Back to School

Its August and its back to school and back to school retain sales are the talk of Wall Street. Look for Wall Street to make an overly big deal about slow back to school sales, while Wall Street is busy predicting the next recession it would be wise to remember that retail is always slow during the summer months,most Americans are focused on enjoying the great out doors not running to the shopping all or auto dealers. Summer is time for fun, family and friends, which often causes people to postpone large or significant purchases during the summer months.

No More Easy Money

No more easy money but Bank and Insurance company officers have bought more of there own stock than any time in 12 years (wow) . By the way does anyone really think we are going to have a good number for existing home sales and if so why?

Panic of 1907 ?

Sub prime tsunami spreads, and it all in the package .So here is the deal, looks like the wise men of Wall Street put together mortgage backed bonds that could have high credit ratings yet contain a few illiquid credits (low credit quality credits). Although this spreads the risk over the credit system and could disperse losses it undermines the confidence of buyers and credibility of the rating systems creating suspicion and illiquidity. Translation: buyers got more than they paid for and not what they paid for. So buyers are now looking for assurances that they are getting what they think they are getting. This implies that in order for buyers to step up credit standards will have to be greatly increased, thus a “credit squeeze” is underway, or as some would say a return to more prudent normal lending practices.

Buyers on the other hand are busy confessing their sub prime indiscretions on a daily basis, many being forced to admit that they shouldn’t have been buying sub prime paper in the first place.

Mean while other investors ask; Is there really a crisis or is this just an effort by large investors to get the federal government to bail out home owners with sub prime loans and therefore bail out wealthy investors that invested in hedge funds who bought those loans? I respect Bill Gross of PIMCO but he sounds like he is lobbying to get preferential treatment to some investors. If you’re good enough to take the big risks and make the big money, you should be good enough to take the hits when things don’t go your way.

I am also pleased to announce that I am now to offer Investment Advisory Services. I can offer access to a diverse rage of Investment Strategies, low initial minimum investment, a customized portfolio structure, access to qualified and respected advisors, offering a wide range of investment strategies to balance risk and diversify.

I have some good news for all clients, those difficult to fill out class action suit claims will now be automatically submitted for you by my partner Horwitz and Associates and all money’s received will be directly deposited into your Horwitz Account.

Thank you again for all the referrals you have passed my way the last couple of months I really appreciate it.

Don’t forget through www.jamesfoytlin.com I have entered into an agreement with Elliott Wave International to provide additional content on Elliot Wave Specific strategy and commentary. Contact me if you are interested in using the Elliott Wave to more effectively manage your portfolio.

James Foytlin
Financial Advisor
toll free 1(866) 492-3959
1(201)301-2780
Cell 1(201)966-7788

I repost this after every sell off...."the Talk"

Repost from September 22,2006

Time to get started Part 3 the Talk: "Asset Allocation"
September 22, 2006

Hello,

This is when most investment professionals give you the talk; you know the talk about how you should be diversified into different asset classes. I think this is the most over used bunch of BS the investment community throws at investors and I have a bit of a different take on asset allocation.

First and foremost it is important to recognize that for new investors with small amounts of money asset allocation becomes a meaningless gesture, as a new investor you need to concentrate on building your asset base so you have something too diversify with. Secondly if you were an investor in the early 2000 during the market melt down you noticed that everything you owned no matter what it was or where it was invested sold off and if there is one thing we learned from the bubble bursting in 2000 was that in a serious bear market asset allocation does not work. I will repeat that in a serious bear market asset allocation does not work.

For many investors some asset classes are just not viable or not suitable or simply conflict with the investor’s investment style or risk tolerance. There is also the practical problem that some asset classes remain in very long periods of Bear markets and from time to time arise for very short Bull runs leaving investors buying at the highs and selling at the lows more often than not. And finally I have come to think that most asset allocation models are set up to feed money manager’s businesses not increasing investors return .It is more about the money manger full employment act than anything else.

For most investor’s assets the allocation process can be accomplished with the use of common sense ie… large cap, mid cap and small cap or Aggressive Growth, Value, Fixed income or Energy, Technology Consumer Products. It is most important to not to violate the viability, the suitability, your investment style or your own risk tolerances.

Another important issue is to make sure the funds are not all holding the same stocks .I know this sounds silly but the dirty little secret of the mutual fund business is that most of the larger mutual funds can only buy certain stocks that have a large enough capitalization that allows the fund to purchase a significant amount of shares to effect change in the total portfolio of the fund. With careful observation most investors will notice the same 10 stocks in every fund they own .Now that’s not much diversification is it?

Another hole in the Fund Manager Full Employment Act (Asset Allocation theory) has popped up in recent months, according to Bloomberg News, ”The average daily correlation of returns for Morgan Stanley Capital International's World and Emerging Markets Indexes has climbed to the highest since at least 1988. The S&P 500 and Japan's Nikkei 225 Stock Average, along with the Nikkei and Europe's Dow Jones Stoxx 600 Index, are tracking each other's daily returns by the most since at least 1987, data compiled by Bloomberg show. Shares in the U.S. and Europe have the second- highest correlation in 20 years.” Also according to the same source this year, the average daily correlation between the MSCI World gauge tracking developed markets and MSCI's measure of emerging markets increased to 0.87, according to Bloomberg data, which dates back to 1988 for that comparison. A correlation of 1 means stocks are in lockstep, while minus 1 indicates stocks are moving in opposite directions. So it seems proof that global markets are more correlated than ever before. As I have said many times when your broker gives you the talk (Asset Allocation Theory) better take a walk.


Thank you again for all the referrals you have passed my way the last couple of months I really appreciate it.

Through www.jamesfoytlin.com I am entering in to an agreement with Elliott Wave International to provide additional content on Elliot Wave Specific strategy and commentary. Contact me if you are interested in using the Elliott Wave to more effectively manage your portfolio.

New Phone Numbers are toll free 1(866) 492-3959
1(201)301-2780
Cell 1(201)966-7788


James

http://www.jamesfoytlin.com/

Holy Cow; there is more to the story than this

The sub prime “crisis” does not seem to merit the amount of selling we have seen the last couple of weeks, this investor suspect that some major financial institution perhaps over indulged in the sub prime give away.

In the long run I remain very bullish but in the short run I think we have not seen the last of the shake out.

Perspective

The sub prime lending crisis is a lot like having a working antique gold watch, it keeps excellent time but no matter what you do you can’t seem to sell it at any price .So does that mean its worthless and broken?

Drying up liquidity?

Wall Street seems to be bouncing back and forth between Chicken Little and a “don’t worry be happy attitude” With the main question being; is the mortgage squeeze turning into a credit freeze? As I have repeated before this market seems to be entering a new phase of more normal volatility and greater momentum after almost a decade of low volatility and low momentum. It is quite normal to retrench after a break out and the magnitude of the retrenchment often signals the power of the coming rally. Yes I am still bullish and yes I think the current volatility is more normal than extraordinary.

This market looks more like its getting religion

This market looks more like its getting religion the morning after .Suddenly investors have noticed that we seem to be in a severe slow down in Real Estate ,shocker yes and that banks that once spread the word of Real Estate Sage Carlton Sheets and Wade Cooke encouraging a ”no money down” home ownership have since recanted. What this investor remains skeptical of is how significant the sub prime debacle will be? Will it spread through the credit system, causing a credit crunch or will it be contained to the very hedge funds that profited so mightily from it? Remember in market sell downs the good gets swept down with the bad so for investors there is boundless opportunity in the many stocks that have been taken down by market action that really have nothing to do with the consequence of housing.

Original down side target was 13200 we could see some where around 12800 which is the 200 day moving average.