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admin :: Aug.13.2009 :: Doodles :: No Comments »

admin :: Aug.13.2009 :: Doodles :: 1 Comment »

Everyone is yelling “the recession is over”.  The stock market has risen close to 50% since its march low.  Lets examine the forces that might influence future markets:

Upside:

•  For individuals and fund managers who missed the recent rally.  There are intense pressure to get back into the market.  With talks of recovery everywhere, the baby boomers who lost 30-50% of their retirement portfolio are really anxious to get back into the market.
• Cost cutting + increasing productivity + sales recovery might push companies that have heavy international market exposures to produce positive earning surprises.  The recovery in emerging markets are pretty evident.  With the dollar staying weak, multi-national companies can rake in handsome sales overseas.
• Government Spending, Stimulus programs, and loose monetary policies would inject money into the economy, causing asset prices to inflate.  The prospect of recovery and inflation would cause stocks to be more attractive then bonds.

Downside:

• The short term market is very over-bought.  And profit taking is inevitable.  For those who are lucky to gain from the rally, it would be tempting to lock in the profits.   The current price level is pricing in a $75 earning for the S&P, which is almost impossible consider that the peak earning in 2007 is $85, with almost half of it from the financial sector.
• The economic system is not cleaned.  It is actually gotten worse due to poor government policies.  Household deleveraging has not happened, and with the cash-for-clunkers program, people are accumulating more debt.  Therefore, the rosy sentiment that “good days are back” are not backed by fundamental improvements in the economy.  Such positive sentiment might mark the top of the “recovery” bear rally.

admin :: Aug.11.2009 :: Market Analysis :: No Comments »

WRE is a REIT that owns properties in the Washington DC area.  It is currently paying 6.5% dividends.   The story supporting this pick is simple:  There is no end to the ever-expanding government.  The trend of expanding government can be found in many places in history.   According to Milton Friedman, human history is dominated with big governments and concentration of power.  Civil liberty, freedom, and small government are actually exceptions in human history, which over-time loses to expanding government.

Since the market has had a huge rally.  I would recommend buy this stock on market correction or accumulate it over time to avoid market timing risks.

admin :: Aug.11.2009 :: Stock Picks :: No Comments »

Buy a house on mortgage.  This is the only way you can load up a lot of debt.   We are marching closer to the inflection point beyond which deflation turns into inflation.  Interest rates are still low - although they are feeling the pressure to go up.  By loading up on debt, you are taking advantage of the coming high inflation, which would wipe out the your debt.

Of course, heed your cash flow, you don’t want to be forced into foreclosure before reeping the benefits of inflation.  If you have extra money, put them into foreign assets and commodities.

admin :: Jun.12.2009 :: Strategy, Finance/Investment :: No Comments »