du Pasquier Asset Management
Arlington Econometrics Market Commentary for the week of August 4, 2008
No news is…no news!!
The number of persons claiming they would buy stocks if properly motivated declined last week, as sentiment and surveys concluded that earnings meltdowns, portfolio devaluation, and depleted savings made equities purchases superfluous or, at best, discretionary. The markets need to launch a full-blown public relations campaign to locate eligible buyers other than professional traders.
Volume, breadth, and volatility were clearly negative last week. A search for the bottom became as onerous as looking for the lost city of Atlantis.
Despite the gloom, mini-bounces within the existing secular bear emboldened some to go “value hunting” and to pick up some Financials and Industrials midweek. There exists no special factor, however, that might reverse earnings erosion and thereby provide a genuine foundation from which the markets might rebound.
Overall, relative strength (RSI) indices continue to traverse negative territory.
Not in your house.
The economy is not faring any better than the markets. Jobless claims went up, layoffs accelerated, and the dollar still weakens against most global currencies. On balance, weakness in manufacturing coupled with an intractable energy price dictate that economic activity has a way (down) to go before stabilizing. The nation’s output is much weaker than the dollar’s level would otherwise indicate, reflecting a slowdown, globally, in discretionary spending.
Investors are sifting through filings, reports and anecdotal news releases to find any reason to find hope and, yet, the news is just not strong enough to bolster the negative psychology which permeates the landscape. After a surprisingly strong January (2008), we seem to have hit the wall hard.
Define your methodology.
The basis for sound portfolio theory has always been diversification and asset allocation. In fact, I subscribe to the much delivered mantra that “asset allocation plays a greater role in the probability of portfolio capital gains than does any individual security within that portfolio”. Thus, to stay ahead of the curve I have avoided Cyclicals and Financials. And yet, even with leading categories providing most of the impetus this year, even those momentum plays are weakening.
Indeed, the prudent thing to do now is to look for short term yield, hold cash, and not to panic. Irrespective of sector, geography, or net-worth the next few months might be painful to endure.
My long-term track record remains ahead of the averages and I intend to stay there.
Scotty C. George
(212) 624-1147
www.dupasco.com
Arlington Econometrics is a quantitative market tool. Utilizing proprietary algorithmic equations, Arlington offers solutions for market-timing, asset allocation, and macro economic analysis. Arlington Econometrics’ database spans over forty market bourses, and includes over 70,000 financial and statistical instruments. Using historical time-series measurements, Arlington Econometrics optimizes the analytical process and forecasting coefficients to make economic forecasting more objective.
The information contained herein has been obtained from sources believed to be reliable but is not necessarily complete and it accuracy cannot be guaranteed. It is intended for private informational purposes only. Any opinions expressed are subject to change without notice. Du Pasquier Asset Management and its affiliated companies and/or individuals may from time to time own or have positions in the securities or contrary to the recommendation discussed herein.
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