Dravis Wealth Advisor
Investment Ideas from around the World
SEEKING CERTAINTY IN AN UNCERTAIN WORLD
Weekly Update: April 10, 2011
As earnings season begins, it’s all about the outlook. As many equity and commodity markets rose over the past several quarters, investors were
confronted with a broad set of challenges to consider including: 1) a potential U.S. housing double dip, 2) state and municipal government budgets issues,
3) financial bailouts of Greece, Ireland and Portugal, 4) inflation in developing countries such as Brazil, China, India and Russia , 5) Middle East and North
African political conflicts, 6) an oil spill in the U.S. and 7) Japan’s earthquake/tsunami/nuclear disaster. This week earnings season begins with Alcoa Inc.
(US: AA) announcing its quarterly financial results on Monday and other high profile firms including Bank of America Corp. (US: BAC), Charles Schwab
Corp. (US: SCHW), Google Inc. (US: GOOG), Infosys Technologies Ltd. (India: INFO) and JP Morgan Chase & Co (US: JPM) providing updates on their
businesses. MY TAKE: In the coming weeks, managements from hundreds of companies will share their views on navigating this uncertain environment
and the potential affect to earnings results for 2011 and beyond. Positive quarterly results and outlooks will be critical components for maintaining the
current market momentum.
What is driving oil to a 2 ½ year high? (See chart on page 2) On Friday, a barrel of Brent crude oil traded up to $126 in Europe (+34% YTD), while oil in the
U.S. traded at $113 a barrel (+23% YTD). Dynamics contributing to the price increase include: 1) increased global demand for oil, 2) damaged oilfields in
Libya, 3) uncertainty about elections in Nigeria (a large oil exporter), 3) possible increased gasoline demand during the summer driving season, 4)
unresolved U.S. government budget issues and 5) speculative commodity trading activity. MY TAKE: If oil prices remain high, inflation expectations will
likely increase, which could result in lowering consumption and slowing the economy. Investors will be paying close attention to comments from company
managements in the coming weeks regarding the impact that higher input costs could have on earnings forecasts. NOTE: Given that U.S. housing prices and
hourly wage trends remain weak and the government budget environment remains challenging, investors should consider the potential for both inflation
(short term) and deflation (longer term).
Table 1: Selected Market Indications (through April 8, 2011)
Global indications: The tone remains positive. As we approach
earning season, investors are focused on the potential impact of
elevated prices in oil and other commodities.
Snapshot on selected positions.
Moved toward a more caution position as we move into earning
season.
Dravis Group LLC
San Francisco, CA
INDEX
CLOSE
US (S&P 500)
1328.2
Europe (DJ Stoxx 600)
281.7
Japan (Nikkei 225)
9768.1
Brazil (Bovespa)
68718.0
Russia
2122.2
India (Sensex)
19451.5
China (Hang Seng)
24396.1
Indonesia (Jakarta)
3741.8
South Korea (Kospi)
2128.0
Gold
1474.9
Oil (WTI)
112.8
Baltic Dry Index
1401.0
1 of 3
5D % MTD % YTD %
-0.32
0.18
5.61
0.59
2.09
2.13
0.61
0.13
-4.51
-0.79
0.19
-0.85
1.43
3.81
19.88
0.16
0.03
-5.16
3.69
3.69
5.91
0.93
1.72
1.03
0.33
1.01
3.75
3.23
2.98
3.81
4.49
5.69
23.43
-8.43
-8.43 -20.98
DAILY
Cautious
Positive
Positive
Cautious
Positive
Positive
Positive
Positive
Positive
Positive
Positive
Negative
WEEKLY
Positive
Positive
Neutral
Neutral
Positive
Positive
Positive
Positive
Positive
Positive
Positive
Negative
MONTHLY
Positive
Positive
Negative
Positive
Positive
Positive
Positive
Positive
Positive
Positive
Positive
Negative
April 10, 2011
Paul@DravisGroup.com
Dravis Wealth Advisor: Investment Ideas from around the World
Oil Price trends per barrel U.S. (WTI) and Europe (Brent) in US dollars: Jan. 2000 – March 5, 2011
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Dravis Wealth Advisor: Investment Ideas from around the World
NEW IDEAS AND ACTIONS
I continue to review the investment landscape for new ideas, with a strong basis toward “high cash flow yield” opportunities in the idea generation process.
As always, focus, patience and discipline are core components of my investment process
Contact Details
If you wish to discuss individual investment ideas or strategies, please contact me directly at Paul@DravisGroup.com or 415.271.7255.
Comments on InvestMap Indicators
The InvestMap process provides three views of market price trends: 1) Daily - which seeks to highlight the level of short-term strength/weakness in price
trends, 2) Weekly – which provides a medium term perspective of the market, and 3) Monthly – which attempts to identify major market shifts and
highlight the level of caution to apply to the investment process. The InvestMap process can be applied to varied asset classes (equities, commodities,
currencies) market indexes and economic indicators. Some investors refer to this process as “the scrolls” because, in presentations, the charts rollout to a
width of six feet presenting market dynamics back to 1985.
Note: InvestMaps and RiskTriggers are trademarks of Dravis Group LLC.
Background of Paul Dravis
Founded Dravis Group LLC to provide market and investment research.
Clients have included multi-national corporations, non-governmental organizations, government agencies and entrepreneurial start-up firms.
Director at RCM Global Investors managing a $1 billion global equity fund along with global research staff.
Advised institution investors around the world as a Managing Director & Senior Analyst at Banc of America Securities and as a senior analyst at Robertson
Stephens and Co.
Wall Street Journal All-Star Analyst (stock-picking)
At JP Morgan, a founding member of the firm’s equity research practice and member of RiskMetrics task force to formalize value-at-risk (VaR) as a global
market risk management tool for foreign exchange trading.
Disclaimer
Dravis Group LLC is not a registered investment advisor or broker/dealer. Readers are advised that the material contained herein should be used solely for
informational purposes. Dravis Group does not purport to tell or suggest which investment securities readers should buy or sell.
Readers should conduct their own research and due diligence and obtain professional advice before making investment decision. Dravis Group LLC will not
be liable for any loss or damage caused by information obtained in our materials. Readers are solely responsible for their own investment decisions.
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