A FREE RIDE IN THE MARKET

July 29th, 2012

Maybe there is no Free Lunch, but there can be a free ride in the stock market. Suppose you have a nice million-dollar portfolio, half in bonds and half in equities. And suppose after reading up a bit and doing some research, you are convinced that the S & P index is not going to go up more than 10% over the next two months.

The S &P index is a nice bundle of 500 diversified stocks that kind of tracks the Dow Jones, not exactly, about 1/8th of the price. So when the S&P moves 8 points the DJ moves about 64 point, but not exactly.

That’s the time to sell a call spread. After reading a number of economic reports lately i am only mildly bullish on large cap US equities for the rest of this year.

So while the market was up this month I sold 10 September calls on the S&P index, called the “SPY” 1400 calls ” for $1,700 and bought the same options but at a strike price of 1410 paying $360. I ended up with a net premium of about $1,150. The purchase of the 1410’s is a hedge against a sudden jump in the market above 1400.

Here is the good news. If the S & P does not go over $1,400 by the third Friday in September, I just get to keep the $1,150. That sounds good. But if the market does go up, while I have a risk of $4,000 possible loss on this trade, I will make much more on the increase in my stock portfolio. So I can’t lose!

But there’s more. Suppose the market does go up and I might lose up to $4,000 even though I make more on the rest of the portfolio. I don’t have to take the loss. I can buy back the September1400 calls for a loss and sell back the 1410 calls for a small profit, taking a nice loss for tax purposes, and at the same time sell a new call spread at higher numbers, such as 1410’s hedged with the 1420’s, and bring in a new premium. If I do that as soon as the market hits 1400, the chances are good that the new premium will be almost as much as the loss. So I get a free ride: if the market goes down I pick up a premium, but of course lost some value in my equities that I would have lost anyway. If the market goes up I get a tax loss plus an increase in value of my stocks. Isn’t the stock market wonderful?

Notice that I’m NOT predicting that the market will go down between now and September. Although it might. What this trade relies on for profitability is that the market will not go up very much during the next few weeks.

While profits are doing well in the large cap sector, there are also a number of negative things happening in the world that can affect prices. The Eurozone might fall apart. Spain might go into bankruptcy. Chinese imports are already falling. Some companies, like Facebook, are not showing well. All of this creates a psychology in the market that is negative and holds down prices.

But even when I think that most stock prices will not go up, there are always exceptions. A couple of months ago I bought some Xerox stock, because its way down but the company seems to be improving. I bought the copper ETF, because I read an article about how the world is consistently using more copper than is being produced. Copper has continued to decline since I invested in it, but I’m holding on.

And so it goes for this week. Some advisors are recommending an investment in the “VIX”, which is the volatility index. The think that we are going into a period of higher volatility, and that causes the VIX to go up.

I never invest in the VIX because it has a built-in decline mechanism. But to each his own. That’s one of the things that makes the market so much fun.

MLH, July 27, 2012

I AM HOLDING MY POSITION IN GMCR IN SPITE OF ITS DECLINE

July 26th, 2012

In spite of the fact that GMCR is below my prediction of $20 a share, I’m sticking with it, and holding on to my put spread (the 20’s vs the 16’s as a hedge). Here is what a friend writes:

GMCR has grown their revenues from 800 million in FY09 to an expected 4B in FY 2012. The Keurig branded K-Cup coffee maker is in close to 12 million homes which constitutes approximately 13% of total coffee drinking households. Last year, single serve coffee makers represented 50% of the dollar sales of all coffee/espresso makers. GMCR has licensing agreements with Starbucks, Dunkin Doughnuts, and many other leading premium brands. The licensing agreements are clearly less lucrative than selling their own branded coffee. This is a classic razor/blade business model. This market for single serving coffee should grow in excess of 20% for quite some time. Will SBUX selling single serve branded coffee cut into GMCR’s sales or SBUX’s? Will generic competition market penetration exceed the rate of growth of the market?

The recent downdraft in the stock from the 50’s was due to a missed inventory forecast. There could be stale product that needs to be written off. This adjustment could be more than a 1 quarter issue. How do you accurately forecast inventory when you are growing over 75% per year? I think the stock is very inexpensive here but could go lower on further inventory/demand data. The market is telling you that this will happen. I do not believe that this is a long term issue. Why would 2 of the leading branded coffee makers sign licensing agreements with GMCR if they could do this on their own? The patents that are rolling off in Sept/Oct are for less advanced technology than they currently are using. Coffee is a basic business that is not going away. Who will own this business? The single serve coffee is the fastest growing market in the grocery channel.

There are other issues which are germane. There is a informal SEC inquiry into their accounting. Management has credibility issues. Private label coffee is coming into the market. The coffee makers are actually pretty cheap looking and do have some quality issues. All said, I think this stock is much higher from here in 1-2 years. How soon it regains its footing remains to be seen. They report on August 1st.

merv

PREDICTIONS

July 19th, 2012

Some people don’t invest in the stock market because, they say, one can’t predict where it will go, or the value of any particular stock. I tend to agree with that, but it doesn’t keep me from investing. While I don’t pretend to be able to predict the price a stock will go to, or the market in general, I do think I can predict the LIKELIHOOD of a stock WITHIN A RANGE, OVER A SHORT TIME FRAME. And that’s enough to make money in the market.

For example, while I think Apple stock will go up and down during the rest of this year, I don’t think it will fall more than 10% in any 60 day period MORE OFTEN THAN NOT. In other words, if we look at the next three 60 day periods, I don’t think that the stock will fall more than 10% during more than one of those periods.

The fact is that I don’t actually think Apple stock will fall more than 10% in any of those three 60 day periods because I think we have just begun to see the tablet revolution, and Apple TV devices, which have barely started to be distributed, are going to be the next big hit for the company.

“If I were a rich man’” as the song goes, I might buy 1000 shares of Apple stock. But $600,000 is to much for me to invest in one stock, particularly one that doesn’t pay much of a dividend. Or maybe not: Apple stock has already moved up a lot based on future predictions, and I feel more confident about it not moving down than I do about it continuing to move up. So based on my prediction of statistical likelihood, I sell puts on the stock.

The last round of puts I sold on this stock were the July 530’s. In other words, I was betting that the stock would not go below $530 (or I would be contractually obligated to buy 1000 shares at that price—which, if I did, I would have sold the same day even if it were below 530 and I had to take a loss). For 10 puts I received $30,000.

I would be nice if I could keep all of that, but in fact I usually hedge my risks be buying puts at a lower price, to protect me against a catastrophic loss. So here I bought 10 puts at a strike price of 515 and paid out $22,000. If fact Apple stock went up a bit, so my profit for this 60 day period will be $8,000. My risk was limited to $7,000 (15 points less the premium).

Here are a few other predictions I am currently following in my account:

1. I think Bank of America stock (BAC) will go up to over $8 a share by the end of the year. I am selling the $8 puts based on this prediction. Yes I realize that financials and banks have not done well, but the stock seems oversold to me for its potential. This called an “in-the-money” put, which is a way to benefit if a stock goes up in price. Note that this is different from the other examples here, which are betting that stock will not go DOWN below a certain level.

2. Based on the research done by a friend who shared it with me, I have accepted his prediction that Green Mountain Coffee Roaster (GMCR) stock will not go below $20 a share. At the moment I have sold the September 20’s, taking in a $2,100 premium. The stock dropped from over $90 a share down to the low 20’s, and we think this is an over-reaction for a company in the coffee industry that has a good customer base.

3. JP Morgan (JPM) stock was hit with unexpected trading losses, and the market reacted. But when I looked at it I noticed that in spite of billion dollar losses, current profits remain higher than the losses. So again I felt that the market over-reacted. I sold the July 30 puts and took in a $1,600 premium. Since I placed that trade the stock has moved up in my favor.

4. I’ve been consistently writing puts on Unilever (UN) based on my assumption that the stock will go over $35 a share. It seems like a good stock that pays a handsome dividend, and if I have to buy it that’s OK. So far my prediction has been wrong, and the stock has stayed between $33-$34 a share. But the premiums have been just about the same as the losses, so I’ve only lost a small amount during the past 3 quarters. I am continuing with the same prediction.

5. When Walmart stock was around $58 a share it looked like a good investment, so I sold 10 puts at a strike price of $55, and bought the 45’s as a hedge, taking in a net premium of about $800 due in September. Yes it appears that I made a profit, but I would have made a lot more had I just bought some of the stock. The stock has moved way up and is currently trading at around $73 a share. One of the negatives about writing puts is that you don’t participate in the big hits!

6. Some of you might have noticed that all of these predictions concerned upward price movements. None of them were predictions benefiting from the likelihood of a downward movement in price. That’s true. Since the beginning of 2012 I’ve been generally bullish on the market, and felt that prices of good stocks in general will go up during the year. Also, put premiums have been greater than call premiums. But I do sell calls, based on a likelihood of a decline in price, and perhaps in my next article I can talk about that.

MLH

What Does the Supreme Court Ruling on the Health-Care Reform Law Mean for You?

July 10th, 2012
On June 28, 2012, the U.S. Supreme Court ruled, in a landmark decision, that the Patient Protection and Affordable Care Act (ACA), including the provision that most Americans carry health insurance or pay a penalty, is constitutional.

The ACA, signed into law in 2010, made sweeping reforms to health-care coverage in the United States. Many provisions of the law have already taken effect. A number of other provisions are scheduled to take effect in subsequent years, including the requirement that most Americans and legal residents have qualifying health insurance (exceptions apply) or pay a penalty in the form of a tax. Here’s a summary of some of the important provisions that are already in place, and those that are on their way by 2014.
In effect now

  • Children can no longer be denied insurance coverage because of pre-existing conditions
  • Payment of $250 rebate to Medicare Part D beneficiaries subject to the coverage gap (beginning January 1, 2010) and gradually reducing the beneficiary coinsurance rate in the coverage gap from 100% to 25% by 2020
  • Insurers will not be able to impose lifetime caps on insurance coverage
  • All plans offering dependent coverage will be required to allow children to remain under their parents’ plan until age 26
  • Insurers cannot cancel or deny coverage if you are sick except in cases of fraud
  • Adults with pre-existing conditions will be able to buy coverage from temporary high-risk pools until 2014, when coverage cannot otherwise be denied for pre-existing conditions

Key provisions effective on or before January 1, 2014

  • Increasing the medical expense income tax deduction threshold to 10% of adjusted gross income, up from the current 7.5% (January 1, 2013)
  • Increasing the Medicare Part A tax rate by 0.9% on wages over $200,000 for individuals ($250,000 for married couples), and assessing a new 3.8% tax on some or all of the net investment income for these higher-income individuals (January 1, 2013)
  • All Americans must carry health insurance or face a penalty (in the form of a tax) of up to 2.5% of household income on individuals, with exceptions for economic hardship, religious beliefs, and other situations (January 1, 2014)
  • Adults with pre-existing conditions cannot be denied coverage or have their insurance cancelled due to pre-existing conditions (January 1, 2014)
  • A requirement that states establish an American Health Benefit Exchange that facilitates the purchase of qualified health plans and includes an Exchange for small businesses; also requires employers that contribute toward the cost of employee health insurance to provide free choice vouchers to qualified employees for the purchase of qualified health plans through Exchanges (January 1, 2014)
  • Tax credits will be available to qualifying families to offset the cost of health insurance premiums (January 1, 2014)
  • Employers with more than 50 employees must offer health insurance for their employees or be fined per employee (January 1, 2014)
  • Imposing taxes or fees on health insurance providers and drug companies, while doctors and hospitals will receive less compensation from government sources (January 1, 2014)

So is this it?

While the Supreme Court has ruled the ACA constitutional, it may still face challenges as Congress may seek to repeal the law. The ultimate fate of the health-care reform law may be determined by the outcome of the November elections.

MARKET WEEK: JULY 9, 2012

July 9th, 2012

The Markets

Even the small gains seen in equities early in the week fizzled after the holiday on discouraging economic news from around the globe. Only the Nasdaq and small-cap Russell 2000 were still in positive territory by Friday's close. U.S. Treasury prices benefitted once again from the bad news as the 10-year yield headed south.

Market/Index

2011 Close

Prior Week

As of 7/6

Week Change

YTD Change

DJIA

12217.56

12880.09

12772.47

-.84%

4.54%

Nasdaq

2605.15

2935.05

2937.33

.08%

12.75%

S&P 500

1257.60

1362.16

1354.68

-.55%

7.72%

Russell 2000

740.92

798.49

807.14

1.08%

8.94%

Global Dow

1801.60

1831.63

1814.28

-.96%

.70%

Fed. Funds

.25%

.25%

.25%

0 bps

0 bps

10-year Treasuries

1.89%

1.67%

1.57%

-10 bps

-32 bps

Equities data reflect price changes, not total return.

Last Week's Headlines

·         Unemployment remained stalled at 8.2% and the U.S. economy added just 80,000 new jobs in June. According to the Bureau of Labor Statistics, the average monthly increase in new jobs during the second quarter was only 75,000 compared to the 226,000 monthly average in Q1.

·         Economic news abroad wasn't encouraging. Eurostat said the unemployment rate in the European Union hit a record 11.1% in May, and there also were signs of weakening manufacturing activity in Germany. The European Central Bank cut its key interest rate to a record low 0.75%, and Spanish and Italian 10-year bond yields rose above 7% and 6% respectively. China also cut its one-year rate for the second time in two months, lowering it to 6%.

·         According to the Institute for Supply Management, manufacturing activity in the United States fell in June for the first time in three years. The ISM's index dropped to 49.7% from 53.5% the previous month; any number below 50% is considered a contraction. The ISM said new orders and exports also contracted for the first time since mid-2009. However, the Commerce Department said factory orders were up 0.7% in May, and durable goods orders were up even more, by 1.3%.

·         Meanwhile, China's manufacturing sector also slowed in June to its lowest level in seven months; the National Bureau of Statistics' 50.2 reading was just barely in expansion territory. However, China's services sector saw solid expansion with a 56.7 reading by the NBS.

·         The U.K. Serious Fraud Office announced it will investigate possible criminal charges in connection with manipulation of the London Interbank Offered Rate (LIBOR). Barclay's PLC was fined £290 million by the U.K.'s Financial Services Authority the previous week after it admitted that false LIBOR-related information had been repeatedly submitted since 2005. It also had previously been fined $160 million by the U.S. Department of Justice.

·         The International Monetary Fund urged the United States to reduce uncertainty about the impending "fiscal cliff." The IMF said the package of tax increases and government spending cuts scheduled to take effect in 2013, coupled with the anticipated renewed wrangling over an increase to the U.S. debt ceiling at year's end, could threaten an already tepid economic recovery.

Eye on the Week Ahead

The week kicks off with Alcoa's earnings release, which marks the unofficial start of the Q2 earnings season. Also, eurozone finance ministers will meet to try to figure out how to implement the recent agreement to tighten fiscal union among countries. Meanwhile, auctions of 10- and 30-year U.S. Treasury securities will suggest whether recent strong demand will continue.

Key dates and data releases: eurozone finance ministers' meeting (7/9); balance of trade, Federal Open Market Committee minutes (7/11); wholesale inflation (7/13).

Data sources: Includes data provided by Brounes & Associates. All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Past performance is no guarantee of future results.

The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. Market indexes listed are unmanaged and are not available for direct investment.

Advanced Pension Strategies

July 8th, 2012

Dear Friends,

We are half way through the year, a year in which many concerns get played out through the media to occupy our minds and perhaps even cause concern or worry.  While elections and ballot propositions may be important, all too often we  focus on big ideas that quite frankly are not in our control – at least not on a day to day basis.  I must constantly remind myself of the same, to focus on the objectives at hand over which I have some measure of influence.  One task assigned to us all is that of preparing for a strong financial future, one where there is secured or even guaranteed income.  How you invest for that future and how your income is protected is a critical task.  My job is to assist business owners and professionals in creating safe and reliable streams of income for all contingencies – whether in retirement or catastrophe.  These are challenges I prefer to worry about.  Let me take some of that burden off you.

Meanwhile, please enjoy our brief take on some important financial and economic topics:

Hot Financial Topics for July 2012

  • HOT TOPIC: Coming to America: Foreign Travelers Boost U.S. Economy
    International visitors spent a record $153 billion visiting the United States in 2011, an increase of 14% over 2010. As the overall U.S. trade deficit continued to grow, foreign tourism produced a trade surplus of $42.8 billion. This article examines the growing U.S. travel and tourism industry and what it may mean to the domestic economy.

Following the Federal Reserve
This primer on the central bank discusses the Fed’s recent policy moves, including the unprecedented actions it has taken to help prop up the banking system and spur the economy in the wake of the financial crisis, and how Chairman Bernanke has promoted greater transparency.

What Is Your Business Worth?
The market for selling small businesses improved slightly in 2011, but buyers still had the upper hand. This article addresses some reasons why a precise professional valuation could be useful for effective business, tax, and retirement planning.

What’s Your Retirement Vision?
It’s disappointing to dream about a comfortable retirement and then find yourself with limited financial resources, unable to enjoy travel or hobbies due to high daily living expenses and needs. Workers of all ages should factor the kind of retirement lifestyle they want into their saving and investment strategy.

Investing When Rates Are Low
Interest rates have been exceptionally low for three years – and are expected to remain so through the end of 2014. For investors approaching retirement, capital preservation is typically very important, but portfolios should also outpace inflation in order to last. This article presents considerations for investing in the current low-interest-rate environment.

Costs of Caregiving
More than 65 million Americans – about one in three adults – provide unpaid care for someone who is ill, disabled, or aged. Caregivers may incur substantial financial burdens but could also face risks to their own physical and mental health. It may be prudent to consider the cost of long-term care into your retirement plans.

Also, please take note – our business is growing and we are looking for talented individuals who are interested in financial services to join our team.  If you know of someone who is looking for a mid-career transition, we would appreciate an introduction.

All the best!

Daniel Bennett

MARKET WEEK: JULY 2, 2012

July 4th, 2012

The Markets

The sight of eurozone officials agreeing to measures designed to ease the region's immediate debt crisis and promote longer-term stability helped power equities upward last Friday. The measures also boosted prices for both oil and gold, while U.S. Treasuries ended the week relatively unchanged.

Market/Index

2011 Close

Prior Week

As of 6/29

Week Change

YTD Change

DJIA

12217.56

12640.78

12880.09

1.89%

5.42%

Nasdaq

2605.15

2892.42

2935.05

1.47%

12.66%

S&P 500

1257.60

1335.02

1362.16

2.03%

8.31%

Russell 2000

740.92

775.13

798.49

3.01%

7.77%

Global Dow

1801.60

1792.14

1831.63

2.20%

1.67%

Fed. Funds

.25%

.25%

.25%

0 bps

0 bps

10-year Treasuries

1.89%

1.69%

1.67%

-2 bps

-22 bps

Equities data reflect price changes, not total return.

Last Week's Headlines

·         Under pressure from Italy and Spain, European Union leaders agreed that a single body–possibly the European Central Bank–should oversee banks in all 17 eurozone countries, and that details should be finalized by year's end. Once that is in place, the current bailout fund and its replacement, the European Stability Mechanism, will be able to lend directly to struggling banks in countries whose governments have been struggling to assist them, such as Spain. The summit also reassured investors that any loans to Spain to address its immediate debt crisis would not be treated as senior to existing bonds.

·         Implementation of the Patient Protection and Affordable Health Care Act will continue in the wake of the Supreme Court's ruling that the health-care reform legislation is constitutional. The 5-4 decision held that the penalty to be paid by those who choose not to buy health insurance as required by the law is constitutional as part of Congress's power to tax and spend.

·         The final number for first-quarter GDP remained at 1.9%; that's substantially lower than the 3% of Q4 2011. The Bureau of Economic Analysis said increases in personal spending, exports, and investments in business inventories and both residential and nonresidential investments were partly offset by reduced government spending at the federal, state, and local levels. Expiration of an investment tax credit helped cut corporate profits by 0.3%, compared to Q4's 0.9% increase.

·         Consumers spent less and saved more in May, according to the Commerce Department. Spending was down 0.1%, while the savings rate went from 3.7% to 3.9%.

·         After two months of declines, orders for durable goods popped up 1.1% in May, according to the Commerce Department. Even setting aside the 4.9% jump in the commercial aircraft sector, orders for goods intended to last for three years or more were up 0.4%.

·         The Commerce Department said new home sales shot up 7.6% during May. That put sales at their highest level in more than two years and almost 20% higher than a year earlier. The Northeast and South saw the biggest increases, while sales in the Midwest and West were down.

·         There also was a bit of good news on home prices. The S&P/Case-Shiller index was up 1.3% in April, and 19 of the 20 cities measured by the index saw gains (Detroit had a 3.6% loss). However, that still left prices 1.9% below last April, though that was better than the 2.6% year-over-year decline of the previous month.

Eye on the Week Ahead

With a midweek holiday in the United States and the Q2 earnings season on the horizon, domestic trading volume could be light, though global investors will continue to assess the impact of last week's EU summit. And as always, Friday's unemployment data will be closely watched.

Key dates and data releases: U.S. manufacturing sector, construction spending (7/2); factory orders (7/3); unemployment/payrolls (7/6).

Data sources: Includes data provided by Brounes & Associates. All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Past performance is no guarantee of future results.

The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. Market indexes listed are unmanaged and are not available for direct investment.

ANOTHER QUESTIONABLE SYSTEM

July 2nd, 2012

Systems for writing options are lots of fun to design. But it’s hard to tell if they work or not without letting them run for a long time through different market conditions. I am currently testing several.

One interesting system under test I described in an earlier posting. I bought 10 puts of the Bank of America expiring in January 2013 at a strike price of 5 as a continuing hedge against a drop below 5. The plan was then to sell puts at strike prices over 5 each month while the hedge is in place.

This worked well for the first three months. In January and February I was able to profitably sell puts at 6, 7 and 8 for a profit of $600. I paid $600 for the hedge, so I had recouped my investment after three months, and had 8 more months of selling to create a profit from the system.

But then in March the stock took a big dip, and I lost $455. I rewrote a new position and then in April the stock took an even bigger drop and I lost $1,250. I wrote a new position for July, at $7, and that looks like it should hold for a $600 profit.

The bottom line at the half way mark is a small loss of just over $1,000, but with another 5 chances to write puts at a profit. With the financial sector improving as it has, I’m optimistic that the system will provide a profit by the end of the year, but as they say, “time will tell.” One thing is sure, no matter how clever the system, in times of volatility it’s hard to make a profit selling options. One does much better during periods of stability.

—–xxx—–

Last week I sold puts against JP Morgan. This is something I often do. I think that good or bad news on a company is compounded in the market by a psychological factor. So when there were reports of heavy losses by JP Morgan, the stock dropped significantly. But as big as billion dollar losses seem, they didn’t seem to me to be so big compared to the annual profits of the company. So while I agree that billion dollar losses are not good for a company, I think the market over-reacts to this kind of news, and the stock drops for a while and then rebounds. At least that’s the bet that I’ve made.

So at the end of May when the stock dropped below $32 I started to look at it. While looking it jumped back up over $33. I finally put in my trade when the stock was around $34, having missed the best opportunity by being too slow. I sold ten of the December 30 puts and bought the December 22 puts to hedge (and avoid a margin call in my account) and took in $1,150 in premium. That’s not a huge trade for a six month position, but the way I look at it I have a risk of $7,000 for 6 months for which I stand to gain over $1,000, so it’s like a 30% return on my money if it works, so it’s a reasonable risk. Since I wrote the trade the stock has continued an upward trend in spite of renewed bad news, so I’m feeling pretty good about it.

—xxx—

I’m writing this from the South of France, where I usually spend the Spring. Everyone here is talking about the European economy. Most are pessimistic, yet there are signs of a long term recovery from the problems of the countries like Greece that are bankrupt and need support from the community.

For me, I am not investing in Europe, and I am reducing investment in US companies that rely heavily on sales into Europe. I am reinvesting in US companies selling into Asia and the third world. This has been my consistent position now for about one year, and I am more convinced than ever that it is the best position.

Merv Hecht
Port Grimaud France