"pervert of the day"

June 7,2005
Hello,
In a blow to the SEC the Supreme Court ruled against the use of medical marijuana for stock holders in order to ease the pain of underperforming portfolios. Stock holders have for some time turned to marijuana to simply to take the edge off. Sighting the inability to discern the negative impact of higher gas prices on SUV sales by management GM shareholders got a special dispensation form the Supremes themselves.

So what does it really mean to have increasing short term interest rates, while long rates continue to decline? What it is not; is a sign that inflation is coming. It suggests in fact the total opposite. I will say it again just to make it clear; declining long term rates signal there is an absence of inflation in the long term. So then what, you say? Perhaps it is suggesting the level of systematic risk is beginning to decline in the long run. That means that the new paradigm of risk assessment factored into the market since 9/11 may be receding. This could lead to higher valuations and better stock market returns.

Back to 1995-1996, looking at the recent trading it is interesting to see that storage technology have been trending up and perhaps semi conductors are about to do the same. This same pattern was in place in late 1995 into the first half of 1996 and was the precursor to the period of “irrational exuberance” at the end of the 1990’s.

A client asked me the other day what all these brokerage houses mean when they say buy quality? When you hear the “Buy quality” mantra from Wall Street firms it is best to run for your life .Their list of quality is often a list of dogs they are trying to rid their own institutional portfolios of. Buy quality as used in the brokerage business is meaningless term. Today’s quality is tomorrows General Motors and the one thing for certain in the stock market is that things always change. New technologies, new industries, demographics and changes in life style mean changes in the way we all do business. “Buy quality” is simply an empty phrase used to separate you from your money.

James