11/1/02
Hi,

ALL OF YOU BULLS MUST BE REALLY HAPPY. SPEAKING FOR ME, I AM CONFUSED. Let's quickly summarize where we are: the stock market up over 10%, gold down 2%, bonds down over 8%. Normally when stocks go up, bonds go up. WHAT IS THIS TELLING US? I DON'T KNOW. It appears to me to be a major short covering rally, for stocks anyway. Bonds were at a bubble - I have stated my belief that bond yields will rise - the ten year went from 3.57% to 4.24% IN THREE DAYS! That's a 3/4% change in yield in 3 days!

Where do we go from here? the DOW and NADSAQ should start to base and head lower, gold should head higher and bond yields continue rising.

Economic activity is still not visibly improving. The great earnings last week from IBM reflected an 18% drop in earnings (that drove the stock up 12%) GE's great earnings were with a drop in sales. Consumer debt - continues to rise to unsustainable levels, the trade deficit - is at a record high - most importantly imports are continuing to rise while exports are declining. Companies are continuing massive layoffs.

Rumors abound United Airlines may file for bankruptcy. Other rumors involve major telecoms and cable providers filing for bankruptcy. There are even rumors of a major bank failure that is imminent - NOT A PRETTY PICTURE.

If you have not sold out your stock portfolio yet, PLEASE, for your sake, place stop losses below the trading points of your stocks. If Arnold is wrong, you will continue to own these stocks; if Arnold is correct, then you will be saved from very painful losses.

You should be up to 80% in Treasury Bills, Treasury Money Market Funds or Bank CDs (no more than $100,000 per bank, FDIC rules). Up to 20% in gold/precious metals stocks such as:

Newmont Mining (NEM)
Barrack Gold (ABX)
Bema Gold (BGO)
Canyon Resources (CAU)

Please be as liquid as possible and reduce or eliminate all debt - first consumer debt, then mortgage debt.



Copyright 2002, Arnold's Ramblings, Inc. All Rights Reserved.

- posted by Arnold @ Friday, November 01, 2002