Core Values

FX Update - Dollar Bearish Trend - Odds at 59%

After reviewing data for the Aussie dollar, my view on the US dollar is still bearish. The UDN is sitting right at my entry point, and I'll start building out of the money strangle option spreads, along with an outright purchase of the UDN (Powershares US Dollar Bear ETF)

Economic Update - Odds of continued expansion set at 62%

I just updated my Economic model and I'm still setting the positive outlook at 62%

Interesting highlights - data for the end of Aprill 2011

• Generally, interest rate trends remain down
• The 5 and 10 Year T Bond yield is creeping upward
• Spreads of short term paper such as 3 month LIBOR and Euro deposits against the 3 month T Bill are widening
• Personal Income from 2011 Q1 continues to improve

Could Meredith Whitney be right?

The has been a wave of discussion and critique of banking analyst Meredith Whitney and her predictions of a wave of defaults in municipalities.Warren Buffet has also voiced concern on this issue - (Buffett, Whitney 'Out of Their League' on Munis: Analyst).

Are they right? That's not the point. What is important is the terrible state of finances of governement at every level, and the refusal and or ignornace of politicians to deal with budget gaps. State and local governments might get through this situation, but only if the economy continues to improve and government spending is slashed. Tax increases are probably not an option anywhere given the national voter mood.

In my own state of Colorado, there is a commission formed of various state politicos, and they are proposing a series of tax initiatives, without dealing with the state government spending side of the equation. The can is still being kicked down the road, and being the betting man that I am, I would venture to guess that a tax proposal would be savaged by voters.

 

An Under Performing Portfolio by Design

I'll never try to sell an investment newsletter, or manage other peoples money with this portfolio. Because I'm honest in what I can do.

I can protect capital - but I'm not going to beat a market metric.

Economic Risk Model - 70/30

Our updated risk evaluation of the US economy has the odds of continuing recovery at 70%.  Not too bad; but remember - we don't forecast, we just place estimated odds on outcomes. However, plugging this assessment into our Core Portfolio still yields a cash position of 45%. You can see our complete assessment and allocations here.

Why so much cash? 

The Core Portfolio is a very defensive strategy - designed for two reasons - under performance and preservation of capital. As I outlined here - this portfolio embraces under performance.