The Great Crusade

April 21, 2005

Hello,

The Cardinals have made an amazing shrewd choice with the choice of Cardinal Joseph Ratzinger .In one move the Cardinals have joined the war on terror and the war against international one world government George Soros socialism. Meanwhile the President did something even more astonishing .Merely by holding hands with a Saudi King oil prices plunged more than 4% and below $50 a barrel for the first time in some time. The gesture sent out a simple message simultaneously reiterating confidence, legitimacy and a special friendship to the Kingdom of Saud and recognition of the law of diminishing returns, were by to high of oil prices lead to permanent conservation which in the long run leads to a decline in oil demand.

As for the market well the choices available may not have the same impact. The energy sectors seems the place to be, with drugs and health care looking to make a come back. What happened last week you ask? A very over extended market to the down side produced what looks to be the signal that that things are going to start moving in a positive direction. Remember the NASDQ is still down over 60% form it’s 2000 highs ,yet earning have increased nearly 50%. The one day burst of 200 plus points to the up side, with advancers out pacing decliners 3-1 and up volume led declining volume 5-1 with very heavy volume. Yes it could be short covering and yes it could be a one up day on the way down but in my view the market has put the brakes on the down ward slide. The follow up rally on Friday April 29th would suggest that this is the beginning of something big. Like I said be fore it still could take some time to build a head of steam.

The market continues to trade like it is looking for the final bottom. It could be several months or a matter of days. In the years since the March 2000 meltdown all the rules have been tossed out the window. We had a prolonged period of low volume sell downs. We have had information and pricing break downs. Then nothing more than a bit of a post 9/11 dead cat bounce. Now the signals of the grand finely are upon us. In a rare occurrence the percent of Bearish Advisors has become greater than the percent of Bullish advisors, in fact Bearish advisors out pace the Bulls by almost 20%, historically that suggest a big rally is coming. Since October of last year we have seen an unprecedented amount of corporate repurchasing of there own company stock. Also signaling that there are good value’s out there is the reigniting of corporate takeovers and mergers. We are all just so glum. Lots bad economic data followed by lots good data, but lets face it with a GDP growth rate of 3.1% ,home ownership at a record high, and an unemployment rate of 5.3% it is simply impossible to make a historical negative argument. The Facts just get in the way. Especially given Europe and Japan’s GDP for sometime have been growing at less then 1% and Europe’s unemployment rate hovers near 11%, with trade and budget deficits comparable to ours. Perhaps it may take tax refunds or the rumor that Microsoft is beginning to see the light on some new grand technology. It seems all we need is a little exuberance irrational or otherwise to get this thing going.

James