Private Account Wealth Management Services
Newsletter Issued 09- 18- 09:
By: John T. Moir

Position overview . . .

Our previous newsletter, dated August 18th, stated that the DOW remained within a period of consolidation, and we were anticipating a trading range for the month between 9,100 and 10,050, before resuming the primary bear market decline in the near future. The actual result saw the DOW continue its period of consolidation during the course of the month, with a trading range between 9,116 and 9,630 — a fairly accurate forecast.

The US treasuries were projected to have a base-yield for the month of 3.45% for the US 10-year Note, due to the expectations of the suspension in the Federal Reserve purchasing program and the continued increasing supply size of the various US Treasury Refunding Auctions. The actual result did see yields rise, as prices of US treasuries declined in price, with a US 10-year Note yield range for the month between 3.39% and 3.88% — a very accurate forecast.

The US dollar was anticipated to remain under pressure, at least for the near-term, and we projected a euro fx equivalent trading range for the month between $1.40 and $1.46. The actual result saw the US dollar decline in value during the course of the month, with a euro fx equivalent trading range for the month between $1.4060 and $1.4445 — a very accurate forecast.

Looking forward . . .

The National Association of Realtors have been reporting higher sales of existing houses, which created a positive reaction by the Street, but was a tad exaggerated by the fact that it came hard on the heals of a decidedly less inspiriting release from the Mortgage Bankers Association. This group reported that the percentage of residential mortgages in foreclosure or at least one payment past due shot up to 13.16% in the second quarter, an all-time high. Particularly disturbing was that holders of subprime loans were no longer the major offenders; that unenviable role was taken over by homeowners with prime fixed-rate mortgages, who suffered a significant rise in foreclosures.

The tally of existing home sales did not justify the celebratory fuss that greeted it, since the report was saved by a surprise and suspect 16,000-unit increase in Northeast condo sales. The true national count would have been 12,000 fewer than the month prior, June, if this suspect increase in the Northeast was not included.

Careful review of the July numbers reveals that sales of single-family detached units were down; foreclosure activity increased by 24,000 over the previous month; and despite much lower prices, interest rates at historic lows, tax credits and stimulus galore, this summer’s sales are barely keeping pace with a year ago.

We are in one of those stock markets where good news is magnified and bad news ignored, and that is fine as long as it lasts. There is an incredible amount of liquidity sloshing about within the global markets, thanks to the exertions of Mr. Bernanke, Chairman of the Federal Reserve, and his foreign counterparts. This liquidity is the dominant investment current carrying equities and commodities far beyond the levels warranted by the fundamentals.

This may be setting up as the perfect central-banker trap, where, at some point, they will have no choice but to turn the spigot off. This may be hard to pinpoint when it will happen, but when it does, the bear market rally that we have seen since March will end and the primary downward trend will once again continue.

The employment situation still remains weak, as outlined with the recently released August payrolls, which shrank by 216,000, compared with nearly 276,000 upwardly revised losses for the previous month. The unemployment rate jumped to 9.7%, the highest in 26 years, from July’s 9.4%

The so-called household measure, showed a much grimmer picture, as some 466,000 unfortunates were dismissed. There are now 14.9 million people out of work, 7.4 million of whom have lost their jobs since the recession began in December 2007.

Moreover, the measure of unemployment that we have long preferred because it best represents the true job scene is U-6, which includes part-timers who want but cannot find a full-time position and workers who are just plumb discouraged. In August, that rate hit an all-time peak of 16.8%, which means actual and effective unemployment includes an astonishing 26.3 million people.

One of the few seeming bright spots in the report for the laboring masses is that hourly wages rose 0.3%, but most, if not all, of the rise reflects the hike in the minimum wage, which inevitably also boost the pay of workers just above that level. This is not a sign of incipient wage inflation.

Many more men than women have been losing jobs, which is the reason it has been dubbed a “man-cession.” We conjecture that the women’s share of the workforce may have reached 50% last month and, if not, will certainly do so this month. We suspect, while it is part of a long-term trend, that its recent acceleration reflects a fact of economic life, namely that women are still paid less and tend to occupy less remunerative jobs — a perverse advantage during a recession as to whom gets fired and who does not.

Forward-looking components within the report like temp and retail employment suggests that we are in for more of the same for some time to come, even if Gross Domestic Product (GDP) growth turns up in the future.

This Bureau of Labor Statistics also reported on the number of job openings and labor turnover, commonly known as JOLT. The number of openings were at a record low of 2.4 million, off from 2.5 million in June, 3.9 million a year earlier and a formidable 50% below the recent peak of June 2007.

The jobless recovery is obviously a big reason why, according to the latest tally by the Federal Reserve, consumers in July reduced their borrowings, some $21 billion worth, which was five times more of a reduction than the Street forecasted and the deepest monthly contraction since the Fed started keeping track in 1943 This, however, still left consumers in debt for a tidy sum of $2.46 trillion.

One might logically think that a turn toward consumer prudence after years and years of spending on credit would inspire encouragement from the US Government — not on your life. Instead, they have gone overboard trying to persuade the consumer to indulge in more borrowing. The consumer is not buying, even with a job and a house, which allows for the following conclusion: they may be strapped, but are not stupid.

Long-term conclusions and current month expectations . . .

Much of the current unemployment situation reflects a flood of almost 800,000 new job seekers since January, perhaps spouses and other family members looking for work to supplement household incomes or to substitute for those who have lost their jobs. It will take awhile, if history is any guide, for the labor market to catch up, even after most other economic indicators confirm an actual economic recovery.

The average lag came to seven months, in the 10 recoveries since World War II, and the longest, after the 2001 recession, exceeded 21 months. It takes the unemployment rate several more months than payrolls to reflect the economic recovery.

President Obama may get lucky and have a shorter lag than usual, because business, in its recent panic, cut payrolls much more radically than sales fell; therefore, the labor market might be primed for a more sudden turn. Job cuts during the past six to nine months went so far that worker productivity, between September 2008 and June 2009, picked up at an average annual rate of 2.8% — this is highly unusual.

Business drags it feet on layoffs, typically in recessions, and because payrolls then remain larger than needed, productivity falls. Then, when the pace of economic activity picks up, business can draw on the pool of underemployed workers before rehiring anyone..

The global economy is still very sick, as proof in the ever-shrinking rate of bank lending to the private sector around the world. The problem is that the deleveraging that invariably follows a boom gone bust is starting to unfold in earnest.

We are convinced deflation is lurking around the corner, poised to pounce next year, contrary to the prevailing view that all of the stimulus has so thoroughly soaked economies worldwide will lead to inflation. The Baltic Freight Commodity Index, now 40% below its June High, is a telltale sign of lagging global demand and an ominous indicator of the gathering deflationary trend. The US treasuries will likely have very low yields for many years to come, but in the near-term, could remain under price pressure. This pressure, during the course of the month, could cause US treasuries to decline in value, inversely producing higher yields, with the US 10-year Note having a base-yield of 3.30% or higher.

The housing bubble bust began to wreak havoc just two years ago, and has revealed itself to be the largest bubble with the most vicious deflation, since the Great Depression. Economists and investors, however, have begun to anticipate the recovery that supposedly always emerges after this length of decline. The anticipation of an inventory-led rebound from the bubble-bust is profoundly evident, as investors contemplate the larger impact of such an occurrence. What happens if such a third or fourth quarter inventory-led rebound never transpires?

The top indicator of inventory trends is the imports lead inventories, which remains in a steadfast decline. Hence, an inventory recovery — or even a slowdown in the pace of liquidation — would seem like anything but a foregone conclusion. We have no road map for what happens, when consumer spending is contracting out-right, as what is presently occurring today. This uncertainty, along with others, could cause the US dollar to decline further in value, at least for the near-term, with a projected euro fx equivalent trading range for the month between $1.42 and $1.50.

One wonders from where this confidence that an inventory rebound was due to arise in the first place, as consumers are slamming their wallets shut with unprecedented ferocity.

Financial’s plunged, in the market meltdown of this past year, as investors feared many banks would fail, much like Lehman Brothers. The financial’s led the rebound, then some confidence returned in March 2009, which has caused some investors to believe a new bull market is underway. However, the rebound by the financial’s is not sustainable, due to the credit problems. Foreclosures are still rising, and the commercial-real-estate market is rapidly becoming a major problem. The market overreacted with the financial sector to the downside, and now is doing the same on the upside — overstating the strength of the recovery by the market. Any weakness in the financial sector will negatively affect the market — a classic indication of a bear market rally, not a new bull market.

We remain fundamentally bearish as Main Street readjusts its consumption/saving patterns to the new normal. Furthermore, spending, debt and the deficits are going to get much worse in the years ahead, as this is just the tip of the iceberg. Aside from everything else, the aging population alone is a coming tsunami that can not be avoided.

We expect lower stock prices once the sugar high, provided through the various stimulus programs, runs its course. Currently, the sugar high is still persisting, allowing for the stock market to remain within a period of elevated consolidation. We are anticipating a DOW trading range for the month between 9,200 and 10,300 as this period of consolidation continues, gradually removing the long-term oversold condition that exist within the stock market. The eventual decline will be quite nasty; therefore, investors should consider the unique and flexible Private Account Wealth Management Services outlined below as soon as possible, since these services are designed to generate an above normal rate of return on investment in either a rising or declining stock, bond or real estate market.

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.


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.

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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, Mark Hanson of Mark Hanson Real Estate and Mortgage Advisory, Mortgage Bankers Association, MacroMavens by Stephanie Pomboy, National Association of Realtors, Liscio Report by Philippa Dunne and Doug Henwood, Rhodes Report by Richard Rhodes, Aden Forecast by Mary Anne Aden and Pamela Aden, Albert Edwards with Societe Generale, Milton Ezrati with Lord Abbett, Trading Online Markets by Hans Wagner.

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