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wealthbuilder.ie latest market brief

Wealthbuilder.ie

Quarterly Market Brief

1st. December 2010

Chris over at wealthbuilder.ie has sent over his latest market brief

My favourite indicator of market breath, the McClennan Summation Index, is finally beginning to get to a level where it is becoming interesting. A move into negative territory, though some ways to go, will herald the probability that stocks will soon begin providing price action that brings solid technical support. This is good news particularly for those who have been out of the market since the early September bull move. In my books patience is a major key to achieving above average investment returns. Those investors who relaxed and held off while the herd chased the trend should now begin to sharpen their attention. At the moment the Dow Transports (DJ-20) are showing more strength than the Dow Industrials (DJ-30).  However, Technology, Mid-Caps and Small Caps all remain strong despite pull-backs. This indicates that the March 2009 bull trend is still solidly in place for the moment.full PDF Doc here Nov Market brief

“ignorance is bliss.”

Ireland Still Refuses To Contemplate
Leaving the “Imperial” Euro

By Christopher Quigley

Thursday 18th 2010 The IMF arrived in the Emerald Isle. What a sad sad day for the proud people of Ireland . Following 300 years of armed struggle the resident government have replaced English masters with the Continental variety. However the method of usurpation this time was not guns and bullets and starvation but economic and financial prowess. To the victor goes the spoils. Professor Honohan Governor of the “Irish” central bank and his associate Mark Elderfield, the resident bailiffs of the Continental finance houses, already have a list of the target assets compiled courtesy of “An Bord Snip” ( A committee set up to identify where Ireland’s creditors can get funds quickly in the event of default). On this schedule of valuations are such national jewels as: An Bord Gais, C.I.E., Coillte, The Dublin Airport Authority, The Dublin Port, R.T.E., The National Transport Network, The ESB power grid, The National Lottery etc.
etc. You get the picture. These assets belong to the Irish nation. They will soon belong to foreign bondholders.The hapless Prime Minister of Ireland Brian Cowen, like a rabbit in the headlights, refused to face the inevitable fact that he has led the country to ruin through utter incompetence. One of the saving graces of ignorance is that your stupidity does not possess the intelligence to understand
that it is stupid. It’s what psychologists call: “a closed self-deception psyche.” The vernacular manner of formulating this state is; “ignorance is bliss.” Or as our great Lord expressed it so passionately in prayer on the mound at Golgotha; “father forgive them for they know not what they do.”

Mark my words Ireland will leave the Imperial Euro (IE). That is my prediction. If not now then in five or ten years time. It is inevitable. The romance between Ireland and Europe is over.
When love ends so goes the relationship. Divorce is in the offing. If we had true leadership they would bite the bullet and file the papers now. A new “Mediterranean Euro Zone” (ME) should be conceived involving Ireland, Spain, Italy and Portugal. Orthodox Greece may want to join if it so desires. This “ME” is needed to pool resources to ensure that the countries leaving the “Imperial
Euro” (IE) can get out of its hard currency loans. Not to do so would be disaster. Argentina saw this problem and faithfully managed to “humble” American dollar bondholders and so saved their economy and their nation. Hungary failed to identify this issue and is now repaying hard Swiss and Imperial Euro loans in a significantly devalued national currency. As a result its economy is a structural basket case.

Why is it important that Ireland leave the Euro? Well the main reason is that through simple devaluation we can restore competitiveness to our economy without applying crippling IMF deflationary “austerity measures.” Of course to prevent inflation and its concomitant problems undermining the future growth of the nation, real enterprise with real wealth benefits must be promoted. The civil service mentality of pay without production must be finally put to rest.
Socialism died in Russia in 1989 it needs to be finally buried in Ireland in the wake of the IMF arrival in Dublin.

If Ireland chooses to stay in the Imperial Euro and belong to a club it cannot afford to be in it will be continue to mean economic suicide. IMF austerity cuts over the next five years are going to halve Irish GDP through budget cuts, expenditure and tax hikes. In addition none of its banks will be native owned. It is also axiomatic that many of its prized semi-state assets will be sold off to foreign operators at bargain basement prices. Thus when Ireland Inc. finally leaves the IMF/ECB bankruptcy process it will be a shadow of its former self. If Ireland as a Nation complies with this liquidation without a future strategy for growth it will be a Nation in name only. The day a leader emerges in Ireland who formulates a credible Mediterranean Euro strategy with associated tactical links to the Sterling area is the day a new dawn will have arrived in Celtic Ireland.

Market update November 2010

The corner of Wall Street and Broadway, showin...

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our friends over at Wealthbuilder have sent us this stock market update

Market Brief November 2010

The market continues to power ahead with significant momentum. The Dow 30 Industrials,

the Dow 20 Transports, the S & P 500 and the NASDAQ 100 all are taking wind from a new

quantitative easing policy, extended Bush tax breaks and positive earnings guidance. In addition

Wall Street likes the idea that Democrats and Republicans must work together and compromise

following the mid-term Congressional elections.

There is of course another factor influencing the positive trend. Given that current interest

rates are near zero the only way bond rates can go is up. Rising rates will herald an end to the

extended bond market rally we have witnessed over the past years. Smart hedge managers

are reading the change and are moving ahead of more cautious mutual fund players. Should

this capital re-allocation strategy become more pronounced, good times could finally arrive to

beleaguered equity managers. Remember the stock market has ambled range bound since 2001.

It is thus well in line for major price movement particularly when you factor in the inflation

multiples which will eventually kick in to common price levels as a result of quantitative easing

dollars moving out from financial balance sheets and into the broader economy.

Since September our recommendations have done fabulously well. Silver (SLV) is up 36%,

Gold (GLD) has gained 10% and our emerging markets ETF (EDC) has advanced 70%.

Long may it last. I recommend sticking with these momentum trades until their 20 DMA’s are

significantly broken on large volume. I do not believe we will see that soon. If anything I reckon

those investors who are out of the market may find it difficult to find a safe entry point until the

earnings season in early 2011. But traders should not be disheartened. The market eventually

always retrenches. I am a great believer in waiting for a technically sound purchasing position.

Patience will always outlast recklessness. In other words never chase “Mr. Market.” For those

who are looking for an investment “target” that has not run too far from a conservative technical

range I recommend consideration of USO, the oil investment vehicle. This ETF is significantly

off its 2008 high of 103. It currently trades around 39.50. Should it break the 41 dollar level

it will be a definite buy and could go all the way to 120, in 2011 and beyond, should the bull

perception begin to consolidate.

On the value front there have been great results from our watch-list candidates. To name a few:

Western Digital (WDC) is up 41%. Monsanto (MON) has risen 29%. The Blackstone Group

(BX) has gained 40%. Southern Copper (SCCO), a company that actually pays a fantastic

dividend, has increased 50% and Telefonica (TEF) has advanced 35%.

Observing price action broadly across the market-place the message I am getting is that the

worst is over, short term, and that the bull trend is growing in energy and power. Extended and

compressed high stochastics are a feature of bull markets and that is what we are experiencing.

The final leg to the “Bull” stool would be for the bottom to be finally set for the Real Estate

market. My property contacts in Florida tell me this may not happen too soon given the

complexity of the crisis but the current “mixed” real estate story has a silver lining. The FED

will not raise interest rates aggressively until bank balance sheets have stable “mark-to-market”

property valuations. When that happens stock market advances will begin to be tempered by

rising interest rate trends, but we are not there yet. Thus as long as monetary policy continues to

be accommodative I see no reason why Wall Street will not enjoy a traditional “happy” festive

season and a New Year that beckons “new hope” and higher prices. Thus the traders mantra will

not be “buy low and sell high” but “buy high and sell higher.” The wall of worry has arrived.

The easy money has been made. It’s time for the seasoned traders who understand technical

positioning to rule the roost and make some real money going long on appropriate risk reward

candidates. Fundamentals are fine but always remember that technicals rule.

http://www.wealthbuilder.ie

Christopher M. Quigley

B. Sc., M.M.I.I., M.A.

Market Brief

Wealthbuilder.ie

22nd. October 2010

 Getting Some Perspective

From a Dow Theory point of view this is the situation as I see it. The market is giving very strong signals particularly on the Transports side. My key break point is 5265 to give the first indication that the new Bull Run has commenced. We are currently at 4735. Near but not quite there. My key break point on the Dow Industrials is 13566. WE are currently at 11146 some 2420 points away.

 From a purely momentum perspective if the current positions on the Dow Transports and the Dow Industrials are solidly broken up through, even though the market is very overbought (based on fast and slow stochastics and the McClennan Summation index) it will very bullish short term. This situation is corroborated by price action on the NASDAQ and the S & P.

 As we are currently down the line on a fairly positive earnings season and it is understandable that when it ends there should be a correction, but if it proves to be mild it will offer an excellent buying opportunity to participate in your favourite value and momentum targets.

  Dow Transports: Weekly

 

 

In 2014 Ireland’s GDP will be 90 billion a drop of 25%..

Standard Multiplier Effect.

Definition: Fiscal Multipliers

Multipliers can be calculated to analyze the effects of fiscal policy or other exogenous changes in income and spending, on aggregate output.

For example, if an increase in German government spending by €100, with no change in taxes, causes German GDP to increase by €150, then the spending multiplier is 1.5. Other types of fiscal multipliers can also be calculated, like multipliers that describe the effects of changing taxes (such as lump-sum taxes or proportional taxes).

Figure 1 presents estimates for the historical effects of shocks to government purchases on output. For each period, we consider a policy shock equal to 1% increase in government spending and report a dollar increase in output per dollar increase in government spending over 20 quarters (see the paper for details).

Figure 1. Historical multiplier for total government spending

GDP (purchasing power parity): (Source CIA World Book)

$172.5 billion (2009 est.)

country comparison to the world: 57

$186.7 billion (2008 est.)

$193.4 billion (2007 est.)

note: data are in 2009 US dollars

Euro conversion rate @ .74 (Approx) Means Irish GDP is currently Euro 120 Billion.

Thus using an average multiplier 2 of  means that if the government takes 15 billion out of the economy over the next four years the Irish GDP will fall by 30 billion. This means that in 2014 Ireland’s GDP will be 90 billion a drop of  25%.. This “collapse” in an economy  that is already weak will turn a “recession into a “depression”. This will mean higher unemployment, lower VAT, lower corporation tax, lower local government and city rates, major business closure and great stress on social services.

http://www.wealthbuilder.ie

“A Guarantee Too Far”

 

“The Irish Economy Collapses As A Result Of The Global Financial Crisis.”

  Currently the Irish economy is in freefall following the collapse of the real estate market that had expanded ten fold in the decade from 1997 – 2007. The reasons for this “Celtic Tiger” boom are many but in the main reasons it arose are due to the following:

 

  1. A.    Ireland’s entry into the Euro allowed Irish banks access to unparalleled pools of cheap credit.
  2. B.     Ireland then had a low cost base.
  3. C.    Ireland had an unusually well educated workforce.
  4. D.    The integration of Europe brought many foreign companies to Ireland.
  5. E.     We introduced a most favourable corporate tax structure for international transfer pricing.
  6. F.     Wage rates rose at unprecedented levels due to job growth and a new liberal taxation policy.
  7. G.    The “originate to distribute” banking model increased banking liquidity to unprecedented levels.
  8. H.    “Social Partnership” brought industrial peace after many decades of instability.
  9. I.       The Northern Ireland “troubles” were finally resolved and the country had true peace which had eluded it for over four decades. These troubles had artificially repressed the country financially. The arrival of peace engendered a new positive attitude and an economic outburst.

 

 

            Due to a lack of government regulatory control and strategic foresight taxes from an unsustainable property base were used to fund a bureaucracy that is now overpaid and over extended  and is in severe danger of bankrupting the country for generations. As with many western democracies the executive system is proving incapable of making the tough choices necessary to stabilise the destructive spiral of debt interest compounding on debt principal.

 

            However, apart from the reality of supporting a burgeoning government and semi-state bureaucracy, the Irish government made a particularly disastrous mistake in the autumn of 2008 when the financial catastrophe first broke. In a mid-night crisis meeting, at Farmleigh (the former mansion of the Guinness family which now serves as a luxury bolt-hole for Irish elites)  the department of finance cajoled the ruling Fianna Fail party in power into not only guaranteeing banking deposits but also guaranteeing all bank bondholders. Thus far, two years on, for one lone particular financial institution called “Anglo Irish Bank,” the bill for this “guarantee too far” is now 36 billion Euros and rising. No other government in Christendom has provided such a windfall to the privileged bondholder elite. Under this guarantee as bonds mature the holders are being paid off, in full, instead of for cents on the dollar. As long as this guarantee remains in place the country will continue to be fleeced. As a result of this largess the price on Irish government borrowings has rocketed to 6.6% almost twice the German bund rate. This situation is making a mockery of the concept of a “common Euro currency”. Increasingly the Euro is being seen as an exchange rate mechanism rather than as a true currency.

 

            As with Portugal and Greece in Ireland the economic situation on the ground is becoming desperate. The main banks are basically insolvent and unable to lend. Capital expenditure by the government departments has stagnated. Taxes are rising to pay for the bloated interest charge on ballooning foreign borrowings. Business cash flow has collapsed and credit is non existent. Many enterprises now no longer accept cheques and insist on cash or payment through credit or debit cards. Money has become very scarce. It is the greatest crisis the country has faced since the 1921 Irish War of Independence. Unfortunately the media has failed to highlight this reality and many politicians and banking executives act as if this crisis is just a normal credit cycle event. They actually believe that soon Ireland will return to the boom years. They plead that all we have to do is wait the situation out. This type of complacency is preventing party leaders from taking the radical actions necessary and as each month passes the government borrows an additional 2.6 billion just to fund day to day expenses. Soon government borrowings will be over 100% of GDP and with exploding interest charges, increasingly taxes are simply being used to pay off foreign bondholders. Increased taxes are contracting the economy further and so the death spiral of debt is squeezing the life out of day to day commerce. Business is collapsing under a deflationary depression while bureaucracy is being sustained through misguided political policy. Ireland has become a socialist nightmare over-night.

 

What Ireland now faces is a highly competitive, low cost, low credit, web-interconnected, transnational and level-taxation based environment. Ireland must grow up and move on. It is time for fresh ideas and fresh action. It is time for leadership, courage and vision. It is time for affective sound bites to be replaced by effective strategic and tactical practicality. Hopefully the Irish people will wake up from their consensus trance and force the political elite to stop bailing out corrupt banking institutions and start to cut its public expenditure budgets. Enterprise not bureaucracy must be championed and its educated young workforce given hope rather than an emigration ticket. Whether this wake-up call will be headed is anybody’s guess. Increasingly the trend in Euroland is for Brussels to call the shots over local “sovereign” parliaments. In this crisis this development has turned out not to be beneficial. Local politicians have thus opted to pass the buck rather than courageously face up to the challenges. However, in Ireland it would appear an end game is shaping up. There is a limit to the level of borrowing the country can run up particularly with exploding interest costs. Should the Irish political system continue to prove itself incapable of restructuring its bloated public service expenditure it is inevitable that at some stage the IMF, probably through the auspices of the European Central Bank, will wade in and directly instruct the Irish Department of Finance to act. From my point of view the sooner this happens the better because it is only then that people will realise that the bottom is in. It is then and only then that confidence will be restored to the wonderful Emerald Isle.

This article was sent to me a few minutes ago and is an excellent follow up on my previous points in my earlier posting

Thanks to Chris at wealthbuilder.ie

Latest market up-date from Chris

EUROPEmod3

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Latest market up-date from Chris

http://www.wealthbuilder.ie/

My thanks to Chris for his latest market up-date

This is a real treasure for those that are following the markets

Please click on link to view attached PDF documentWealthbuilder Quarterly Update 19.09.2010

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