Commentary for the week ending 12-24-09

Please note: There will be no market commentary next week. Thank you.

Amid a holiday-shortened week and light volume, the markets posted some solid gains. For the week ending Thursday, the Dow was up 1.85%, the S&P gained 2.18%, while the Nasdaq topped them all with a 3.35% gain.

Contributing to the gains this week was a better than expected unemployment report. Analysts were looking for 470,000 initial jobless claims, yet the number came in much lower at 452,000. These numbers are the lowest we have seen since September of last year. While this is a promising sign, the seasonal adjustments can always be tricky, so we will be paying close attention to the employment report next week. Also important to remember is that there are over 10 million people still unemployed in the U.S. (officially), so there is still a long way to go until this economy is healthy again.

We see next week being very similar to this past week. There will be light volume and few economic or earnings reports to impact trading, so this Santa Claus Rally will likely continue. Like we mentioned above, we will be paying close attention to the jobless claims on Thursday. Also worth watching, the Treasury will be auctioning off $118 billion in debt throughout the week. Monday will be $44 billion in 2-year notes, Tuesday is $42 billion in 5-years, and Wednesday is $32 billion in 7-years. There has been dwindling interest in U.S. debt and we don't see these auctions being well received, either. We have been investing in TBT (which shorts Treasuries) for some time now, and believe these poorly-received auctions will give the fund some nice gains.

Where are we investing now?

Similar to last week, we are not doing much trading in any of our portfolios right now. If we wanted to put some money to work, we would buy equities if the market makes a pullback, especially higher-quality stocks. We are still bullish on commodities and believe the dollar will continue lower. TIPs continue to be a favorite, as we expect inflation to increase in the future. Additionally, we are looking at putting more money internationally, as emerging markets (excluding China) are an area we favor.

As we close out 2009, we would like to wish you and your family a happy and prosperous 2010.

Commentary for the week ending 12-18-09

High trading volume and several economic releases saw the markets close mixed for the week. The Dow hit a new high for the year on Monday, yet lost ground as the week progressed. For the week, the Dow closed down 1.33% and the S&P was down 0.35%, while the Nasdaq was up 0.98%.

There were several economic releases this week that signal the recovery is still in full effect. Industrial production, a coincident indicator, posted a solid gain. Housing starts continue to show improvement. The Leading Economic Indicators (Press Release) also showed a nice gain for the month. Both the Consumer and Producer Price Indexes showed an increase, with higher energy prices having a significant impact on these numbers. The price index numbers show that inflation is, in fact, occurring, albeit at a low rate.

Also this week, we heard from the Fed as they announced that the federal funds rate will remain unchanged at 0-0.25% for an "extended period". They acknowledge an improvement in economic conditions, yet the high unemployment rate justifies the historically low rates. We still worry that these easy monetary policies, if left in effect longer than necessary, will fuel another bubble and create an inflationary environment. Their argument is that the unemployment level and inflation are inversely related, so inflation is not a concern. This is typically true. One can look at the stagflation-plagued Carter era to realize that this isn't always the case.

Although the upcoming week is shortened by the Christmas holiday, we still have some important economic reports to consider. Tuesday we get the third quarter GDP estimate and existing home sales. On Wednesday, personal income and spending, consumer sentiment, and new home sales are released. Finally, on Thursday we will see November durable goods and weekly jobless claims. We don't see these having much impact on the markets and many traders will be on vacation due to the Christmas holiday, so it may be a quiet week on Wall Street.

Where are we investing now?

We are not doing much trading in any of our portfolios right now. If we were, though, we would continue to buy equities on the market pullbacks, especially higher-quality stocks. We are still bullish on commodities and believe the dollar will continue lower, despite its recent gains. TIPs continue to be a favorite, as we expect inflation to increase in the future. Additionally, we are looking at putting more money internationally, as emerging markets (excluding China) are an area we favor.

Merry Christmas from Bluefin Investments

Commentary for the week ending 12-11-09

Volatility returned to the markets as lot of movement - both up and down - saw the week close mostly higher amongst the major averages. The Dow closed the week up 0.80%, the S&P 500 was up 0.04%, and the Nasdaq was lower by 0.18%. Solid economic releases helped the markets higher late in the week.

The interesting story of the week started on Tuesday as the dollar started gaining strength. Debt issues are beginning to weigh on European countries as the credit rating of Greece and Spain was downgraded, so naturally it pulled the Euro down. Hence, the dollar is looking stronger. The trend over the past couple months had been a weaker dollar equals a stronger market, so the stronger dollar spooked the markets and sent them sharply lower on Tuesday.

As the week progressed, solid economic releases helped push the markets higher. Inventories in the wholesale sector came in positive for the first time in 14 months. An increase in exports narrowed the trade deficit of the U.S. Retail sales were up 1.3 percent, which is twice the estimate. And finally, consumer sentiment came in higher than expected. No surprise that markets were up. What is surprising is that the dollar rose while the market rose, breaking that inverse relation that we mentioned above.

At this time of the year, many major investment firms are releasing their 2010 forecasts. We would like to highlight some topics from the Goldman Sachs report. Why did we choose to highlight Goldman's predictions? Because they only lost money trading on ONE day last quarter. And TWO days the previous quarter (Link to Story). They are market makers and we take heed to what they say. Here are some highlights:

· They predict the S&P will reach 1,300 (it's just over 1,100 now) around mid-year, yet close the year around 1,250.

· No hike in rates from the Fed until 2012.

· Cash coming off the sidelines and into equities.

· They like the BRIC countries (Brazil, Russia, India, China), high operating leverage stocks, cyclical stocks (Tech, Energy, Materials), and high Sharpe Ratio stocks.

All-in-all, these are reasonable predictions from Goldman. However, we find it interesting that they don't believe rates will be raised until 2012. If that does happen, we believe that will cause a huge bubble in equities (which may still be happening at the moment).

A lot of useful information will be released this week. Tuesday has the releases of the PPI (Producers Price Index), Empire State survey, industrial production, and home builder's survey. Wednesday we will get the CPI (Consumer Price Index) and housing starts, as well as the Fed announcement on interest rates. Thursday we get the leading economic indicators. Finally, Friday is quadruple witching Friday, so we should see a pick-up in volatility to close out the week. These economic reports are all predicted to come in higher, yet any surprise could rattle this already nervous market.

Where are we investing now?

Little change in our strategy here. Until the Fed raises rates, or hints that they will, we continue to buy equities on the market pullbacks, especially higher-quality stocks. We are still bullish (positive) on commodities and the dollar will continue lower, despite its surge this week. TIPs continue to be a favorite, as we expect inflation to increase in the future. Additionally, we are looking at putting more money internationally, as emerging markets (excluding China) are an area we favor.

Commentary for the week ending 12-4-09

Positive economic reports released this week helped push the markets higher. The Dow gained 0.76% for the week, with the Nasdaq up 2.61% and the S&P 500 up 1.32%.

The big news of the week came on Friday with the November jobs report. Economists were predicting over 100,000 job losses for the month, yet the number came in at just 11,000. When initially announced, many traders on Wall Street believed there was a typo. Nonetheless, this sent markets sharply higher for a short period until traders digested the information further. A lower unemployment rate means an improving economy and possible Fed rate hikes, as well as a stronger dollar. Remember, this market has been feeding on the easy-money, cheap dollar policies of the Fed. This frightened many on Wall Street and the market turned briefly negative, yet managed to close up by just 0.2%, significantly below the highs of the morning.

Jobs had been the big topic all week - even before the unemployment report - as the Obama administration held a "Jobs Summit". It seems that the only conclusion to come from this summit is that the government needs to spend more money to create jobs. We could write a whole article on the failures of these Keynesian policies and the backward thinking of this administration, but we won't. What we do see if a second stimulus is implemented, however, is an increase in an already record high debt, a weaker dollar, and higher taxes. Each, a factor that will hurt the economy in the future.

Despite the headwinds from the government, we see continued economic growth in the future. How this will affect the Fed's decision to raise interest rates, we aren't sure. Friday's market sell-off provides us some insight in how the market may behave in the face of rising interest rates. The market has come a long way since its lows back in March and has certainly gotten ahead of itself, so a pause or a sell-off is not unlikely. Until that time, however, we see the markets pushing higher.

A relatively quiet week awaits us in terms of economic releases. The trade balance comes in on Thursday and Retail Sales on Friday. We do not see these having much impact on the market. Unfortunately we will be subjected to the Copenhagen climate nonsense beginning Monday, as well.


Where are we investing now?

Until the Fed raises rates, or hints that they will, we continue to buy equities on the market pullbacks, especially higher-quality stocks. We are still bullish (positive) on commodities as the dollar trends lower. TIPs continue to be a favorite, as we expect inflation to increase in the future. Additionally, we are looking at putting more money internationally, as emerging markets (excluding China) are an area we favor.