sun spots in my eyes

September 12 2005

Hello,

While the country is still arguing about who’s fault the hurricane Katrina is ,I have moved on to new hurricanes and a more plausible explanation ; sun spots. For years science has studied these solar flares know to the laymen as sun spots. They have been credited with the bull market of the 1980’s and 1990’s, the end of the Second World War, the fall of the Roman Empire; Roger Maris hitting 61 home runs and on and on. Some studies suggest that the good performance in the stock market tracks certain sun spot phenomenon. It has been rumored that certain large Wall Street firms has devoted significant resources to studying solar flares effect on the market. My personal experience has been a bit more mixed. Sun spots seem to explain only the crazy market inconsistencies and So if things seem a bit off, stocks down when they should be up the next time you hear blame game, just think quietly to your self, it is all about sun spots.

First it was all about who to blame for Katrina, now its blame everything on Katrina. Company after company is rushing to tell us that its not bad management, accounting irregularities, lack of vision, or poor judgment. It is just good old mother nature reeking havoc to the unsuspecting masses, yea right.

As I said in the last email Semi’s still looked good, with their technical charts intact and the first week of September was surprisingly strong .Of coarse last week things went back to the normal September swoon and sold off. As I have said before the key to the market returning to more normal performance would be a sizable rally in the Semi conductors. I am still looking at weakness thru the 3rd week of October and then a substantial year end market rally.

Looking over the past couple of years it is becoming increasing clear that it is all about timing and asset mix, I can have 20 accounts with the same stocks and yet the performance could run the gamut from up 30% to down 25% all depending on the date of purchase and percentage of a particular asset. Energy has dominated the winners, but several times I have been under the impression that the sector has gotten way a head of itself. It looks to me that the pressure on energy prices stems more from underinvestment, restrictions and underdevelopment of the infrastructure to deliver the energy to the consumer not some depletion of reserves as many would have you believe. I think what is confusing to lot of people is that the long term trend of raising energy prices and raising energy stocks, yet short term, which could last several months the corrections are giving very strong sell signals ,later to reverse to a strong buy signal. The pricing mechanism of the stock market seems to still be off, no efficient market at work here and it can take some time to dig yourself out when a stock goes against you and can take sometime for a stock to move up for very obvious reasons.

James

www.jamesfoytlin.com