Griffin Account Talk

[Griffin]

Thinking of your recovery theory that you brought out last year after May/June drop, wouldn't S-fund be the next fund to likely see most movement next? S-fund appears to have more room to catch up than C or I.

2% more and were back where we started so a big recovery is not in the cards. Actually going back to that, the I-fund was the place to be once we got back to the area of setting new highs.

I don't even see the last couple of days as a recovery, I can see a wave of 5-6% market variation coming so if we get that kind of volatility, I would expect the S-fund to be more volatile and possible loose more net value comapred to the C-fund.

Better to illustrate from a historical perspective - the top chart is 2003-2004 time frame, the bottom chart is current starting at the beginning of 2006. The gold line is the S-fund, the black line is the C-fund. Are we at point A or point B?

If we are at point A it certainly would be better to use the S-fund as your stock of choice, but if we are at point B, then the C-fund may be a better choice. Given all the discussion about slipping into an economic slowdown, intuitively you would expect us to be at point B, but if the market behaves from the perspective that the Fed is keen on what is going on and will take action to prevent an economic slowdown or recession, it is reasonable to argue that we are at point A.

The extent to which high volatility drives folks to a flight to quality could very much effect the way things pan out.

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[Birchtree]

Thanks Griffin, I'm appreciative of your analysis. I've already been at B, now I'm ready for some more A. When Tom thows another 25% that will certainly help.

 

[Griffin]

When were you at B? and why do you think we are at A?

I've already been at B, now I'm ready for some more A.

 

[Birchtree]

I was at B in February'04 and A is 1995. I was also at A in March'03 and that's why I'm ready for more upside continuation.

 

[Griffin]

The point of the exercise is to use a historical example to develop a conceptual model going forward. It was not my intention to walk down memory lane. In 1995 I was dating a lingerie model (true story)....thanks for the memories. She was a psychopath. If I had married her, I wouldn't have a penny to my name today.

I was at B in February'04 and A is 1995. I was also at A in March'03 and that's why I'm ready for more upside continuation.

 

[sugarandspice]

The point of the exercise is to use a historical example to develop a conceptual model going forward. It was not my intention to walk down memory lane. In 1995 I was dating a lingerie model (true story)....thanks for the memories. She was a psychopath. If I had married her, I wouldn't have a penny to my name today.

Ahhh, the memories.

 

[love-to-bike]

In 1995 I was dating a lingerie model (true story)....thanks for the memories.

Wasn't Markie Mark a lingerie model back in '95? Just sayin':worried:

 

[sugarandspice]

She was a psychopath.

Yeah but he used the word She............ Oh wait Markie still qualifies.

 

[Griffin]

Sorry love-to-bike, I don't ride that way, If your looking for a partner to go tandem with you.....you'll have to search elsewhere.

Wasn't Markie Mark a lingerie model back in '95? Just sayin':worried:

 

[love-to-bike]

Touche!

 

[Griffin]

Housing data is in and the average price data really bounced back. The housing market. While the prices are still slightly below 2006's it appears as if they are leveling off, good news for sub-prime borrower who may be living in fear of not being able to break even if they are forced to sell. The market is getting a slight bump out of the data. I guess the Brititsh hostage incident is starting to weigh on people's minds.

Here's the data source...good stuff if your into real estate as well: http://www.realtor.org/Research.nsf/files/EHSreport.pdf/$FILE/EHSreport.pdf

We have new homes sales coming in on Monday, which should help to close the loop on the sub-prime fears.

 

[Griffin]

Something I thought worth reading:

http://www.optionetics.com/market/articles/16959

http://usmarket.seekingalpha.com/article/30797

The consumer confidence is a two part report, a smaller percentage is dedicated to current conditions and a larger portion to expectations. The overall report dropped further then expected, but the current conditions portion actually rose while the expectations took a significant tumble. Some to think about considering Bernake is talking tomorrow to the Joint Economic Committee.

 

[Griffin]

Bernake speaks at 1030. I believe it was in the article's I posted links to yesterday that talked about Bernake psuedo-recanting of the dovish nature of the FOMC policy statement. If that happens, we could be in for a rough day. I think most people moved into capital preservation mode yesterday. I will be tied up in a meeting all morning, so I will not be making a move regardless of what happens. I am currently 100% in copper (G-fund pennies )

 

[airlift]

Griffin,
I know most people moved into capital preservation mode yesterday. However, I am one of the exceptions and I am in the I fund 100%. When you say that Bernake's pseudo-recanting of the dovish nature of the FOMC policy statement might trigger a rough day, are you thinking of a down day even though the I fund theoretically could benefit from knowing that a dovish FED that keeps rates unchanged or lowers rates in the U.S. would be favorable for the I fund. I hope I haven't confused the issue. Can you please give us your opinion and help to sort this out as to the temporary or longer term impact of Bernake's testimony on stocks and stock indices? Thanks in advance Griffin.

Bernake speaks at 1030. I believe it was in the article's I posted links to yesterday that talked about Bernake psuedo-recanting of the dovish nature of the FOMC policy statement. If that happens, we could be in for a rough day. I think most people moved into capital preservation mode yesterday. I will be tied up in a meeting all morning, so I will not be making a move regardless of what happens. I am currently 100% in copper (G-fund pennies )

 

[Griffin]

If the US market sells off, that will likely carry through the foreign market's. The dollar index is already down, I don't expect it to go much lower. Europe and Japan both have their fair share of problems right now that could effect their currencies. This election in France and the British/Iran hostage situation both seem to have volatility associated with them. I am more focused more on the geopolitics and the macro economy right now then currencies. There is a lot of technical damage to every market that still needs to be reconciled.

I admit that I have gotten very bearish and I have not played the volatility well. However, the volatility is not going to go away anytime soon. This is going to be a market that can taketh away just as easy as it giveth. That is the way Bernake's comments are being interpreted. Issues that increase volatility will be red for the market, the bulls need stability. What Bernake calls flexibility, the market calls volatility. If your bullish on this market then expect to see your returns fluctuate rapidly. There will be a few that will nail it time and again and we will have some big returns this year from some members, regardless which stock fund they use. I don't believe those that are more bearish are in any real serious risk of having this market run away from them. It stings to be on the outside when the market rallies but it can be more confusing when your getting pounded. Personally, I would rather miss a 4% rally then take a 4% ride down, I believe your more likely to make a rational judgement in the aftermath.

http://biz.yahoo.com/ap/070328/bernanke.html?.v=21

I hope that helps

Griffin,
I know most people moved into capital preservation mode yesterday. However, I am one of the exceptions and I am in the I fund 100%. When you say that Bernake's pseudo-recanting of the dovish nature of the FOMC policy statement might trigger a rough day, are you thinking of a down day even though the I fund theoretically could benefit from knowing that a dovish FED that keeps rates unchanged or lowers rates in the U.S. would be favorable for the I fund. I hope I haven't confused the issue. Can you please give us your opinion and help to sort this out as to the temporary or longer term impact of Bernake's testimony on stocks and stock indices? Thanks in advance Griffin.

 

[airlift]

Sensible viewpoint. Thank you.

 

[chemmie]

Long-term...shouldnt we be very concerned that the dollar has deteriorated over the last couple of years? Cannot much of the gains be explained by that fact? Not to mention the massive debt in the system...thanks

 

[Griffin]

Wow what a question, I like this explanation

http://www.nybot.com/productPages/USDX/library/what really drives the DX.pdf

Long-term...shouldnt we be very concerned that the dollar has deteriorated over the last couple of years? Cannot much of the gains be explained by that fact? Not to mention the massive debt in the system...thanks

 

[Griffin]

If you read the article, in his discussion of figure 8, the author makes a good point about broad indexes and their related currencies. Basically what he says is the indexes lead the currencies. If you take the ratio of returns of foreign indexes against us indexes, you can get an idea of how the dollar index will perform. The key is to look at the foreign index returns as measured against their currency, not the dollar (the later is what you get if you look at the DAX, Nikkei, FTSE etc. on yahoo).

Figure 3 shows the correlation between interest rates and currency strength for the dollar. The same logic can be applied to foreign currencies. When a central bank raises rates, it can often cause a sell off, but in the long run it strengthens that countries currency and vise versa.

Combining those two points, if we start to slip into a recession, the fed will likely lower rates which will weaken the dollar, which is of course good for the I-fund. The other side of that coin is the trade deficit. If the US slips into economic slowdown based on a weakening consumer, it will have a profound impact on Japan, China and to a smaller extent the EU who all have their trade surpluses diminish against the US and likely see their central banks follow suit. Most foreign central banks have not gone to the extent of rate hikes that the US has been through in the past few years.

The question is: who get's hurt more by a US economic slowdown, the US or the OSMs?

 

[Griffin]

Here's a link to the personal income data

http://www.bea.gov/newsreleases/national/pi/pinewsrelease.htm

February personal income came in at .6 which is better then the .3 expected and down from 1.0 in January. January saw a significant increase in payrolls and you can chalk a lot of that up to employeers who give wage increases annually. So you can't just look at last month and say we took a plunge from January but if you do look at the data, the personal income growth for February was not as good as the average month. Although it beat expectations, it really turns out that the growth wasn't lacking significantly. The market likes the news for now, will it be the fuel for the end of quarter window dressing? France and Germany are popping hard on the news or maybe that's their own window dressing.