WAVETECH ENTERPRISES, LLC
Private Account Wealth Management Services
Newsletter Issued 07- 17- 09:
By: John T. Moir
Position overview . . .
Our previous newsletter, dated June 19th, stated that our technical perspective may allow the stock market to remain within a period of consolidation — removing the oversold environment that exist, prior to resuming the long-term bear market decline. We anticipated that the DOW would have a trading range for the month between 8,450 and 9,400, as this period of consolidation continues even further. The actual result did see the DOW continue in a period of consolidation, but in a narrower range than projected, between 8,259 and 8,878 — a somewhat accurate forecast.
The US treasuries were projected to remain under price-pressure for the entire yield curve during the course of the month, inversely causing yields to rise, and, therefore, we anticipated a base-yield for the US 10-year Note at 3.60%. The actual result did see US treasuries decline in price, inversely allowing yields to rise, producing a yield range for the month between 3.46% and 4.01% — a very accurate forecast.
The US dollar was projected to remain under pressure and we anticipated a euro fx equivalent trading range, during the course of the month, between $1.37 and $1.44. The actual result did see the US dollar steadily decline, producing a euro fx equivalent trading range for the month between $1.3750 and $1.4310 — a very accurate forecast.
Looking forward . . .
A recent survey, by the Nation Housing Foundation For Credit Counseling (NFCC), indicated that almost half of all American adults, more than 100 million people, no longer believe that home-ownership is a realistic way to build wealth. This is counter to the long-held belief that buying a home and building equity should be a major component of a person’s financial strategy.
Other results from the survey were equally reflective of this new attitude toward home ownership, which are as follows: 1.) Almost one-third of those surveyed, or roughly 72 million people, do not think they will ever be able to afford to buy a home; 2.) Forty-two percent of those who once purchased a home — but no longer own it — do not think they will ever be able to afford to buy another one; 3.) Thirty-one percent, of those who still own a home, do not think they will ever be able to buy another home — upgrade existing home, buy a vacation home, etc.; and. 4.) Seventy-four percent of those who have never purchased a home felt that they could benefit from first-time home buyers education from a professional.
The lack of confidence in consumers’ ability to buy a home, improve their current housing situation, or trust home ownership to provide a significant portion of their wealth sends a strong message about the impact of the housing crisis. It appears that whether a person was directly affected or not, Americans’ attitudes toward home ownership have shifted.
The June employment report confirmed that the job market remains in the pits, as payrolls were slashed by 467,000 positions last month, bringing the total of people unemployed to 14.7 million. The unemployment rate edged up to 9.5%, the highest in 26 years. Moreover, the losses would have been worse had the Bureau of Labor Statistics’ birth-death calculation not conjured up an additional 185,000 jobs.
The truer report on the overall unemployment condition is more specifically disclosed in the line devoted to U-6, which includes discouraged job seekers and part-timers who would dearly love to be full-timers, weighed the June unemployment rate at 16.5% — another new high. The real number of involuntarily idled workers would rise to an awesome 25 million or so.
There was nothing encouraging buried within last month’s employment numbers, and losses were widespread over the many different spectrums of industries. Those fortunate soles who managed to hold on to their jobs saw their workweek dip to an all-time low, and yearly aggregate hours decline by 7% to the lowest level of 33 hours since the category was added back in 1964. The unemployment rate would have risen to 9.6%, had the labor force grown in line with the population. We now wonder if some serious discouragement is setting in, and the marginally attached workers are becoming the formally detached.
Furthermore, the forward-looking indicators like temp employment were also unpromising. We find nothing to suggest an imminent turnaround, even though pundits may conclude and actually cheer that the rates of decline in unemployment have slowed from earlier this year.
The mean duration of unemployment rose to 24.5 weeks; the median duration jumped to 17.9 weeks. Moreover, as of June, 53.5% of the unemployed have lost their jobs permanently, the highest figure in the life of the data. This is one sign that the current recession has generated a considerable degree of structural, as opposed to cyclical, unemployment, reflecting the amount of excess capacity that had developed in the economy over recent years. These displaced workers will likely be unemployed for a prolonged period, even as the economy eventually shows signs of a recovery.
Long-term conclusions and current month expectations . . .
The entire state and local government sector, representing about 15% of the US economy, is starting a contraction like none other in postwar history. The states had a combined deficit approaching $102 billion in fiscal 2009, and in the new fiscal year will find themselves nearly $121 billion in the red.
These daunting figures do not count the multi-trillion-dollar problem of unfunded future retiree benefits, nor the revenue shortfalls of local governments, including school districts. State, as California illustrates, are going through conniptions, hacking away at jobs and hours worked. Such measures have sorry consequences in the overall economy, and worsen the problems of the still-towering debt load weighing down the consumer.
The state and local government crisis bottom line is that it will worsen, scaring the municipal finance market, creating a divisive national debate on federal aid to states, and shaking household confidence in hard-hit areas by forcing painful cuts in basic public services.
There is continued evidence that housing remains in serious trouble, especially as it relates to re-default performance on both current-on-time loan modifications and already delinquent loan modifications.
Between 35% to 60% of homeowners who were current on their loans when they defaulted for the first time, again defaulted by month 10, after their loans were modified. Between 62% and 80% of homeowners who had already defaulted, when they were seriously delinquent, re-defaulted by month 10, after their loans were modified.
This illustrates the fundamental flaw in the notion, widely embraced, including by the Obama administration, that loan modification is the salvation for troubled homeowners, beleaguered builders and lenders.
Loan modifications are designed to keep the unpaid principal balances of the lender’s loan intact, while re-levering the borrower, and are worse than all those horrors created by mortgage bankers during the bubble. Mortgage modifications turn homeowners into underwater, over-levered renters for life, unable to sell, re-buy, refinance, shop or save — essentially, turning homeowners into economic zombies.
The Federal Reserve’s policy has restored a degree of confidence in financial markets, with many key metrics are back to pre-Lehman levels. The frozen financial system is thawing, and the short-term cash markets are back to more normal spreads.
Liquidity has dramatically improved, as measured by the TED (Treasuries versus Eurodollars — the gap between interest rates on the US government securities and dollar-deposits held outside of the United States/Eurodollars) and Libor (London Inter-bank Offered Rate) spreads. We have seen a brisk stock-market rally off the March lows, improving consumer confidence, and indications of a firming in housing. This improved liquidity could keep the DOW this month within a broad trading range, between 8,100 and 9,500, before resuming the primary bear market decline in the near future.
Gains in emerging markets and other higher-risk assets indicate that risk appetites are increasing, and the bleeding may have stopped in a few areas, but it is important to remember that the more recent economic and financial data are coming off of a much lower base.
Recessionary influences are still very much with us, and retail sales are only positive year-over-year for the big box discounters. Credit spreads nonetheless remain at recessionary levels, although reduced to a more manageable level. The markets are less concerned about bank stability and credit, but there are still concerns about the overall credit risk of corporate America.
We expect the number of bankruptcies in the US to continue to rise, as excess capacity and tight lending standards indicate further problems still lie ahead. These concerns could keep the US dollar under pressure, at least for the near-term, and are projecting a euro fx equivalent trading range for the month between $1.38 and $1.48. This US dollar weakness could cause foreigners to liquidate some of their US treasury holdings, creating additional downward price-pressure, inversely producing higher yields to re-attract buyers. Hence, we are anticipating that the US 10-year Note could have a base-yield for the month of 3.25%, as prices decline further, and yields inversely rise.
FOOTNOTE: The release of this month’s newsletter was postponed, to the financial benefit of investors utilizing our Private Account Wealth Management Services. Our unique and flexible management services are further explained below — for those investors interested in seeing their wealth continue to grow, in either a rising or declining stock, bond or real estate market environment.
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 them 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 have large stock, bond and/or real estate holdings and 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.
We operate within the “Exemption from Registration” provision provided by the Code of Federal Regulations (CFR) Title 15, Chapter 2D, Subchapter 2D, Subchapter II, Section 80b-3. This provision allows investment firms to grow their business prior to registration, and the large expenses associated with such a process. Investors’ funds remain securely in their name at major brokerage firms and/or banks, while, we, at Wavetech Enterprises, LLC., manage the funds “Online.”
We are pleased to provide a letter written by Attorney, Steven Stucker, regarding the “Exemption from Registration” provision, who has also been aware of our wealth management services, as well as our operating procedures, for more than nine years. Investors are more than welcome to telephone him directly at 775-884-1979 to discuss this provided letter as well as our unique Private Account Wealth Management Services in further detail.
INVESTORS, take action NOW to maintain, keep, protect and grow what wealth you have with our unique Private Account Wealth Management services. What more can we do and/or offer to help you preserve as well as grow your wealth toward achieving both your short and long-term investment objectives? Call us today at 775-841-9400.
John T. Moir
Worldwide Investment Manager
Wavetech Enterprises, LLC
Phone: (775) 841-9400
Acknowledgements: Federal Data, Richard Moody with Forward Capital/Mission Residential, Gail Cunningham with National Foundation For Credit Counseling (NFCC), Levy Forecast by David Levy and Jay Levy, Liscio Report by Philippa Dunne and Doug Henwood, Amherst Research, John Calamos and Nick Calamos with Calamos Investments, Mark Hanson of Hanson Advisors.
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.