August 10, 2011

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Right On
ValuEngine Capital Management Portfolio Manager Brian Brogan Discusses Downgrade and We Revisit his June 10, 2011 Market Call
Brian Brogan is a portfolio manager and COO for Value Engine Capital Management. He specializing in risk management and technical analysis. Brogan served on both the retail and institutional sides for several leading financial firms including Morgan Stanley Smith Barney, LPL Financial, Revenue Shares ETFs, H.G. Wellington & Co. Inc, PNC Bank, ING America, US Allianz, and Morgan Stanley Dean Witter. Brogan has over 12 years of experience on Wall Street working with some of the largest fund managers in North America. Brian specializes in Behavioral Finance.

ValuEngine Capital Management Portfolio Manager Brian Brogan appeared on the Philadelphia, PA FOX affiliate this weekend to discuss the Standard and Poor's US credit downgrade. We have been receiving lots of inquiries from clients vis-a-vis the downgrade and the prospects for the economy and equities so for today's bulletin we are providing a link to Brogan's appearance.

Click HERE or on the image below to watch a clip of Brogan on FOX 29's business report

We also wanted to revisit one of Brogan's recent market calls in which he predicted the recent market decline as well as the US bond rate with a stunning degree of accuracy. We welcome Brogan's addition to our line up of analysts and believe that his knowledge and savvy market calls will bolster our ability to advise investors and protect their assets. The following is an excerpt of Brogan's column published on June 10, 2011 and sent out to subscribers. An archived copy can be found HERE. In light of recent events, we revisit the call so that you can see that Brogan made a very precise and accurate prediction. Today, many are looking for the proverbial next shoe to fall." The easiest way to do this is to find out where risk is being downplayed or hidden. Once you discover where the risk is being removed from the market, you can spot the latest bubble.

In 2007, the destruction of the housing market-- with its liar loans, no doc loans, 2/28 ARMs, CDOs, CDSs, and all the other bubble accoutrements-was a little easier to understand because real estate, at its heart, is an asset class that is tangible and transparent. But when it comes to understanding other asset classes subject to bubbles-- like Commodities, Fixed Income, and/or derivatives, most investors are lost in translation. Indeed, even professionals typically deal in specific asset classes so unless they are a generalist they usually follow a herd mentality when it comes to their own trades. One must understand the risk involved in different asset classes and how they relate to each other in order to navigate through a global market which provides numerous opportunities for bubbles and black swans. We are closing in on 2 years of this Bull market and we may not have much further to go, and by the looks of todays market and new IPOs like Linkedin trading at 30x sales it may be time to look for cover. In the current investing environment, managers are concerned with non-correlated assets-- an asset class which does not go down when the S&P 500 goes down. The key to contrarian investing is to start to leave the party just as others are starting to arrive. The best place is cash, but this doesnt pay to stay, so do you venture into Bonds for yield? The bond market has been on a nice up trend in price since February of this year. This is good news if your Ben Bernanke because the general investor is now doing the heavy lifting for the Fed. But one needs to be concerned over the debt-ceiling debate now on the big screen in Washington. If this spooks the market, you could see a drop in bond prices as the weak hands close out of their short term trade with a gain. You could see a 6 or 7% handle and a attractive price if this were to happen in the upcoming days and weeks.

In this sort of environment, I look to the following position: Short S&P 500 Cash Looking for Ten-Year Yield Target @2.4%

Want to know what's next for bonds and the market? Contact VE Capital Management's Brian Brogan. Interested in receiving Brogan's market analysis when it is available? Then--if you have not done so already--subscribe to our free weekly newsletter HERE. Interested in using Brogan's market savvy and the analytical power of ValuEngine to manage your assets? Then go HERE for details and contact info.

MARKET OVERVIEW
Summary of VE Stock Universe
Stocks Undervalued Stocks Overvalued Stocks Undervalued by 20% Stocks Overvalued by 20% 84.40% 15.60% 52.38% 5.17%

SECTOR OVERVIEW
Sector
Aerospace Auto-Tires-Trucks Basic Materials Business Services Computer and Technology Construction Consumer Discretionary Consumer Staples Finance Industrial Products Medical Multi-Sector Conglomerates Oils-Energy Retail-Wholesale Transportation Utilities

Change
3.15% 5.08% 5.58% 3.83% 4.17% 5.13% 4.40% 3.53% 5.60% 4.25% 4.36% 3.40% 5.93% 4.53% 4.95% 4.54%

MTD
-10.07% -17.40% -13.21% -11.31% -12.12% -13.29% -11.54% -9.73% -9.10% -12.94% -11.25% -12.21% -16.57% -9.45% -12.28% -6.95%

YTD
7.34% -27.82% -18.52% -7.88% -9.60% -24.72% -10.72% -14.23% -8.64% -13.68% -5.33% -14.12% -17.87% -3.36% -17.46% -5.03%

Valuation
18.38% undervalued 25.56% undervalued 21.49% undervalued 18.95% undervalued 22.84% undervalued 24.41% undervalued 21.86% undervalued 13.77% undervalued 18.24% undervalued 23.29% undervalued 23.54% undervalued 18.95% undervalued 22.31% undervalued 16.99% undervalued 12.74% undervalued 8.33% undervalued

Last 12MReturn
8.27% 10.74% 28.90% 4.39% 8.72% -13.44% 6.18% 4.07% -0.93% 10.29% 2.73% 8.51% 14.39% 14.24% -5.17% 6.65%

P/E Ratio
19.9 15.72 24.14 22.19 37.75 39.71 30.68 17.21 23.69 18.83 28.6 21.53 44.96 23.49 16.54 25.07