- The Housing Recovery will remain sluggish in 2013. This remains my theme as the National Association of Home Builders Housing Market Index has stalled below the neutral 50 reading with single family housing starts just above 600,000. Note that there are no buy-rated homebuilder stocks and that 11 are rated sell and 9 are rated strong sell. Check my post of March 19, Sell Downgrades Weaken Homebuilder Foundations.
- The rebound in home prices will slow. While the media touts a solid year-over-year gain of 8% the fact is that the rise in home prices has stalled at 8.0% above the March 2012 low and remains 30% below the bubble peak of June/July 2006.
- The upside for money center and regional bank stocks will be limited in 2013. During the first quarter three of the four "too big to fail" banks were downgraded to hold from buy and all four lagged the market with multi-year highs set between March 11 and March 19. I covered the first two downgrades on March 11 in Downgrading Two of Four 'Too Big to Fail' Banks.
- Community Banks will continue to fail. The FDIC List of Problem banks was just 75 at the end of 2007, and at 651 at the end of 2012, more failures seen certain. The FDIC has slowed the pace of bank closures to protect the size of the Deposit Insurance Fund. Since 2007, the FDIC has closed 468 banks vs. my prediction that at least 500 would fail before the "Great Credit Crunch" ends.
- Consumer Confidence will remain below neutral. We began the year with a 65.1 reading on the Conference Board's reading of consumer confidence. In March the reading was 59.7 even further below the 90 to 110 range considered the neutral zone for this measure.
- The low yield environment for the 10-Year Treasury note will continue. My annual pivot at 1.981% has been a magnet so far in 2013, as any backup above this yield has been a buying opportunity.
- The bubble in Comex Gold will not re-inflate. Gold is down year to date, but the precious metal has not broken down, as my annual pivot at $1599.9 has been a magnet.
- The bubble in Nymex Crude Oil will not re-inflate. My first quarter pivot at $95.84 was a magnet providing stability and preventing both a break-down and upside price action.
- The euro vs. the dollar will maintain a trading range. After trading up to 1.37 into February, my annual pivot at 1.3257 was a magnet to bring the euro back down. My semiannual value level at 1.2797 held on weakness going into the end of the first quarter.
- The stock market is a risky asset class in 2013. Based upon being correct on the first nine themes, stocks are stronger than they should be year-to-date. I consider QE3 and QE4 as Fed-induced steroids that will eventually cause adverse effects on the major equity averages as the year progresses.
Q2 Investment Themes and Trading Strategies
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