Vol. 130 - Can The Bull Keep Running?

Aug. 17, 2009 - PRLog -- Vol. 130 - CAN THE BULL KEEP RUNNING?

August 17, 2009

Dear member,

The bull-run we've all been enjoying since March has taken a short pause. North American stock markets declined for the first week in five at the behest of weak consumer confidence. Consumer confidence is low for two reasons:

1. The overall weak job market and
2. Widespread decrease in wages.

The housing market has not rebounded in the least.  Defaults and price declines are still the norm. According to Bloomberg data, the S&P 500's 50% rise since March is the fastest since 1938, following the Great Depression. Financials and commodities have led the charge. We've repeatedly stated that financials led us into the crisis and they will have to be the ones to lead us out.

The smart money took profits last week and rightly so.  With that stated, a trend has been established which presents a valid reason to keep some money in the game as we head into the fall season.


Global Manufacturing Output:

On Friday, July 25 2009 our newsletter titled, "Have we turned the Corner" was released. Our team received a backlash of inquiries and comments - both positive and negative. We argued that global and domestic economic numbers would continue to improve. For the most part they have. There was an increase in GDP across countless nations and better than expected earnings among major banks and retailers.

Read Pinnacle's Volume"Have We Turned The Corner"


Macy's, for example, recently smashed analysts' estimates. Pinnacle member Bigspender posted a blog on Macy's surprising numbers. Feel free to join the blog,  Buy Retailer Stocks, to weigh in on the debate. Many have argued that Macy's positive numbers were not justified and that they were only achieved in lieu of ravenous cost cutting and layoffs. It is a harsh environment for retailers and Macy's is doing what is necessary to survive in very tough market conditions. Not only will they last, but will be positioned for huge market growth when the consumer comes back to spend. We are not eternal optimists at Pinnacle, rather realists with a respectful eye on the continued economic turmoil which still exists in our economies.

Our key argument for a gradual turnaround was that manufacturing numbers were improving and would continue to do so throughout 2009 and 2010. In discussing the inventory liquidation of late 2008 and early 2009 we stated that inventories would have "to be replenished to keep up with resurging demand."

There are few statistics more important than global manufacturing numbers. The dramatic rise documented over the past 6 months is undeniable. We are above the 50.0 mark which is consistent with all Bull Market Rallies and positive GDP growth in the developed nations. The last chart is very telling of the economy and a reason we review it in detail each month. You can see the manufacturing numbers begin showing weakness in 2006, a few years before the crisis began to unfold.

Keep in mind, the United States still accounts for over 30% of the world's GDP. Although China has made leaps and bounds in the past decade and continues to drive demand specifically in the commodity realm, it is only responsible for roughly 5% of global GDP. The health of the United States economy will remain our focus over the coming weeks as we head into a critical autumn period.

All the best with your investments,





PINNACLEDIGEST.COM

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