4/22/2006 newsletter
*** Market
The market is bullish this week due to FED loosing its stance on further interest rate increase. However, commodities (oil, gold, copper) continue their march to new highs, boosted by the potentially weaker dollar if interest rate ceases to increase (of which Buffett has betted). This dented the rally in the stock market. Nevertheless, DJIA has reached the highest level once marked the peak of dot com bubble in March 2000 (when I moved to NJ). This is an emotional moment for many investors.
Google (I do not own) marched back to its high of $450. But it is funny on Friday, its 10% gain did not help Nasdaq 100 at all. Nasdaq ended down 1%. The weakness of tech stocks is unbelievable. CME reached $500. It appears that CME wants to be the king (highest per-share price) of the market (excluding Berkshire and a few odd stocks). What an ego!
*** Portfolio
My portfolio reached $13.8 (+38% since 12/2004). that is about +17% YTD. SP500 is about 6% YTD. The 10% gain over SP500 in 5 months seems to come too easy. I am cautious. But the yield of my portfolio does not deviate too much from my simulation...
*** Comment
US is in a dilemma. Meeting with Chinese PM did not yield any positive result to US, especially on the revaluation of Yuan. China got so used to piggybacking US dollar and enjoyed the inflow of hot money. It is hard to ask her to stand on herself in the world market. But US no longer has the strength to subsidize China anymore. US has also relied on China's appetite on Treasury to sustain the bond bubble. Now you got the flat yield curve and FED wants Treasury to turn bearish. One reporter said jokingly, it is like a co-dependent marriage with 30 children that has gone bad. What are you going to do?
Since Yuan is seriously undervalued, it is an investment loophole to invest in China. It is good for investors. However, the inflationary economy is bad for the common people. I feel bad about the massive Chinese workers who can not benefit from their strong economy and the should-be strong currency. The same scenario can also play out if Bush continues to inflate the economy and allow the twin deficits to balloon. I want to remind you that stock market is a better inflationary hedge than bond and cash (since it has a pricing power fix income does not have). But it is dangerous to invest in stock market without a good value proposition. Therefore, an inflationary environment is particularly risky to common people.
Steve
The market is bullish this week due to FED loosing its stance on further interest rate increase. However, commodities (oil, gold, copper) continue their march to new highs, boosted by the potentially weaker dollar if interest rate ceases to increase (of which Buffett has betted). This dented the rally in the stock market. Nevertheless, DJIA has reached the highest level once marked the peak of dot com bubble in March 2000 (when I moved to NJ). This is an emotional moment for many investors.
Google (I do not own) marched back to its high of $450. But it is funny on Friday, its 10% gain did not help Nasdaq 100 at all. Nasdaq ended down 1%. The weakness of tech stocks is unbelievable. CME reached $500. It appears that CME wants to be the king (highest per-share price) of the market (excluding Berkshire and a few odd stocks). What an ego!
*** Portfolio
My portfolio reached $13.8 (+38% since 12/2004). that is about +17% YTD. SP500 is about 6% YTD. The 10% gain over SP500 in 5 months seems to come too easy. I am cautious. But the yield of my portfolio does not deviate too much from my simulation...
*** Comment
US is in a dilemma. Meeting with Chinese PM did not yield any positive result to US, especially on the revaluation of Yuan. China got so used to piggybacking US dollar and enjoyed the inflow of hot money. It is hard to ask her to stand on herself in the world market. But US no longer has the strength to subsidize China anymore. US has also relied on China's appetite on Treasury to sustain the bond bubble. Now you got the flat yield curve and FED wants Treasury to turn bearish. One reporter said jokingly, it is like a co-dependent marriage with 30 children that has gone bad. What are you going to do?
Since Yuan is seriously undervalued, it is an investment loophole to invest in China. It is good for investors. However, the inflationary economy is bad for the common people. I feel bad about the massive Chinese workers who can not benefit from their strong economy and the should-be strong currency. The same scenario can also play out if Bush continues to inflate the economy and allow the twin deficits to balloon. I want to remind you that stock market is a better inflationary hedge than bond and cash (since it has a pricing power fix income does not have). But it is dangerous to invest in stock market without a good value proposition. Therefore, an inflationary environment is particularly risky to common people.
Steve
posted by Steve at 10:13 AM
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