April 17 2005
Hello,
The markets certainly hate uncertainty. The recent sell off has given way to sector rotation with drugs and healthcare stocks taking the lead .Energy still looks to be the place to be . The pricing in of terrorism in the market has been getting a very hard hitting revision. Given the latest moves the fighting season may coincide with the summer driving season. The problem with pondering the imponderable is that it usually comes in a form and from and place you would least suspect. The market senses mid east tensions are again beginning to mount. Egypt has been added to the list of political hot spots along with Syria, Lebanon and Iran. These events have currently upped the ante in the global risk paradigm.
Another recent addition is the increased tension in Asia. The US is rearming and pushing to place Japan on the Security Council at the UN. Recently Japan signed on to the US policy to defend Taiwan against aggression. A rearmed Japan is a terrifying prospect for most of Asia. China which suffered terrible hardship under the Japanese occupation during World War Two is feeling acutely threatened. Friction between Japan and China is the worst it has been in 30 years or more. Add the already unstable North Korea and strong terror movements in Indonesia and the Philippians and you have brewing a recipe for trouble.
Meanwhile it is becoming reasonably clear to everyone that because of the UN oil for fraud program, the UN was in the pocket of Saddam Hussein. It now looks as if the war and the bloodshed could have been avoided if the UN had not taken the payoffs and done it’s job and enforced it’s own sanctions. The oil for fraud programs looks to have not only bought the favor of many of the Security Council members such as France and Germany but also global power brokers deep in the halls of many governments. So deep and so vast that the oil for fraud could be considered part of the social welfare fabric for many countries. Saddam used the program to buy favors and insulate himself from criticism or removal. Many on the 38th floor of the UN are now facing questions as to what did they know and when did they know it. The scandal seems to encompass everyone except one notable exception; Halliburton.
On the domestic side this week is dominated by first the tax day hangover and then Corporate Earnings. The bad earning usually hit the tape early; with better earnings filtering in as the week goes on. The pundits have gotten even more negative and the fund managers have followed suite. The market looks very over sold to me yet recent economic data is showing a slowing of the industrial and real-estate sectors. Again the jury is out weather these data releases indicate a trend. I remain primarily bullish and look at the short term volatility in the market as buying opportunities. The bearishness of the pundits and press compels me to remain bullish .The consistency of the press being always wrong when it comes to investing is mind boggling at times. This week the New York Times was touting a hot real-estate market, wow run for your life that’s one party that may be near the end.
James
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