In a recent radio interview, one of the world’s biggest bond fund managers said that the “old normal” of growth from 6% - 7% per year has gone away for good and the “new normal” is going to be about half of what it once was.
Fortunately we don't have to accept that view.
Today’s technological advances along with the products that exchanges currently offer, make the “old normal” very achievable; not just per year but per month and if the conditions are right – per week. For those subscribers who are determined to become craftsman in the art of spread trading, these types of monthly returns are not only possible – they are our “new normal”.
February
• 10.62% - 16.28% Return on Investment, 90.25% - 90.32% Probability of Win.
• 12.61% - 13.12% Return on Investment, 88.31% - 88.92% Probability of Win.
The Markets and How They Affect Us
With record earnings and an improving global economy, U.S. stocks are defying the new normal of below-average returns. There were several warnings back in 2009 that suggested returns would lag behind historical averages because of government budget deficits and increased regulations. But as investors look back at 2010, they’ve witnessed the S&P 500 gain 13% marking the biggest rally since 1955. For the moment, most investors are beginning to believe that economic growth is sustainable and current sentiment is that it will probably continue well into 2011. The S&P 500 closed at 1,257.64 last week - the largest December rally since 1991 while the Dow Jones Industrial Average closed at 11,577.51 – a yearly increase of about 11%.
At the end of the 3rd quarter, investors were caught off-guard as they watched stocks rally after the Federal Reserve pledged to buy $600 billion in Treasuries to stimulate the economy. But by doing so, many long-term investors switched to bearishness citing that all we’re doing is just kicking the debt can down the road. This is a valid concern - the Fed printing more money is not the way to long term growth and prosperity. It’s not a question of if inflation and interest rates rise but more a matter of how much and how fast. Fortunately, for us options traders, there is an answer to every market direction that allows us to remain profitable even when troubles reverse the current advance.
U.S. GDP grew at 2.8% in 2010 but is forecasted to slow to 2.6% in 2011 and then back up again to 3.2% in 2012. Employers added 140,000 jobs last month; an increase of 39,000 from the previous month. The Labor Department will release it payrolls report this Friday with the expectation that the unemployment rate will drop to 9.7%. Even with this expected drop, there are still some very big questions out there regarding the sustainability of economic growth as housing, lending and, of course, jobs have yet to fully recover.
The combination of an economic recovery coupled with consumer sentiment suggests that even the most economically sensitive or cyclical sectors should perform their best this year. Corporate data is showing an increasingly positive trend. As such, the benchmark measure of using S&P 500 options to hedge losses, the VIX, dropped to 17.75 from 2010’s high of 45.79 back in May.
However, treasuries also rose as the 9.8% unemployment rate, record low inflation and the Euro-nation’s sovereign-debt crisis continues to weigh heavy on investor’s minds. The bond market returned 5.9% in 2010 after losing 3.7% in 2009. Although the recovery didn’t happen as quickly as people had hoped, economic sentiment is now hovering at multi-year highs. Quantitative easing has been effective in stimulating both the economy and inflation--and how that will affect us going forward is still a big unanswered question.
What are the Secrets of the Week?
With the New Year upon us, the majority of traders and volume will return this week and we’ll be joining the fray with two new plays – one on an equity and the other on an ETF---so let’s get started...
You can get in on this week's trades along with two new high-probability trades per week by clicking here now: http://www.cashflowheaven.com/ws
Stack the Deck on Every Trade,
Robert
To all our subscribers, God Bless and have an awesome trading week!
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