Selling Continues:
This week several of our indicators continued to slip into neutral and negative, thereby causing us to do some more selling.
Last week we increased cash equivalents to 17.5%, and this week we added another 3.5%, for a total of 22.0%.
Talk About Risk Off:
Today, for a brief moment, the yield on a one month Treasury Bill fell to -0.005%!
That's right, investors were so anxious to get out of risky assets that they were willing to pay Timmy Geithner to hold their money for them.
Yields have since settled in at 0.00%.
Comments on Bernanke's Speech:
Fed Chairman Ben Bernanke did his quarterly Q&A this week. One interesting question was, "Why do you think the economy continues to lag?" His answer was, "We don't have a precise read on why this slower pace of growth is persisting." OK, an honest statement.
One of the problems with the Feds QE2 (aka money printing) is that even though they can print as much as they would like, they can't control where that money goes. As the chart below shows, ever since the Fed embarked on QE2 last August we've seen a nice move up in stocks. This is what the Fed was hoping for. Zero interest rates, and money printing push investors into equities which leads to a wealth effect. This is great for the wealthy who own stocks.
Unfortunately, all of this loose money also found it's way into oil and other commodities. Why is this unfortunate? Because, most of America actually has to buy gas and eat. Again, the Feds ZIRP hurts most of America, and did very little to create jobs. Sure the wealthy, the banks, and the hedge funds have done a bit better, but they are not creating jobs.
The only way out of this mess is to encourage investment and innovation. This is out of the Feds purview. Washington needs to cut stifling regulation and tax disincentives in order to spur growth.
The Daily Shows Jon Stewart on Greece:
The two following links make for enjoyable weekend viewing:
What's Your Number?
I often get asked, "Do I have enough to retire?" Or, "How much do I need to retire?"
This is an extremely complex question, because there are so many variables and assumptions.
But guess what...There's an App for that.
Smartmoney and the WSJ have put together a great App called the Smartmoney Retirement Planner. It's free, and incredibly simple to use.
You can tailor it to your own unique circumstances, and change your return and inflation assumptions. Do several scenarios and see what great shape you're in!
Please don't use investment returns north of 5% (try 3% & 4% too).
Be careful out there, and keep the lights on,
Chris Wiles, CFA
412-260-7917
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This article contains the current opinions of the author but not necessarily those of the Rockhaven Capital Management. The author’s opinions are subject to change without notice. This article is distributed for informational purposes only. Forecasts, estimates, and certain information contained herein are based upon proprietary research and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed.
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