Dan The Money Man Frishberg Gives Some Timely Information For Investors

Dan The Money Man Frishberg Gives Some Timely Information For Investors

There is a lot for investors to be confused about, if they get too close to the market and try to make sense of it.

Our forecast for the U.S. economy indicates that the growth rate will actually pick up over the next two to three months, surprising many. Here is a partial list of the traps and potential mistakes observers are making right now

1. Investors are overestimating the impact the Fed and government fiscal policy will have on the economy between now and spring 2011. The fact is, decisions made now will make a major difference in our wealth and standard of living over the next decade, but the stock market is looking ahead only three to six months and is not concerned about the more distant future.

2. News reports only feed the pessimism about the potential relapse into recession, with observers focused on persistent unemployment. The fact is much of the unemployment our country is experiencing has more to do with changing technologies and the failure to match what our economy needs and wants with the jobs people want to do, than it does with the slow business cycle. Also, in the short run companies' and stockholders' interests are not necessarily aligned with those of their employees. Rising productivity is allowing companies to profit from technological advances and less expensive labor without much improvement in domestic employment. We do believe, however, that U.S. jobs will look better next year, though it is difficult to tell what the impact of the impending tax hikes will be, or whether the expected tax hikes will actually occur.

3. I've been engaged, over the past couple of years and even recently in TV debates, in which experts expressed the belief that the developing middle class around the world, centered in Asia and Latin America, does not have the scale to carry a global economy which includes the U.S. and Northern Europe. We are not forecasting a repeal of the business cycle, but we expect 6% growth word wide over the next five to ten years, which has so far been able to pull the U.S. and Europe out of their swoons, since those developed markets are instrumental in the development of the emerging markets. Global growth will continue to provide plenty of opportunity for U.S. companies, especially in areas of financial services and technology.

4. Two years ago I wrote a book called INVESTING WITHOUT BORDERS. What I described in that book is now reality. Unlike any other time in our history, U.S. investors' fortunes do not have to rise and fall with the value of our dollar. The attempt to fuel economic recovery by debasing the dollar is, in our view, foolish and unlikely to generate good results, but it will not keep American investors or innovative and well managed American companies from participating in global prosperity.

A very wise mentor of mine told me years ago, "Intelligence is the ability to adjust your world view when confronted by new and different data."

It is very easy to be distracted by the expectations about potential quantitative easing by the Federal Reserve, and the Presidential election. Both are important, and investors will get the opportunity to "sell the news," since prices have run-up hard, in the excitement over these two factors.

The outcomes of these two factors will probably be known to our readers by the time they get this letter. I would expect some pullback or correction as investors "sell the news."

If there is no selling once the outcome of the election and the Fed action are known, we would see this as a sign of significant strength, and would begin to scale into the same assets we held until recently. More likely, though, we will get an opportunity to buy those same assets back at more favorable prices and risk/reward ratios in the coming weeks.

We continue to be short term cautious, long term bullish on stock prices.

More important, we continue to feel more than ever that the greatest danger facing investors in the U.S. is in potential losses of purchasing power, wealth and living standard with erosion in the dollar and higher long term rates in the not too distant future.

Daniel Frishberg

THE TRADER'S CORNER:

TextTraderThoughts from Resident Trader Jason Shade, CEO of TextingTrades:

Makemytrip Ltd. MMYT (35.89)

I believe India offers tremendous opportunities to those willing to risk their capital in its booming economy. The country is expected to grow GDP by nearly 10% this year. This eye-popping growth is generating booms in all types of sectors and industries --- one of those being the travel industry.

Makemytrip Ltd. MMYT (35.89) is a firm that offers travel reservation and services. Although it is similar to Priceline, Orbitz and all the others it has one niche - it focuses primarily on Indian customers. AS an Indian-based company, it is only one of a few ADRs U.S. investors can trade. Naturally, this has helped with demand for the company's stock since its IPO this past summer. MMYT was offered at $14-$16 a share and has never looked back. It is now trading at more than $35/share and is looking frothy to say the least.

There is no doubt that the company is growing rapidly taking its revenues from $68 million a year ago to $83 million this year. The question becomes how rapidly will it continue to grow and how soon it will become profitable. This coupled with its lofty valuation of more than $1 billion in market cap, I believe makes this company ripe to sell short heading into its earnings later this month. Although I do believe MMYT will be a long term winner in this travel space due in large part to its market position in India, I believe some hype needs to be taken out of the stock. I think a 25-35% pullback in the stock would not be unreasonable at this particular time. Unless the earnings report is extraordinarily positive, I maintain a price target of $24 on the stock.

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