Daily Investment Interpretations

October 11, 2010

2010-10-11 (Monday Night):  The markets went nowhere today. The NASDAQ Composite verniered up 0.42 points (0.02%) to 2,402.33. The Dow minced up 2.11 points (0.02%) to close at 11,008.59, and the S&P 500 eased back 0.11 points (-0.01%) to end at 1,165.04. Oil slipped to  $81.90 a barrel, while Gold ended at a new high at $1,355. The VIX ended the day down 1.79 at 18.93.
    Pimco’s El-Erian: Economic peace threatened  
    Read El-Erian's op-ed.  
    Dr. Copper's in the house  Myra Saefong points out that "Copper has a unique ability to gauge global economic trends and the metal’s climb to a more than two-year high speaks volumes about the prospects for the world’s emerging markets. Copper’s /quotes/comstock/21e!f:hg\z10 (HGZ10 378.15, -0.80, -0.21%)  economic sensitivity is so great, in fact, that traders often refer to it as “Dr. Copper,” suggesting that it holds a Ph.D. in economics because of its ability to help predict economic trends. The fact that the price of copper is strong means that investors are becoming confident that the Great Recession is a past story,' said Sam Subramanian, editor of AlphaProfit Sector Investors’ Newsletter. 'Backed by economic growth, particularly in emerging markets, demand for copper should remain strong. I would wait for a pullback before putting new money in copper,' he said'” 
Read about three ways to play the commodities rally.
 
"PowerShares DB Commodity Index Tracking Fund /quotes/comstock/13*!dbc/quotes/nls/dbc (DBC 25.02, -0.12, -0.48%)  — This fund tracks a broad basket of commodities. It is energy-heavy, but it should ride a rally with other commodities as well.
"IShares Silver Trust ETF /quotes/comstock/13*!slv/quotes/nls/slv (SLV 22.75, -0.03, -0.13%)  — This fund tracks silver prices. Silver is a precious metal — moving with gold most of the time — but it’s also an industrial metal. That means silver should rally with an improving global economy. Net imports of silver into China quadrupled in the first seven months of 2010. Recently silver has outperformed gold due to its industrial strength, and I expect that outperformance could continue for the rest of the year.
"IShares MSCI Brazil Index ETF /quotes/comstock/13*!ewz/quotes/nls/ewz (EWZ 79.35, +0.05, +0.06%)  — This is a play on the emerging markets.Not only is Brazil firing on all cylinders, but Brazil feeds China’s ravenous hunger for resources. I’ve stood at the Panama Canal and watched ship after ship sail through on its way to Brazil from China."
    Brimelow: Gold's run not over yet?  
    Going gets tougher for U.S. job seekers  Marketwatch's Brett Arends points out that there are 3.3 million fewer jobs than when President Obama took office. (He also points out that other presidents have had similar problems that they inherited from previous administrations.)
    "The so-called 'underemployment' figure, which measures those who want a full-time job but can’t find one, just jumped to 17.1%. And what kind of jobs are we creating? Waitressing and bartending rose by 34,000 last month. Manufacturing has been flat since May. Every recession in the modern economy hits the lower-skilled workers the hardest. But this time around, the slump has been devastating particularly for those who went to college, a constituency that broke for Obama heavily in the 2008 election. This is a recession that has hit the white-collar, college-educated middle class especially hard. You can see that in the polls and among the voters. Right now, nearly one in four men over 25 with a college degree lacks a job, any job."
     • Nine products and strategies for a bullet-proof retirement 
     Surprising buys in large-cap stocks  
    Right on  This article discusses the predictions of the MarketWatch forecaster of the month. "In early 2005, DeKaser found that 53 metro areas, accounting for 31% of the U.S. housing stock, were severely overvalued by 30% or more and faced a high risk of price correction. The year before, cities that were overvalued had accounted for just 1% of the total value of the nation’s housing stock. By mid-2006, DeKaser’s research showed severe overvaluation in 79 cities, or 40% of the housing stock. At the time, when Federal Reserve Chairman Alan Greenspan was pooh-poohing the very idea of a bubble and saying it was 'difficult to ascertain' if housing was overvalued, DeKaser was warning of 'adverse implications' from the bubble, including a sharp drop in household wealth, elevated losses at lenders, tighter credit conditions, and a decline in economic activity such as consumer spending and home building.
    "As for the economy in general, DeKaser finds himself one of the more optimistic forecasters. For 2011, he’s forecasting growth of 3.1%, the fifth highest forecast among the 52 forecasters surveyed by the Blue Chip Economic Indicators. The labor market is stabilizing, he said. Job growth is still insufficient, but moving in the right direction. Companies have squeezed all the extra productivity they can out of their existing workforce, he said, so further gains in sales will have to be met by increased hiring.
    "DeKaser wasn’t too worried about the midyear slowdown that had lots of people moaning about a double-dip recession. He said the slump was largely due to unusual, one-time factors, including the end of the housing credit, the timing of a tax credit for energy-efficient appliances, the European financial crisis, and the hiring and firing of hundreds of thousands of census workers."