WAVETECH ENTERPRISES, LLC
Private Account Wealth Management Services
Newsletter Issued 01- 09- 08:
By: John T. Moir
Chief Editor: Clare Mc Kendrick
Position overview . . .
Our previous newsletter, dated December 12th, stated there were growing negative divergences that would seriously challenge the outlook for both the domestic and overseas markets. We further stated that the November correction in the major stock indices was the worst in five years, and that the bears are growing increasingly stronger and the bulls weaker, as we transition toward a prolonged bear market. We projected a DOW trading range for the month between 12,200 and 13,785. The actual result saw the DOW decline during the month, but not as much as forecasted, producing a narrower trading range, between 13,092 and 13,780.
The US dollar was anticipated to hold new-found support, with a euro fx equivalent trading range for the month between $1.43 and $1.48. This forecast proved to be very accurate, as foreigners supported the US dollar, resulting in an actual euro fx equivalent trading range for the month between $1.4336 and $1.4743.
The US treasuries were projected to be price-supported, since the US financial system will be first to break down, followed closely by the US consumer, leading to a peak yield for the US 10-year Note during the month at 4.17%. The actual result produced a larger yield-range than anticipated, as inflationary-concerned data released during the course of the month caused the US treasuries to both decline as well as rally in price, resulting a yield-range for the US 10-year Note between 3.90% and 4.29%.
Looking forward . . .
The market opened the for business in the new year only to find the Institute of Supply Management’s (ISM) Purchasing Managers Index collapsed below the 50 level, which indicates factory activity slowed outright in December instead of expanding at a more moderate rate, as forecasters had predicted.
The real shocker came last Friday in the employment data — released by the Bureau of Labor Statistics — that showed non-farm payrolls rose by only 18,000 in December 2007, far less than economists’ predictions of an anemic 70,000 gain. Private payrolls actually shrunk by 13,000, with job losses again in construction, down 49,000, and manufacturing shedding 31,000 positions.
The unemployment rate jumped to 5% from 4.7%, instead of ticking up a tenth of a point, as had been expected. The jobless rate, since 1949, has never risen by this much without the economy being in a recession. This type of big jumps in the jobless rate occurred before in July 1990 and January 2001 at or near the peak of those economic cycles. The current unemployment rate of 5% is already above what the Federal Reserve had projected for the next three years.
The TrimTabs Employment Analysis based on income-tax receipts estimates the economy actually lost 12,000 jobs in December. They further estimate, over the past three months, that job growth has been at 29,000, or one-tenth the 292,000 increase in payrolls reported by the Labor Department.
Long-term conclusions and current month expectations . . .
The Federal Reserve is off on a mission impossible, namely to pump up the fast-deflating housing bubble, which they should forget such an attempt in the first place. There has never been a time in history where a bubble was reflated, while they hope this will be the first, it is highly unlikely.
The massive supply of unsold houses and the little matter of banks having to write off between $300 to $500 billion in mortgage-related losses before they can begin to think about extending new credit, is further evidence of just how ambitious a quest the Federal Reserve may be attempting to achieve.
There still remain concerns about the US dollar, the real US growth level expected to decline to near 0% in the fourth quarter of 2007, and the subsequent drop in profits of more than 20% on year-to-year basis, whether the Federal Reserve cuts the prevailing fed funds rate by either 25 or 50 basis points (0.25% or 0.50%) at their next Federal Open Market Committee Meeting (FOMC) on January 29th and 30th . We imagine the Fed will do what it always does when it gets agitated — cut rates. However, we suspect that will have a minimal lasting effect on the economy and the stock market, but will likely price-support the US treasuries, with a anticipated peak-yield for the US 10-year Note during the month at 3.90%.
These results will fuel the fears for a domestic recession, encourage expectations of contractions in most developed countries, and cause significantly slower growth among fast-developing nations. Consequently, we expect the downward trend in equities to continue, with inflations pressures remaining. The bad news is piling up, with no cheap mortgages, oil or food, further supporting the case for stagflation — a slowing economy with higher inflationary pressures. We are projecting a DOW trading range for the month between 12,100 and 13,280, as these concerns and others propel the major stock indices lower.
Analysts are finally beginning to take a red pencil to their earnings forecasts, which usually have generated little angst about jobs. Borrowing costs are on the rise, which will shrink the already limited impulse to hire. Wages are being prioritized toward non-discretionary household expenditures, which now account for 80% of their wages — the highest in recent experience and far higher than the levels at the onset of prior recessions.
The mortgage reset period — promotional adjustable rates being reset upward to much higher fixed rates — will start in the next several weeks, putting further pressure on consumers. Also, the elevated prices for gasoline and heating bills that $95 to $100 a barrel oil has created, will reduce consumers ability to spend and affect future credit quality.
The US dollar will likely resume its decline, as lower US treasury yields — driven downward by a slowing US economy and additional Fed interest rate cuts — will make the currency less attraction to foreigners. We are projecting a euro fx equivalent trading range for the month between $1.46 and $1.50, due to the change in our technical analysis of the US dollar against the various foreigner currencies.
FOOTNOTE: The release of this month’s newsletter was postponed by one-week, to the financial benefit of investors utilizing our Private Account Wealth Management Services through this “ideal economic cycle entrance.”
PRIVATE ACCOUNT WEALTH MANAGEMENT SERVICES:
We, at Wavetech Enterprises, LLC, offer our Private Account Wealth Management Services, which is a conservative, flexible, and actively managed investment strategy. Investor’s ordinary and/or tax-deferred funds remain securely in their name at major financial institutions and/or brokerage firms, while we manage their funds Online.
Our wealth management services outperforms others, since we use a unique and proprietary culmination of the following: fundamental analysis of relative valuations, technical analysis of the changing market conditions, evaluations of various economic business cycles, diagnosing sector market psychology, and strategic investment selections with appropriate allocations.
These services are ideal for individuals, trusts, foundations and privately held corporations that are seeking an active management service to generate a long-term average rate of return on investment between 15% to 20% per year (after fees) through either a rising or declining stock, bond or real estate market.
Please call the number provided below or e-mail us and we would be happy to provide further clarification, if there are any questions regarding the information discussed within this newsletter or our unique wealth management services.
John T. Moir
Worldwide Investment Manager
Wavetech Enterprises, LLC
Phone: (775) 841-9400
Acknowledgements: Federal Data, MacroMavens by Stephanie Pomboy, Sparks Report by Nicocles Michas, TrimTabs, David Resler, Chief Economist with Nomura Securities, Liscio Report by Phillippa Dunne and Doug Henwood.
Note: These newsletters have no regard to the specific investment objectives, financial situation or particular needs of any specific recipient. These newsletters are issued for informational purposes and are not to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments. These newsletters are based on information obtained from sources believed to be reliable, but are not guaranteed to be accurate, nor are they a complete statement or summary of the securities, markets or developments referred to in the various newsletters. Recipients should not regard these newsletters as a substitute for the exercise of their own judgment. Any options or opinions expressed in these newsletters are subject to change without any notice and the Wavetech Enterprises, LLC newsletters are not under any obligation to update or keep current the information contained within. Past performance is not necessarily indicative of future results. Wavetech Enterprises, LLC and its newsletters accept no liability for any loss or damage of any kind arising out of the use of any or all parts of these newsletters.