• THE CONTRARIAN'S VIEW -- Nick Chase: Stock-market "bull" has expired

• The Peter Dag PORTFOLIO STRATEGY & MANAGEMENT -- George Dagnino: When you buy foreign equity markets you buy volatility

        George Dagnino: "I am amused when people suggest that investing in foreign markets is more profitable.
        It may be. I have several problems with the idea, however, First of all most investors do not even know where the countries they invest in are.
        Second, information is minimal, at best. If you cannot make money with what is available in this country, how can you hope to make money in countries you do not know anything about.
        Third, you buy foreign assets if you believe the dollar will weaken. This is an enormous feat. Forecasting the dollar is one of the most challenging endeavors.
        Fourth, and this is the most important point, turning points in the global equity markets happen at the same time.
        The odds of having a bull market in France when there is a bear market in the US are zero. All markets turn at the same time. The global economy and financial markets are too intertwined for financial markets to behave differently.
        So, what is the deal? When you buy foreign equity markets you buy volatility. The global equity markets rose from 1995 to 2000, declined until 2003, and have been rising since then. Exactly as the US market.
        They have appreciated more than the US market since 2003. They do not protect you against a bear market in the US, however. When we have a correction, they have a correction.
        For this reason I don not get too excited about foreign markets. Because they add volatility to our portfolio. The portfolio performance becomes more difficult to control.
        The strategy we have recommended is based on the slow, steady transition from commodity driven stocks into assets performing well when the economy starts growing at a more average pace in an environment of higher real short-term interest rates.
        We continue reducing the exposure to cyclical stocks, and preparing for the new business climate."

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        Nick Chase: "The stock-market "bull" has expired. We are now in transition from the 2003-2006 mini-bull jag of a multi-decade bear market, and about to embark on the next bear leg. Technical indicators suggest that an intermediate bottom will be reached in mid-June to early July, followed by a choppy summer and renewed selling pressure in the fall. An October or November crash is possible, though not likely at the moment.
        It's still to early to tell if the fall 2006 bottom will be followed by another mini-bull in 2007, or whether selling will continue into a major 2007 bottom. A great deal depend on just when the Fed starts slashing short-term interest rates to counteract a rapidly-collapsing housing bubble.
        As the world's stocks markets "crack" under the strain of global interest rate increases, in my opinion the risk of systemic failure is currently about 55%."