The news in mid-August seemed to signal that health care reform in the United States was going to be more of an “evolution” rather than the originally hoped for (by President Obama) “revolution.” In response to this apparent change the health care sector of the stock market experienced a broad rally.

Harry Rady commented that he, along with Rady Asset Management tries to asses an economic climate outside the influence of government forces, which are unpredictable and unreliable. Rady therefore looks to investments which are dependable no matter what the government decides to do.

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As the blitzkrieg rise began to slow investors and traders continued to (unsuccessfully) look for new signs of other economic strengthening.

After several comments made by the Russian finance minister, the dollar began to rise in comparison with other currencies. The stronger dollar forced prices for oil and other materials down, bringing to a halt the increase in prices recently of these energy and materials stocks.

Harry Rady is not surprised.

“The market just seems to keep driving the car into the wall and then wonders why it can’t keep driving,” Rady said.

“The market just seems to keep driving the car into the wall and then wonders why it can’t keep driving,” Rady said.

After deep drops in prices of stocks in Europe and Asia in response to the strengthening dollar, prices of commodities and other materials declined.

An additional blow came when the index of manufacturing in New York showed that demand was also faltered in the months of May and June.

Harry Rady continued to explain that as these second and third tier companies (junk companies) continue to rally he sees excellent chances to short and build cash, perhaps as never before.

Admitting that “It’s been an extraordinary rally,” Rady continued to explain that “even if we’re a little early, we’ve decided to take some chips off the table, raise cash and build some short positions.”

Rady’s feeling is that the recent market rally is a “head-fake” and that we should not expect consumers to suddenly go back to the “buying-spree” that they were participating in in the past.

“We’re approximately 70 percent in cash,” Rady said, describing his portfolio. “The cash position has been built mainly over the last week. As the rally continued, we’ve sold into the rally and put on more shorts.”

Two industries Rady does feel bullish about are the drug and biotechnology sectors.

“Everything is overpriced. A very long, protracted recession is still very much alive.”

This remark was reported in an article in Lubbock On-Line in response to a week of see-saw movement of the major markets including the Dow Jones industrial average. The Dow along with all the other major market indicators, finished the five days ending on May 23rd just barely in the black. The Dow, S&P and Nasdaq rose 0.10, 0.47 and 0.71 percent, respectively.

Despite a good showing on Monday, stocks sunk downward the rest of the week in response to some bad economic news. Re-running a pattern that is now only too familiar, early gains on Friday were neutralized by sustained losses in the last hour of trading.

The choppy trading waters were caused by announcements that unemployment could reach as high as 9.6 percent and that the British government could lose the Standard and Poor’s Triple-A credit rating.

Coming at the end of next week are several economic indicators that will help determine whether the markets will be sustaining their rally of early spring, or rather if they are instead a disappointing indication of more bad times to come. These barometers include reports of home sales, orders for manufactured products and consumer confidence.

Frustrating a six-week Wall Street rally, the stock market suffered a 3.5% loss last Monday, April 20, 2009. The recent decline in the Dow Jones Industrial Average on Monday will be the worst one day decline since the beginning of March when the Average reached its lowest point in 12 years.

Adding to the downturn was a 23% drop in Bank of America. Despite announcing a net income increase in the first quarter of more than triple, including the purchase of Merril Lynch recently adding more than 3 billion dollars to its bottom line, B of A still experienced a net loss due to a rise in “charge-offs” and huge losses in its credit-card business.

For more complete discussion of this issue you may follow the link to: ‘U.S. Stocks Lower as Banking Concerns Lead to Broad Sell-Off.’

Rady says that often fund managers see a stock trading near its 52-week high, and then they jump in, instead of waiting for it to come down and even be undervalued.

Read more in EuroMoney’s article here.

” The free market should determine who makes the best cars, and the consumers should determine who survives,” said Harry Rady, CEO of Rady Asset Management.
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