The BarkerLetter

January 21, 2008

Greetings investors.

I have reservations about the theory of global decoupling. I doubt foreign markets or certain commodities (such as gold) will remain immune to a major selloff (and possible recession) in the U.S.

Each and every foreign market began falling in November along with the U.S. market. However, according to my sources they haven’t fallen as far.  Still in the black for the year to date are Hong Kong (+26%), Germany (+12%), and Australia (+2%). The biggest yearly losers are France (-7%), Britain (-5%), and Canada (-2%). By comparison, the S&P 500 lost -6.5%.

I suggest that if and when we register two consecutive quarters of negative growth and confirm a recession, it will be rather too late for investors to do anything about it.  In fact, that would be the time to be buying.

In meantime you may want to consider selling. 

In analysing the Dow Industrials charts today, it appears that the bull market in the broader sense is indeed over.  The Dow has broken below its major bull market trendline extending from the 1982 bear market lows through the 2002 bear market lows.

Suggestion: There are doubtless several rallies to come, but I believe they will be smaller and smaller. Sell in the rallies, and sell hard. Everyone else will be.  In fact it’s wise counsel to sell those mutual funds and ETFs that are in the money and buying them back incrementally over the next two years.

I’m still a buyer of sensibly priced junior exploration deals with good projects and/or low operating costs.

Careful out there.

Kb