Friday, December 10, 2004

"maddeness has the advantage of suprise", Kofi must go now

December 6, 2004


Don’t bet the ranch, that’s what the NASD says, the pro’s scale into stock positions over time using the power of dollar cost averaging. Just waiting for the Santa Clause rally, despite the lack of performance of the indexes the market internals continues to trend to the positive. There was a three year period at the end of the 1990’s were indexes out performed ,but now it seems we are back to a more traditional stock pickers market ,were certain stocks and certain sectors significantly out perform. It is very important to use this holiday season to position your self for next year. Year end activities: remember you only pay taxes on realized gains. In theory your account should be up yet you should have realized losses. This time of the year it is a good idea to clean house and sell your losers, especially if you have taken some gains during the year. However I have often found that putting off taking a stock gain for the sole purposes of avoiding taxes leads to folly and perhaps disaster; ask anyone who didn’t sell in December 1999.

One day Sigmund Freud was smoking a very large cigar while lecturing on oral fixation, when questioned by a student on his stogie Dr. Freud responded,” sometimes a cigar is just a cigar”. The reason I bring this up is with the market moving up and down from day to day with all the economic data there is a tendency of some “experts” to assign specific market moves to trivial events of the day .Folks sometimes a cigar is just a cigar meaning, the ebbs and flow of the day to day market moves may have no correlation to the day to day news events what so ever. Even if there is a correlation, correlations in the stock market tend come and go.

This brings us to one more year end pearl of wisdom, “even a broken clock is right twice a day”. With all the reporters, pundits and pollsters seemingly endless speculations on the fate of humanity, state of the economy and laments of moral decline of mankind it is important to keep in mind that no one ever questions them on any inaccurate predictions. The pollster Zogby has even gone as far as to say that his polls were right and it was our vote that was wrong. Why do I bring this up ,well first on wall street no one ever got fired for being to bearish: bearishness protects capital even if it does not make any. Secondly what makes these guys experts anyway after all they are almost always wrong? And finally there is a tendency to see in the numbers and charts what ever you want it to be; if you want oil prices to be higher because your making money of the price raise ,everything you see tells you oil prices will be higher. This gets back to my point ,pundits promote there own self interest not yours ,they can like a broken clock and be accidentally right from time to time, but that does not mean you should not look at what ever they say with great suspicion.


Thursday, December 02, 2004

rather not be rather

December 1, 2004


Funny the Saudi’s announce a huge increase in their capacity to produce oil and oil prices raise? Consumers spent money as the expression goes like “drunken sailors”, increasing spending by a whopping 5.1% paying apparently scant attention to the “consumer confidence numbers”. Funny again that real spending has less of am impact on the pundits than consumer confidence polls? Sounds strikingly familiar to something? Wall Street continues to chant the sky is falling, the sky is falling, don’t buy it for one minute! The more the wall of worry keeps increasing the more chances for investors to be rewarded with upside surprises, and strong stock advances.

So why is the dollar really falling in value? The US for decades has been the buyer of last resort for all foreign goods. As a country we seem to have an insatiable appetite. Very good demographics have continued to propel US to consume all that is offered. A strong currency keeps prices and inflation down. Some countries like Japan have horrible demographics and need to export there way to prosperity. Because of Japans success many emerging countries have been encouraged to follow the Japanese model. The problem being that some of these countries like China have huge unmet internal demand making it entirely unnecessary for them to think that they can and should export there way to prosperity. Every country has different population demographics, skills, educational levels and resources. Common sense would suggest to anyone that different countries need differing development policies. Far too many countries are following the same model, keeping the currency cheap, and exporting there way to fame and fortune. There are simply not enough buyers. What we see is market forces attempting to rebalance the value of certain currencies to change the equation. The US can no longer afford to buy everything from everyone. The devaluation of the US dollar will pressure Asia and Europe and force shifts from export driven economies to something more balanced. Asia looks most likely to have a currency crisis while Europe looks most likely to be hurt in the long run.

Now Ridgewoods largest dealer of Iraqi Dinars,