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The week ahead

11/09/2009


Investing is about making solid decisions based on a plan. Sometimes, the plan is rather difficult to execute because it defies simple logic.
 
Many years ago, I was taught that the best investments are usually the hardest to execute, just as the hardest trade is usually the best trade. I guess if it was easy, everyone could do it.

With that in mind, one of my better trades recently involved the Yankees. Late in July I adopted a plan, in honor of a critically ill family member, to enjoy the moment of the Yankees capturing the World Series in the Bronx. My strategy was to attend either Game 6 or Game 7, but not both; it is a balance sheet recession. It seemed so easy to choose and attend Game 7. The historic nature of a Game 7, CC pitching, etc. But, "the market," in this case ticket prices on Stub Hub, was oddly slanted toward Game 6 being the "better trade." Heavily overpriced relative to Game 7, I went with what the market was telling me to do.

Great that the Yankees won and I have a memory for a lifetime - something my ill Uncle would have enjoyed. Clearly, there is a parallel to last week's market action. 10.2% unemployment rate!  Wow is that some kind of headline news. But, curiously, the S&P 500 Futures closing price was 1066.20 on November 6th. No washout below 1000, as predicted heading into the week's mammoth ISM, FOMC, and Unemployment moments. The market is telling investors something - it has been since the dark Armageddon days of March. Please listen, Game 7 was a rather cold, empty experience for those who waited and showed up at Yankee Stadium for that game. Investors should draw the parallel.
 
For the Week ahead: Plain and simple, not much!  90% of the SP 500 market cap has reported so the Q3 earnings season is basically over with little impact expected on the capital markets.  In terms of economic reports, next Friday, November 13, the University of Michigan reports on Consumer Confidence.  Besides that, next Thursday's Weekly Initial Jobless Claims should be the biggest report of the week.

Clearly, what remains to improve in this recovery is the lagging jobs report. If this truly is a "jobless recovery," then Initial Jobless Claims should be rising, not falling.  Last Thursday we had another unexpected drop.  The signal may just be that the peak in the Unemployment rate will come earlier in 2010 (think NHL playoffs) versus the previous forecast, (think Yankees / Red Sox for the 2010 ALCS).
 
2003 = 2009

Source: Bloomberg

Virtus Investment Partners provides this communication as a matter of general information. The opinions stated herein are those of the author and not necessarily the opinions of Virtus, its affiliates or its subadvisers. Portfolio managers at Virtus make investment decisions in accordance with specific client guidelines and restrictions. As a result, client accounts may differ in strategy and composition from the information presented herein. Any facts and statistics quoted are from sources believed to be reliable, but they may be incomplete or condensed and we do not guarantee their accuracy. This communication is not an offer or solicitation to purchase or sell any security, and it is not a research report. Individuals should consult with a qualified financial professional before making any investment decisions.