Weekly Risk Report 5/13/2010
This link is to an article which does a good job of of providing some perspective as to the current monetary and fiscal policies with a “big picture” analysis. The article discusses the views of Lacy Hunt, who is an internationally renowned economist with Texas-based Hoisington Investment, an institutional fixed income manager. It appears in a recent edition of Advisor Perspectives. http://advisorperspectives.com/newsletters10/Lacy_Hunt-Keynes_was_Wrong.php Although the article is long, it is very well worded. Furthermore, being of the von Mises economic education myself, I tend to agree with much of the anti-Keynes views proposed in the article. In the late ‘60s when I received my education we compared and contrasted the Keynesian and von Mises models. In this article, 40 years later, we see good statistical evidence of the errors of Keynesian economics.
While this may seem a bit distant from our day to day activities, in my opinion our SignalPoint process is actually better designed for such projected economic times than it is for a stock market like we had during much of the ‘80s and ‘90s. There were very few strong cyclical moves for our Process during those times. However, we’ve had two massive market swings in just the last ten years. Each one has provided our Process with the necessary fuel to advance ahead of market averages by deploying our “insurance” of cash reserves during market corrections.
Our Market Risk Indicator has been benign for most of the last 12 months. Only in recent weeks have we seen the building of market risk pressure again. First it showed up in the Speculation component. Now it has started to spill over to the Divergence component. We should expect the Speculation to moderate over the next couple of weeks, but the overall shift is toward higher risk. The risk indicator’s Oscillator is +4 for last week, indicating a building of overall risk pressure.
With healthy cash reserves built into our portfolios, we’re believe we are well positioned for more cyclical activity.
Best regards,
Tom Veale
