From all the sources I read, it looks like Spain is going to need a government bailout as well as the bank bailout that has already been agreed to by the European Central Bank (ECB ). I’ve been talking about Europe each month for many months now – and there’s still more to go. Sadly, the debt crisis in Europe is simply just not something that can be addressed quickly. Or, more correctly, on a nation-by-nation basis, decisions could be made to address government debt levels pro-actively. However, few nations are making those choices, rather, they are continuing to worsen their debt loads and pretend that their budgets are not overburdened with debt payments. This behavior simply makes the crisis longer and harder.
In the U.S., the economic indicators remain very mixed. The 2nd quarter US GDP growth number came in at 1.5% annually, which is very slow growth – barely above recession levels. We are going nowhere fast.
The U.S. stock market has rallied nearly 8% since early June – but in my opinion there is not much basis for the rally. Certainly there’s no reason to be overly optimistic on the U.S. economy.
Commodities have also been rising steadily since early June. One more time there’s not much basis in global economic conditions for increasing demand for raw materials. This looks like a short term trend, but is enough to trigger our buy signal for DJP. That being said, here are the trade instructions:
Pro-Folio model evaluates its holdings on a monthly basis. As of the
last trading day of July (31st), we have the following trade signals:
SPY – HOLD
EFA – AVOID
IYR – HOLD
DJP – *** BUY *** Threshold: $42.17 Price: $42.93
IEF – HOLD
For existing investors:
Before today’s trade, you should have had approximately 40% of your portfolio in cash. Take 1/2 of your cash, or 20% of your total portfolio, and invest that amount in DJP.
For new investors:
If you are new to Pro-Folio
this month, you should divide your portfolio into 5 equal parts, and
invest an equal amount of money in each of the securities shown above,
marked as “HOLD” or “BUY.” Because you didn’t invest in the “HOLD” components of
the model at the time when the buy signal first turned positive, your
return on these initial trades may not be reflective of the model’s
typical expected returns.
As I noted last month, a lot of the market movement that happens in the summer is due to the “dumb money” or retail investors, as the professionals hedge their holdings and go on vacation. I wouldn’t be surprised for a different market vector to start emerging at the end of August as market moves put in their orders for autumn.
Fortunately for us, the Pro-Folio model has
proven its worth over 37 years including the 2008 market crash, so we
can continue to follow it precisely and expect that the value of our
holdings will be preserved.