MACRO WHIPSAW & SARAH CONNOR PALIN
The Well-Timed Strategy for Week Ending September 6th
by Peter Navarro, Ph.D.
September 2, 2008
Market Pulse
The U.S. stock market continues to be whipsawed by alternating bullish and bearish forces – with the bears (mostly) prevailing. Last week’s action underscored the importance of taking a macro view of the markets.
The Thursday GDP report caught virtually everyone by surprise with its sharp upward revision of 2nd quarter growth and sent the markets surging. The next day, however, bad news on the consumer front – the biggest drop in personal income in three years and weak spending.
The GDP report was remarkable in that fully 3% of the 3.3% increase in the real GDP was attributable to a spike in exports and a corresponding fall in imports. However, with the dollar now in an uptrend and one of America’s key export markets heading South (Europe), this is not a sustainable stimulus.
Bottom trader’s line: U.S. market trend continues down. Cash plus biotechs is king.
Wall Street Survivor
I initiate a new feature this week called Wall Street Survivor. I’ll be trading a mock portfolio on this site for the foreseeable future. See http://wallstreetsurvivor.com/ for results AND trade your own portfolio.
The purpose of this exercise is to offer guidance to beginning and intermediate traders who want to trade from a macroeconomic perspective. The goal is to learn about sector rotation, global diversification of the portfolio, and trading with the market trend. We will also focus on proper timing of entries and exits using technical analysis as well as sound money management techniques. (Note that this will be a conservative portfolio – we are not swinging for the fences.)
My first two buys for the portfolio are sector rotation plays. As the business cycle moves through recessions and expansions, different sectors outperform over the cycle. Moving in and out of sectors to leverage this can be a good way to both stay abreast of the market and earn some profits. (For a full description of sector rotation, see my book If It’s Raining in Brazil, Buy Starbucks.)
Presidential Politics: McCain’s John McEnroe Candidate
You may recall that in an earlier column, I discussed at length the magazine story about McCain the crap shooting gambler and Obama the speculating poker player. As traders, we want to be intelligent speculators, not gamblers, always playing with the odds on our side.
John McCain has demonstrated once again that he is a huge gambler with his crap shoot choice of Alaska governor Sarah Connor – oops, I mean Sarah Palin. If I had to bet on the election right now, I’d have to move my chips off the McCain square where I’ve had them over to Obama.
This truly seems to be a John “You can’t be serious” McEnroe moment. The America gut is going to rumble over a 72-year man with a history of cancer putting a political novice one heartbeat away from the Oval Office.
Quick Takes
- In an eight game losing streak, the L.A. Dodgers have managed to turn me away from the game I’ve loved for years. Losing a trifecta to the Washington Nats is the last straw. Manny should never have cut his hair.
THE CHINA EFFECT
Please see my latest You Tube report.
© 2008 Peter Navarro
“Any trader or investor who ignores the power of macroeconomics over the world’s financial markets will, sooner or later, lose more than they should and if they are trading on margin, perhaps more than they have.”-- If It’s Raining in Brazil, Buy Starbucks
Peter Navarro is a business professor at the University of California and the author of the best-selling investment book If It's Raining in Brazil, Buy Starbucks and The Well-Timed Strategy. His latest book is The Coming China Wars: Where They Will Be Fought, How They Can Be Won.
Contact Information
Peter Navarro Irvine, California USA | Email | Website | Editorial Archive
