1/25/2008 - Investment Meeting

Notes from meeting-
Jack Sullivan, Susan Foley, Thomas Foley

Market Stats

Dow
12,374.14

4.47 (0.04%)


Nasdaq
2,367.06

6.14 (0.26%)

S&P 500
1,350.97

1.10 (0.08%)

10-Yr Bond
3.6550%

0.0150






Currency Cross Rates
Currency U.S. $ ¥en Euro Can $ U.K. £ AU $ Swiss Franc

1 U.S. $ 1 107.2650 0.6813 1.0043 0.5050 1.1340 1.0984
=

Market Overview
Getting weaker
Interest rates -> stable to down
Commodities -> flat to down
World Economic Growth - Slows

Negatives:
January Disasters

Recession following election

Subprime - 3x

Globally more correlated than believed

War?

Neutral:
Weak Dollar - still currency of choice

Positive:
Venture Capital/Private Equity/Hedge Fund - record capital raised on books - lots of cash on hand - looking to find a home

Real Estate opportunities for investment - "paucity of real estate

Asset Classes - we need a chart to show the returns in different sectors over last couple years




Other Points -
Unemployment Rate
FED - US still is skittish about new Chairman - Stimulus package will largely be unnoticed
Democrats - negative for drug index
GDP Guesses on where it will be - Papa - '08 - 1%, '09 - 1.5% … Susan - '08- 2%, 2%+ … Thomas - '08 - <1&, '09 - >2%
Possibility for a BIG inflation run
China Unemployment - 11-9%, wrong numbers … Thoughts that China and India might slow down to 6% growth
European growth - 1%
Things to look for:
10 Year Bond

Investment Strategies:
Q1-Q2: Most likely in Cash

When ready to invest - Grandchildren's Account - 50% International/50% Domestic

Possibilities - Financial ETFs

Papa's Account
70%: 50%- QQQQs, 20%- Rus (commodities), 10%-Brazil (commodities), 10% - India (consumer), 10%- China (consumer)
30%: 20%- Natural Gas, 20%- Gold, 20%- Copper, 20%- Zinc, 20%- Nickle

Susan's Account Proposal -
50% US - 20%Large Cap Growth, 10%- QQQQs, 20% Russell 2000
50% International - 10% China, 10% India, 10% Europe, 10% Emerging Markets, 10% - Brazil, Rus, South Africa

Alternative - Financial ETF
Bank of America - 39.96
Wells Fargo - 30.48
Bank of Chicago
Wachovia - 36.79
Citigroup - 26.94
GS - 194
JPM - 44.14
MS - 49.12

Patrick Notes:

January Swoons:

January 2008 is on track to be one of 6 worst January declines since 1926. Averaging the six worst January periods – the following 24th month period in the S&P 500 was up 26%. This would lends support towards Sue’s optimism on a market rebound.

3 Prior Crash Charts:

Does not account for all recessions – Back to back recessions for 80-82 saw a peak to trough decline of 33%, 73-75 was 46%,. Dad compared this prospective recession to be most like that of 80-82. Also, keep in mind the 2001 recession continued to see a precipitous decline as the Fed aggressively lowered rates down to 1%.

Impact of financial stimulus on consumer:

The conventional thinking is aggressive fiscal stimulus we spur consumer spending. I posit it will stabilize consumer spending, and as such will not drive the similar economic expansion 2003. If the American debtor gets a shot to maintain low cost of debt, it will not allow them to take off on a spending spree. It will however, keep them out of default. This is anecdotal evidence from a person who has a slight exposure to variable debt.

Michael Sharf: "Agree with everything except the emerging consumer plays from pappa. I think you have to go basic materials and infrastructure from emerging markets, especially resource rich ones eg Russia, Brazil. Maybe look into some kind of a Saudi/ Dubai construction/infrastructure etf/Reit. commodity demand profits those sovereign funds and that money will be spent on infrastructure development. I was looking at GuruFocus.com and some of the big investors, I think George Soros included, were way overweight basic materials. I think that it is too hard to predict where growth in India and China will be, but a blunt approach to it would be basic materials.

The end of the email is definitely on point though, there is a lot of noise right now caused by these plans to fix the problems. Only reversal, and reprising can fix the problems fully- instead of putting lip stick on them."

Nicholas Nolan - look at the distressed company funds - more to come next week.


Idea: Unemployment rate is too high - ~7% means we are headed/in a recession.

3 Prior Market Crashes
Wednesday, January 23, 2008 | 12:45 PM
Here's a comparison of 3 prior market crashes: 1930, 1962, 1987 and today. (Note that there is no guarantee that this will be a crash, or if it is it will be the same as those others):
1930 1962 1987 2008


We are getting to a point where markets are oversold, and due to bounce. But understand what odds we are facing here: A deep recession likely awaits us, and with it, earnings compression, and lower -- often considerably lower -- stock prices.
We will hear a lot of noise about Fed action, stimulus plans, etc. -- every reason why you should jump back in here -- but all that intervention will accomplish is delay the inevitable washout.