A Few Dollars More

It was a short week on Wall Street in more ways than one. The Dow joined NASDAQ in Bear territory (20% off their peaks) and the S&P 500 is perilously close to making it a trio. Crude oil, on the other hand, continues to break records driving the markets even lower as well as General Motors. The automaker hit historical lows as investors sold its stock fearing GM might not survive in the face of higher gas prices. As of Thursday, the S&P 500, after testing support at 1256, finished the day at 1262 on thin pre-holiday volume. It was not at all convincing.

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My answer in one word is no. That’s not to say the markets won’t go lower. They will. But it appears to me that we are testing the bottom for the third time this year and three is usually a magic number.
It appears the “sell in May and go away” slogan was simply postponed a month this year. June witnessed over an 8% decline so far in the Dow Jones Industrial Average reaching a level last seen in 2006. On Friday it crossed into official bear territory with a full 20% decline from its peak in October of last year. That’s important because once an index declines 20% it is officially in a bear market. The NASDAQ has already attained that dubious position leaving only the broader, more representative S & P 500 still officially “only” in a correction although it was down almost 9% in June.

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Traditionally, investors run to cash or bonds, preferably Treasury bonds, when the stock markets decline. They exit, waiting on the sidelines, hoping to re-invest at the lows. Sadly, that strategy has proven to lose investors more money than if they had done nothing. Yet, no one wants to suffer the pain of watching their portfolios go down month after month. My advice is to hedge your investments in dire times like these with inverse exchange traded funds that protect your portfolio in downturns.

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Oil has held the world’s stock markets hostage for several weeks now and this week was no different. What is different however is that the S&P 500 broke a key support level at 1325 on fairly heavy volume However, Friday was also an options expiration date when funny things happen to stocks that have nothing to do with valuations. So I’ll give the market the benefit of the doubt until Monday’s close. If the market regains support and moves higher that would be a good sign. If it doesn’t the next stop will be 5-6% lower.

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Given the amount of rain that has flooded our nation’s mid-west over the last month it may be hard to believe that the United States is facing a fresh water shortage. We are not alone. Water scarcity is growing worldwide and at an increasing rate. As it does food prices everywhere will continue to rise. Here’s why.

Seventy percent of world water use, according to the Earth Policy Institute, an environmental think tank, is used for irrigation (farming), 20 % is consumed by industry and 10% goes to residences. At the same time, demographic shifts like expanding population, migration to cities or from one region to another have conspired to increase the demand for human drinking water. Take our own country, for example, where the main growth in population and migration over the last few decades has been to the south and the west. This same phenomenon has occurred in countries as far a field as China, India, Iran and Mexico, to name a few.

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