Werlinich Asset Management, LLC
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January 19, 2012

Current Market Analysis
Last Month's Results
Statistics to Watch
Trends To Watch
Fearless Forecasts
What I'm Thinking and Doing
Professional News and Notes

Current Market Analysis

Out with the old, in with the new. Other than 2008, I haven't been this happy to see the calendar turn since the end of the tech bubble over a decade ago. 2011 was incredibly challenging for me because in my 20 years in this business I can't remember another year with such month-to-month, day-to-day, or even intraday volatility in the stock market. And I don't think we ever had such strong links between domestic and international markets, and virtually all asset classes, as local political, economic or even meteorological events rippled to every corner of the globe with lightning speed. As world markets became increasingly correlated (meaning that they go up or down together), it made it very difficult for investors such as myself to find an edge.I expect that as more time passes, and we move farther away from the abyss of a global economic melt down, markets will again move on fundamentals, and good stock picking will again rule the day.

Not only has the October 3 low held, but we've had a very powerful rally of over 21% in the three and a half months since that bottom, as you can see below. While the rally itself is impressive, also important to note is that there were two corrections which may have scared people out of the market. If you stayed in, you've enjoyed significant gains. If you sold, you're probably still sitting on the sidelines waiting for the next correction, hoping you haven't missed your chance to get back in. That's the risk you run when you bail on the market every time there's a hiccup.

I've written for the last few months that I've been "guardedly optimistic" about the near-term market prospects, and I remain so today. I think the chart of the Dow Jones Industrial Average paints a very bullish picture. The Dow had a great run in October, breaking through resistance before closing at 12,284. The inevitable selloff wasn't too bad and the subsequent recovery ended just below resistance at that resistance. The next correction was more shallow, and the subsequent rally blew past 12,284 on its way to a new intermediate high. The next resistance level comes in at around 12,753. Also notice that the index is well above both moving averages, and the 50-day is higher than the 200-day, which is very bullish.

The chart of the transportation average looks very similar to the industrial average. The index has moved to a new intermediate high concurrent with the industrial average, which is very bullish according to Dow Theory. The next resistance level comes in around 5,627. Also note that the 50-day moving average is about to cross above the 200-day average, which again is very bullish.

The chart of the Dow Jones Utility average is very interesting. Utilities, which was one of the best performing sectors in the market last year, have turned down so far in 2012. The index sits just above the 50-day moving average. The only conclusion I can draw is that either the sector sees higher interest rates coming up, which I don't believe, or it is simply a rotation of money out of a previously hot sector into riskier assets. Should the sector weaken much further, it may provide a nice entry point for new investors.

Thanks to the easy money policies of Ben Bernanke and the Federal Reserve, Treasury yields will likely remain artificially and historically low at least through 2013. Adding to the downward pressure on yields is the unrelenting buying by investors seeking a safe haven from global economic uncertainties. There is a limit to how long the Fed will be able to keep expanding their balance sheet before they're forced to stop buying treasury and agency bonds. At that point, rates will begin to move higher. Also, should global economic conditions really start to improve, investors will sell Treasuries and move to equities. But for now, don't fight the Fed.

Last Month's Results

As always, I provide the following chart to show the raw results for the preceding month, the quarter-to-date and the year-to-date, including the reinvestment of dividends. I had written in the prior couple of months that the market would finish the year on a positive note, thanks to better than expected retail sales and a slowly improving employment picture and that proved to be the case. The final quarter was a good one, helping to move most of the broad market averages into the black for the year. Leading the way was the venerable Dow Jones Industrial Average as investors moved into strong, dividend paying blue chip stocks. US government bonds had the next best performance as investors also sought the safety of "risk-free" treasuries. Not surprisingly, the MSCI EAFE was the big loser, as the development foreign markets suffered from the Euro crisis. Could they be the big winner next year should the crisis be averted?

Name of Index





S&P 500




Large-cap stocks

Dow Jones Industrial Average




Large-cap stocks

NASDAQ Composite




Large-cap tech stocks

Russell 1000 Growth




Large-cap growth stocks

Russell 1000 Value




Large-cap value stocks

Russell 2000 Growth




Small-cap growth stocks

Russell 2000 Value




Small-cap value stocks





Europe, Australia, Far East

Barclays Aggregate




US government bonds

Barclays High Yield




High-yield corporate bonds

* Return numbers include the reinvestment of dividends

Statistics To Watch

  • According to the Department of Labor, the figure for seasonally-adjusted initial jobless claims for the week ended January 14 was 352,000, a decrease of 50,000 from the prior week's revised figure. The four-week average of 379,000, a small decrease from the prior week. The DOL cautioned people that the Martin Luthor King holiday and some seasonality reduced the number of claims. Still, the overall trend of jobless claims is moving lower. About 3.43 million people continue to collect unemployment insurance, a drop of more than 200,000 from the prior week.
  • Non-farm payroll employment increased by a very solid 200,000 in December, with 212,000 gains in the private sector offset by 12,000 losses in government jobs. The majority of the gains came in couriers and messengers industries as well as other seasonal jobs, so we'll see how many of those jobs are retained in January. Only 8,000 jobs were actually lost to revisions in October and November. The total number of workers counted as unemployed fell to 13.1 million, helping move the unemployment rate down to 8.5%. The more comprehensive U-6 rate, which was as high as 16.7% in June, actually moved up to 15.2% from 15.0% last month.
  • A slightly lower 5.6 million people continued to be unemployed longer than 27 weeks. The seasonally adjusted number of people who could only find part-time work fell to 8.1 million and the number of marginally attached workers inched lower to 2.5 million. The number of people holding multiple jobs fell to 7.03 million. The average hourly wages for blue collar workers remained at $19.54 while the average work week crept up to 33.7 hours. So overall, this report continued the incremental improvement shown in recent months but wages and hours worked remain stagnant.
  • The Congressional Budget Office (CBO) estimated that on a net present value basis, the Treasury reported a federal budget deficit of $84 billion for December and $320 billion for the first three months of fiscal 2012, which was about $50 billion less than the same period a year ago. But half of that resulted from shifts in the timing of payments, so it would have only been $23 billion less.
  • The Census Bureau reported that the U.S. trade deficit of goods and services was $47.8 billion in November, up from the revised figure in October, but still within the range of the rest of the year.
  • The Census Bureau reported that privately owned housing starts rose 9.3% in November, after being flat in October, and was 24.3% higher than a year ago, to a seasonally adjusted annual rate of 685,000 units. The monthly results continue to fluctuate wildly from month to month, so a reliable trend is not yet in evidence. New building permits were up 5.7% from the prior month and 20.7% from last year. Like starts, the number of permits are fluctuating wildly from month to month, so no discernable trend is yet in evidence. But at least the figures are moving up, not down.
  • The National Association of Homebuilders/Wells Fargo Confidence Index in November rose to 21 from 19 in October, marking the highest level since May 2010. While these are still very low numbers, we now have three months of consecutive increases, which provides a glimmer of hope.
  • The Census Bureau reported that on a seasonally adjusted annualized basis, sales of new homes in November rose 1.6%, and at 315,000 units, sales were actually 9.8% higher than the depressed level of a year ago. The estimate of homes for sale was only 158,000, which represents 6.0 months at the current rate of sales. The median sales price of $214,100 marked the lowest price since October 2010, and was well below the 12-month moving average price of $225,842. While the rising number of home sales is good news, and probably due in part to the better weather and ever cheaper prices, the falling average sales price continues to be worrisome.
  • The National Association of Realtors reported that on a seasonally adjusted annualized basis, sales of existing homes were 4.0% higher in November to 4.42 million units, and were 12.2% higher than a year ago. (All the figures for the year have been revised.) There is an estimated 7.0 months supply of available homes. The median sales price of $164,200 is slightly lower than the 12-month average of $165,108. With mortgage rates at historically low levels, and prices as cheap as they've been for years, this is a great time to buy a home if you have cash, good credit, can find someone willing to sell and take out a conforming loan. If you want a jumbo mortgage, you're basically out of luck.
  • The S&P/Case-Shiller Home Price Index (10-city index), which uses a three-month moving average to track the value of home prices across the US, slipped for the second straight month in October. This is not surprising considering the falling home prices reported by the Census Bureau and the National Association of Realtors. My guess is that next month will also be down.
  • According to RealtyTrac, the number of foreclosures in September decreased 5.82% from the prior month, and remained 38% lower than a year ago. According to James Saccacio, CEO of Realty Trac, while foreclosure activity in September and the third quarter continued to register well below levels from a year ago, there is evidence that this temporary downward trend is about to change direction, with foreclosure activity slowly beginning to ramp back up."
  • The Institute for Supply Management (ISM) index of manufacturing activity was 53.9 in December. This marks 29 consecutive months of expansion in the manufacturing sector, and a slight improvement over the prior month. The ISM index of non-manufacturing activity was 52.6. This marks growth in the service sector for 24 consecutive months. These numbers demonstrate that business still growing, slowly but steadily, and moving away from a risk of recession.
  • The Conference Board reported that it's index of Leading Economic Indicators increased by 0.5% in November, a small increase versus the prior month. Says Ataman Ozyildirim, economist at The Conference Board: "Novembers increase in the LEI for the U.S. was widespread among the leading indicators and continues to suggest that the risk of an economic downturn in the near term has receded."
  • According to the Bureau of Economic Analysis, the "third" estimate of GDP growth in Q3 was 1.8%, down from the "advance" estimate of 2.5% and "second" estimate of 2.0%. This highly mediocre number follows a weak Q2 GDP growth of 1.3% and the putrid Q1 GDP growth of 0.4%. This compares with 2.3% in Q4, 2.5% in Q3, 3.8% in Q2 and 3.9% in Q1 of 2010. The evidence would suggest that while (at least for now) we have avoided the "double-dip recession", the economy continues to sputter.
  • The Federal Reserve reported that in November the amount of outstanding consumer credit was $2.48, up 0.8% from the prior month. This was the largest month-over-month increase in total outstanding consumer credit since November 2007. It would appear that after years of retrenching, the American consumer is back and spending again. This is very bullish for the future of the retailing sector.
  • According to the Census Bureau, retail trade and food service sales were up a meager 0.1% in December, and were 6.5% higher than a year ago. This was a weaker than expected report. Autos and clothing led the way while electronics and appliances (which was the best performer the prior month) were the biggest losers.
  • The Federal Reserve reported that in December the rate of growth in the supply of M-2 (a broader view of money) slowed a bit from prior months, but continued to move higher, up 12.7% over the prior six months. The supply of M-1 (the most narrow definition of money), on the other hand, rose 21.9% over the same six months. Where is all this money going, other than to the reserves at your local bank or sitting on the balance sheet of the Fed? It seems clear to me that this subtle and dangerous policy of monetary expansion isn't having enough real influence on the economy.
  • After plunging in October, the Conference Board's Consumer Confidence Index recovered in November, surging from 40.9 to 55.2 (revised), then moved even higher in December to 64.5, the highest level since April. Still, the index is well below a healthy reading as the economy shows signs of life but home prices and real incomes decline. A reading above 90 indicates the economy is solid, while 100 or above indicates strong growth. It could be a while before the confidence index again reaches those lofty levels.
  • According to the FDIC, 90 banks failed in 2011, which was a big improvement over the record 160 banks that were either closed or merged into healthier banks in 2010, and 140 in 2009. By comparison, only 26 failed in 2008 and a paltry 3 in 2007.

Trends To Watch

In 2011 the relative value of the dollar was the most important factor determining the direction of the stock market. When the dollar went up, the market went down, and vice versa. Almost all sectors traded down when the dollar rose. The big increase last year in the value of the greenback had a particularly deleterious effect on the relative values of hard assets like gold, copper and iron ore. This will be a very important relationship to watch this year. Should the ECU get a handle on their crisis, expect the dollar to slip, increasing the relative value of hard assets and equities. Looking at the chart below, one might expect the dollar to take a breather anyway.

Last month I wrote that it was "a very interesting and important moment for gold investors. The price of gold has fallen below both the 50-day and 200-day moving averages, and below the rising trendline. For some, this is time to panic and sell. For others, like me, this will create a profitable buying opportunity." I hope you listened and bought when it was in the $1,500's as you may not see that price again for some time. Even with the year-end weakness (as you can see in the first chart), 2011 marked the 11th consecutive year in which the price of gold increased on a year-over-year basis. Can you name any other asset class that can make the same claim? And I'm confident that the trend will continue this year as the global debt problems and political uncertainty will persist for the foreseeable future.

To put the movement in the price of gold into greater perspective, I'm showing you a three-year picture below. The decline in December violated the trendline which wasn't good. But if the current rally bring it back above 1,700, it'll be back on trend and back above both moving averages.

The decline in the price of silver was greater than the concurrent losses in gold over the last quarter of 2011. You can't describe the chart any other way than ugly. Yet recently silver is again showing some life. I've show, with a green line, the next level of resistance at around $35.70. Even though silver is a "precious metal", it's also viewed as an industrial metal, and therefore more susceptible to economic uncertainties. So assuming the economy continues to improve, one might expect the price of silver to recover. I'm still bullish.

It appears that Dr. Copper is now giving the economy a much better prognosis as the price of copper has advanced more than 23% over the past few months. It would be even more bullish if the price can break above resistance around $3.75 or so, and above both moving averages. Still, this is a positive sign.

The price of West Texas Crude had exploded higher over the past three months, rising back to around $100/barrel. The price is now bullishly above both moving averages and at the high end of the trading range (in blue). A little profit-taking and consolidation is normal after such a brief and powerful rally. It will be very important for the bulls for the price to remain above $90/barrel (red line) then eventually move above resistance at around $104-$105. For now, remaining in the upward moving green channel is bullish.

I've written about my bearishness on the financial sector every month since early 2008, and that was a very good stance to take for over three years. Now, things may be changing. As you can see, there has been a strong rally over the past two months, after an equally powerful move in October fizzled in November. The index is now trading above both moving averages after bumping against resistance around 14. I've been a bear for so long that I'm not ready to change my tune just yet. We'll see if this rally has legs.

I have been bearish on the housing sector since 2007, and like the financial sector, it saved my clients a lot of money to avoid housing stocks. I honestly cannot understand why this index has gained about 58% since the end of September. I have reported virtually no good news on housing. Indeed, prices continue to fall and show no sign of going up any time soon. Yet you can't argue with the chart. The index is right at resistance around 120 and far above both moving averages. RSI is into oversold territory, so I'd expect some profit-taking. I'm just not ready to turn bullish just yet. 

The equity markets of the developed international countries, not surprisingly, took a beating the second half of last year. The good news is that support held around 46. The better news is that the price has recently moved above the 50-day moving average. I'm not saying that it's full steam ahead. In fact, the slightest bad news could easily send this index plunging again. It's hard to imagine any sustained rally until the ECU is on more stable footing. But there is a whiff of optimism in the air. The next resistance comes in around $54. So we'll see if this index can continue to move higher.

The chart for the emerging markets index, which shouldn't be correlated with the developed markets, looks remarkably similar to the chart above. The emerging markets don't have the same crushing debt burdens, and a much higher GDP growth rate. This suggests that should there be some global economic stability, there could be some explosive gains coming from the emerging markets region. Technically, the chart looks better now that the index has risen back past both failed support levels and the 50-day moving average. The next resistance looks to come in around $43-$44, which would also bring it past the 200-day average.

I wrote for six months last year that the weakness in the Shanghai Index made me very nervous because of China's importance to the world economy. Indeed, you could make that case that as China goes, so goes much of the rest of the world. In July the index fell below its moving averages and a year old support level (green line). Then after testing it in early October, the index sunk In December below major support (red line) to a level not seen since the Lehman failure when it bottomed out at 1,665. I also wrote that RSI was extremely oversold which suggested that a short-term pop should coming up. Fortunately, as you can see in the circle below, the SSEC has indeed popped a bit, although there's a long way to go before I'll call a recovery. So for now, we'll watch and see what happens.

What a difference a few months make. After suffering through extreme bearishness in early October, the market could now be considered mildly bullish. Add to that the fact the RSI is in oversold territory and it suggests that a correction is coming sometime soon, although I don't know how severe that correction might be. My intuition suggests it will be mild.

This chart, which shows that almost 80% of stocks traded on the New York Stock Exchange that are trading above their 50-day moving average, also suggests a hint over over-exuberance. Look for either a correction, or at least some sideways action ahead.

Finally we have the somewhat busy chart of the "Fear Index". One might expect that after all the political, economic and meteorological crises we endured last year, a few of which are noted below, the VIX would show evidence of greater concern. Yet amazingly, it's closer to the complacency range than the fear range. Is the VIX discounting all the bad news and forecasting better things to come? While I don't miss the crazy volatility of 2011, I don't want to see too much more complacency because that could set up a big sell off.  

Fearless Forecasts - Looking Back and Looking Ahead

Each year in the January newsletter I make a number of predictions about the stock market, the domestic economy and maybe a few key trends. At the same time, I use this opportunity to review the accuracy, or lack thereof, of my Fearless Forecasts from the prior year. So first, let's see how my prognostications from last year panned out. The forecasts are in black and what really happened is in red.

  1. As much as it worries me to say it, I think 2011 will be a good year for the market. It wouldn't surprise me to see double digit gains by the end of the year. What worries me is that bullishness is the consensus view right now. Still, I think the Dow Jones Industrial Average will finish the year around 13,500. It won't be a straight line to get there; indeed, I expect at least two corrections of 5% or better, and maybe one of more than 10% sometime during the year. The Dow finished the year at 12,217, so I was way off. About the only thing correct with this prediction was my discussion of the corrections, and even there I didn't envision their severity.

  2. I expect the Fed to leave short term rates unchanged for the entire year. And I also believe they will resist the temptation to enact further "quantitative easing" policies as the economy shows tepid signs of life. The Fed did indeed leave rates unchanged, but the Fed continued to intervene in monetary policy, most recently with "The Twist" to lower long term rates in an effort to reduce mortgage rates.

  3. I believe the Fed will continue its efforts to restrain the yield on the 10-year Treasury but it will be to no avail. I think the yield will slowly creep higher until it finally surpasses 4.00%. It may even go as high as 4.50%. The only way I see rates moving lower is if there is a new crisis, probably in Europe, that sets off a "flight to quality", which is still US sovereign debt. Contrary to my prediction, the Fed was indeed able to keep 10 year treasury rates low. I was correct though in suggesting that a crisis in Europe would set off a flight to quality.

  4. Forecasting the direction of the dollar is tough. Left on its own, the greenback would clearly sink lower. But given that the Euro is in either worse shape, and the yen isn't very appealing, this will be a year of relative performance for currencies. Therefore, I expect the dollar index to trade in range between 75-85 depending on the sentiment of the moment. I nailed this one as the low for the dollar was around 73 in May before rallying to finish the year around 81 as problems in the Euro zone helped push the dollar index higher.

  5. Again, I believe that the price of West Texas Crude will creep inexorably higher. I think we'll again see prices north of $100 per barrel as summer approaches. I'll set a high of $105 and a low of $80 per barrel. Broadly speaking, I got the general trend correct as the price of West Texas crude finished the year higher than it started. The high price was $115 in early May and the low was about $75 in early August before finishing the year around $100.

  6. The price of gold has moved higher in each of the last 10 years. Can any of your investments say that? I think it will again close higher this year, but I don't expect a big move. My upside target is about $1,600 per ounce while the downside is about $1,250. I think the price of silver could reach $35 per ounce while it's downside is limited to about $25. I think silver will probably outperform gold this year. Mixed results here. Gold finished higher again, as predicted, marking the eleventh straight year of gains. The low was around $1,310 in January and the high was around $1,925 in September. Silver though had a more challenging year and finished lower. The high price was a shade under $50 in April, but finished the year at around $27.50, near the low.

  7. I expect the housing market to remain relatively flat this year, as the story remains dominated by low prices and foreclosures. If rates go up in any meaningful way, a flat market would be the best possible result. Watch for more stories on "robo signings", lawsuits, and adjustable rate mortgages coming due for refinancing. These predictions were pretty spot on.

  8. I think the average rate of GDP growth over the next four quarters will be 2.0% to 3.0%, which isn't horrible, but isn't enough to generate meaningful job growth. I expect better growth in the second half of the year. I was in the ballpark here, but a little too optimistic, as GDP growth for the last four quarters averaged closer to 1.5%, but things did get better in the second half of the year.

  9. Employment, or the lack of it, will be the biggest domestic story of the year. The unemployment will likely top out around 10% to 10.2% before falling, at best, to around 9% by the end of the year. 9.5% might be the best we get. The U-6 measure for unemployment, a more accurate gauge of the true unemployment situation, will likely remain in the 16%-17% range. I was dead on in calling the lack of employment the biggest (domestic) story of the year, and I got the trend correct. The unemployment rate remained in a range of 9.2% - 9.0% for most of the year before falling to 8.5% in December. The U-6 rate held around 16%-17% for most of the year before falling to 15.2% in December.

  10. Finally, the big domestic stories of the year will be:  the fight over the health care bill, the inevitable move by President Obama towards the center, the attempts by the Republicans to govern from the majority and to find a credible presidential opponent, the upcoming debate over our tax system and the national and statewide budget deficits. And we can't forget the problems in Europe over their budget problems. I was right about almost every one of those. The Republicans continue to wail about the health care bill. The inability of anyone in Congress to govern is a major problem as our elected leaders almost put our government in default. The GOP continues to seek a credible presidential candidate. The tax system will be a major topic of debate throughout the election year. Governmental budget deficits continue to drive almost all fiscal decisions on every political level. And Europe continues to dance on the brink of the abyss. The only thing I got wrong was suggesting (wishing?) that President Obama would move to the center. In fact, he has moved even farther to the left to stake out his position against the GOP in the upcoming election. That's bad for the rest of us.

I guess I had mixed results on last years' forecasts, which isn't too bad considering how unsettled the world was in 2011. And remember, I have no formal training in economics. I'm just someone who observes what is happening in the world, not just reads about it. Anyway, last year is history now; it's time to look forward, which means a new set of Fearless Forecasts. So without further ado, here we go:

  1. I think the broad markets will be up in 2012. Put me down for a 10% gain for the Dow Jones Industrial Average, which will finish the year around 13,440. As usual, it won't be a straight line to get there; there will likely be three or four corrections of at least 5% and up to as much as 15%. But investors who hold tight will be rewarded.

  2. Clearly the Fed will leave short term rates unchanged for the entire year; they've already declared as much. I also believe that there will be no new "quantitative easing" plans as the economy improves organically. I think the yield on the 10-year Treasury will stay in a range of 1.75% - 2.50% and the 30-year bond will hold at roughly 1.00% higher than the 10-year. Short rates will likely continue to hover around zero.

  3. Forecasting the direction of the dollar is tough because as bad as things here have been, economies around the world are much worse. So much depends on what happens in the ECU and what happens domestically as our elected officials debate tax policy. Therefore I'm going to forecast, like last year, that the dollar index will trade in a relatively narrow range for most of the year at 75-85.

  4. The price of West Texas Crude is no longer simply a factor of supply and demand. It also trades on the health of the global economy, sentiment and the relative value of the dollar. That being said, I think the price of WTIC will stay for much of the year between $90 - $110, with outer boundaries of $80 and $120, unless there is a strike on Iran, at which time oil prices could briefly spike to $150.

  5. The price of gold has moved higher in each of the last 11 years and I'm confident it will do so again this year. My upside target is about $2,000 per ounce while the downside is about $1,450. The primary trading range will probably be something like $1,600 - $1,850. I think the price of silver could test $50 per ounce again while it's downside is probably around $26.

  6. The housing market will continue to suffer in 2012. Average prices will remain depressed thanks to foreclosures and short sales. Even historically low rates won't move this market as only consumes with pristine credit looking to buy conforming homes will be offered mortgages. The jumbo market remains effectively closed.

  7. I think the average rate of GDP growth over the next four quarters will be around 2.5%, which is better than 2011.

  8. Jobs will continue to be one the most important domestic stories of the year. The unemployment rate will likely top out around 8.7% to 10.2% before falling, at best, to around 9% by the end of the year. 9.5% might be the best we get. The U-6 measure for unemployment, a more accurate gauge of the true unemployment situation, will likely remain in the 16%-17% range.

  9. I believe President Obama will defeat Mitt Romney in a relatively close election as a divided GOP is unable to coalesce behind Romney. The Tea Party is marginalized and the Senate remains in Republican control. Fiscal austerity, job creation and tax policy are the main debate points. The electorate forces Obama away from class warfare and back to the middle (ok, that's my wishful thinking).

  10. There will be a military strike on Iran by some nation. There will be more unrest in Russia as the population rises against Putin. There will be more violent weather this year, continuing the carnage from 2011. Europe will continue to push their fiscal problems into the future, offering palliative band aid solutions rather than applying the tourniquet. And the Giants will surprise everyone and beat the Patriots again in the Super Bowl (ok, more wishful thinking).

What I'm Thinking and Doing

I think the global economic landscape is much better now than it was six months ago, but there is still much work to be done. For now, I'm feeling more optimistic than I've felt in a while, which is making me a little nervous. Therefore, I'm raising some cash by selling off some non-core and underperforming holdings. That way I'll have some cash to spend during the next correction. I also expect various asset classes to return to their more historically normal correlations. And therefore I'm sticking with the sector-based investment philosophy that has served my investors well over the last decade.

As I mentioned above, I've been raising some cash over the past couple of weeks, and if the market continues up for a bit longer, I expect to raise more before the end of the month. I've also been putting selected cash to work for a few clients, filling in existing positions. I'm very pleased with the way our portfolios are positioned for this year and the next few years and I'm optimistic that this will be a good year for WAM and its clients.  

Professional News and Notes

With a new year comes new objectives and aspirations. While I don't make New Years Resolutions, I do have some professional goals for 2012. All of these goals revolve around doing business with more clients, continuing to serve the clients that I have to the very best of my ability and trying to make a difference in the lives of as many people as possible. I hope to accomplish the latter in a number of different ways including helping people achieve their financial goals, helping others grow their own businesses and donating a larger percentage of my income to charity.

Building on the success of my first ever Holiday Party (check out last month's newsletter for some great photos), I also plan to throw two parties this year - one in late spring/early summer and one in the fall. So keep your eyes and ears open for information on those upcoming events.

Once again, don't forget that you can connect with me on Facebook and  LinkedIn or follow me on Twitter. I tweet the latest market and economic news every day. Following me is a very easy way for you to receive stock market updates in between my newsletters. I passed 300 followers by the end of last year. I would like to at least double that by the end of this year. So if you use Twitter, please consider following me, and ask your colleagues, friends and family members to do the same.

As always, I thank you, my readers, and remind you that this newsletter is for you. I have been writing News and Views for eight and a half years now. If you'd like to read any prior edition, simply go to my website and click on the link to my newsletter archives. I hope some of you have learned something about our economy and our stock market, and that you will continue to follow along with me into the future. If you have any thoughts or suggestions on how to make it better, please let me know. And if you'd like to speak with me about your investment needs, I'd be pleased to be of service. Simply give me a call or drop me an email.

Best regards,

Greg Werlinich

"News and Views", Copyright 2012, Werlinich Asset Management, LLC and All Rights Reserved.