Weekly Risk Report 03/02/2009
The i-Wave Risk Indicator is only slightly changed this week and is still showing an incredibly low risk threshold for new investments. Within each component, and when I look at other data outside my usual sources, I find persuasive evidence of this market being deeply oversold.
Fear halted Consumer Spending in the latest 5 months. This can be seen nicely in this graphic captured from the CNBC Website on Monday. Now the drop in Consumer Spending has stirred ‘fear’ amongst investors.
(Courtesy of CNBC)
As you can see, it is as though all consumers, acting in unison, cut up their credit cards.
The ripple effect is that sales and then earnings, especially in the consumer sector of the economy, are going to suffer in the short term. For the longer term investor, this is a speed bump, and doesn't mean consumers won't ever spend again. But the pendulum did swing rather wildly and rapidly. Even the most astute business manager would have had a hard time reacting quickly and properly to this change.
Once the economy starts to operate more normally there will be a return to profitability. As that occurs the stock market should respond favorably. Watching the consumer confidence statistics may be one sign of the start of a recovery.
Inside the i-Wave the Speculation numbers are starting to look a bit more interesting. Last week in Value Line the "Best Performer, Last 13 Weeks" had risen over 440%. It now takes a gain of almost 65% just to make the list. There are now 16 companies on the list who's stocks have risen more than 100% in the last 13 weeks. Back in January it only took a rise of 8% to make the Best list and the top dog was only up 80% - not a single stock was up 100%.. So, there is some money starting to flow back toward some stocks. This is true in both the larger and smaller cap sections of the market.
We continue to navigate this troubled sea. Our income portfolios have been active in recent months doing some capture of shorter term profit opportunities. This holding has shown activity on both the buy and sell sides.
By capturing price changes since the beginning of October, 2008 this holding has managed to diminish the effects of market price fluctuation. Currently the price/share is down about 12% in the last 5 months, but the account's value is break-even because of SignalPoint's activities.
We will, from time to time, review other portfolio components as well.
