Weekly Risk Report 12/08/2008
The previous gains were all but used up at one point last week but by Friday’s close the markets had recovered most of the early losses. The i-Wave is responding in a similar fashion showing values unchanged from a week ago.
Three of the four components were unchanged this week with Speculation being the exception. It dropped to yet another record low. It takes only a 1% gain in the last 13 weeks to make Value Line’s “best performers” list and the best of that list is only up 37.7%. Compare that to the “worst” and we see it takes a drop of 84% to make that notorious list and the entire range only drops to 94%. Obviously there’s been significant bias on the selling side. While the smaller caps are a bit more optimistic, there again we see a massive bias against accumulation by speculative investors.
Should the markets find a base here, the i-Wave numbers will start to head back toward more normal levels. It’s rare enough to have three components all in concert in either bullish or bearish times. Here we see them also at or near all time record lows since starting the database in 1982. While it won’t be known which prognosticators are right about the future, we do see two healthy signs 1) low valuations and speculation and 2) higher than average volatility. The higher volatility should allow our process to capture some internal profits while the market is at reasonable valuations.
Last week we were able to capture some profits in the 7-10 year and 20 year treasury funds in the Stable Income and Balanced Income portfolios. This allowed for adding to real estate income positions using the proceeds.
