July 3, 2012
A major part of my job is trying to predict the future. This newsletter
expresses my very firm opinions as to where the USA and World Economies are
headed. Even though it should be obvious, it is important to understand that I
DON’T ever know what is going to happen in any market. These are my “educated
guesses”. They are my opinions, and no one else’s.
Continuing Recovery…NOT another Recession (or even close to it)
Yesterday’s highlight economic statistic was the ISM Manufacturing Index, also
known as the Purchasing Managers Index, and having come in “lower than
expected”, has already generated headlines such as “Recession now more
likely”…or put another way, “Don’t buy the stock market”.
If you read anything I write, you will know I see the US (and world) Economy as
being on the cusp of a gigantic boom, and therefore steadfastly maintain
investors should be ignoring all the “perpetual doubt” and buying the stock
While I can read 10 times a day that “job growth is too slow” or “recession more
likely”, virtually every economic chart I look at argues (in my opinion) that
the economy is growing steadily (in some areas, robustly) stronger, and beyond
that, those came charts look pretty much the same as they always do when we are
recovering from an economic contraction.
As I’ve done before, I present these charts, which are basically glimpses of
various sectors of the USA’s overall economic picture, and let you decide for
yourself. I, of course, have thrown in a little of my maybe warped perspective
here and there…
On these charts, the “shaded areas” indicates periods of US recessions. I
suggest you block out every bit of economic media opinion you’ve heard, and
using the history here, do nothing more than compare the present with how all
these charts “behaved” following the all the previous recessions experienced in
the United States.
This final section deals with Housing and Construction, the area where, without
any doubt, the biggest hit was taken in the economy…And these charts do look
different from those you’ve just seen…The are NOT pushing towards new highs,
BUT, without exception, every one of them looks very much like they have solidly
bottomed during the past few years…And frankly, I believe the next few years
could easily see some fairly ASTOUNDING gains in both Commercial and Residential
Real Estate values. I want this letter to be mostly just “pictures” so I won’t
elaborate on my reasoning, but I will just say: Real Estate has NOT disappeared
as one of the primary asset classes or repositories of wealth on this planet.
And THIS is a very interesting chart…
So here is a chart you’ve seen before…and the one I see as best defining where
the economic world has been for the past century…as well as where it is headed
in the future.
Looks pretty obvious to me…
So I am buying the Mini Dow, futures or call options…
And I still see Treasury Bonds as an enormous short…that all the “safe haven”
money is going to get crushed as Europe DOESN’T fall apart…
And still buying the Eurocurrency…This is a crazy business…When NOBODY wants a
trade, when people tell me I must have lost my mind…? More often than not, it
means I’ve got a good one…Here it is…this PIECE OF PAPER…whose value, I believe,
is totally a function of perception and mob psychology…and in which the
speculative community has its biggest short position ever? When the whole media
and investment “expert” community is trying to write off an entire
continent?...I’ll take this bet 100 times in a row. Maybe I’m dead, dead wrong,
but I WILL take this trade any day…
And believe me…NOBODY likes this idea.
Have a great 4th. Give me a call if anything here interests you.
Old Hack Willie