$10,331,139,000,845.92
The news and observations continue to come at us, fast and furious. Here are some that we continue to be particularly important for GreenThought$ readers to be aware of:
- The title of today's newsletter says it all
According to an article published on October 20 by Everbank.com's "Daily Pfennig" newsletter, "From September 30, 2007 to the end of this past fiscal year on September 30, 2008, total federal debt grew by $1.0 trillion, from 9,007,653,372,262.48 to $10,024,724,896,912.49, which is an 11.3% annual rate of growth. The federal debt as of October 16, 2008 is now $10,331,139,000,845.92. So in just 16 days since the end of the last fiscal year, the federal debt has grown by an astounding $331.1 billion, which is a 75.5% annual rate of growth. It has taken just 16 days to borrow one-third of what the government borrowed in all of last year."
In our opinion, that can only mean one thing over the next few years: inflation, and lots of it. That will hold down the stock market somewhat, but the counter to that will be the "red-tag-sale" prices that are starting to develop for long-term investors. We conclude that a choppy path toward decent positive returns over the next several years is the most likely scenario. Treasury bonds, on the other hand, could see their yields rise following a massive "flight to quality" that has kept rates artificially low for quite sometime. I am not talking about short-term rates, which are maneuvered somewhat by the Fed. I am talking about longer-term rates (10 year, 20 year, 30 year bonds).
- Michael Kahn, our technical analyst, added the following recently (shown in italics) in his Quick Takes Pro newsletter:
The opposing forces these days, aside from Democrats and Republicans, are those that think now is a good time to buy for the long-term and those that are waiting for the fifth and sixth shoes to drop on the economy and the market. We are in the former camp although we will hedge with the warning that volatility is not over yet. That means more scary days are entirely possible so if you are shopping for long-term bargains keep your Tylenol, Mylanta and Grey Goose in good supply.
In other words, right now, performance in down markets is more important than performance in up markets. That is the approach we have taken all year, and while we are feeling more long-term bullish than we have in several years, we are not pretending that areas that were in bear markets simply transition directly to bull markets. That rarely happens.
- The Cycle of Market Emotions
There is an oft-quoted chart which shows words that describe several investor moods. The idea is that the worse the moods get, the closer you are to the best long-term buying opportunity. The better the moods get, the closer you are to a meaningful market top. You can view the Cycle of Market Emotions on our website, www.emeraldassetadvisors.com, by clicking on the "resources /media" tab, then on "charts and graphs". You will see it in the short list there.
Since the technology we use to deliver GreenThought$ is not very friendly to graphics, we will list the cycle without the chart. We have added a few lines of commentary to better help you understand the Cycle.
BULL MARKET IN FULL SWING
Optimism
Excitement
Thrill
Euphoria
BEAR MARKET DEVELOPS
Anxiety
Denial
Fear
Desperation
Panic
"SELL OUT MY PORTFOLIO!"
Capitulation
Despondency
Depression
THE STORM PASSES
Hope
Relief
Optimism
What level do you think we are at right now? Based on what we've said above, we'll go with somewhere between Panic and Capitulation. The chart states that the point of "maximum financial opportunity" is between Despondency and Depression. In other words, not far from here. That's good news for long-term investors, but bad news for "guessers" who insist that successful investing is some perfectionist exercise of picking tops and bottoms of markets, and for whom any loss is unacceptable. 2008 will be remembered by us as a year in which "investors" muddled through and survived, and "guessers" either harmed their portfolio in the long-run or allowed market volatility to get the better of them.
The information herein has been obtained from sources believed to be reliable, but Emerald Asset Advisors, LLC ("Emerald") does not warrant its completeness or accuracy. Prices, opinions and estimates reflect Emerald's judgment on the date hereof and are subject to change at any time without notice. Any statements nonfactual in nature constitute current opinions, which are subject to change. Projections are not guaranteed and may vary significantly. Further information on the firm and its advisory fees may be obtained from the firm's Form ADV Part II, which is available without charge upon request. Complete descriptions of all Emerald's products and benchmarks are available upon request.
(c) Emerald Asset Advisors
www.emerald-eas.com
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