By Dexter P. Lyons, Issachar Fund Portfolio Manager

Weekly Update December 10, 2015

Bottom line: Market risk is still rising and the potential reward is still declining so I am 100% in Cash on the sidelines protecting principal.As of Thursday,  December 10, 2015, SPY is Up 1.6% vs Down 0.1% (me) with a Maximum Draw Down (MDD) Loss of  11.9% vs 4.2% (me) since 12/31/14.

1) Oil is still in a steep decline as supply (OPEC, etc.) increases and demand (China) decreases with no turn around in sight.
2) Prices for iron, copper, zinc, aluminum, corn, wheat and soybeans are also in steep down trends as China’s decline in GDP growth continues to manifest itself.
3) Global central banks have tried their best to create inflation and the end result is that they created deflation and that usually leads to recessions ……so be prepared.
4) China’s exports dropped 6.8% from a year earlier in November and October’s decline was 6.9% and Chinese imports declined for a record 13th straight month!
5) Chinas export decline indicates that its trading partners are weak and getting weaker and the decline in imports indicates that the Chinese might be in a private sector recession.
6) Brazil is in a recession with an inflation rate of 10.5% and they will not be getting out of that mess for quite a while!
7) The number of IPO’s launched this year in the US has declined by 60% over last year which clearly indicates weak demand.
8) Stock Buy Backs in the trillions of dollars is what has been fueling the market higher and higher rates might dampen buy backs as borrowing costs rise.
9) The Chinese renminbi has been accepted into the IMF’s SDR (Special Drawing Rights) basket and now the question is when will the renminbi replace the US dollar as the world’s reserve currency?
10) Junk Bond ETFs like JNK are down about 10% since 5/29/15 as the Junk Bond market is fraught with oil service companies in financial trouble due to steep oil price declines.

Read More