Market Commentary

In the real world study of schizophrenia known as the stock market some of you (ok probably about all of you with a life) may have missed this news over the weekend:

“This past weekend, China printed their September Import and Export data, and brother did it surprise everyone with how strong these two components were. September Exports rose 15.3% VS a year ago, and Imports rose 7% for the same time frame. The consensus was for 12% and -2 respectively, so not only did Exports and Imports kick some tail and take names later, they beat the forecasts! I think that this data is good proof in the pudding that China will show a recovery in the economy in the 3rd QTR, and really improve in the 4th QTR.” The Daily Pfennig

Why is this important enough to warrant a blog post? Because the “market” can’t decide whether to panic over the economy being too good – and the Fed raising interest rates soon, or whether to panic because the global economy is so bad that a slowdown will cross onto our shores and deflate our record high corporate earnings that have kept this market rally alive.

While Europe is still the big question, the prospect of a further slowdown of the Chinese economy has also spooked commodities and the industrial sectors. Maybe with some optimism that Chinese growth has bottomed we can put a floor on the market and end the current selloff.

As I have mentioned many times, it’s best to make your investment plans before events happen, taking the emotions away from decision making. I noted earlier that we began building our “arc” months ago. We have raised substantial amounts of cash in our Dividend and Growth managed portfolios – in the 35% range. And have about 20% cash in our Growth portfolios. Even if the markets turnaround from here, many stocks have seen fairly large selloffs and I have a shopping list of discounted equities that I am ready to buy.

On a side note, OPEC led by the Saudi’s, has continued to produce oil at their previous pace despite a global slowdown in demand. Normally you can count on the Saudi’s to cut production to prop up prices. This time however they have chosen to keep the pedal to the metal so to speak and maintain production. Why the change in strategy? Because they feel that by lowering the cost of a barrel of oil they will slow down the growth of U S and Canadian production which they see as a threat to their economy. What goes around…comes around…

Even more ironically, with gas prices dropping by about $.50 a gallon over the last year, the average driver is saving about $100 a month at the pump. By giving the U S consumer a little extra spending money, the Saudi’s have done what our own politicians are incapable of – creating a policy to help out us poor working stiffs in the middle class!

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bill@401advisor.com • 937.434.1790

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Charles H. Dow Award Winner 2008. The papers honored with this award have represented the richness and depth of technical analysis.

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