin rally on CNN you might have thought you had been taken back to the 1950's, except in color. The tone and tenor of the right wing talk show hosts has long bordered on lunacy but when it is encouraged by a major party candidate it becomes scary as hell. The racist rant is rising and when combined with the McCarthyist "guilt by association" program that has typified recent Sarah speeches we must be truly frightened for Obama's safety. This campaign is fast becoming one in which the party of hope is fighting the party of hate.

Bobby Kennedy was fond of saying that "20% of the people will be against everything all of the time", the problem in America is that 20% is heavily armed. There will be an ugly start to a day that will end on a very positive note.

April

2008-04-02T17:10:00.000-04:00

The Laurel Comment

“Logical consequences are the scarecrows of fools and the beacons of wise men.”
-Thomas Henry Huxley

Commentary

Although America has lost much of its military and economic influence during the Bush years it still remains the world’s most powerful nation in both regards; and because of this tragically incontrovertible fact, the coming November election is of greater importance to Canadians and other citizens of the world than are their own domestic political issues.

The month of March was supposed to signal the end of both primary campaigns but alas the Democrats rage on. During this latest period of silliness each of the three remaining candidates was confronted with an issue problem, two of which were directly related to what we now call “misspeak”.

It may not seem fair or even logical to define a candidate’s honesty, knowledge or intellectual depth on the basis of a “one off” comment or occurrence but what we do discover from these events is the meaning of the mistake and the capability of the candidate to respond meaningfully to the self created crisis.

In the case of Barack Obama, whom I incidentally support, the reaction to his pastor’s rather outlandish display was a measured and hopeful speech on the history and potential future of race relations in America. Oratory is one of Obama’s greatest strengths but more importantly for America it is not just the verbiage expounded by the man that gains purchase with his public but the tone of the subject matter and the hope it portends.

Hillary Clinton on the other hand misspoke about an event that never occurred, effectively creating a story that was intended to enhance her credentials as an experienced world diplomat. Worse still was the absurdity of repeating this easily fact checked fabrication on more than one occasion as part of an attack on Obama’s international capabilities. Not smart!

More egregious still was the thrice repeated gaffe by John McCain, the Republican candidate who prides himself as a military expert. McCain stated that Iran was training Al Qaeda terrorists and sending them to Iraq. It was not until he was corrected on a third occasion by one of his potential running mates, Joe Lieberman, also known in some circles as the Senator from Tel Aviv, that he revised his thinking.

John McCain, the military expert, has also adopted, as one of his main campaign themes, his belief that his Democrat opponents are weak on Iraq, that the surge is working and that America might maintain a troop commitment there for 10 more years or even 100. He also repeatedly states that a withdrawal will mean victory for Al Qaeda.

Let us grant the fact that Senator McCain is a great patriot and a war hero with terrific military genes who suffered sorely during his captivity by the Vietnamese. But let us also understand that anyone with a modicum of knowledge of Middle Eastern affairs is aware of a number of absolutes. The Shi’ite and the Sunni may be both Muslim but they are enemies in Iraq where the Shi’ite represent 60 percent of the population, the Sunni 35 percent and the Kurds 15 percent. Furthermore, Iran is 90% Shiite and Persian. The Al Qaeda movement is 100% Sunni and has no presence whatsoever in Iran. Worse still, McCain’s continued belief that America’s abandonment of Iraq will lead to an Al Qaeda victory belies all common sense as the majority Shi’ite would be busy vanquishing (a nice word), any remnants of Sunni power including Al Qaeda, in a post occupation Iraq.

This is a civil war being fought over oil and who owns it and this war will not end until one faction of the Shia is victorious.

McCain’s gaffe has deadly and costly overtones, Hillary’s was silly and self demeaning, Barack’s was countered with a positive spin, you judge.

Spending 5 years in a POW camps may make someone tough, the experience does not however make anyone a Clausewitz.

Markets

The last year has been a devastating one for many in America but for the most part Canadians and others have escaped the brunt of the housing collapse and the sub prime disaster. “Greed is good”, as Gordon Gekko said in the movie Wall Street, had become the creed of the financial engineers who created and sold fabricated products to many who should have known better. The fallout, which began last Spring among the knowledgeable, culminated recently in the collapse of Bear Stearns an 85 year old investment bank that had been worth billions only last year.

“How could this happen” many have wondered over the past few months “and when not if will another debacle reoccur?”

The answer to part one, at least in general terms is about regulation or the lack thereof; in more specific terms it may be about the Glass Steagall act which was created in 1933 to separate commercial and investment banking and replaced in November 1999 through the auspices of Republican Senator Phil Gramm, the encouragement of Alan Greenspan and the signature of Bill Clinton. The investment world that was then created may have been largely responsible for the mess that financial markets are now experiencing.

As many readers of this letter are aware our bearish position on markets that lasted throughout 2007 (save gold and oil) was repealed by our bullish stance adopted in mid-January when we stated that the lows had been made. The several tests of these lows over the past weeks have confirmed our belief in their validity. We have stated and continue to believe that financials lead markets both up and down, we now look forward to the former side of the equation.

Added to our recommendation to buy financial ETFs; XFN and HFU in Canada, XLF in the U.S. is a bullish scenario for technology. Semiconductors lead this area and there are many including Intel that will benefit. PMC Sierra and Micron are among the many.

Gold has taken a hit from the hedge funds but should settle in above 850 before it makes its next run to the upside. Inflation is a growing, not a declining factor.

Other themes continue to grow with infrastructure, agriculture and oil sands being predominant. The market should be profitable until next spring after which some new chickens may come home to roost.

Remarkably

The month of May should bring an end to the last hopes of Hillary Clinton after which the Democrats can get down to the serious business of trashing John McCain and the Republican greed machine.

The coming campaign will ostensibly be about two issues; the economy and Iraq, but in reality these two are interwoven and the Democrats must be adamant in their emphasis on this linkage.

Last month we mentioned the Stiglitz-Bilmes book entitled The Three Trillion Dollar War, a study that should become mandatory reading for every voting American.

Since its inception the war in Iraq has been an exercise in economic, moral and political suicide. The argument that America is obligated to see it through is both specious and stupid. It is the same argument that was used in Vietnam in years one through ten. In 1967 Alaskan Senator Ernest Gruening, who along with Wayne Morse of Oregon was one of two Senators who voted against the 1964 Golf of Tonkin resolution, answered a reporter’s question on how the United States could get out of Vietnam.

He responded simply by saying “in ships and in planes”. Tragically and fruitlessly that is exactly how they left 8 years and thousands of deaths later.

Barack Obama should propose a fix for Medicare, Social Security and the economy in general by proposing a massive infrastructure program. When asked how to fund it he may easily respond by saying that he will end the waste in Iraq and the tax cuts to the already wealthy. The side benefit will be a $30 per barrel drop in oil.

Geoff Ryan
March 5, 2008
GeoffreyRyan@hotmail.com
514-795-8450
http://thelaurelcomment.blogspot.com/

March

2008-03-05T16:18:00.000-05:00

The Laurel Comment
“Nations are formed and kept alive by the fact that they have a program for tomorrow.”
-José Ortega y Gasset

Commentary

Unfortunately for America, the Democrats and most of the civilized world the primaries will continue to be of importance through to April 22 when the Pennsylvania votes are counted. The happiest souls to be found out and about the political spectrum this month are the Republicans, who now look forward to 6 weeks of mean campaigning from the Hillary camp who are deviously delighted with the late gains achieved from their attack ads in Texas and Ohio.

The math still largely favours Obama and we fervently hope that he remains a high roader rather than a gutter player…no matter what the cost.

This year’s election in the U.S. is far more important to Canadians and everyone else in the world than any political machinations that occur here in the sane sector of North America where high oil, wheat and base metal prices make governing an incredibly simple task that even some of our more challenged officials cannot screw up.

The issues before the American electorate should be simple this time around: the economy, the war, medicare and the deficit. The side issues will however be evident among some media types (read Lou Dobbs) and the Christian Right, these are the usual candidates: immigration, guns, gay marriage and the “right to life” movement.

John McCain, the Republican nominee has promised to campaign on more of the same, more war, more tax cuts, more deficits, and more pandering to the nutty extremes.

Hillary Clinton promises to end the war sometime, create a medicare plan and tax the rich.

Barack Obama promises to end the war more quickly, create medicare plan and rejig the tax system at the expense of the already wealthy.

Well we all know how the McCain plan works because it’s the one we have seen for 7 years. An outrageous and immoral war funded by deficits at no cost to its perpetrators (the wealthy) and at a great cost to the middle class in both treasure and lives. The McCain campaign will attack the Democrats for being weak on terrorism while the economic issues and medicare will remain largely ignored except for the usual conservative mantra of private health and low taxes.

Tragically it appears that Democrats response will be a gutless expression of “half a loaf” solutions that will include some mistaken diatribes against free trade, (Ontario did not steal jobs from Ohio and NAFTA has been a net positive for all so let’s drop the subject) when in reality they should be arguing the case for a massive infrastructure buildout rather than the puny Barack proposal of 60 billion over 10 years or roughly the cost of five months in Iraq.

Iraq, the Three Trillion Dollar war as Nobel economist Joseph Stiglitz and Linda Bilmes have called it in their fact filled book, must end immediately because it is the most easily identifiable source of America’s current problems. When George Bush took office, oil was $20 a barrel, the Euro was at $0.83 to the U.S. dollar and Canada’s Loonie was $0.65. The U.S. Federal government was in surplus and gold languished in the $250 per ounce range.

Yes, there was 9/11 and maybe it could not have been prevented, but Iraq had nothing to do with the attack and the Bush/Cheney reaction to the event has proven to be far worse then the attack itself. This idiocy must end and a new America must emerge from the ashes of the Bush Administration.

America does not just need a change in policy, it needs a bottom up change of spirit, one that Barack Obama has the best chance of providing.

Markets

As readers of this column are aware, our long held bearish views on U.S. and world markets changed following the mid-January lows. Our five year bullish opinion on gold has not as our short term $1000 target plays out and our one year level of $1500 comes into view.

Many bears have been calling for a retest of the January lows and some for a possible breakdown of the Dow Jones to the 8,000 level. The retest may have already occurred and the Dow 8,000 has already been achieved if one wishes to relate the index to Euros, Canadian dollars or gold, because the entire movement of U.S. markets is mistakenly seen by most in “greenbacks”. We have said it before and will now repeat it. The United States is on sale and now is the time to buy it. By the time we get to November and a Barack Obama Presidency the entire picture may have a new and positive look about it.

Democrat themes are infrastructure, technology and bio research which should bring the nanotech and stem cell stocks back into play. The constants of world growth will be agriculture (there is a small list of stocks) base metals, energy and the aforementioned precious metal play. Learn more about ETFs and special situations.

Remarkably

The total amount of gold in circulation is about 5 billion ounces.

The U.S. money supply as formerly measured by M3 has risen from 800 billion in 1971 to 12 trillion today.

The largest proportion of the rise has taken place since the late 1990’s.

Gold traded at 850 1980 dollars, it now trades at 990 2008 dollars. You do the math.

On the positive side 2 billion new consumers have been created since the early 1990’s in Asia, the sub continent of India and in Central Europe, Russia and South America. This new world is no longer solely driven by either the U.S. economy and its profligate consumption or by its foreign policy blunders.

The United States remains the world’s largest economy but it is no longer the world’s fastest growing economy. Last month we quoted the former Governor of Hong Kong Chris Patten who said that China had been the world’s largest economy for eighteen of the last 20 centuries and would be again in this one. Nothing has changed in the last 30 plus days to change that view.

Geoff Ryan
March 5, 2008
GeoffreyRyan@hotmail.com
514-795-8450
http://thelaurelcomment.blogspot.com/

February

2008-02-06T15:35:00.001-05:00

The Laurel Comment
“China, for 18 of the past 20 centuries, has been the largest economy in the world and will be again this century”.
-Chris Patten (former Governor of Hong Kong)

Markets

January did not treat the world’s bourses very kindly and despite the continuous economic warnings of the last year, the downside momentum still came as quite a surprise to the unprepared and the “none so blind…”

Among the first 2007 warning shots was the February shakeout in China which transcended European and North American markets in quick succession. This potential for debacle however ended in an Asian minute as markets reversed course and soared to new highs, at least on the surface of things, for underneath the indexes the real story of what was to come had just begun to unfold.

The sub prime mess and the housing decline in the U.S. did not appear overnight, last Christmas or even last summer. They were both well known and well documented prior to both the August and November meltdowns, and were amply illustrated by the “financial” indexes which had peaked in the spring of 2007 dropping major bank stocks anywhere from 20 to 60 percent with Citigroup having led the way.

The Federal Reserve strongly intervened during the August crash awarding markets a three month respite, by January the Fed had exercised outright panic proving that their ability to follow far exceeded their talent for leadership.

So now it is February and many investors are wondering what is in store for 2008 and beyond. Will there be more panic, a deep recession, a global meltdown or will the world slog through its present difficulties and emerge solvent but chastened?

The answer to part one will be positive in this writer’s view as the actions of the Federal Reserve to liquefy the system in order to save it is always a short to medium term winning strategy. The answer to part two is even clearer, chastened capitalism is an oxymoron. There will always be excesses that lead to bubbles that end in troughs. This is a product of both a successful system and human nature.

As many readers are aware “The Comment” has been bearish on markets for many months now while it has remained bullish on gold and special energy situations for a somewhat longer period. This former position on markets has now changed. It is our belief that the financials lead markets both up and down and we now suggest that the bottom in this group was achieved in mid-January. In short the new market leadership will come from this sector, one best accessed through the purchase of specific exchange traded funds. The XLF in New York and either the HFU or XFN in Toronto will allow investors to buy the group rather than trying to choose a particular winner. Our position on gold remains not only unchanged but reinforced as our 1000 short term target fast approaches. We believe that $1500 in 2008 remains a distinct possibility as the massive financial infusions of the world’s central banks have further devalued most currencies. Buy precious metals, Japanese Yen and do the former through the aforementioned ETFs.

There will continue to be a great deal of talk during the coming year about the outcome a Democratic victory would have on stock markets. Don’t believe the talking heads on the business channels as they are, with few exceptions, reactionary Republicans whose idea of the common good rests with their own pay cheques. Markets have historically outperformed under Democratic administrations. The accompanying charts prove the point.

The most compelling argument in Democratic times is the one that small caps and tech stocks in general fare better than large caps and defence related companies. We wonder why.

Think too of the regulatory bodies which were put to sleep during the Bush and Reagan years enjoying a revival, a time to come when we hope that white collar crime has the same stigma as armed robbery. Try this metaphor on; think what would have happened on the streets of New York if all the policemen had been sent home for the past eight years.

Be bold in bad times and careful during the fourth, fifth and sixth boom years and you will likely do well.

Commentary

George Bush recently presented his government’s 2009 budget. The main points propose cuts for Medicaid, medicare and education while increasing the defense portion to its largest figure (adjusted for inflation) since World War II, a number that does not include the off budget spending on the Iraq/Afghanistan mess, another 200 billion.

The good news resides in the fact that this is the last Bush Budget, the bad news may be the continuation of his disastrous Middle East policy should Senator McCain win the Presidency now that the Super Tuesday primaries appear to have assured his nomination. This is not to say that any of the other Republican choices were or are better than McCain but more of the same is not what either America or the World needs at this juncture.

The momentum story of these 2008 primaries has obviously been that of Barrack Obama who despite his rather thin resumé is proving to be an inspirational public figure. This campaign has resonance for those of us who remember 1968 when an assassin stole the spirit of America and gave the world Richard Nixon in its place.

The Democrats in power are not like the Republicans because the people that surround and advise Democratic administrations are demonstrably more pragmatic and far less agendized. In short President Obama will not have a Vice president Cheney, he may instead have a team made up of the “best and the brightest”.

Remarkably

Writing a bullish market letter in the midst of a crash is not an easy task, particularly when one is aware of some very severe pitfalls in the underlying fiscal and monetary structure of the world’s largest economy. It is a time when faith, not in religion, but in history helps to restore the balance between what is and what is likely to be.

The banking systems of the world have been refinanced. The securitization of bank assets (conversion of existing assets into marketable securities) does not however necessarily solve the economic crisis that the bursting of the housing bubble has effected. The problem, as some more learned than I have begun to emphasize, is the slowing in the velocity of money from bullish multiples to deflationary negatives. This slowing of the economy may be attributable to a number of things many of which have ominous similarities to the mid to late 70s when money last moved en masse from consumers to the sovereign funds.

The OPEC led oil price rise at that time effectively moved circulating dollars that were better utilized buying fridges, stoves, cars and life’s necessities into the bank accounts of Arab Sheiks who bought planes, gold and collectibles in countries where trickle down economics was a literal experience.

This time around, the supply crisis for oil along with the political risk price due to Bush policies has added to the commodity price boom, thereby enriching the sovereign wealth funds who now seem to be more intent on buying existing assets than creating new ones. This and the Bush tax breaks to the already wealthy have combined to place money in the hands of those who don’t spend it, a phenomena that may also explain why the world market indexes stayed up over the last year while the underpinnings were crumbling.

In essence, it is possible to create enormous liquidity but if the banks don’t lend it and the people don’t spend it, the economy comes to a halt. To be crude, it is somewhat similar to someone with lots of Viagra but no partner.

Finally it is good to remember two things; the opening quote and the proven market adage “don’t fight the Federal Reserve”. After all during the 1920’s Germany under the Weimar Republic saw its stock market rise from 600 to 29,000; grant it they did print so much money that the entire Daimler Company was worth only 342 of its cars in then current US dollars. Daimler did survive.

Geoff Ryan
February 6, 2008
GeoffreyRyan@hotmail.com
514-795-8450
http://thelaurelcomment.blogspot.com/

January

2007-12-31T15:29:00.001-05:00

The Laurel Comment
“ It was ordained at the very beginning that time would be the natural equalizer of all humankind and that it would be at once, both man’s mortal enemy and his greatest savior “ William Milton

If the major economic events of 2007 are to act as a harbinger of those things yet to come about, then it would appear that unlike Ebenezer, it is already too late for the world to change course. The impact of the sub prime mess that was brought about through cheap credit, lax regulation and blatant hucksterism may have been temporarily eased through the facility of the world’s central banks and their out of control printing presses but it is far from resolution.

As was the case during the Reagan-Bush Senior era when the Savings and Loan crisis was spawned, it is the perpetrators rather than the victims who are receiving the bailout. The ongoing actions of the aforementioned central banks to alleviate these short term difficulties are even seen as necessary and unavoidable by many of the issue’s most severe critics as their fear of imminent collapse has superceded their normal reticence toward monetary inflation. The question , it appears has reached beyond the pale, and that the only hope for present and future economic stability lies with “more of the same”. In essence, the easy credit , low rates and printed money that created the crisis in the first place are not being reversed, but enhanced.

Added to the actions of these all powerful government institutions are those of a relatively new and increasingly influential subset of national entities known as the “sovereign funds “. Dubai , ( known by some as the world’s money laundering capital ), China, Singapore, the OPEC nations and a still growing list of others have spent billions during the past few years buying U.S. based assets, including large positions in major financial institutions barely diminishing their ever mounting reserves of dollars. Hard assets , it would seem are better investments than currency based low yield treasuries, lending thought to the prospect that “ boxing day “ may have ended on December 26th but “ boxing year” in America has only just begun. The country is on sale , not necessarily to the highest bidder , but to any bidder at all.

It is difficult to believe that less than a decade ago America sat unchallenged as the world’s only superpower as it rode the rich technology wave to a budget surplus and record job creation। Remember too that oil in 1998 was at 10$ per barrel and only double that in the days of 9/11. Alas the surplus is no more and the deficit appears to have been permanently installed, while job growth even in the midst of the real estate boom barely matched labour market increases. Meanwhile the Iraq debacle , despite the surge fantasy, continues to waste both precious lives and precious funds as it destroys the last vestiges of America’s international moral and military credibility. This first decade of the new millennium has once again proven that a small group, or cabal if you will, of influential people can have an enormous impact upon history, unfortuneatly this impact is of a negative and destructive nature.

So where to now we might ask? Since the U.S. election is still eleven months away , there is little point in speculating upon what a new administration might do as the problem is about now. Furthermore, a recent poll voted George Bush as America’s most admired person, yes folks even a President Huckabee is possible . Betwixt here and there however lies the challenge for “sane “ Americans to fill the vacuum of intelligent political leadership with new hope for without such hard slogging...disaster looms.

Economy
The American consumer is responsible for 70 plus per cent of the U.S. economy, the savings rate in that country is effectively zero, credit card debt has reached epic proportions and the ATM machine that used to be a three bedroom house is broken. Meanwhile, energy and food prices have continued to escalate in the face of increased demand and market manipulation typified by the absurd subsidization of corn based ethanol. The potential for a return to the stagflation of the 1970's has fast become a topic for discussion among economists who either lived the experience and did not understand it and those who were conceived during its long nights and think they can avoid it.

Gold, energy and food appear to be the investments of choice should such a circumstance come about. It is true that emerging markets may one day replace the need for vast amounts of American consumption but that day has not arrived. China and the other sovereign funds will continue to support the “system” as long as they can and as long as it is in their interest to do so. Think 2008 Olympics.

Look for a strong market upsurge early in the year despite all the bad news as the mass of paper liquidity chases hard assets higher. Beware however that markets and economies are subject in the end to two important tenets, real growth and trust in the system. Such growth is fast fading and confidence in world currencies is eroding at a rapid rate. This is the recipe and the burners are on high.

Commentary
The recent events in Pakistan have underlined the nuclear threat we wrote of last month, they have also served to illustrate the failed policies that have abetted the breakdown. The government of Pakistan has received some 10 billion dollars of Bush largesse since 9/11, monies that were purportedly spent in support of the Bush “ war on terror” as well as to stabilize that country. This is not a joke, it is a tragedy of what may be epic proportion, one born of naivete at best or stupidity at worst. It is past time to change these insane neo con policies and for America and the West to abandon their interventionism as their efforts have not only proven to be wasteful, but counterproductive.

Leave, monitor and contain should be the freshly adopted stance of all serious Presidential candidates। Islamic terrorism is undoubtably a danger to the world but it is not an uncontainable one. North America , Europe including Russia, China , Japan, newly emerging India and Brazil represent a far more powerful potential economic and military alliance than all the bin Ladens of the world can ever dream. It is time to unite in the face of such tenth century foolishness and stop wasting precious resources in the pursuit of oil. Worries over global warming will quickly pale if a loose nuke finds its trigger.

Remarkably
The decade of the roaring twenties ended with a bang not a whimper as the crash of ‘29 brought a painful end to the excessive pursuit of pleasure and of things material that had typified the post Great War period. The depression that followed, it is said , did not have to be so severe, if the policies implemented by the Hoover administration had been more enlightened. Tight money and restrictive trade legislation have long been blamed for the length and depth of the economic decline that ended only with the buildup that preceded the Second World War.

As we look forward now to our present circumstance we note a different reaction to some of the same emerging problems. Instead of tight money, our cure has been greater monetary expansion as we have sought to innoculate the economy with the bacteria that caused the disease. As for trade and globalization , the real boom creators, we now hear rumblings of discontent from both the left and right as the scepter of protectionism and the xenophobia wrought from immigration and job loss move to front and center of the Presidential campaign.

In 1932 Franklin Delano Roosevelt , an aristocratic Democrat replaced the then unpopular Republican Herbert Hoover as President and quickly proceeded to rally the American public, morally if not practically with both his speeches and public policy decisions which appeared to be both inclusive and caring leading many observers of history to believe that his actions saved capitalism from itself and America from a revolution.

Social and regulatory policies implemented during FDR’s three plus terms some 70 plus years ago remain the basis for what is now America’s tattered social safety net. There have been additions over the years in the areas of civil rights and old age medicare of a sort but for the most part the nation has lagged far behind the rest of the industrialized world when it comes to citizen rights. A new agenda is long overdue and it is becoming ever more obvious and increasingly imperative that a vigorous and charismatic leader must emerge soon before the now developing social revolution becomes something else. If America is to move forward and regain the moral high ground it has most recently forsaken then it must elect a new FDR not another George Bush.

December

2007-12-06T09:32:00.000-05:00

The Laurel Comment

“We are in a race between cooperation and catastrophe, and the threat is outrunning our response”.
Sam Nunn

Commentary

The global warming issue has once again moved to center stage this month as representatives of 190 nations along with a goodly number of NGO’s initiated a new round of subject discussions in Bali Indonesia, the framework of which, when decided shall replace the Kyoto Protocol which expires in 2012. Once again it is America that has so far chosen to avoid taking a leadership position in this global movement and with the signing on of Australia’s new Prime Minister Rudd, it becomes the only non-aligned nation.

Although Kyoto, and what will soon be known as the “Bali” something, are not, nor have they been a panacea to global warming they do encourage both a constructive effort and a forum for discussion of the views, both pro and con the growth of carbon emissions.

Even though there remains much to be learned in this area, the debate continues to rage over what is bogus science and what the real threat to climate change may be. The question to be begged here concerns the pursuit of knowledge and not the ideological rejection of ideas that don’t fit the anti-progressive mold. Yes there have been questionable claims and hyperbole on either side of the issue but the activation of international caring and commitment should never be diminished or counted out. It is also kind of nice to see some of the world’s youth inspired by something more substantial than i-pods and x-boxes, even if there is little they can contribute to the general solution other than enthusiasm.

The problem, there always is one, that I see with this exciting venture is its relative importance to what may be a greater environmental problem…the nuclear bomb.

For most of the last 60 years the nuclear club had five members; the United States, the former Soviet Union, China, Britain and France; and amazingly with all of the fear and fuss of the Cold War, humanity managed to survive.

However, since the fall of the Berlin Wall and the end of the Gorbachev era, the “peace bonus” as it was once called has been squandered and the age of proliferation has arrived as India, Pakistan and North Korea now boast such capability. The view that nations such as these latter three hold little international threat due to their inconsequential delivery systems and fear of massive reprisal is a questionable one if we take the role of fanaticism and loose nukes into account.

Difficult as it is to fathom, the question of “loose nukes” and unprotected plutonium first surfaced during the breakup of the Soviet Union when in the pre-Putin, pre-oil price surge days, everything was for sale. The answer to this incredibly dire threat was the 1992 passing of the Sam Nunn – Richard Lugar legislation known as the Cooperative Threat Reduction Program. This important and sensible program helped to deactivate or destroy some 7000 nuclear warheads and nearly 700 ICBM’s among other things. Similar to most such intelligent initiatives it was and remains under-funded having spent some 10 billion dollars during its long lifespan, or the equivalent of 3 weeks in Iraq.

According to Michael Crowley of the “New Republic” Sam Nunn the former Democrat Senator from Georgia and co-creator of the “loose nukes” program has since enlisted the support of Ted Turner and Warren Buffett to fund his Washington-based foundation the “Nuclear Threat Initiative” or N.T.I. circa 2001. Please Google.

Alright, now let’s go back to that first number of 6000 nuclear warheads destroyed and understand for a moment that 3 times that many remain, as well as the plutonium to potentially create yet another 40,000 new ones.

The Bush Administration has now spent over 600 billion dollars and incurred future costs of another trillion fighting a war of choice in Iraq that was ostensibly begun in the pursuit of nuclear weaponry. Furthermore, these actions have further empowered the non-Arab Shiite community of Iran and the Sunni Pakistanis. The former, it has recently been revealed, possess no nuclear program despite Bush bombast, while the latter has been an unstable nuclear state for a decade.

The bottom line here is that the world is now relying upon a privately funded (or underfunded) 250 million dollar organization to seek out and destroy real threats while the administration spends trillions chasing neo-con phantoms as it simultaneously courts the newly emerged and potentially combative powers of Pakistan and India.

Does this policy make any sense at all…to anyone?

Markets

Markets successfully tested their August lows in late November before staging a massive 2 day rally that served to place the entire precept of financial rationality in doubt.

We have often noted in this space that markets have a proven tendency to overshoot fair value at both tops and bottoms and that such volatility usually expends itself in the form of a burst bubble or a throw in the towel bottom. It is our view that neither condition has yet been reached.

In previous letters we have described the growth of sovereign funds and their increasing investment importance. China, Russia, India and even Brazil have joined OPEC nations as major players in this realm of super wealth. The amount of money controlled by these “sovereign” nations along with that of the private hedge funds has proven to be enough to not only move financial and commodity markets but to control them. Aided and abetted by the U.S. Federal Reserve, these behemoths have taken a world awash in paper currency created by loose credit and the world’s “out of control” super power and turned its economic system into “casino world”.

Super wealth, not immigration or free trade, is in the process of destroying middle class America and with it, the stability that both the nation and the world require for their survival. Western Europe and our beloved Canada appear to stand alone as bastions of sanity in this nether world of uncaring greed.

Buy gold, it will do well no matter what the market or economic outcome of the coming year.

Remarkably

As has been the case throughout history, booms end in busts and the world goes on to bigger and better cycles. The final result of this the greatest period of world growth is of course yet unknown, and only a reasonable prognostication based on previous performance can be made.

The foundations for a better world are laid through cooperation and diplomacy, functions that are most successfully realized through strong and informed leadership among the major powers and through the growth and improvement of international institutions. Let us hope that such leadership will become the norm rather than the exception in future years as we cannot dodge the bullet of stupidity forever.

Note: Will Stephane Dion’s next dog be named Bali Hai?

November

2007-11-06T15:53:00.003-05:00

The Laurel Comment

“Time will run back and fetch the age of gold”.
-John Milton

Commentary

The world had great reason to celebrate on October 28th with the passing of the 45th anniversary of the Cuban Missile crisis. Although this date did not fall on a special number in 2007 its observance held particular importance in light of the recent drum banging by the Bush regime.

Our ability to look back four decades is predicated upon the actions taken, or lack thereof, at that crucial time in history. Similar to all things historic, we are now aware of greater detail than those who lived the experience. This is not hindsight; it is knowledge dispersed over time and now freely available to all through the magic of the Internet. For an interesting take go to the National Public Radio (NPR) site and listen to JFK’s premier speechwriter, Ted Sorenson, review the event.

The lessons of history are numerous and incredibly dangerous when ignored. One such instruction that appears increasingly relevant to our present circumstance is the understanding that permanence as it relates to both allies and enemies is a fleeting thing and an undisciplined measure, both of what has been and of what is likely to come about.

The Bush Administration’s recent campaign against Iran appears to ignore even the most basic lessons of diplomatic process as its penchant for grandstanding and unbridled hubris have now reached pre-Iraq invasion status. Worse still, their rhetoric belies the true effect of such bombast given the recognition by the rest of the world of its now diminished military and economic power. This perception, as it pertains to the Middle East, may prove to be highly dangerous because the true might of America now resides in only one area… its nuclear arsenal and its capacity to deliver weapons of mass destruction. What insanity we might wonder would provoke anyone to consider such a course of action, particularly given the minor nature of the threat? Welcome again to Bush world.

So in the name of perspective let us review once again the friends and foes list of the last century. Our enemies in World War II were Japan, Germany and Italy…okay? Our allies included the ex Soviet Union and China. Fast-forward to the Mao Tse Tung successes of 1949 and the outset of the “Cold War” and we then find that these are allies no more.

Bring on Vietnam, as boy George might opine, and America is soon faced with its greatest policy disaster. Concurrently let’s include the excursions into Latin America and the Middle East where Iran was then America’s best buddy, or at least the Shah was. How things change, by the 1980’s. Reagan at his Machiavellian best was arming both Iran and Iraq during their nine year war of attrition while another crazy in Libya topped their evil persons list.
Then along came Gorbachev and the fall of the wall, reform in China in the post Tiananmen Square era and a whole new look in the Muddled East.

Oh wait! I forgot to mention Osama, Al-Qaeda and America’s support of these gentlemen and the Mujadeen\Taliban during the Afghan-Soviet war. Silly of me, but it is as if this game of musical chairs, normally played by children now resounds to the harshness of rap as opposed to the gentler melodies of my youth; just as the war hawks’ mentality that had remained tethered during that other more serious confrontation of the 1960’s has now been freed to both proselytize upon and perpetuate the myth of nuclear weaponry as a military option.

This is indeed a troublesome time fraught with dangerous people but it is not the little Iranian who is the major problem.

Former enemies Japan, Germany and Italy are now America’s allies. Vietnam, Russia and the late Eastern Bloc have each become trading partners meanwhile China has over a trillion dollars in US currency, an amount that is growing faster than the US treasury can print the paper. Yes and even Muamar Qaddafi, remember him, well Al Qaeda’s number two man now calls him an enemy because he is too close to the United States.

Go figure, is the world going to watch George Bush and his neo con masters risk World War III against Iran, which left alone or properly courted might well prove to be America’s next best friend in that troubled and troubling part of the globe?

Markets

Every bull market ends in a credit\currency crisis and this one is a doozie. The problems this time around are not with the peso, the baht or even the ruble, well not just yet anyway because it is the US dollar that is in deep and dire straits and as Canadians we have carnal knowledge of the event as we have seen our newly minted petro\gold currency reach and surpass historic highs, while the new century’s Euro performs similar aerobatics.

Gold has now traded beyond $800 per ounce but is still priced at one-third of its inflation adjusted 1980 high. The prospects for this imperfect hedge are now almost limitless as paper rich holders around the world seek value for their fast diminishing greenbacks.

We will be hearing a good deal more about “sovereign wealth” over the coming years while excess liquidity in Petro dollars, Asian banks and Hedge funds may presently amount to as much as 20 trillion dollars, an amount that has driven markets higher this past year. But that was then and this now we have been warning of for many months includes the recognition that this mass of liquidity is made of paper and backed by less and less real value. The binge may not yet be over but as Robert Redford famously said…it’s close, it’s damn close.

Remarkably

As the fires raged in Southern California this past month it was interesting to watch the out pouring of sympathy for the many who had to leave their homes for their other homes. It brought to mind the greater tragedies of New Orleans and Iraq where 4 million of the displaced had neither a place to go nor an insurance policy to cover their losses.

And to finish with one more read on markets, someone recently pointed out that if you removed Google, Rim (Blackberry) and Apple from the NASDAQ, the index would be close to even on the year. So I guess that as in all things it’s not what you own but whom you own that counts most.

Buy gold, it has only begun to rise.

Addition

When Charles de Gaulle exited NATO in 1966 he demanded the removal of all U.S. troops to which Lyndon Johnson responded “Does that include the ones buried there?”

From de Gaulle to “freedom fries” to the Sarkozy-Bush wedding…plus ca change…

Geoff Ryan
Nov 6, 2007
GeoffreyRyan@hotmail.com
514-795-8450
http://thelaurelcomment.blogspot.com/

November

2007-11-06T15:53:00.001-05:00

The Laurel Comment

“Time will run back and fetch the age of gold”.
-John Milton

Commentary

The world had great reason to celebrate on October 28th with the passing of the 45th anniversary of the Cuban Missile crisis. Although this date did not fall on a special number in 2007 its observance held particular importance in light of the recent drum banging by the Bush regime.

Our ability to look back four decades is predicated upon the actions taken, or lack thereof, at that crucial time in history. Similar to all things historic, we are now aware of greater detail than those who lived the experience. This is not hindsight; it is knowledge dispersed over time and now freely available to all through the magic of the Internet. For an interesting take go to the National Public Radio (NPR) site and listen to JFK’s premier speechwriter, Ted Sorenson, review the event.

The lessons of history are numerous and incredibly dangerous when ignored. One such instruction that appears increasingly relevant to our present circumstance is the understanding that permanence as it relates to both allies and enemies is a fleeting thing and an undisciplined measure, both of what has been and of what is likely to come about.

The Bush Administration’s recent campaign against Iran appears to ignore even the most basic lessons of diplomatic process as its penchant for grandstanding and unbridled hubris have now reached pre-Iraq invasion status. Worse still, their rhetoric belies the true effect of such bombast given the recognition by the rest of the world of its now diminished military and economic power. This perception, as it pertains to the Middle East, may prove to be highly dangerous because the true might of America now resides in only one area… its nuclear arsenal and its capacity to deliver weapons of mass destruction. What insanity we might wonder would provoke anyone to consider such a course of action, particularly given the minor nature of the threat? Welcome again to Bush world.

So in the name of perspective let us review once again the friends and foes list of the last century. Our enemies in World War II were Japan, Germany and Italy…okay? Our allies included the ex Soviet Union and China. Fast-forward to the Mao Tse Tung successes of 1949 and the outset of the “Cold War” and we then find that these are allies no more.

Bring on Vietnam, as boy George might opine, and America is soon faced with its greatest policy disaster. Concurrently let’s include the excursions into Latin America and the Middle East where Iran was then America’s best buddy, or at least the Shah was. How things change, by the 1980’s. Reagan at his Machiavellian best was arming both Iran and Iraq during their nine year war of attrition while another crazy in Libya topped their evil persons list.
Then along came Gorbachev and the fall of the wall, reform in China in the post Tiananmen Square era and a whole new look in the Muddled East.

Oh wait! I forgot to mention Osama, Al-Qaeda and America’s support of these gentlemen and the Mujadeen\Taliban during the Afghan-Soviet war. Silly of me, but it is as if this game of musical chairs, normally played by children now resounds to the harshness of rap as opposed to the gentler melodies of my youth; just as the war hawks’ mentality that had remained tethered during that other more serious confrontation of the 1960’s has now been freed to both proselytize upon and perpetuate the myth of nuclear weaponry as a military option.

This is indeed a troublesome time fraught with dangerous people but it is not the little Iranian who is the major problem.

Former enemies Japan, Germany and Italy are now America’s allies. Vietnam, Russia and the late Eastern Bloc have each become trading partners meanwhile China has over a trillion dollars in US currency, an amount that is growing faster than the US treasury can print the paper. Yes and even Muamar Qaddafi, remember him, well Al Qaeda’s number two man now calls him an enemy because he is too close to the United States.

Go figure, is the world going to watch George Bush and his neo con masters risk World War III against Iran, which left alone or properly courted might well prove to be America’s next best friend in that troubled and troubling part of the globe?

Markets

Every bull market ends in a credit\currency crisis and this one is a doozie. The problems this time around are not with the peso, the baht or even the ruble, well not just yet anyway because it is the US dollar that is in deep and dire straits and as Canadians we have carnal knowledge of the event as we have seen our newly minted petro\gold currency reach and surpass historic highs, while the new century’s Euro performs similar aerobatics.

Gold has now traded beyond $800 per ounce but is still priced at one-third of its inflation adjusted 1980 high. The prospects for this imperfect hedge are now almost limitless as paper rich holders around the world seek value for their fast diminishing greenbacks.

We will be hearing a good deal more about “sovereign wealth” over the coming years while excess liquidity in Petro dollars, Asian banks and Hedge funds may presently amount to as much as 20 trillion dollars, an amount that has driven markets higher this past year. But that was then and this now we have been warning of for many months includes the recognition that this mass of liquidity is made of paper and backed by less and less real value. The binge may not yet be over but as Robert Redford famously said…it’s close, it’s damn close.

Remarkably

As the fires raged in Southern California this past month it was interesting to watch the out pouring of sympathy for the many who had to leave their homes for their other homes. It brought to mind the greater tragedies of New Orleans and Iraq where 4 million of the displaced had neither a place to go nor an insurance policy to cover their losses.

And to finish with one more read on markets, someone recently pointed out that if you removed Google, Rim (Blackberry) and Apple from the NASDAQ, the index would be close to even on the year. So I guess that as in all things it’s not what you own but whom you own that counts most.

Buy gold, it has only begun to rise.

Addition

When Charles de Gaulle exited NATO in 1966 he demanded the removal of all U.S. troops to which Lyndon Johnson responded “Does that include the ones buried there?”

From de Gaulle to “freedom fries” to the Sarkozy-Bush wedding…plus ca change…

Geoff Ryan
October 1, 2007
GeoffreyRyan@hotmail.com
514-795-8450
http://thelaurelcomment.blogspot.com/

October 1

2007-10-01T16:08:00.001-04:00

The Laurel Comment

“I think we agree, the past is over”
-George W. Bush
Markets

The August sub prime crisis that served to mortify bulls and please the “I told you so” bears largely subsided in September as the world’s central banks injected unseemly amounts of cash into the system, effectively solving a credit problem by expanding credit.

On the surface of things this unprecedented action brought both stability and strength to equity markets and some “funding” currencies such as the Euro and our own resource backed dollar. It also empowered US dollar based commodities, as both gold and oil rose to new (unadjusted for inflation) highs.

It is now, however, October and the beginning of the year’s final quarter, one that has begun trading with a continued upswing. As we write, Canadian markets have risen well above 14,000 and the dollar has exceeded par with its US neighbour. In America the weak currency has continued to help equity markets regain, and even surpass, their mid-July highs as foreigners convert their ever more worthless paper into the harder assets found within US companies.

The question before investors now is to decide whether the printing presses of the world’s banking system are solving the present problem or creating a far greater one. There are of course, differing opinions as to what the likely outcome may be, for as Mark Twain familiarly stated “that is what makes horse races”. The opinion of this writer for many months has been and continues to be guardedly pessimistic. It is possible that China may be capable of kiting America’s cheques through to the end of next summer’s Olympics, it may also be their wish to do so. But on balance we don’t believe that this can happen and that a severe market correction will soon occur.

There are any number of reasons both fundamental and technical for adopting either a bullish or bearish stance at this juncture, the most important of which resides in market momentum and the continuance of present trends. If you are determined to remain fully invested I extend my very best wishes but advise that you might do well to hedge your bank stocks with some gold positions. Try a Sprott fund or the Horizon ETF (symbol HGU). There is also a pure bullion play available through Central Gold Trust (symbol GTU.UN).

Special situations also exist among Oil and gas Royalty trusts as the merger and acquisition game continues. You might also wish to follow one of Canada’s more astute investors, Seymour Schulich, first by following him into Starfield (SRU) and Birchcliff (BIR) and secondly through reading his book “Get Smarter”.

You may also use this period to cover your gains with 100% or 150% national or Quebec based tax shelters.

Commentary

There are numbers and then there are numbers beneath the numbers, the ones that we can grasp.

The all time high for gold was reached in January of 1980 at $850 US dollars per ounce, a price this letter has projected for year’s end. But wait a minute folks, this is like comparing apples to oranges because the real price, you know the one you think your house is worth, would be better reflected in current dollars; and when adjusted for inflation that number would be in excess of $2000 dollars per ounce. Think of oil at 40 1980 dollars then apply the same 2.5 times multiple and think about how cheap gas actually is when that equivalent comes to one hundred bucks a barrel.

The flip side of these realities can be seen when you reduce the inflation factor to constant dollars and discover that the much followed S&P 500 has only appreciated from 139 at its 1982 August bottom to 270, not the inflated factor of 1555 which it reached this past July. As David Nichols points out in his Fractal Market Report this truer measure reflects a realistic growth factor of doubled wealth over 25 years.

So next time you are calculating your net worth think about that $60,000 cost home you own that is now selling for upwards of $400,000 and ask what it all means?...or on second thought maybe we shouldn’t bother.

Remarkably

A recent analysis of the Iraq War cost put the number at 720 million dollars per day, an amount that promises to continue to grow for some years into the future.

Last month we wrote of the need for an infrastructure rebuild in America that would dwarf the one required here in Canada, one that will take 5 years and a trillion dollars to begin to address. Strangely this is roughly the amount that has been frittered, no pissed away, in Iraq over that same period of time.

The question for the Democrats, should they be elected, is whether they will reverse this course by withdrawing from the former debacle and implementing the latter programs.

Long ago, Bill Copp, suggested that Iraq be divided into 3 federal or independent sectors whose transition would be temporarily guarded by United Nations forces made up of mostly Muslim nations, a position that has since been adopted by some Democrats. It is now later but it is not too late to begin the beginning. If you believe the foregoing then sell defence stocks and buy infrastructure for the coming 4 years.

Real numbers also tell a different story when the actual cost of oil is assessed. Details are available to anyone who wishes to do the research but suffice to say that 80 dollars per barrel does not include the 50 billion tax payers send to the Middle East each year nor does it include the subsidies given to the energy companies. Factor everything in and you come up with a number closer to $260 dollars a barrel. Don’t believe me? Then read it in a Senate report and discover what the true depth of lobbying can mean.

And finally, do the math once more on displaced Iraqis; 4 million of them are now refugees. That’s roughly 15% of the population, a number equivalent to greater Toronto.

What is there not to see? Maybe if New Yorkers had to pass through an Iraqi checkpoint as they travelled to and from work or day care, they might begin to understand what Bush’s America has wrought.

Geoff Ryan
October 1, 2007
GeoffreyRyan@hotmail.com
514-795-8450http://thelaurelcomment.blogspot.com/

September

2007-09-05T15:16:00.000-04:00

The Laurel Comment

“The modern conservative is engaged in one of man’s oldest exercises in moral philosophy: this is to search for a superior moral justification for selfishness.”
John Kenneth Galbraith
Commentary

There seems to be little question that the opening decade of this, the third millennium has been frought with unforeseen difficulties. There is also little doubt that the present dearth of competent world leadership has served to magnify rather than to alleviate or resolve these growing negatives.

In our view however the major long term event that has overshadowed all others is not the absurd Iraq war but the China growth story and that of the other emerging economies in Russia, Brazil and India. These economic stories are the basis upon which our future world will develop and their potential will not be consumed but enhanced by Middle Eastern misadventures.

While America remains the world’s most powerful economy it is no longer the engine of international growth that it once was, as the diminishment of its national treasure and global reputation is now reaching unprecedented proportions. The arrogance of power, as Senator William Fulbright once called it, has truly been perfected by the Bush administration.

The final cost of the Iraq war is now being estimated at 1 to 2 trillion dollars while a recent paper on the need for an infrastructure rebuild in America calls for a 1.6 trillion expenditure over 5 years.

Although we Canadians have become acutely aware of our own such basic infrastructure failures in recent years, our needs pale when compared with the creaking underpinnings of major U.S. cities and the interstate highways that were constructed 50 years ago. The tragedies are multiplying monthly if not weekly and they are each so unnecessary.

Bombs, guns and the equipment of war are indeed stimulants to short term economic growth but aside from the obvious issues of morality and waste they are essentially, unless you are Halliburton, a non-productive use of public funds.

When a bridge, a sewer system, a hospital or a school is built the money spent is regenerated within the community and taxes are paid by both the companies contracted and the workers employed. Better still, at the end of construction society may have a useful facility or a safer environment instead of an exploded bomb, a flag draped coffin and an enriched defence contractor with an offshore account.

Put your two palms up and weigh these alternatives in the balance of life.

Markets

It has taken far longer then we ever expected for world markets to recognize the potential dangers inherent in the most recent policies of many of their central banks. Led by the once monetarist U.S. federal reserve, money supply growth has soared beyond any historical measure, save the Weimar Republic, while access to fast money and easy credit has abounded.

The surprise so far however, has not been the volatility of the market’s reaction but the facility with which it recovered from its August 16th flirtation with disaster, wherein the Fed, which had created the problem in the first place temporarily solved the liquidity crisis by creating more liquidity. This addendum policy was highly necessary as a short term solution and effectively added trading stability, but in the end we must ask…for how long?

We are now over 5 years into this present cyclical bull market and the time to pay heed to history has become imminent. The problem of a credit expansion and an inflated stock market can only be resolved by a contraction in both. The bigger the bubble grows, the greater the bursting will be, when not if it occurs.

The sub prime mortgage and “teaser” loan crisis has yet to work its way though the economy because the big jump up in U.S. mortgage rates will not take place until January. Markets however, will not wait until then to discount a possible recession in 2008.

September and October are the two worst market months of the year in normal times and these are not those. Please pay attention to the seasonality of what is happening and continue to take serious precautions as this summer’s action has a familiar 1987 look about it. For those of you who are either short of years or memory Google 1987 crash and look at a chart of the period, then move a large portion of your investments to cash or short ETF’s and sleep like a baby until all this passes; as it surely will.

Remarkably

Breaking news has Toyota taking over second place from Ford in U.S. car sales but the real economic and moral news is written beneath the headline number. BMW and Lexus sales have risen over 20% this past quarter while mid-sized cars, light trucks and compacts sales are all down. Get it, the rich are doing okay while everyone else is heading into the tank. Welcome to Bush world.

The ATM machine that closely resembled the average American’s house these past four or five years has stopped functioning and the aftermath wrought by tighter credit is about to begin…and no, cutting taxes to the already wealthy is not even on Bush’s agenda although it may be on Harper’s.

The Laurel comment may be wrong about all this but why take a chance.

Some months ago this letter noted a possible shift in Bush Administration policy towards Iraq. This transition of support from Shiite to Sunni now appears to have crystallized with the Bush Labour Day visit to Anbar province where a courtship of Saddamites appears to have been furthered. This situation bears watching.

Geoff Ryan
September 4, 2007
GeoffreyRyan@hotmail.com
514-795-8450
http://thelaurelcomment.blogspot.com/

August

2007-08-29T11:25:00.000-04:00

The Laurel Comment

“…this is not the end. It is not even the beginning of the end. But it is perhaps the end of the beginning.”
Winston Churchill
Commentary
A little over 7 ½ years ago (6 ½ if you count your millennia properly) the United States entered the 21st century as the most powerful nation on earth and arguably, the mightiest in history.

Around the world she had been admired by some, envied by many more and despised by only a minority, reflecting a condition of public opinion that had been growing positively, albeit with the exception of certain periods, since her revolution and birth.

There have, unquestionably, been times during which America’s incredible foreign policy blunders have brought both its international and domestic popularity poll numbers to numbing depths, yet it has been seen that its powers of recovery have been strong enough to overcome tragedies even as great as Vietnam. In fact the disdain once felt for America during the late sixties and early seventies had largely dissipated through the Reagan and Clinton years. America, in short, with the Cold War behind her and a budget surplus gilding her treasury was on a roll when Bill and Hillary turned the White House keys over to the Bushies.

Then there was 9/11 and America’s popularity in the world soared to new heights as sympathy, loathing and fear shook the emotions of even the most cynical of the civilized nations. Ah, the opportunity for a positive and united response to such treachery could have only found parallel with that exercised by the Allied powers in the 1940’s. Sadly it was not to be at this time and place in history as this potential watershed for progress was squandered by ideologues infatuated with power and robber barons hungry for oil. The Republican party and its newly appointed administration sought not the friendship of allies or the advice of history, instead it began the hijacking of America in pursuit of goals that were not only dishonourable but incredibly misguided.

The unnecessary and debilitating war in Iraq may go down in history as the first symptom of America’s terminal disease. It may also be seen by future historians as the symbolic event that led to America’s hurried demise as the world’s greatest power contrasted to China’s accelerated rise. This will have not proven to be a good thing for our world because the promise that the United States and its Constitution held in both philosophical and practical terms may well be vanquished in future decades by nations which operate under far less democratic principles, where rule of law is subject to the rule of the state.

The irony inherent in this possible circumstance lies with the knowledge that it was a conservative/libertarian coalition that brought it upon us.

Markets
Bulls have called the recent market downdraft a healthy correction while bears have intoned the crash word and others meanwhile still have adopted the fence sitters motto…let’s wait and see.

The difficulty in writing a “market current” letter to be read on any but the day one parses it, is a conundrum solved only by those who believe in the theory that “I’m in it for the long term” which may be either a catchall phrase or an investment philosophy. For those of us however who struggle with the ups and downs of extreme market volatility bear with me while I present the other side.

In last month’s column I wrote that “a 5% upside move in markets won’t change your life but a 20% downside move might.” Well since that time the former has largely been achieved while the latter (at this writing) is still pending. Caution is not a particularly strong word unless it is applied to a flashing yellow light on the cusp of turning red. This bull market has now past 5 years of age and unless “things are different this time” the economic and credit cycles are in the process of forcing a set of old realities on this new realm of circumstance.

Protect is a stronger word and it implies a move to money market funds in whole or in part of your portfolios. Stronger still for the brave among you is the phrase “creative action”. This would involve familiarizing yourself with the methods of money making in down markets, the most simple of which we have already mentioned, the second involves the purchase of short or ultra short Exchange Traded Funds. As an example; for those of you who do not wish to sell your bank shares, now or ever, for whatever tax or personal reasons try the following HFD on the TSX. This is Horizon’s short on the TSX financial index, a wonderful hedge considering the age old market adage that financials lead markets up or down. You may also wish to engage the HGU which is a long on gold ETF.

Remarkably
The Bush team of Gates and Rice have been travelling the Middle East lately handing out defense packages to those it presently deems to be friends.

This current program of arming majority Sunni nations is reminiscent of the 1980’s policy that funded the Iran-Iraq war. There is little beneath the Machiavellian surface of these machinations as they portray a possible exit strategy from Iraq and a balancing of the Iran threat.

This is such a screwed up policy that the grasping of straws in the wind is now finding purchase in neo con circles.

And while on the subject of irony, George W Bush bears no similarity to the old lion who roared our opening quote during the worst days of WWII, despite what he may believe.

Geoff Ryan
July 31 2007
GeoffreyRyan@hotmail.com
514-795-8450
http://thelaurelcomment.blogspot.com/

July

2007-07-05T09:31:00.000-04:00

The Laurel Comment

“The unapparent connection is more powerful than the apparent one”
Heraclitus 500 B.C.
Commentary
During his recent visit to the United States, the Russian leader, Vladimir Putin made one thing perfectly clear; unlike Tony Blair he was not and is not Bush’s man.

Politeness and platitudes aside the underlying message that now emanates from the remainder of the former Soviet Union, is one of strength, even of arrogance but certainly not of fear. Putin, for the moment, and perhaps for the foreseeable future presides over one of the fastest growing world economies… a Russia that now boasts the world’s most expensive city.

Who would have thought that the ascension to power of Mikhail Gorbachev some twenty plus years ago would quickly lead to the end of the “Cold War” and the capitalization, if not quite the democratization of this once powerful communist empire?

And who could have predicted that the rocky road upon which this reluctant nation began its journey would soon pave its way to a Moscow rife with billionaires and a 1000-dollar per night Ritz Carlton hotel? Well folks, it wasn’t all Putin’s or Yeltsin’s or Gorbachev’s doing, this growing success story has a taste of irony to it, because it is George W. Bush who deserves a great deal of the credit.

Canada and Russia as we all know are similar in many ways other than just a love of hockey. We are both rich in natural resources and particularly awash in oil, a commodity that was trading at one-quarter of its present price when George W. Bush assumed the presidency under the auspices of the United States Supreme Court.

The floundering economy of Russia’s turn of the century days was not rejuvenated by brilliant leadership but by bubbling oil prices. What Putin has supplied is stability, what Bush mistakenly conferred was an incredibly stupid war. Russian and Canadian economies have been among the greatest beneficiaries of the Bush years, a time of vast money supply growth and incredible waste. A time of growing distortions between the super rich and everyone else, the dawning of an era of extraordinary wealth wherein private planes, luxury vehicles and castles in the air are being paid for by the blood of the innocent and the false hopes of the ignorant.

The lessons of history are clear in one regard. Never ever open “Pandora’s Box”. Be it in Iraq\Afghanistan today, Vietnam yesterday or during the days leading up to the Great War a century ago. This truth has been ever evident, wars of conquest and civil wars that could have been prevented were not; crises that could have been managed were left to fester and jaw-jaw too often became war-war. The failure of leadership has always been thus.

Markets
A trend will remain such until a clear top or bottom has been delineated. Stock markets are in the process of forming the former while the US housing market is not even close to creating the latter condition. Yet this paper fuelled global expansion continues to defy all previous ones. Britain for example, has enjoyed ten years of sustained economic growth, far and away its best record in modern history. At home in Canada we of the rising Loonie are also enjoying tremendous top-line numbers even as we sell off our future well-being. Meanwhile China and India continue their record achievements as their world shipping lanes may well attest. Trade, trade, trade, the single most important factor in post World War II growth has now gone into warp-drive as production has beget new markets in nations that had no significant middle class a decade or two ago.

Fuelled by massive M3 growth, this printing press phenomena shows few signs of slowing as the “new privateers” and the growing nouveaux riches continue to spend their fiat currency on hard assets, ever wary that these liquidity driven markets are ballooning out of shape and defying fundamental form.

We are either at or fast approaching that point in the cycle when shoeshine boys (they must have them somewhere) are offering market advice. Be on guard for your portfolio and remember that the last five percent of upside is not going to change your life; a twenty percent downside correction might.

Remarkably
The battle between right and left had always been more of an American than a Canadian thing. We citizens of this comfortable and pleasant place have generally kept our politics civil and respectful. Hell, even the séparatiste issue has been debated and fought over (Chomedey ballots aside) with a degree of decorum unknown in other lands.

This is why the Conservative Party attack ads on Stéphane Dion seem so out of character in this Karl Roveless environment. We as Canadians do not indulge in this kind of crap and most of us simply watch in awe when our American neighbours do.

At least we did until recently.

The Afghanistan adventure\occupation begun in another time for reasons that no longer apply should be ended as quickly as possible. It is long past time for Canada to pass the baton to other NATO nations……… it is not our war, maybe it is theirs or perhaps it is the Afghani’s war, perhaps it always was.

Geoff Ryan
July 4 2007
GeoffreyRyan@hotmail.com
514-795-8450
http://thelaurelcomment.blogspot.com/