Friday, May 7, 2010

Market Update - 5/7/10.....written by Greg Gann

I hate to lose money. And I especially hate to lose money for clients. As you know, my position has been that the market has been overbought and has been ripe for a pullback. What the S&P 500 returned in the last twelve months should have taken a decade. The fundamentals of the economy are still shaky, and unemployment has not improved much at all. The stock market has acted on its own volition, and it has ignored the economic realities. We have had very, very little allocations to stocks in the last year, finding other assets that provided good returns with much less risk and volatility. Because the market has ignored the economy, I decided to acquire some individual equities in specifically targeted areas last week after the initial market pullback. Over the last week, the stock market has been ugly. At one point in the Thursday’s trading day, the Dow was off 9% from its daily high. My computer screen showed the market going down like the Titanic. My first goal is to cause no harm and not lose principal. I frantically reset sell-stops and also sold out of some positions. There was so much trading commerce that the computer was operating extremely slowly and it was difficult to get a trading representative on the phone line. I don’t know where the market is heading. Whoever thinks markets are rational should sit by my computer and read my research. The point is that now I regret making last week’s trades. Hindsight truly is 20/20. However, I’d rather be bruised than burned. I want to make sure that we survive to see another and better trading opportunity.

Being nimble means not being beholden to any position and shifting to a protective, defensive stance when the market changes course. Being nimble also means acknowledging defeat, and realizing that if we step up to the plate with any degree of frequency, we are bound to strike out. It means cutting your losers short and letting your winners run. You will be receiving confirmations of the purchases and sales, and I just wanted to give you a heads up and appreciation for the moves. None of these positions represent a significant percentage of your portfolio, but I still hate losing any money for you.

The opinions voiced in this material are for general information and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, you should consult a financial advisor prior to investing.

Tuesday, May 4, 2010

Learning from the Best....written by Greg Gann

For an avid baseball fan, I can now imagine what it would be like to be all together at one time in a stadium with Babe Ruth, Willie Mays, Hank Aaron, Cal Ripken, and Brooks Robinson. I can now imagine this level of excitement and awe because I am intrigued with different economic perspectives and investment models, and last week, I attended an exclusive conference in La Jolle, California where many of the world’s greatest spoke. Normally, a conference will have one or two headline personalities. This one had more than ten. In future emails I may detail their exact viewpoints and predictions, but for now, I merely want to offer the bios of some of the presenters and give a very general overview of their wisdom. In addition to being world-class economists, most are also well- regarded authors. The conference was limited to approximately 300 individuals, and it was very humbling to receive insights in such a personal forum from the very same people whose books have helped me manage clients’ assets over the years, and who are regularly interviewed on CNBC, Bloomberg, Barron’s, The Wall Street Journal, the New York Times and the like. Allow me to welcome:

1) Niall Ferguson

Niall is an Oxford-educated author and world renowned speaker. He has written The World’s Banker: The History of the House of Rothschild and The Ascent of Money: A Financial History of the World. In 2004, he was named by Time Magazine as “one of the world’s hundred most influential people”. He is a professor of history at Harvard University as well as a professor of business administration at Harvard Business School.

2) Claudio Macchetto

Claudio is the Director of Global Platforms for Paulson & Co., the company that was featured in the book, The Greatest Trade Ever describing how Paulson ingeniously defied Wall Street betting against subprime mortgages to earn a spot in financial history.

3) Jason Cummins

Jason is head of economic research for Brevan Howard, one of the world’s largest hedge funds. Prior to joining the company, he was a Senior Economist at the Federal Reserve Board.

4) Dr. Lacy Hunt

Lacy is the author of two books as well as numerous articles in leading magazines, periodicals and scholarly journals. He is an internationally known economist and the Executive Vice President of Hoisington Investment Management Company, a firm that manages $5 billion for pension funds, endowments, insurance companies and others.

5) John Mauldin

John is a New York Times best-selling author and the editor of the highly acclaimed Thoughts from the Frontline e-letter which is read by more than 1.5 million readers weekly.

6) George Friedman, Ph.D.

George is an internationally recognized specialist in security and intelligence issues. He is the author of numerous articles and books on international affairs, warfare and intelligence. His most recent book, The Next 100 Years: A Forecast for the 21st Century is also a New York Times best seller.

7) Dr. A. Gary Shilling

Gary is well regarded for his forecasting record and his numerous books relating to economic themes and investment strategies. Since 1983, he has been a regular columnist for Forbes. He was also an informal economic advisor to President George Bush.

8) Dr. Michael West

Michael is the CEO of BioTime, Inc. and Embryone Sciences, Inc. The companies are focused on developing an array of research and therapeutic products using human embryonic stem cell technology. He has focused his academic and business careers on solutions for age-related degenerative diseases.

9) David Rosenberg

David is Chief Economist and Strategist for the Toronto-based investment firm of Glushkin Sheff. David ranked first in economics in the Brendan Wood International Survey for Canada for the past seven years and has been on the U.S. Institutional Investor All American All Star Team for the last four years, and ranked second overall in the 2008 survey.

10) Paul McCulley

Paul is Managing Director of PIMCO, one of the world’s largest fixed income managers. He is the author of the monthly research publication Global Central Bank Focus.

There were many other presenters who also provided great economic and investment insights. All but two of the presenters painted a very bleak economic picture in particular for the United States and Europe. There were serious arguments made why this past recession was not a normal recession and why a double dip is certainly within the realm of possibilities. All were concerned about record-breaking world deficits, taxes, increasing debt service expenses and the fact that just like Greece is experiencing today, there is no real easy way to unwind the mess that’s been created. The defensive stance that I have taken was very much affirmed. The bottom line was that markets are not always a gauge of the underlying economy. The economic stimuli have helped to cushion the fall but we are far from out of the woods and we are likely to face many, many headwinds moving forward.

Stay tuned. It will not be boring.

The opinions voiced in this material are for general information and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, you should consult a financial advisor prior to investing.