U.S. stock index futures are pointing to a higher opening
on Monday. Crude oil surged above $80 and the U.S. Dollar was mixed. Gold
was rallying. Overnight markets were mostly higher but some were lower,
especially China.
Today's Economic Calendar:
- ISM Mfg Index 10:00 AM ET
- Construction Spending 10:00 AM ET
- 4-Week Bill Announcement 11:00 AM ET
- 3-Month Bill Auction 11:30 AM ET
- 6-Month Bill Auction 11:30 AM ET
News For Thought
Changing trends: Americans go from buyers to doers. The recession has
turned Americans from shoppers to doers, and those seeking experiences over the
latest products or gadgets. As a result, museum attendance has increased, and
people are staying at home more and spending more time with family and friends.
According to The New York Times: "Quietly but noticeably over the past year,
Americans have rejiggered their lives to elevate experiences over things. Because
of the Great Recession, a recent New York Times/CBS News poll has found, nearly
half of Americans said they were spending less time buying nonessentials, and
more than half are spending less money in stores and online." The Times added: "Americans
are not just getting by with less. They are also doing more. Some are working
longer hours, but a larger proportion, the poll shows, are spending additional
time with family and friends, gardening, cooking, reading, watching television
and engaging in other hobbies." What's the bottom line? If you own a business
you may be able to tap into this trend by offering activities and products that
enhance that activity.
Small business credit crunch could return. Although some small businesses
have seen improving credit conditions of late, a new run of tight credit could
be around the corner. According to The Wall Street Journal: "Business owners
could face a new credit squeeze as early as next month, in what amounts to a
gap period between the expiration of two popular stimulus provisions and the
ramp-up of President Barack Obama's plan to boost loans for small companies." Small
businesses have found alternative ways of funding operations. Restaurants have
joined barter clubs trading dinners for contract work such as plumbing services.
Others have found that zero or low interest rate credit cards allow them to buy
equipment with lower interest expenses.
Entrepeneurs return to the home office. As a result of circumstances,
such as job losses or reduced hours at a current job, many workers are returning
to the home office. According to The Wall Street Journal: "For those who have
temporarily joined the ranks of the self-employed, a home office is the natural
(and cheapest) place to get work done. For others who are using severance packages
to take a shot at entrepreneurship, the home can be an ideal incubator to test
out ideas." The Journal recommends a few rules, such as have a separate room
in which to run the business, set business hours, plan breaks throughout the
day, and make sure that you look at the tax consequences and benefits of a home
office.
Cash still talks in real estate. According to The Washington Post: "Investors
have reemerged with brute force in the Washington region's real estate market
over the past few months, triggering bidding wars in some neighborhoods teeming
with foreclosed properties and hindering traditional home buyers."
Job losses translate to less traffic on roads. We've used this indicator
here since things started getting wobbly in 2007. Now the media has caught up.
According to The Wall Street Journal: "Motor travel was expected to increase
in 2009 after a jump in prices at the pump and the economic downturn led drivers
to cut back a year earlier. In 2008, U.S. highway officials didn't record a year-over-year
increase for the first time in 25 years. But a tally of miles driven by U.S.
passenger and commercial vehicles for the 12 months ending in October, the latest
available, indicates that drivers still avoided their cars in 2009. In fact,
it is possible that final 2009 numbers from the Federal Highway Administration
will show that Americans drove fewer miles than in 2008. And the 2009 total will
clearly come in well below 2007's high-water mark."
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The new year is full of certainty and uncertainty. It's
nearly certain that the political developments that transpire will be fairly
significant, both domestcially and globally. What is uncertain is how the
public, the economy, and the markets will react.
And we here at Joe-Duarte.com realize that. So while our first and foremost job
remains to help our suscribers make money, we think that this year will require
more than just buying and selling stocks bonds and commodities. This year, more
than ever, will require the integration of market analysis with everyday life.
As a result, our coverage of issues will expand beyond the potential effects
of politics, social trends, and technical analysis beyond the markets to provide
information that you can use to live better, save better, manage your business,
and survive what looks to be the beginning of a few tough years.
If we see a new trend emerging, we'll highlight it, and follow its progress.
If we see a good idea somewhere, we'll bring it to you. And if you, our subscribers,
see something that you find useful and interesting, we'd like to see it and give
it some thought.
Why are we doing this? Because we are just as concerned as you are about what
lies around the corner. Aside from higher taxes and policy reversals from Washington,
the international economy looks poised to make some big leaps. That means that
our lives are going to change, and that those of us who can adapt, and innovate
will have a better chance to survive and even thrive. And that means that we
will have to look beyond what we now consider our comfort zones, and to look
for companies and ideas that will help us to get there.
Does that means that we're going to move away from the things that make us unique?
Not even close, in fact, our plan is to make better use of what we know works
and to make it work better for you.
Let us know how it goes and send us your suggestions.
The Two Trades For The Year
We should start by considering where we are, in the U.S., and in the rest of
the world, and then go from there. China, Brazil, and India are increasingly
making strides with regard to their economic standing and their influence in
the world. That means that money is flowing their way. But is that really what
we should be doing right now?
If you consider that the U.S. economy, warts and all, is still the biggest in
the world, and that the U.S. Dollar is still the world's reserve currency, then
you may want to consider looking at things from a contrarian point of view.
Think of it this way. Everyone is already tolling the death bell for the U.S.
economy, and the U.S. as a global super power. Yet, there is still no country
in the world, despite the major problems that are facing the U.S., that can take
up the slack if the U.S. trully falls apart.
If the U.S. was to fall apart, it wouldn't likely happen overnight, barring a
major cataclysmic event, natural or otherwise. The odds of either of those are
higher than they once were perhaps, but not astronomically high.
Markets deal with odss of what's possible, not what's plausible. And that means
that although China, Brazil, and India are likely the next generation of major
global economic players, and that the U.S. has lost some ground, the full, or
even a significant switch from a U.S. centered global financial system is still
years away.
Now consider this. The U.S. economy has likely bottomed out and sometime this
year, the Federal Reserve will likely start raising interest rates. What are
the odds of China, Brazil, and India raising interest rates aggressively? Not
very likely, especially since those three countries are still fielding export
based economies, which require a fairly weak, or stable currency.
The U.S., on the other hand, has a whole different ball game on its hands, the
prevention, or at least the slowing of yet another bubble, which is why the Fed
will have to raise interest rates.
And that means that owning dollars and considering the short sale of U.S. Treasury
bonds make sense as significant contributors to any portfolio.
Chart Courtesy of StockCharts.com
The charts support this notion, especially that of owning dollars. The Deutschebank
U.S. Dollar Bull Fund (NYSE: UUP) bottomed late in 2009, and looks to be forming
a bullish pattern. Even if UUP doesn't deliver a huge rally in the short term,
the chart pattern suggests that the probability of huge losses is very small,
given the dollar's multi-year bear market. More important is the fact that few
investors are willing to own dollars currently, a bullish circumstance for contrarian
investors.
Selling short U.S. Treasuries makes sense, if the Fed starts to raise interest
rates and if the U.S. economy continues to strengthen. So, it's a second best
trade, especially since treasury bonds can be hugely volatile.
Chart Courtesy of StockCharts.com
The chart of the Barclays Ultrashort 20-year plus T-bond ETF (NYSE: TBT) highlights
that volatility. This is also a leveraged fund that moves twice as much as the
underlying treasury bonds that it shorts. That means that it's not for all investors,
and that losses could mount fast.
How does owning dollars help you to run your business? Maybe it won't help you
directly. But it's good to know that a strong dollar usually means that commodity
prices tend to be more stable.
That's information that you can use. It may mean lower grocery prices, or lower
fuel bills. It may mean that small stocks, which tend to do better with a strong
dollar, may be something that you could overweigh in your 401-k plan.
It may also mean that the U.S. economy will improve and that this may be a good
time to plot potential strategies that will alow you to expand your business.
And that means that you may want to ask more detailed questions about what your
customers may want if things improve.
A strong dollar could also help your business if you buy materials or products
from foreign sellers, as you may get more for your buck, thus enhancing your
margins.
In other words, by considering the effect of a change of trend in the U.S. dollar,
you'll start thinking of other ways to improve what you do on a daily basis.
Conclusion
Taking information from one branch of your life and using it in another makes
sense. In this case, we started by looking at the possibility that the U.S. dollar
may have bottomed.
If we are correct, then a significant number of trends, in investments, and in
the economy are likely to take place.
Investors who understand this can prepare their portfolios, their businesses,
and even their everyday lives to the changes and use them to their advantage.
What's the take home message? For one thing, the dollar may have bottomed. For
another, it pays to think about the effects of financial trends on your everyday
life.
As of 1/4/2010 Dr. Duarte has an open position in UUP. Dr. Duarte uses TBT as
a trading vehicle. He is considering a long position in TBT as of press time.
Know when to sell and how to make money when the market falls. Get a detailed
trading plan in your pocket. Read Dr. Duarte's All NEW Books "Market Timing For Dummies." and "Trading Futures For Dummies." The Trading Manuals for
All Seasons. Also Available As Kindle Books. |
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