 | |||||||||||||||||||||||||
| |||||||||||||||||||||||||
 | |||||||||||||||||||||||||
Does the name Dexia sound familiar? If not, it should. This huge European bank has assets greater than the entire Greek banking system and larger than the combined assets of all the banks bailed out in Ireland over the last couple years. Dexia was the world's largest lender to municipalities. Now it is being dismantled under a bailout plan after its funding evaporated. In my humble opinion, this is the first domino to fall. Germany quickly promised to work something out so their failure wouldn't cause all the dominos to begin falling. They said within the next 2 or three weeks they would have a plan. This promise has caused our markets to catapult up 2.5% this morning. Wow. Really? 
Angela Merkel on the Size of Greek Debt Problem
The problem with this promise? They have been working on this problem for two years already. It isn't like the U.S. where a few committees can gather and make a decision. There are many sovereign Countries involved with each having its internal politics to work through. Unfortunately, politics is the easy part of the problem. The greater problem is the system needs about 6 trillion Euros to resolve the debt crisis. How much do they actally have? 400 billion. Before your eyes glaze over from these large numbers, lets get a feel for the difference between 400 billion and 6 trillion. We will begin with a mere million. If you had a million dollars, you would have a dollar for every second for 12 days. A billion dollars would be a dollar for every second for 33 years! A trillion dollars is a dollar for every second for 33,000 years!!! If you do the math, you will find the bailout pool available is only about 7 percent of what they need. "Won't you be able to bail out one problem child at a time?" It would be nice if you could simply bail out Greece and then recover a couple years and then bail out Spain, etc. However, when a parent bails out one of their children, the other children want to be treated fairly and equally. All these countries in trouble are waiting for the first deal to be made so they can jump on the band wagon. It seems like human selfishness would rather see all of Rome burn than give up an "entitlement". Because of the above, I believe this pop in the market, that came from a new lower level, will fade quickly and join the rest of the downturns that have rocked our market. The bright side? The market doesn't care what I think! In this week's briefing Don points to a potential shift occuring in the momentum of this current down trend. If he is right, we may have an opportunity to make some money soon. For those of you who missed the live webinar, you can watch it here. This is about an hour and a perfect way for someone to get a feel for our investment approach. For those of you who might not understand who Don Miller is and his capabilities, spend 50 minutes watching this video (episode 6) and you will know why he is managing YOUR portfolio.
Have a great day!!
John Norquay CEO PivotPoint Advisors |
 |  | |||||||||||||||||||||||
Monday, October 10, 2011
DEXIA: Europe's First Domino?
Sunday, October 2, 2011
A Bug Looking For A Windshield
| |||||||||||||||||||||||||
| |||||||||||||||||||||||||
| |||||||||||||||||||||||||
 Please note there are no attachments to this eLetter. No motion sickness bag needed. In fact, this week is what we would call a "value" week. The area between our return and the S&P 500's is what we call the value area. This week that area grew. Not losing is gaining in the area of value. Everyone who has followed this eLetter knows that our first objective is to not lose money. There will always be a time when making money in the market will be easy again. We want all our marbles still in the game when that time comes. This way, we won't spend all our time trying to simply get back to even. There are a number of reasons I'm concerned about the current market and why I believe everyone needs an investment approach similar to ours. I'll share a couple of them. The headline of an article on Wednesday said that an "organized default" by Greece, might be a positive for the market. Huh? European banks are in a worse situation right now than the American banks prior to the 2008 sub prime debacle. As I've said before, when things are so fragile, ANYTHING can become a trigger. Greece has been in default 160 out of the last 200 years. How could we be surprised when they do it again? No one really cares about Greece by itself because it is an insignificant part of the world's economy. The fear comes from the fact that the over leveraged European banks haven't had to put anything away in case a sovereign country defaults on their debt. The thought behind this rule is that sovereigns never default. Unfortunately the black swan always shows up sooner or later and the dominos begin to fall. Japan is one such economy, but one that everyone cares about. It is still the third largest economy in the world. John Mauldin says that Japan is a bug looking for a windshield because they are going to hit the wall within the next couple years. We've been in a secular bear market since 2000. "Secular" in this context means long. A Secular market simply means the long term trend. Therefore a secular bear market means the long term trend is down. I"ve found these long term cycles have a tendency to last about 15 years. If this is true, we still have a few years to wait this market out. Historically it's taken three solid recessions to get out of a secular bear market. We've had two so far and many believe we are either in or heading into our third. The good news is a deep recession could help straighten the world out. The bad news is how much people in the market would have to give up in order to get there. Thursday at 7 pm central this week, I will be doing a live Webinar explaining PivotPoint Advisors investment approach. An ex-anesthesiologist in Vermont is hosting the webinar and inviting 2,500 of his closest friends. You are all invited as well and I will be sending a link to join the event early this week. Feel free to share this link with anyone who may have motion sickness from their portfolio. This webinar may act as the dramamine they are looking for. Read the briefing if you would like to get a warm feeling about your portfolio, regardless of your risk profile.
Have a great day!!
John Norquay CEO PivotPoint Advisors |
| | |||||||||||||||||||||||
Tuesday, September 27, 2011
25? Or 6 to 4?
| |||||||||||||||||||||||||
| |||||||||||||||||||||||||
| |||||||||||||||||||||||||
In contemplating the theme to this week's message, the title 25 or 6 to 4 occurred to me. I grew up loving the song, but never understood the title. I'm sure many financial writers are stuck in the same conundrum. The market is their meat and potatos therefore they must love it. Unfortunately it makes no sense to them. I say this because many articles try to explain why the market made a particular move and are written soon after the move occurred. If they truly understood the market, more of them would be writing about what is going to happen next! I'm convinced the market moves and then the reporters are out searching for all the possible reasons that could have caused the move. This is why they are reporters and not investment managers. Technical analysis allows you to make educated decisions about what is going to happen next, based upon what happened last. Just as no one can predict on a regular basis what is going to happen next in the market, no one can be 100% in their investment choices. But, as everything else in life, it is a numbers game. The more closely you track human psychology as it relates to supply and demand, the more successful you will be. With all that aside, I will make my point. Last week was a horrible week in the market. There are plenty of articles to tell you the cause was due to Europe or the global financial crisis. But between yesterday and today (Monday and Tuesday) the market has staged a remarkable short term increase. Now there are articles pinning this increase on "renewed hope that Europe can tackle the region's debt crisis." The operative word here is HOPE! Financial markets may rely on hope, but I will certainly place my hope in something else! In the financial markets I would prefer to place my understanding and wisdom calling on past experience. Not hope. The market the last couple days is simply a result of last weeks sell off. Rebounds ALWAYS occur after an oversold condition. The key is in understanding the oversold condition. . . not hope in an event you have no control over. A wise man once said to positiely effect the things you have control over and don't worry about the things you don't. 
Einstein discovers that "TIMING" the market equals MONEY, not "Time in the market".
This brings us to this weeks briefing which may be one of our more important briefings due to last weeks market actions. I doubt if this weeks volatility will be any better than last week with what is setting up to occur later in the week (Europe). Check out the briefing here. By the way, the title 25 or 6 to 4 is simply a reference to time. The time it refers to is 3:34 or 3:35 A.M. which can also be referred to as 25 or 26 minutes to 4. The song was simply about writing songs. Huh.
Have a great day!!
John Norquay CEO PivotPoint Advisors |
| | |||||||||||||||||||||||
Wednesday, September 21, 2011
What Does The Fed Know That We Don't?
| |||||||||||||||||||||||||
| |||||||||||||||||||||||||
| |||||||||||||||||||||||||
Late last week the Fed made an unprecedented move to provide dollar liquidity to the European Central Banks. They need to do this because the regular market won't. If the market won't, why should our Fed? Hmmm, they must know something they aren't telling us and I have a feeling it isn't good. My favorite analyst, John Mauldin, wrote "What in the wide, wld world of monetary policy is the Fed doing, giving essentially unlimited funds to European banks? What are they seeing that we do not?" He goes on to say: "The only reason for this move must certainly be that theiy are acting to prevent what they fear will be another Lehman-type crisis. Otherwise it makes no sense. They can give us any pretty words they want, but this was not something calculated to make the US voter happy. To do this, you have to be convinced that “something evil this way comes.” And to recognize the costs of not doing anything, and try to head them off. My guess is that the European Central Bank made a presentation to the other central bankers of the realities on the ground in Europe, and the picture was plug ugly." I don't know about you, but this doesn't paint a good picture for me. The article points out that French Banks are leveraged 4 times the entire Country's GDP! We saw what too much leverage did for us in the last credit crisis. Europe has that same thing going on as we speak. Its funny, I've heard at least a million times how day traders are to blame for the volatility in today's market. The people who have that opinion must not be aware of Greece, Portugal, Spain, etc, etc. The update, found here, was short and to the point this week. With great hindsight (since this message is coming out so late) I can tell you Don was right on the money again. He mentioned how the market was up against a ceiling and would probably take a bounce lower before making its next move. Monday saw the market give up over 2% before it started to climb back again. We do these briefings so that you, our faithful clients, will feel at ease with your investments even when the market isn't playing nice. The special two day Fed meeting concludes today. I have a feeling we are going to see news of more easing. What is going on behind the scenes may be a bit scarier than they are letting on. If they announce a new round of easing the market should make a big pop upward. If not, then look out below. Whichever it is, you can be assured we are on it!
Have a great day!!
John Norquay CEO PivotPoint Advisors |
| | |||||||||||||||||||||||
