lost in Space..........All You Need is Love....and no more kissing (up)....

July 29th 2005

Hello,

Am I the only one that doesn’t think it is cool for NASA to ground the shuttle fleet while there is still a mission going on? Somehow I don’t think it is a confidence builder for the Discovery astronauts.

According to Bloomberg Radio 87% of companies are making their earning this earnings season, that’s a far cry from the pessimistic view that was expected. My question is and why was, is everyone so pessimistic? The net effect of all this pessimism is the current summer rally. How long will the rally last, my guess till sometime in August perhaps as late as very early September. Again I think we could consolidate through September till the 3rd week in October. Then if all goes well the semiconductors should begin to take off. The new bull market looks after 5 years of sub par returns to be upon us. Housing continues to prove resilient, through many of the stocks seem a bit peaky. Semi ‘s are moving and Bio Techs are on fire. Of coarse the story of the decade, energy also continues to act positively. Why am I not jumping into Bio Techs? In the past I have found that the Bio Techs are very hard to trade and no matter what kind of company or how established, you could lose most or all of your money at the drop of the hat. With Bio Techs I prefer to find patient investors who are willing to buy them when they are down and out and just wait till they get lively selling into the rally.

Bring back the long bond they say. So what would be the net effect of the return of the 30 year Treasury bond which was discontinued in 2001. My bet is the reintroduction of the long term bench mark will give traders of both stocks and bonds a better feel for which way long term interest rates and inflation are moving. More supply of 30 year bonds will also have the effect of raising long term rates by increasing the supply of 30 year bonds and thus lowering the 30 year bond prices and yes this could lead to higher mortgage prices. I was one of those people that thought that the Treasury should have never gotten rid of the 30 year to begin with. The 30 year was a very good predictor of future economic activity, the 10 year simply could not cut it and I think that its demise has led to some very weak stock markets the last few years.

James