ITA Wealth Management

Jeremy Grantham’s market calls have been well above average and we can only hope he is right as he peers into his 2009 crystal ball. Click on this link to see where he thinks specific areas of the market are heading.  One might conclude he is using Quantext Portfolio Planning software to come up with his projections as there is a high correlation between Grantham’s projections and what I am seeing with QPP.

Lowell Herr

Photograph: Curry condiments

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Link to 2008 Photos

November 13th may be the date the bear market ended.  Let’s hope so as the last year has been a painful period.  The S&P hit a 52-week low so we need to see if this level will be retested over the next few weeks.  The NASDAQ is approximately 150 points off its 52-week low and the DJI nearly tested its 52-week low yesterday.

Photograph:  Government building in Budapest, Hungary

Many investors are asking the question, “What Do I Do Now?”  Here are a few suggestions.

• In taxable accounts consider selling so as to take advantage of tax losses.
• Check your asset allocations and if you have available cash, consider adding to asset classes that are under-weighted.  Move slowly.
• Since value stocks are already beaten down, considering adding to value ETFs first.
• Examine the StockCharts for each ETF of interest.  More information is provided under Technical’s over on Premium Content.  See if the ETF is priced to buy.  Also, if you are a Morningstar Premium Member, check what they have to say about the ETF of interest.
• Stick with the liquid ETFs we frequently discuss on this blog.  Do not chase esoteric ETFs.

Lowell Herr

Photograph:  Oregon Coast - the bleak day is in keeping with the volatile market.

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Bryce Ward is a staff economist at ECONorthwest in Eugene, OR.  Ed Whitelaw is a professor emeritus of economics at the University of Oregon and founder and president of ECONorthwest.

In last Sunday’s Oregonian they write, “The U.S economy will endure this crisis, though many in it will suffer severely, as many have already.  Perhaps we’ve seen the worst, but few believe it.  There is a chance that we are on the verge of a severe recession.”

“…we’ve added approximately $200 billion to $300 billion to our national debt, and Harvard economist Kenneth Rogoff thinks that we could easily spend $1 trillion to $2 trillion in taxpayer dollars trying to keep this crisis from spreading.  Those closest to the sources of the meltdown in the housing and financial service industries are likely to take the biggest hits, but problems of this magnitude likely will burden all sectors of the economy.”

“The 30-year push to eliminate (government) regulation must end.  Markets require clear rules and mechanisms to enforce those rules.  Without rules and enforcement, crises occur and people lose trust in markets.  Without trust, markets fail and the economy suffers.  Government must play a vital role in restoring trust.  One of the presidential candidates clearly understands this.”

Hence, the question - “Which Candidate Understands the Problem?  The one who claims to be a deregulator and is now apologizing for this stance, or the other fellow? Is it the one who graduated number 894 out of 899 at the Naval Academy or the one who was head of the Harvard Law Review?

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The Sunday Oregonian carried a series of articles by local bankers, investment advisors, and economists.  Here are a few snippits from these articles.  You will find more over on Premium Content.

From Ray Davis, president and CEO of Umpaqua Holdings Corp. we read, “When we (come out of this), it will be to a vastly different financial system, one that’s stronger and smarter because of what the public and private sectors will have learned.”

“The current economic situation is unlike anything I’ve seen and unlike anything most Americans have seen in the past 70 years.  It’s the perfect storm: a combination of the housing crisis, investment bank turmoil and economic downturn that together are creating an incredibly challenging environment that will fundamentally change the financial services industry.”

Davis, like many others writing in the Oregonian, remains optimistic we will pull out of this problem.  “Investment banks also have been largely self-regulated for many years, something that is clearly going to change.  Remember, the true purpose of regulation is to protect the consumer and the investor–not individual companies.  We are going to see significant regulatory changes, particularly to the investment banks and hedge funds, in order to make sure that consumers and investors are protected.”

One can only hope Davis is correct and that we will see some sanity return to the investment banking business.

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