Thursday, September 30, 2004

Elvis will be spotted before the election.......

Stock Market basics…..

According to data from Ibbotson Associates Inc., large-company stocks returned 10.4 percent a year from 1925 through 2003 -- almost twice the 5.4 percent annual return for government bonds, and almost three times the 3.6 percent return for short-term Treasury bills. Inflation came in at 3 percent a year. (Bloomberg)

In the last five calendar years, the Standard & Poor's 500 Index has been up 19.5 percent; down 10.1 percent, down 13 percent; down 23.4 percent, and up 26.4 percent. (Bloomberg)

In the woebegone 1970s, for instance, when the index suffered back-to-back declines of 17.4 percent in 1973 and 29.7 percent in 1974, it still finished the decade with a total return, including dividends, of 5.8 percent per year. (Bloomberg)

September 28th ,2004

Jimmy Carter the hero and friend of villains and tyrannies all over the world and considered by many the most ineffectual president in the 20th century. No one is more a symbol of worshiping failure and ineptitude than Jimmy Carter. He institutionalized incompetence in the late 1970’s.Creator of the1970’s energy crisis and the accompanied malaise, certifier of all elections involving global criminality such as Jean Paul Aristide (Haiti), Fidel Castro (Cuba) and Hugo Chaves (Venezuela) amongst many. Perhaps his crowning achievement was the founding of a fundamentalist fascist Islamic state in Iran. Now Jimmy Carter has joined the ranks of al Quada in an attempt to undermine the 2004 election. His primary complaint is that is that felons in Florida are being disenfranchised and not being able to exercise the right to vote, don’t get any ideas McGreevey. No Jimmy felons can get elected but they cant vote, they lose that right when they fail to function in a social expectable manner or to quote Teresa Heinz Kerry , “ (act like a) scum bag” . But as you know Jimmy they can certainly run for office. Actually running for office is one of the few jobs you can get after a stint in the big house. I am getting more than a little board with someone who takes pride in, denying self determination to the masses and lending legitimacy to every too bit dictator in the world ,who’s only qualification is to be anti-American in the name of peace, love and understanding.

Back to the market, my thoughts are simple, with the US election looming and perhaps even more importantly the Iraqi election, and Afghanistan elections. Free elections in the mid east would be a near fatal blow to extremism. The Islamic extremists will do any thing to disrupt them. Add Iran’s ability to shot a nuclear missile perhaps into Europe and North Koreas lust to turn Japan into a nuclear waste land. Fear and War will dominate the market which puts a premium on Energy related issues and Defense issues. I know the large cap defense issues have been a bit of a bust, but smaller more focused issues have done quite well. In the long run I still view this oil thing as a bubble. Short term oil will continue to gain on a growing risk premium with the center of the battle shifting from Iraq to Iran. I did not think this new shift was going to hit so hard so fast. In the long run I still view this oil thing as a bubble. Remember higher prices encourage conservation and conservation becomes permanent. Conservation has a long term impact. OPEC is pumping the most in oil in 25 years. Oil often peaks in price in October. The world is much less dependant on oil than it once was. Remember oil would have to go to $100 per barrel to be were it was in real dollars in 1980.Anyway a lot of things look to be coming to a head in the next month to month and a half, so be careful out there.


Thursday, September 23, 2004

Johny Walker Scotch,letting the kids go naked ,simply Rather not

September 20, 2004


Staying on message with their new social agenda the Kerry campaign’s new focus is best illustrated with Teresa Heinz Kerry’s pronouncement, “let the kids go naked for a while”. I have one question, why are the people most likely to go naked always the people who should lest likely do so? Meanwhile CBS gets caught doing a hatchet job on the President, forging documents a felony, faxing them interstate a felony, forging military and or government documents a separate felony, knowingly broadcasting a false report using fake documents, perhaps also a felony and of coarse trying to influence the outcome of an election al Quada would be proud and probably is. Yet never letting the facts get in the way, CBS is sticking to their story.

This week President Bush spoke before the clowns at the UN on the values of freedom and democracy. No organization more clearly represents and supports the corruption, tyranny and bigotry in the world than the UN. I still think we should give the land back to the Indians and let them turn the property into a hotel casino. Meanwhile a commercial airline heading for Washington DC was rerouted to do to the fact that passenger, singer Cat Stevens wound up on an FBI watch list, just goes to show you there is nothing more dangerous than a has-been pop star.

As mentioned before companies a wash with cash continue to pursue stock buy back programs; while Technology companies pursue their assault on the rules governing stock options, in the hopes of continuing to attract the best and brightest with no money down. Pundits continue to tell us the sky is falling and inflation is on the way ,even though the CPI growth rate is now lower than in the hey day of deflationary spiral scare. So why is the FED raising rates, simply to regain the use of a policy tool (interest rates) and to retain more flexibility in dealing with economic trails and travails.

Well September is here and on key the stock market sells off just after Labor Day. But wait, the stock market went up and I got buy singles for the first time in years on the market in general. My bet would be that we should see some softness until the middle of October and then on queue, up, up and away.


Wednesday, September 22, 2004

trying to stay on message,nothing like a little excess stimulatio

September 16, 2004


Yes it is certainly true; more people now read these emails than watch CBS news with Dan Rather. The last couple of weeks have been something. Dan Rather seems to be doing more to single handedly sink the Kerry campaign than even John Kerry himself. Maybe it is just me but when you start putting Theresa Heinz Kerry out there as your spokes person from “lost in space” it suggest things are in a little bit of disarray. Meanwhile the al Quada backed Chechnya rebels have declared war on school children. Not on you and me but on our children. This leaves me with the question of the day, while Bill Clinton was in the hospital; does that make Al Gore the acting former president?

In Barrons I believe the term used was,” The current recovery has been largely a false one-unduly influenced by the “steroids” of excess stimulation”. The Wall Street community still continues to be very much divided over weather the economy is good or bad. Critics point to the accommodative FED (low interest rates), tax cuts (we can’t afford) and out of control deficit spending from Capital Hill. They warn of huge federal deficits, social security and Medicare meltdowns. And of coarse new job creation (payrolls) continues to be below previous expansions. For those of you over the age of 18 you have probably heard all this before.

History tells us however that this is not the only time that excess stimulation has had an effect. In the previous administration there was no recognition of the, peace divided (end of the cold war), the stock market bubble (creating excessive capital gains and capturing excessive capital gains taxes), massive accounting fraud, that accounted for excessive profits and excessive hiring from companies such as Enron, WorldCom, Global Crossing and so on. Coupled with Al Gore’s creation of new industry called the “internet”. Where English majors could make mid six figure salaries right out of college? All these events could clearly be defined as “excess stimulation”.

How does one really make money in mutual funds, it seems many small investors are still very confused and are still looking for a magic bullet. Folks there is no magic bullet .Most of the fund ratings are based on past performance, which as they say in the prospectus is no guarantee of future performance. Most performance is independent of and does not correlate with the level of risk an investor is willing to take. The risk level is based on investment style and asset class that the fund operates in. Most fund investors perceive volatility as risk. Volatility and risk are not a constant. Risk levels can increase and decrease overtime, with changes in markets, maturity of companies and industries. The key is to establish a plan of long term dollar cost averaging with your assets spread out over several different types of funds. Consistent contributions regardless of market conditions force investors to buy low .Even a simple asset allocation model also forces investors to buy low instead of chasing the latest investment craze and as they say in the business buy low and sell high.


"Knowledge is, in every country, the surest basis of public happiness." --George Washington

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

September 1, 2004


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,