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Minyan Mailbag - Rusty's Nail

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Note: Our goal in Minyanville is to remove intimidation from the financial markets and encourage an interactive dialogue among the Minyanship. We share this next column from Rusty Robinson with that very intent.

Economic Trade Winds

The overall stock market is gathering steam in a economic trade wind and remains flat for the year, while the U.S. Treasury market has made its coupon. Investors are poised for bad news, yet in spite of rising oil prices, corporate earnings are reflecting the growth in the overall economy and the prospect that the economy expands and not contracts during the second half of 2005.

Government spending in military and health care services have risen over the past three years exacerbating a budget deficit that is being financed by a vociferous Chinese and Japanese appetite for Treasury bonds. Supply siders will argue past tax cuts by President Bush are stimulating the economy and deficits will not be as large as current projections. Already tax increase talk is being bantered by the administration should Social Security reform fail.

Leadership in the stock market continues in the energy sector, with cyclicals strengthening of late. Utilities and transportation companies are surprising the market mavens as added fuel costs are being past on to the consumer. We are overweighted in energy stocks and have a decent weighting in industrial holdings and find our clients fairing reasonably well. When we wake up from this dream, we hope we are able to pull the trigger on positions we happily own.

The poor performance of the S&P 500 and the Dow are being weighed down by the huge weighting that stagnant technology stocks have had on the indices since 2000. The near 20% decline in the technology sector since 2000 has come with virtually no names being removed from the S&P 500. The 20% holding in finance stocks by the S&P 500 has limited the move in the index as financial companies prepare for lower profit levels.

The bond market could die a slow death over the coming months with no real catalyst. An advancing CRB index usually spells bad news for the bond world. Our point is that we do not know when nor exactly how, but bonds will weaken as commodities rise.

Finally, the fact that a corporate CEO could spend five months in a prison to have its common stock triple questions the logic of even having a corporate CEO.

Minyan Rusty Robinson

R.P.

No positions in stocks mentioned.

Todd Harrison is the founder and Chief Executive Officer of Minyanville. Prior to his current role, Mr. Harrison was President and head trader at a $400 million dollar New York-based hedge fund. Todd welcomes your comments and/or feedback at todd@minyanville.com.

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.

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