Why you don’t feel richer after four years of recovery

Statistics can sometimes, as we all know, be very misleading.  Take the unemployment report for example.  If you examine the numbers out of context, you’d be forced to conclude that workforce participation has steadily increased over the last four years.  A behind-the-scenes look at those numbers, however, reveals a startling discovery: most of those gains have occurred because job seekers have simply given up looking for a job. 

Federal Reserve Chairman Bernanke is acutely aware of this, which is why he is intent on continuing to provide monetary stimulus through the central bank’s quantitative easing (QE) policy.  A growing body of evidence suggests that while QE has been extremely beneficial for the stock market, it has been decidedly less helpful in stimulating the U.S. economy.

With the Fed providing a virtually limitless expansion of the monetary base since 2008, one must ask why this hasn’t had more of an impact on increasing wage growth or reducing unemployment?  Before we can answer this question we must first have a look at just how strong has been the Fed’s commitment to fighting the anti-growth forces that were ignited during the credit crisis.  The logarithmic rise in the U.S. monetary base can be seen in the following graph. 

At any other time such an explosion in the monetary base would correspond with major inflation along with sky-high interest rates.  The reason of course that interest rates remain relatively subdued is because the Fed continues to purchase $85 billion/month in Treasuries and mortgage securities.  The monetary base rose to a record $3.6 trillion as of Oct. 16, compared to $1.5 trillion when QE was first initiated in late 2008. 

As economist Ed Yardeni points out, “There hasn’t been much bang per buck in all this ‘high-powered money.’”  The reason can be seen in the following chart.

Even as the monetary base has soared since 2008, the velocity of M2 money has plummeted.  (M2 velocity is calculated by dividing nominal GDP by M2 money stock).  This chart provides a perfect description of how inflationary pressure has been kept subdued by the deflationary undercurrent of the long-term/long-wave economic cycle (e.g. the Kress/Kondratieff cycles). 

Velocity can also be colloquially defined as the rate of turnover in money, i.e. how much money is changing hands in the economy.  During times of true economic growth the money supply is increasing while interest rates are rising and money velocity is also rising.  But in recent years money turnover is actually falling even as money creation is exploding.  The economy’s demand for more and more money during a period of true inflation is funneled into chasing fewer goods to higher prices.  In today’s undercurrent of deflation, by contrast, the demand for money isn’t so that consumers and financial institutions can spend it, but rather so it can be hoarded.

The reason behind this hoarding mentality is simple fear: fear born of uncertainty about the future in a world where the cost of living keeps rising even as wages are declining.  It’s also a fear based on the observation that the culprits of the credit crisis (the reason for the economic slump) were never properly dealt with.  In other words, producers and wage earners alike rightly fear for the safety of their hard-earned savings. 

Yardeni suggests that monetary policymakers “seem oblivious to the possibility that their gusher policies maybe contributing to this disappointing [GDP] performance.”  Instead, he adds, “they’ve pursued Krugmanomics: If a trillion dollars didn’t stimulate the economy, try another trillion dollars.”  So far it still hasn’t alleviated the hemorrhaging in the job market participation rate.

Washington and the Fed have shown they aren’t above sacrificing the U.S. dollar in the name of preventing deflation, which in turn would benefit consumers.  The Fed has shown a commitment to a weak dollar policy via QE, which in turn has prevented the deflationary long-term cycle from doing its work of flushing out weak competitors and reducing prices across the board.  Washington intervened during the deflationary wave of 2008 by declaring certain institutions as being “too big to fail.”  This concept undermined the work of the economic long-wave and has created the present situation of underemployment, sluggish growth and too-high prices for essential goods. 

Monetary policy has a point of diminishing returns, however, and that point may have already been reached.  Indeed, economist David Rosenberg believes QE has already reached the point of diminishing returns and has only benefited a small segment of the economy.  He points out that the so-called “wealth effect” of monetary stimulus only works “if the positive shock is deemed to be permanent as opposed to transitory.”  With Fed officials making it clear that QE3 will be phased out at some point in the near future, its positive effects can already been seen to be diminishing (most notably in higher bond yields).

Underscoring my point about monetary velocity, Rosenberg observed, “What the Fed managed to do this cycle was help the rich get richer with no major positive multiplier impact on the real economy.”  The rich have certainly benefited from the past four years’ recovery.  The question is does anyone else feel richer?

Economic sabotage in vital Year 2014

How expensive was the 16-day partial shutdown of the U.S. government?  According to ratings agency Standard & Poor’s, it may have cost the economy a staggering $24 billion. 

Millions of government workers were laid off without pay during those two weeks, and many contractors with government ties were hit as well.  During that period of uncertainty these households made significant cutbacks in discretionary purchases which created a ripple effect felt by many smaller businesses, particularly in the service sector.  There were reports of some businesses which relied heavily on government contract work laying off workers or going out of business entirely.

It would be a mistake to over-blow the effects of the shutdown, but to minimize its impact would be equally foolish.  The shutdown had definite repercussions for many workers, some of which are still being felt.  The fear and uncertainty the shutdown generated was, while detrimental to the economy, beneficial to gold and silver.  Metals and mining stock prices have risen in the wake of the shutdown as investors turn their collective attention once again to the traditional safe havens.  It’s clear that investors remain uncertain about the future as can be seen in the price of gold (below), which one analyst has called the “price of fear.”

While many pundits tried to underplay the economic impact of the shutdown, there’s no denying it did more harm than good to the economy.  It can also be viewed as symptomatic of a much bigger problem in Washington, namely a continuing trend toward economic obstructionism in the name of party politics.  This trend is itself a microcosm of the much larger trend of fiscal austerity which Washington has firmly embraced in recent years. 

Politicians and bureaucrats are reactionary by nature, so we can automatically classify the austerity mindset as a reaction to the economic pain caused by the 2007-2009 financial panic and recession.  This momentous event left a deep and indelible psychological scar in the minds of policymakers and it continues to motivate their collective thinking (if it can be called that) and legislative efforts.  It has also helped to frame the political agenda for the critical year ahead – a period in which the historic 120-year cycle of inflation/deflation is bottoming.  This cycle promises to usher in many important changes; indeed, we’ve already witnessed one important change to the system.  Starting in 2014 universal healthcare coverage will be mandated in the U.S., a landmark step on the road to full-scale economic autocracy. 

If not for the continuous fiscal crises created by Congress over the past two years, two million more Americans would have jobs.  Moreover, unemployment would have dropped under 6.7 percent and GDP growth would be around 4 percent stead of the current 2.5 percent.  These statistics are the conclusion of a study by Macroeconmoic Advisers, a nonpartisan consulting firm.  The analysis also found that Congress’s fiscal-cliff and debt-ceiling blunders have roiled financial markets and caused employers to cut back on prospective hiring.  It has also kept consumers from spending more as the entire system has become “paralyzed with uncertainty.” 

The study concluded that the economy is being actively sabotaged by members of Congress who exert a disproportional influence over the nation’s financial affairs.  When such is the case, it can only be a matter of time before Washington trips up the recovery altogether. 

As impressive as the recovery since 2009 has been, Washington’s continuous meddling threatens to derail it in 2014.  The introduction of mandatory health insurance next year will create a drag on the economy at the worst possible time, namely while the 120-year cycle of inflation/deflation is bottoming.  The timing couldn’t possibly be any worse.  The Bernanke Fed “gets it” and clearly understands the danger of the deflationary undercurrent created by the long-term Kress cycle. 

Washington, for its part, doesn’t get it.  Both Congress and the president are fighting the Fed by embracing austerity-type measures that will inhibit growth, including tax hikes.  This will create significant economic headwinds for next year.  On the plus side, it may end up benefiting gold as fear and uncertainty rise in the face of Washington’s economic sabotage.  

As the Wall Street bromide says, “Sooner or later politics always interferes with business.”  Policymakers seem intent on proving the truth of this saying.  Unfortunately, everyone must reap the consequences.  

A Long-Term Megaphone Pattern?

A client asks, “Do you put any merit in the large megaphone pattern in the monthly chart of the [Dow Jones Industrial Average] starting in 1992?  One technician said that this was a pattern visible in many charts back in 1929-30.  I realize this is not a timing tool but I’d like to hear your thoughts on it.”

Answer: I put little credence in long-term chart patterns.  Based on experience I've found that chart resistance levels seldom have significance beyond 2-3 years -- maybe 4 years at most.  The megaphone pattern represents distribution according to most technical treatises.  Major distribution campaigns normally run anywhere from one year to as much as two years.  I don’t see how there could be distribution over 21 years, so I doubt the long-term pattern has any significance.  

There could well be distribution taking place right now but the best place to spot distribution is in the internal momentum indicators (e.g. momentum of new 52-week highs and lows) and also in the number of stocks lagging the major indices.  Chart patterns by themselves aren't always instructive for spotting distribution.

Why the Fed will fail and the cycles prevail

Despite its intent to boost asset prices and restore the economy, the Federal Reserve has run into a major obstacle in achieving that goal.  This obstacle is serving as a reminder that ultimately the long-term natural cycles of inflation and deflation govern the market and that intervention will usually fail.

That major factor that is engineering the Fed’s eventual defeat is the 10-year Treasury Yield Index (TNX).  The rally in Treasury yields from May through September took a lot of steam out of the financial market.  The industrial stocks were heavily affected by rising rates as can be seen by the volatile performance of the Dow Jones Industrial Average (below).  The reason is that the industrial sector is much more sensitive to changes in interest rates than the tech sector.

The reason why rising interest rates are a potentially serious problem for the economy – as well as a stumbling block for stocks – is explained by Chirantan Basu of Zacks: “Rising yields lead to higher mortgage interest rates…. Higher mortgage interest rates mean higher monthly mortgage payments, which slows down the real estate market as home buyers put off buying new homes or upgrading to larger homes. This drop in demand could depress home resale values, which leads to a drop in household net worth. People feel poorer and less optimistic about the economy, which usually means they spend less on non-essential items.” 

Some economists are trying to underplay the effects of rising Treasury by claiming higher yields reflect a stronger economy.  While this may true in normal cases, the present case isn’t one of them.  Treasury yields started rising soon after the Fed telegraphed its intention to begin tapering QE.  Since household borrowing for consumption is the lifeblood of developed economies like the U.S., higher rates are a major point of concern and can’t be underestimated.  Rising yields are also the point where the bond market starts to influence and limit U.S. central bank balance sheet expansion due to the increased cost of debt.

Another point worth discussing is that while rising yields may have reflected an improving economy in the “old days” before widespread globalization, the relationship between yields and economic performance is much more complex today.  Alen Mattich, writing in The Wall Street Journal, observed that rising Treasury bond yields increase yields across other sovereign debt markets, thereby tying the hands of central bankers.  He points out that Bank of England Governor Mark Carney recently made clear that rising U.S. yields were an unwelcome complication for the U.K. economy. 

“Unfortunately,” writes Mattich, “other central bankers will find it hard to battle against U.S. headwinds, if only because by trying to keep downward pressure on domestic interest rates, they also run the risk of triggering a currency crisis.”

In recent weeks I’ve mentioned the importance of the 90-day moving average with regard to the Treasury Yield Index.  In recent months pullbacks in TNX always found support somewhere above the 90-day MA, including most recently in early October.  On Oct. 17, however, TNX broke decisively under the 90-day MA as you can see here.  This indicates that the Treasury yield has lost much of its former upside momentum and is now weaker than it was this summer.  This in turn should take some of the pressure off equities and make it easier for stocks to rally in the near term.

My best “guesstimate” in terms of potential downside for TNX is that the index should decline no further than approximately the 25.00 level as shown in the above chart.  I’m guessing we’ll start to see support becoming established for TNX in the next few weeks yields grind out a lateral trading range.  In other words, despite the recent weakness we may not have seen the end of “high” yields.

Another factor working against the Fed’s attempt at creating asset price inflation is the proverbial cockroach in the casserole, namely the anticipated end to QE3.  For months investors have nervously awaited the Fed’s official announcement as to when quantitative easing will finally be “tapered.”  The Fed has been sly with its handling of this issue, first getting investors used to the idea of the coming end of QE, then surprising everyone by announcing its continuation.  This tactic can be interpreted as a form of financial market engineering in itself, although that’s beyond the scope of this commentary. 

Even if QE continues into 2014, consumers, mortgage holders and businesses will continue to act as if the end is imminent.  As Ramesh Ponnuru has pointed out, “When the Fed creates an impression about future spending levels, it affects the spending that people undertake today in anticipation of that future.  So when the Fed suggests that it will pursue a tighter money policy in the future, it is effectively tightening money in the present.”

The point is that the gorilla is out of the cage and investors know that QE’s days are numbered.  

The Jim Rogers view on gold

If October has held any surprises for anyone so far, it has to be the bears.  While volatility has been in evidence, the crash that some analysts were predicting has so far failed to materialize. 

One reason for this was the increase in short interest leading up to the start of the month.  According to short interest data provided by Consensus Inc., bullish sentiment has been declining for the last few months and recently hit a low for the year to date.  Investors and advisors alike, it seems, have been growing more bearish and had a less-than-favorable outlook for the market heading into the debt ceiling limit debate. 

Now that the worrying is over in Washington, investors will get back to the task of surveying the investment landscape for opportunities.  Sentiment will undoubtedly improve as fear is (temporarily at least) removed from the market.  The lesson investors can take away from all this is that it rarely pays to lean too heavily to one side of the trade when everyone else is doing the same.

Barron’s published an interesting interview with trader Jim Rogers.  He was asked if the record levels of liquidity created by the Fed in recent years should push the stock market even higher.  He responded by making the observation that Fed money usually goes into financial markets, but that the advance is getting narrower.  He pointed out that fewer big stocks are rising, a trend similar to the one preceding the 2000 market top.  I found his final remark in answering this question to be enlightening: “I don’t know how long this will go on, but it can’t go on forever.  That said, you can’t really short this market either.”

I think that sums up my sentiment on this market perfectly, viz. the market advance is clearly narrowing with many internal divergences visible in recent months.  It reminds us of the big divergence in the Advance-Decline line and new highs-new lows that began in late ’98 or early ’99.  Yet I don’t believe this market is “shortable” just yet.  There’s too much residual momentum still in play with the last few trading sessions a case in point. 

Barron’s also asked Rogers to share his outlook on gold.  Rogers indicated that he still owns gold but is currently not a buyer.  He points out that any asset class which rose for 12 straight years is anomalous and that a 50% retracement from its peak would take gold near $960.  He added that 50% correction can be “quite normal.” 

“I know of nothing that has gone up for 12 years without a decline,” he said, “but I’d also expect the correction to be different from normal.”  He added that he expects another buying opportunity for gold in the “next year or two” and that his long-term outlook calls for gold to eventually go “well over $2,000.” 

Rogers views on commodities tend to be prescient, so I won’t contradict him on either point.  There will, however, be worthwhile trading opportunities in the yellow metal in the interim.  One such opportunity may soon be approaching.  Consider that the gold price has recently reached its most oversold technical condition in over a decade, according to the 10-month price oscillator.  This suggests an interim bottom should be near.

Meanwhile, a Federal Reserve governor recently credits the central bank with inflating asset prices since 2009 through its QE3 program.  Housing prices have also risen thanks to the Fed; the median single-family home price was reported up 37.3% through August after hitting bottom in January 2012.  The Fed is also trying to take credit for creating jobs via its monetary stimulus policy.

Yet that obscures the other side of the coin in the recovery.  While housing starts and housing prices are up, construction jobs are not.  As Ed Yardeni points out in his latest blog posting, “Housing starts are up from a low of 478,000 units during April 2009 to 891,000 units through August of this year. Yet residential construction jobs are up only 162,000 since they bottomed during January 2011, to 2.1 million in August. They are still 38% below the record high during the spring of 2006.”

 “So far, the so-called ‘wealth effect’" hasn't created too many construction jobs,” Yardeni observed.  So why has the pace of recovery in the job market been so sluggish compared with the recovery of asset prices?  Chalk it up to the underlying dynamics of the 120-year cycle of inflation/deflation.  That cycle is down for one more year and until it bottoms there will always be a cyclical cross-current of deflation within the economy no matter how much artificial inflation the central banks of the world try to create. 

The working class is still in the process of unwinding the debt and excess from the “party years” prior to the credit crisis.  Wages for the average worker, moreover, haven’t kept pace with the increase in retail food and fuel prices of recent years.  Until this dynamic changes – which means either prices have to come down or wage go up – and until the deleveraging has completely run its course, economists have no reason to expect anything to change anytime soon.

Why no recovery for the working class?

A Federal Reserve governor recently credits the central bank with inflating asset prices since 2009 through its QE3 program.  Housing prices have also risen thanks to the Fed; the median single-family home price was reported up 37.3% through August after hitting bottom in January 2012.  The Fed is also trying to take credit for creating jobs via its monetary stimulus policy. 

Yet that obscures the other side of the coin in the recovery.  While housing starts and housing prices are up, construction jobs are not.  As Ed Yardeni points out in his latest blog posting, “Housing starts are up from a low of 478,000 units during April 2009 to 891,000 units through August of this year. Yet residential construction jobs are up only 162,000 since they bottomed during January 2011, to 2.1 million in August. They are still 38% below the record high during the spring of 2006.”

 “So far, the so-called ‘wealth effect’" hasn't created too many construction jobs,” Yardeni observed.

Why has the pace of recovery in the job market been so sluggish compared with the recovery of asset prices?  Chalk it up to the underlying dynamics of the 120-year cycle of inflation/deflation.  That cycle is down for one more year and until it bottoms there will always be a cyclical cross-current of deflation no matter how much artificial inflation the central banks of the world try to create. 

The working class is still in the process of unwinding the debt and excess from the “party years” prior to the credit crisis.  Wages for the average worker, moreover, haven’t kept pace with the increase in retail food and fuel prices of recent years.  Until this dynamic changes – which means either prices have to come down or wage go up – and until the Great Deleveraging has completely run its course, economists have no reason to expect anything to change anytime soon.

Goldman Sachs strikes again

Call it the revenge of the gold bears.  Jeffrey Currie, the Goldman Sachs chief commodity analyst whose name inspires dread on all gold bugs who hear it, has made yet another bearish prediction for the gold price. 

Last week Mr. Currie stated that gold is a “slam dunk” sell because of his expectation that the U.S. economy will extend its recovery after Congress extends the debt ceiling.  The price of gold, as if on cue, promptly declined after Currie’s remarks were widely published and it appears that gold is indeed poised for another leg down.

Goldman Sachs’ target for the gold price next year was adjusted to $1,050/oz. “Once we get past this stalemate in Washington, precious metals are a slam dunk sell at that point,” Currie said.  “You have to argue that with significant recovery in the U.S., tapering of QE should put downward pressure on gold prices.”

Currie and Ric Deverell, the head of commodities research at Credit Suisse AG, both said on a panel at the Commodities Week conference in London on Oct. 8 that selling gold is their top recommendation for trading in raw materials in the next year.  “The downside of driving the bus off the cliff is so significant that we will come to a resolution,” Currie said. 

Joining Goldman Sachs and Credit Suisse in its bearish gold outlook for 2014 is Morgan Stanley, which stated on Oct. 10 that it expects the yellow metal will extend its losses once the Federal Reserve begins tapering its QE3 stimulus policy.  “We recommend staying away from gold at this point in the cycle,” said Morgan Stanley analyst Joel Crane as reported in Bloomberg.

“Our forecast profile heading into next year is relatively flat against our expectations of rising real interest rates and the U.S. dollar,” Crane told Bloomberg.  Morgan Stanley further predicted that gold would average lower every year through 2018.

There are two ways of interpreting the increase in bearish calls on gold by investment bank analysts.  On the one hand, as we’ve seen on at least two occasions this year, the banks can be wrong when too many of them pile on the bearish bandwagon.  This falls under the contrarian principle of the crowd usually being wrong at major junctures (and yes, that includes institutions at times). 

We’ve also seen that the leading institutional banks can be right in their gold forecasts when the metal is highly vulnerable to political moves – especially when the technical trend is down.  This appears to be one of those instances, and I’m not unconvinced that analysts like Currie and Deverell purposely wait until these critical junctures arrive before grandstanding with their bearish predictions.  It’s interesting that these analysts are nowhere to be seen when gold is in an uptrend; it’s only when a downtrend has been firmly established and gold is at or near a critical chart support (and in danger of breaking under it) that they come out with their bearish proclamations. 

Some would say this is a case of high-profile agenda setting rather than accurate prognostication.  Whatever the case, the analysts have the trend on their side and traders should be wary about assuming these analysts are wrong.  The price of gold (basis December futures) is still under its 15-day moving average (see above), which tells us the dominant immediate-term trend is still down.  Until this downtrend is decisively broken, the sellers are assumed to be in control.  

Another look at Treasury yields

Yet another important index worth watching in the days ahead is the 10-year Treasury Yield Index (TNX). 

In the Sept. 23 report I wrote, “Let’s watch for potential support in the coming days as TNX approaches the 25.50-26.00 area.  The technically important 90-day moving average intersects this area and looks like it could provide support should TNX drop to this area.  A lateral trading band with parameters at roughly the 25.50-26.00 area on the low end and 29.50-30.00 on the high end is a strong possibility in the coming weeks.”

As you can see in the [above] chart, TNX has established support above the 90-day MA in the last two weeks and is threatening to rally from this support.  A rally in the Treasury yield would put additional downside pressure on equities, so let’s continue to monitor TNX. [Excerpted from the Oct. 7 issue of Momentum Strategies Report]

The real reason for the recovery

Without question, the biggest winner of the 4 ½-year recovery is corporate America. 

Publicly traded companies have reaped most of the benefits of the Fed’s ultra-loose monetary policy and have completely recouped the losses in share value since the credit crisis.  Meanwhile, Main Street struggles on and hasn’t reaped nearly as much benefit from QE3 than corporations have.

The increase in merger and acquisition activity in the last two years testifies to the consolidation of corporate power.  Bull markets always result in frenzied M&A activity, which in turn stimulates the growth of oligopolies. 

One school of thought is that bull markets are engineered for the express purpose of enhancing oligopoly power.  Whatever the case, there’s no denying that the last few years have done more for Corporate America than for Main Street America.

Bad news and the October outlook

In recent commentaries we’ve discussed the likelihood of a broad market correction due to a series of divergences among the major averages.  The divergence between the Dow and the NASDAQ, for instance, suggests insider distribution.  Not surprisingly, insider transactions show that corporate insiders have done more selling of their company’s stock than at any time in several months. 

Uncertainty in Washington has also weighed heavily on stocks as investors ponder what effect a continued U.S. government shutdown could have on the economy.  Broad market volatility continued to expand as the Volatility Index (VIX) is up 20% this week after closing at a new 3-month high (below).  As long as VIX is in this position the stock market will be quite vulnerable to negative news headlines.

Speaking of headlines, in the weeks leading up to the market pullback the news headlines c magazine covers were anything but negative.  Optimism bordering on euphoria was reflected on the front covers of several major financial magazines, including Barron’s, Time and Businessweek. 

The Sept. 23 issue of Time magazine, for instance, featured another one of those infamous bull market covers.  The bull was displayed rather prominently on the cover under the headline, “How Wall Street Won.”  Paul Macrae Montgomery, a pioneer of the magazine cover indicator, told Barron’s last month that the Time cover suggested “an 80% chance the market will top in a month and will be lower a year from now.” 

The following week Time featured a story with the headline, “Can Google Solve Death?” on its front cover.  Google represents one of America’s biggest corporate monoliths, and an article suggesting that even death itself could be conquered by the juggernaut is indicative of excess optimism which is normally seen at market tops.  The cover graphic on a recent issue of The Week suggests complacency about the outsized role of Wall Street in the U.S. economy and was also suggestive of a top.

The combined picture presented by these covers is one of investor exuberance – a potentially dangerous state of mind entering a month that historically has seen more than its fair share of volatility.  Until we see a return of healthy levels of fear in the headlines and sentiment indicators, investors might consider scaling back on purchases and watching key support levels for potential breaks in October.  

MSR performance for Q3

Another quarter is in the books which means it's time to review our trading recommendations published in the Momentum Strategies Report for the last three months.  There were only a few recommendations made due to increased volatility and narrowing sector performance, but it was a worthwhile quarter.

The third quarter of 2013 was indeed largely profitable for most companies, though there was more stock market volatility in Q3 compared to Q2.  The third quarter heralded the start of a narrowing phase for the stock market where stock selection becomes much more important than just buying an index ETF and holding.  This trend continued throughout Q3.    

Following are the results of our stock/ETF trading recommendations for Q3 2013:

July 9: Bought Molina Healthcare (MOH) @ 38.99

July 18: Bought PowerShares S&P 500 Quality Portfolio ETF (SPHQ) @ 18.74

July 23: Took some profit in MOH @ 40.90

July 29: Sold MOH @ 38.70

Aug. 15: Sold SPHQ @ 18.74

Sep. 10: Bought CNA Financial Corp. (CNA) @ 36.70

Sep. 16: Took some profit in CNA @ 38.00

Sep. 30: Sold CNA @ 37.60

[For subscription info on MSR, please visit http://www.clifdroke.com/subscribe_msr.mgi]