The Tasgall Group

Here’s a run down of the bullet points that make me think the US equities market is headed for a 10% or greater correction: (more…)

Many, many people are talking about the Fed Funds Rate, but I have a feeling most don’t even know that the rate is not set by Bernanke or the FOMC… they set a “target” rate for the Fed’s open market activities.

You can see here that the number in practice does deviate from the target slightly on a day-to-day basis. Even though the target rate is 5.25% there are several days where the average rate was 5.31% or even 5.17%.

There’s nothing sinister or conspiratorial here, it’s just the fact that the Fed is in less control than everyone thinks. They are subject to some variance just like the rest of the markets…

To quote NowAndFutures.com: “The Federal Reserve Bank is a private company, authorized in 1913 by a Congressional Act called the Federal Reserve Act of 1913. In a very real sense, it outsourced the control of U.S. money and banking to bankers themselves.”

I was visiting my commercial mail drop today to collect my mail.? All my mail is sent there and all my accounts show that address as my home address.? Nowhere is my name linked to my home address except in the records of utility companies, something I couldn’t avoid easily (though it is possible).? As I was leaving the maildrop, the proprietor informed me that a Durham County Sheriff had come in looking to serve me with papers.? (more…)

With my current >90% exposure in equities, I’m feeling that I’ll be one of the first victims of a bear market.? With the recent minor run-up in the US equity markets, I’m thinking that the time is ripe to move at least a 10% chunk of my US equity exposure out and into either a money market account (like the VMMXX with it’s 5% yield) or into Bonds.? I’m becoming increasingly alarmed at the market conditions now and I’m interested in moving my main holdings out into cash in stages and allow my dollar-cost-averaging approach to continue on with my current asset allocation plan.

What are your thoughts?

I’m thinking that if the market continues to show strength throughout the day, I probably will move 5 – 10% of my Large and Mid-cap US equity positions.? I’m feeling very much exposed on these fronts.? Areas I’m probably not going to touch for now are my Small-cap, Foreign and Energy holdings.? Small-cap has already had a tough year and I’m probably going to keep those relatively untouched for now.? My international holdings are all up around 8 – 10% YTD and showing no clear signs of pulling back at the moment, so I’m planning on leaving these untouched for now.? I still feel that Energy has plenty of upside and I’ll continue to hold these funds for the foreseeable future.

Let me know if you think my concerns are unwarranted or you think I need to lay out my case for why Large and Mid-cap equities are heading for a significant drawndown in the future.

Check out the International Networks Archive, a project at Princeton University attempting to “map” globalization in new and creative ways.? I had particular fun with the Infographics (I thought the indication that the IRS?was the only non-police government agency?authorized to carry a firearm was hilarious) and Interactive Maps sections.? There?is plenty of data and links to data also.? While at first glance this doesn’t jump out as investment-related, I think this project might provide some interesting inspiration or clues that could aid in financial outlooks.

John Hussman has a good article on jokes and how investors are following the wrong story line. He argues that “stagflation” is now present in the economy and it’s going to take a while for everyone to realize it.

Hussman’s analysis is insightful… when the consensus changes (like he’s arguing it will) that changes the way the markets behave, react to news, etc.

If you don’t have too much too look at and think about yet, add the Baltic Dry Index to your list of things to watch. The index is a representation of dry freight rates for ocean going shipments of things like coal, grain, or cement.

The BDI is good to watch because it acts as a leading indicator of economic activity. It can’t be manipulated like official Government statistics, and it isn’t subject to speculative over-buying or selling like the futures markets. We might see “conundrums” regarding the price of bonds or their rates, but it would be very difficult to misunderstand a change in the price of bulk shipping.

Right now you can look at the index and see that it is still climbing since mid-2005. That’s either economic growth or inflation… or both.

They also have the individual Capesize, Supramax, and Panamax rates which are the ingredients of the BDI shipping rates. For example, Panamax rates would be the shipping rates for the largest ships that can still fit through the Panama Canal.

There are good articles on the BDI here, here, and here.

In a fairly odd turn of corporate governance, Horizon Lines (HRZ) has declared its first ever dividend and is also issuing new shares — both announced within two weeks of each other. The news of the new shares has pushed the price down 3.3% today and 11% from its recent high.

Now, if you know you’re going to raise cash by issuing new shares (a 15% dilution, no less!), why would you bother declaring a dividend at all? The point of a dividend is to return cash to shareholders… There is a catch-22 in there somewhere…

HRZ has a nice position as a mid-cap in the transportation sector. It has a strong balance sheet and operates as a Jones Act shipper which basically limits their competition as a shipper to Alaska, Hawaii, Guam and Puerto Rico.

Chicken producers got slammed last year in the wake of the Avian Bird Flu Health-Crisis. The sales for Sanderson Farms and Tyson Foods all dipped a bit, but it looks like demand could be picking back up as people start going back to chicken.

I like Gold Kist as a smaller player with strong fundamentals and a decent technical position. It looks like a bottom was put in back in April, and there was buying strength even as the broad market turned down in May.

You can see what other companies produce chicken, many are diversified into other food production as well (like Hormel).

“The stock market is there only as a reference point to see if anybody is offering to do anything foolish. When we invest in stocks, we invest in businesses. You simply have to behave according to what is rational rather than according to what is fashionable.”

“You don?t know who?s swimming naked until the tide goes out.”

“…holding cash is uncomfortable, but not as uncomfortable as doing something stupid.”

There are many more if you like reading pages full of quotes.