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05212012 – Interim May 21, 2012

Posted by easterntiger in economy, financial, markets, oil, silver, stocks.
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Current Positions  (Changes)

I(Intl) – exit

S(Small Cap) – exit

C(S&P) – exit

F(bonds) – up to 30%

G(money market) – remainder

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Weekly Momentum Indicator (WMI***see 110111 for reference)

Last 4 weeks, thru 5/21

+0.19, -10.26, -45.33, -25.81

(3 wks ago/2 wks ago/1 wk ago/today)

It’s time to recover some of the profits gained from the steady climb in the F fund levels that match a combination of (1) record high bond prices, (2) record lows on the 10 year treasury bond, and, (3) the longest streak of rising prices/falling rates since the debt crisis of 1998, at least in terms of time. (the ‘crash’ in 2008 represented a larger change in falling rates/rising prices compressed into a shorter period of time.)

Having used none of my moves this month, I’ll protect my gains in cash (G fund), as I await on either (1) the resumption of the trend toward still higher prices/lower bond yields, or, (2) a reversal downward in price for any hint of some pause in the piling on of weak data from around the world.

As for the data from past weeks, U.S. growth rates are starting to fade, China is slowing more than expected, and much of Europe is in or close to recession.  Further, there’s more Greek debt turmoil (a threat to leave the European union and a suggestion to totally back out of the loan program), weakening Spanish banks (almost 2 dozen banks were downgraded), and, the start of ‘bank runs’ in Greece over the past several weeks, plus there are hints that the same could happen in Italy, Portugal or Spain.  If this happens, a dangerous spiral of fear, tightening capital flows, etc. will lead to still lower rates and another downward slide in prices of the euro, oil, metals prices and stocks can be assured. In the past week, every major investment category fell, except gold,, from 2 to 9%.  Gold only rose 0.75%, but, that was only back to levels from 2 weeks ago, and still barely back to break even for the year.

And, as expected, stock prices are falling much more quickly than they rose, (typical in bear markets) with prices having fallen back to levels from early January, from the peaks of the year reached just 3 weeks ago.  These current levels are also back to the upper levels reached in 2011.  Deja vu. Same place, different year.

If the European crisis gains momentum, every investment category will continue to suffer, except bonds, as more selling of assets across the board will be forced to cover shortages on other investments (margin calls) by major investors, while bonds will be seen as the haven for safety, drawing much of the money coming out of other areas.  That would be more good news for the F fund.

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