Tuesday, January 22, 2008

Here Comes the Global Depression

excerpts from this week's report:

"Forget recession, try depression. At least that’s what the momentum driven panic in the equity markets is signaling.

Valuation levels are now so low that fair value readings are aligned with an earnings plunge in S&P 500 operating earnings for 2008 of nearly 22%!* To achieve such a collapse the world economy and not just the U.S. must slump into a massive recession this year. And for this to occur, policy actions taken by central banks and governments..."

"Adding fuel to this fire are the words of key market influencers like Bill Gross of PIMCO. His missive this month speaks of yet another credit derivative shoe dropping in the form of credit default swaps. According to the Bank for International Settlements (BIS), there are approximately $45 trillion of credit default swaps. Mr. Gross points out that..."

"As if this weren’t enough, an increasing number of market technicians have now signaled that the bear has arrived. Be it the crossover of the 50 day moving average..."

Investment Strategy Implications

"Investor fear is so thick you can cut it with a knife. Yes, the market should be lower due to the credit crisis (it’s reached that status) and an economic slowdown/recession in the U.S. However, to take prices down to 20% plus undervalued levels is more than..."

*see table on page 3 of this week's report

also in this week's report:

* Expected Return Valuation Model
* Moving Averages Scorecard
* Model Growth Portfolio
* Sectors and Styles Market Monitor
* Key US Economic Indicators

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