Market Commentary for the week of October 12, 2009

Let’s get real.
Now that we’ve gotten the fourth quarter starting date out of the way, let’s begin to focus upon more significant data such as earnings, demand, unit volume increases/decreases, and trading patterns.

Just off the top of your head, knowing what you do about your home savings, your job, your neighbors, the neighborhood …would you buy a retail store stock? How about a bank stock?

You might if you’re a “bottom-fisher.” Or maybe a day-trader, or perhaps, even, an altruist who believes they’ll “come around again.”

Would you buy an electric utility, or an energy company?

Or course, your answer depends as much upon methodology as psychology.

Play the trend.
I believe in long-term secular (generational) trends as the ultimate arbiter of portfolio allocation processes. To be fair, I enjoy trading for high powered (or any) short-term capital gains, too. Using cyclic phase methodology only to determine long term patterns limits the scope of my own tools which calibrate location and momentum of financial instruments on any scale, daily, monthly, annually.

But betting against the trend is not my choice. Short term or long, I believe trading patterns and their intricate inflection points, up or down, are a useful tool in mitigating betting by hunch or inference, without any corroborating science.

I feel comfortable, for example, that research in alternative energy sourcing, production and delivery is a secular theme that will yield portfolio profits in this decade. No one needs to scream at me to make me see the potential for return in this sector. Efficient new uses, as well as consumption patterns globally, are more than enough incentive for overweighting these themes.

The theme resonates, as well, into utility stocks and industrial infrastructure. Energy grids, and mass production of new automobiles, occupies a significant content in these metrics. The vastness of possibilities and potentially new alternatives makes you wonder why anyone after the next three decades might buy oil at all?

Technology shares, metals, research and development complement the arc of due diligence.

Infinite choice.
If these sectors resonate from one topic, such as energy, think of the myriad of concentric circles one might envision within their investment portfolio tackling issues like food, water, ecology, national defense, housing?

The fourth quarter (2009) not only opens up a new chronology for our portfolios, but unveils a new era of discussion for portfolio management, methodology, asset allocation, and coffee-table conversation.