Wednesday, September 22, 2004

the circus has left town,,don't do the crime if you can't do the time.

September 1, 2004

Hello,

Folks the circus was in town this week, traders fled for the Hampton and professional protesters descended on the city. Trading on NASDQ and NYSE were at lowly levels. The data however never rests, and both the ISM and the payroll growth gave investors something positive to think about when they return from their week long hiatus. Senator John Kerry earned another purple hart, when Democrat Senator Zell Miller decided he was mad as hell and not going to take it anymore. And yes I can assure Bob Dole, that Senator Kerry did bleed this time. Senator Miller went as far as to challenge several members of the partisan main stream media to a duel. I haven’t been that excited about politics since I found out that Al Gore discovered the internet. The protests remained more of a media event with little or no interest from hardened New Yorkers who were more annoyed by all the inconvenience than sympathetic to any cause. Protesters
continued to complain about their conditions in captivity, funny a bunch of rich white kids get arrested spend 8 hours in a temporary lock up, yet any black male caught urinating on the street could spend a lovely weekend in posh digs in Rykers Island.

Since the market that has preformed in a sub par manner since early January what’s an investor to do? First I blow against the wind with this one; I would suggest that crude oil will plummet during the next year. Primarily because of lessening tensions in the mid east, Iraq’s transition to democracy which is and will continue to go much better than anyone has imagined and excess pumping by other OPEC members flooding the market with oil. We could see a short term boost if Iran continues to misbehave but the party is clearly over in the oil patch. 2nd corporate earnings are valuing the S&P 500 at 15 times next year’s earnings. Which is the lowest valuation since the late 1970’s or perhaps the recession of 1982. 3rd Mutual fund inflows by individual investors are usually a good gage of what not to do. Currently equity fund inflows are far off there highs. Recently I also noticed that Equity fund cash positions also seem to peak around market tops, this indicator is also significantly off its highs. Yes interest rates will continue to move slowly upward, but this seems to be having little or no effect on the bond or stock markets. And finally the inflation threat despite the continued harping is a non starter, productivity growth continues to push up wages, and push down prices .Industries were productivity is the highest such as technology, this has become the most evident. Historically September is the worst month of the year for stocks giving investors and opportunity to pick up some good values and as many of the market risks continue to get sorted out this September may be a historically cheap time to but equities.

Buy low sell high,

James

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