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6/17/2008 Equities: Dog Days of Summer

ARS


Global Equity Markets

On April 29th, this newsletter's headline was "Equities: Not out of the Woods Yet" and signaled that the market's health had turned questionable following our earlier forecasts of a bottom in the Spring. Just one week later on May 8th, our newsletter headline was "WARNING: Equities at Intermediate-term TOP; next BEAR MARKET Decline Imminent!"

I indicated then that I thought the broad market would at least re-test the March lows and lose about 10% of its value with a higher likelihood that the correction would go to 20%.

The decline from recent highs provides a valuable insight into the market's current health. The number of New Lows have exploded during this recent decline. They are, in fact, higher than at any other time since the March rally began. This suggests that the internal strength of the market is quite poor and points to lower prices in the coming weeks and months.

Global Equity Regions
Our portfolios remain in a defensive position.

ASIA (ex-Japan) -

EMERGING MARKETS -

EURO -

JAPAN -

LATIN AMERICA (LatAm) -

USA -
(see Equity Style section for specifics)

Equity Style & Sector Trends
Our Domestic Equity Model suggests a defensive position at this time and our allocation to domestic equities remains 100% in money markets.

Investment Grade Bonds
The combined pressure of a rally in the US Dollar and globally increasing interest rates is putting pressure on all bonds globally. Our models/portfolios are now in a defensive position.

High Yield Bonds
Our models are on a SELL for the High Yield Debt Markets.

Inflation Hedge / Real Assets
As I suspected, the weakness in Real Estate (due to the general market weakness) has now been sold from our Models. Gold has moved back up through the ranks and is on the verge of a BUY.

GOLD Bullion - (GLD) - Highly likely to move onto a BUY signal on any day.

Goldman Sachs Commodity Index (GSG) (largely energy ) and DB Commodity Index Tracking Fund (DBC) remain on a BUY.

Real Estate - Our models now rank REIT's as a SELL.

If you have any questions about our research or Absolute Return Portfolios do not hesitate to call. We can be reached toll-free at 877-632-7491.

Absolute Return Portfolio Management LLC provides absolute return oriented portfolio management and institutional research on global macro trends including equity style rotation, global regional equity trends, short-selling and market neutral strategies as well as fixed income strategies. Contact us for information on account minimums and institutional research offerings.

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