Predictions for 2009

My guesses for 2009 are as good as any others I've read.

1. Media boosterism of Obama will continue through 2009. All positive developments, economic or otherwise, will be attibuted to Obama. Any negative news will be blamed on a Bush hangover and "obstructionist Republicans" in congress.
2. Stories of corruption and waste resulting from Obama's stimulus policies will filter out through the right-wing bloggosphere and Fox News, but will largely be ignored by the MSM.
3. Mahmoud Ahmadinejad will insult Barack Obama on more than one occasion. Ahmadinejad will "step down" by year end.
4. The S&P 500 will end the year 10% to 15% higher
5. Benjamin Netanyahu will be elected Prime Minister of Israel
6. Obama will pass deep cuts in U.S. Defense budget
7. Americans will reject high-priced, fuel-efficient vehicles. Congress will come to the rescue with substantial rebates for green buyers and boost the Federal tax on gasoline
8. The U.S. auto industry will continue to flounder. The government will chip in another $50B to keep it (the UAW) afloat.
9. An assassination attempt on Obama will fail. Right wing bloggers and Fox News will be blamed by the media.
10. President Hamid Karzai will be assassinated
11. Dmitry Medvedev will step down, Vladimir Putin will retake the reins.
12. Government's share of the economy will exceed 25 percent gdp
13. McCain and Obama will collaborate to pass a "comprehensive immigation" bill.
14. Steve Jobs dies from cancer
15. Congress will pass a massive federal tax increase on ammunition
16. Terrorists will sink 2-3 cruise ships via suicide bombers in high speedboats
17. At least one Democrat committee chair will give up his seat under charges of corruption
18. Draconian green policies (Cap and Trade) will be postponed after Obama's economic team takes a sober look at the potential economic fallout
19. Obama will slow or halt the U.S. pullout from Iraq as a resurrented Al Qaida and Mahdi Army launch attacks against Iraqi government forces
20. 2009 tempertures will be below average...again

Week of 12-28-2008

Timing Model = -1.5
20% long, 80% cash

Global allocation of long positions
MSCI EAFE Index 40%
MCCI Emerging Markets Index 10%
Russell 3000 Index - U.S. 50%

Top U.S. Sectors
U.S. Pharmaceuticals 5.0
U.S. Telecommunications 4.5
U.S. Biotechnology 3.5
U.S. Health Care 3.5
Precious Metals 2.5
U.S. Consumer Goods 2.5
Small Cap Value 2.5

Top Intl. ETFs
MSCI Switzerland Index Fund 3
MSCI Japan Index Fund 2
MSCI Malaysia Index Fund 1
FTSE/Xinhua China 25 Index Fund 1

Strategy 3
Money Market 50%
U.S. Long Bonds 50%

Strategy 4
U.S. Long Bonds 25%
Agriculture 25%
Precious Metals 25%
U.S. Large Cap 25%

Two sentiment components of my timing model are retreating from mildly optimistic levels - this is not a good sign during a bear market. Also, the trend direction as measured by the 75 and 200 day moving average is still down. In sum, my timing model is signaling caution as long as the intermediate trend direction remains unclear. A move in either direction would not surprise me though.

Week of 12-21-2008

Timing Model = -0.5
40% long, 60% cash

Global allocation of long positions
MSCI EAFE Index 30%
MCCI Emerging Markets Index 10%
Russell 3000 Index - U.S. 60%

Top U.S. Sectors
U.S. Pharmaceuticals 5.0
U.S. Telecommunications 4.0
U.S. Health Care 4.0
U.S. Biotechnology 3.5
Small Cap Value 2.5
U.S. Consumer Services 2.0
U.S. Consumer Goods 2.0
U.S. Oil & Gas 2.0

Top Intl. ETFs
MSCI Switzerland Index Fund 3
MSCI Japan Index Fund 2
MSCI Malaysia Index Fund 1
FTSE/Xinhua China 25 Index Fund 1

Strategy 3
Money Market 50%
U.S. Long Bonds 50%

Strategy 4
U.S. Long Bonds 25%
Agriculture 25%
Precious Metals 25%
U.S. Large Cap 25%

Not much has changed since last week. We're in the midst of positive seasonality but when I look at the charts it seems as though we may need a break. Precious Metals seem overstretched here - I wouldn't be surprised to see some profit-taking here.

On the whole, it seems as though we're in the midst of an intermediate term rally, but the tape and sentiment indicators aren't all that impressive. I don't expect any big moves one way or the other from here...for a while at least.

Week of 12-14-2008

Timing Model = -0.5
40% long, 60% cash

Global allocation of long positions
MSCI EAFE Index 30%
MCCI Emerging Markets Index 10%
Russell 3000 Index - U.S. 60%

Top U.S. Sectors
U.S. Pharmaceuticals 5.0
U.S. Consumer Goods 4.5
U.S. Health Care 4.0
U.S. Biotechnology 3.5
U.S. Oil & Gas 3.5
U.S. Telecommunications 3.0
Small Cap Value 2.5
U.S. Utilities 2.0

Top Intl. ETFs
MSCI Japan Index Fund 1
MSCI Malaysia Index Fund 1
FTSE/Xinhua China 25 Index Fund 1

Strategy 3
Money Market 50%
U.S. Long Bonds 50%

Strategy 4
U.S. Long Bonds 25%
Agriculture 25%
Precious Metals 25%
U.S. Large Cap 25%

My timing model slipped a little this week as one of the sentiment models I use touched a level suggesting high optimism. If we're at the early stages of an intermediate term rally I expect some backfilling as soon as this week.

The tape indicators haven't changed for months now. Until we see the market begin to flirt with their 75 day moving average, sentiment is all we have to go on.

Lastly, my sector model hasn't shown much rotation recently. Precious Metals are now in the top group but I'm not sure if this is only a temporary development.

Week of 12-7-2008

Timing Model = 0
50% long, 50% cash

Global allocation of long positions
MSCI EAFE Index 20%
MCCI Emerging Markets Index 10%
Russell 3000 Index - U.S. 70%

Top U.S. Sectors
U.S. Telecommunications 4.5
U.S. Pharmaceuticals 4.5
U.S. Health Care 4.5
U.S. Consumer Goods 4.0
U.S. Biotechnology 4.0
Small Cap Value 2.5
U.S. Utilities 2.0
U.S. Oil & Gas 2.0

Top Intl. ETFs
MSCI Japan Index Fund 1

Strategy 3
Money Market 50%
U.S. Long Bonds 50%

Strategy 4
U.S. Long Bonds 25%
Agriculture 25%
U.S. Small Cap 25%
U.S. Large Cap 25%

Not very much in changes since last week. Long Bonds have hit the outer bonds of optimistic sentiment, and contrary to what you may think, nose bleed optimism in long bonds has usually resulted in lower yields over the preceeding 3-6 months. Bonds look like a pretty good long trade from here, despite the big run up in prices.

Not entirely far fetched

Washington , DC

Congress is considering sweeping legislation that will provide new benefits for many Americans. The Americans With No Abilities Act ( AWNAA ) is being hailed as a major legislative goal by advocates of the millions of Americans who lack any real skills or ambition.

Roughly 50 percent of Americans do not possess the competence and drive necessary to carve out a meaningful role for themselves in society, said California Senator Barbara Boxer. We can no longer stand by and allow People of Inability to be ridiculed and passed over. With this legislation, employers will no longer be able to grant special favors to a small group of workers, simply because they have some idea of what they are doing.

In a Capitol Hill press conference, House Majority Leader Nancy Pelosi and Senate Majority Leader Harry Reid pointed to the success of the U. S. Postal Service, which has a long-standing policy of providing opportunity without regard to performance. Approximately 74 percent of postal employees lack any job skills, making this agency the single largest U. S. employer of Persons of Inability.

Private-sector industries with good records of non-discrimination against the Inept include retail sales (72%), the airline industry (68%), and home improvement warehouse stores (65%). At the state government level, the Department of Motor Vehicles also has an excellent record of hiring Persons of Inability (63%).

Under the Americans With No Abilities Act, more than 25 million middle man positions will be created, with important-sounding titles but little real responsibility, thus providing an illusory sense of purpose and performance.

Mandatory non-performance-based raises and promotions will be given so as to guarantee upward mobility for even the most unremarkable employees. The legislation provides substantial tax breaks to corporations that promote a significant number of Persons of Inability into middle-management positions, and gives a tax credit to small and medium-sized businesses that agree to hire one clueless worker for every two talented hires.

Finally, the AWNAA contains tough new measures to make it more difficult to discriminate against the Non-abled, banning, for example, discriminatory interview questions such as, Do you have any skills or experience that relate to this job? As a Non- abled person, I can't be expected to keep up with people who have something going for them, said Mary Lou Gertz, who lost her position as a lug-nut twister at the GM plant in Flint, Michigan, due to her inability to remember rightey tightey, lefty loosey . This new law should be real good for people like me, Gertz added. With the passage of this bill, Gertz and millions of other untalented citizens will finally see light at the end of the tunnel.