Rolling In The Deep

We could have had it all
Rolling in the deep
You had my heart inside of your hands
And you played it
To the beat

Adele - Rolling In The Deep

Treading Water:

By this Valentine's day the S&P 500 was up 5% ... it's still up 5%. So for the last five months we've treaded water. Well, more like treading water with weights strapped to your waist causing you to sink to the bottom, and then push violently to the surface, breath, sink, rise, repeat. Plus 5% is still plus 5%.

The big issues are still with us:

-The great European deleveraging and austerity. Will they be able to hold the Euro together? 

-The US budget crisis. Will they be able to agree on a package that reduces deficits without reducing growth?

-The US economy. Will we find a way to reduce unemployment?

My short answers are No, No, and Maybe.

Longer answers (but not too long). Certain countries in Europe (PIIGS) will default, and some may leave the Euro. We will eventually see a new Euro structure, not sure what form it will take. The simple fact is that there is too much debt to be serviced with too little growth. 

A compromise on raising the debt ceiling will be reached, it won't be enough to address the nation's long-term debt issues. Politicians will put off doing anything substantive until after the 2012 election. 

The Fed will keep rates at zero and do everything possible to encourage corporations to put money to work. It may or may not be enough. Corporations have been growing nicely, but most of their investments/growth have been overseas.

In summary, investors will have to kick hard, bounce off the bottom, fight and struggle for every basis point they can get.

Where We Stand:

Recently we lowered our International Bond exposure to neutral, and increased Gold Miners to Neutral. 

US Equities -- 12% Neutral,

 stocks are bouncing back and forth with little direction.

Int'l Equities -- 12% 

Neutral, but clearly in a down-trend. 

US REITs --  6% 

Bullish, but showing some signs of tiredness.

Int'l REITs -- 3% Neutral

.

Gold -- 9% Bullish, clearly being viewed as a fiat currency substitute. Gold miners are neutral. 

Commodities -- 7% Neutral, with a lot of sideways action

.

US Fixed Income -- 18% Bullish, with the Fed all but guaranteeing that rates will be kept low. US debt downgrade could be wild-card.

Int'l Fixed Income -- 10.5% Neutral, but risk has increased with the European bank problems.

Cash Equivalents & Currencies -- 22.5%, divided between US, China, Australia, and Brazil.

Enjoy this brief video adaptation of "Casey at the Bat".

Click here: Obama at the Bat

Be careful out there, and keep the lights on,

Chris Wiles, CFA

412-260-7917

www.rockhavencapital.com

For prior Rockhaven Views visit:

www.rockhavencapmgmt.blogspot.com

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.

Give Me A Chance To Survive

Give me a job, give me security
give me a chance to survive
I'm just a poor soul in the unemployment line
my god, I'm hardly alive
my mother and father, my wife and my friends
You see them laugh in my face
But I've got the power, and I've got the will
I'm not a charity case

Styx - Blue Collar Man (Live)

Ouch, that was a horrible jobs report. The headline is a gain of just 18,000 jobs versus expectations of 125,000 (and whispers higher), and an unemployment rate that ticked up to 9.2%. Payrolls for May were also ratcheted down from 54,000 to 25,000. More troubling was that the broad measure of unemployment, U-6 which includes discouraged and marginally employed surged from 15.8% to 16.2%.

In the past, the market might actually be inclined to rally after such abysmal economic numbers. The assumption would be that the Fed or Congress would come riding to the rescue, (via rate cuts, tax cuts, injections of stimulus, etc.) to stimulate the moribund economy. It appears there is little hope of that today. After trillions in "shovel ready" stimulus, interest rates grounded at zero, QE1, QE2, QE2.5, and a totally inept/dysfunctional Washington DC, investors aren't expecting a white knight to save the day.

Wow, just think the recession has been over for more than two years now! 

The next couple of weeks the headlines will be full of how Washington is going to manage to lift the debt ceiling while lowering the deficit. Admirable goals indeed, I only hope that the spending cuts will entail cutting deeply into the regulatory morass that stifles business growth and job creation. A man can hope, can't he?

The SGS (Shadow Government Stats) Alternate Unemployment Rate reflects current unemployment adjusted to include long-term discouraged workers, who were defined out of official existence in 1994.

Mr. Market actually took the jobs numbers relatively in stride. While the S&P 500 was down 0.70% on the day, it is still up 6% since June 23. Second quarter earnings season starts next week and the expectations continue to be that corporations are finding ways to keep growing in spite of (or because of) the weak labor market. Profit margins have been at record highs for the last several quarters and that is expected to continue.

Most of our equity and commodity indicators are still in the neutral camp, and our cash levels are around 22%.

Capitalism (at least as practiced today) Is Sick:

As the above charts so clearly show, something in America is wrong. This Great recession (which ended two years ago), is a reflection of a far bigger problem/sickness. What's the problem? Not our economy, not our markets, not even our politics. While our economic pains are very real they are just symptoms of a far greater problem. No, something structural is wrong. I'm not sure when it started (maybe around 2000, maybe long ago), but our capitalistic system has been under assault by greed, deceit, stupidity, corruption, unethical behavior, and a total lack of a moral conscience. 

The problem with capitalism in America today is that we have lost our moral compass. And without it we lose a bit of our soul. 

During the Fourth of July weekend I read a bit about Brigadier General Henry Knox. After his service in helping defeat the British, his good friend George Washington appointed him Secretary of War. While his military achievements were many, what impressed me most were his views on debt, solvency, and responsibility. In short the story goes something like this. After the British soldiers looted and ransacked his bookstore in Boston, he still decided to make full payment of 1000 pounds to a London-based printer who had sent him a shipment that he never received. It was simply a matter of principle. Wouldn't it be nice if some of our elected officials still had those kind of principles?

Another interesting story about responsibility comes from Pittsburgh's own Henry J. Heinz. In 1875 Henry was a partner in Heinz, Noble & Company, one of the nations leading produce processing company's. But in 1875 they had a national bank panic, a bumper crop that depressed prices, and by December Heinz & Noble filed for bankruptcy. The Heinz family lost everything, money, friends, and reputation, but what they didn't lose was character. You see, in bankruptcy your debts are discharged, but Henry Heinz was so distraught that he kept a journal of everyone and every penny he owed. It took him years, but while starting F. & J. Heinz and Company in 1876 Henry eventually paid back every debt he had ever incurred. He didn't have too, but it was simply a matter of principle.

We didn't get sick over night, and it will take a long time to heal, but I believe that we can. It's easy to say that we need corporate and political leaders with a moral compass, but I think it all starts with us. We have to rise above this ethical morass before we will find leaders who will do the same. Capitalism is not inherently evil, capitalism creates jobs, wealth, and raises our standard of living. What is evil is those that seek personal gain at the expense of others. 

I know that's a lot of soap-boxing, but until we find a way to shift responsibility back to the individual the patient will continue weakening.

Summertime, And The Living Is Easy:

Summertime is the time to embrace idleness. Idleness is so very important, but in today's hyper connected world it is also so very scarce. You see, ideas come from idleness, they come from down-time, from the deep recesses of our subconscious. Sometimes you need to daydream, just let your mind get up and wander around and see what it might find. It is very hard to be creative, to see the forest from the trees, if we're running around all day ticking things off our to-do-lists, making phone calls, texting, tweeting, etc. 

I plan on practicing what I preach over the next several weeks...idleness.

Be careful out there, and keep the lights on,

Chris Wiles, CFA

412-260-7917

www.rockhavencapital.com

For prior Rockhaven Views visit:

www.rockhavencapmgmt.blogspot.com

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.

One Blow From Caving In

Do you ever feel, feel so paper thin

Like a house of cards

One blow from caving in

You just gotta ignite the light

Like the Fourth of July

Katy Perry - Firework

It seems like just a week ago that the market was a house of cards, just one blow from caving in, and then...BOOM...Fireworks!

A mix of Greece getting the can kicked a bit further down the road, and some surprisingly strong manufacturing data led the markets to their best week in two years. The S&P 500 was up a resounding 5.6%! What a great way to start a three day weekend. The Fed may have ended their liquidity injection QE2, but that doesn't mean you shouldn't ingest a bit of liquidity this weekend. The world will turn and the issues will still be there come Tuesday, until then relax and enjoy.

Everyone in the pool...especially you Bulls:

Happy 235th America:

Excellent article from Barry Ritholtz in The Washington Post.

It’s been 235 years already? America, it’s time to grow up.

You Are Here:

I always get a kick out of how we humans tend to think the world started with us...you are here.

Happy Fourth!

Be careful out there, and keep the lights on,

Chris Wiles, CFA

412-260-7917

www.rockhavencapital.com

For prior Rockhaven Views visit:

www.rockhavencapmgmt.blogspot.com

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.