1/27/03
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Firstly and most importantly, our cruise was fine - the rest and relaxation was wonderful.

Economically speaking, major layoffs are still announced daily. Earnings are still not strong and most companies are still expecting reduced sales. Will we have war with Iraq? I do not know. I find the entire process curious, but the decision will become apparent within weeks. In so far as North Korea is concerned, I do not expect anything significant to happen there.

The Dow Jones still cannot even come close to 9000. In order for the Dow to really advance, it must exceed 9000 on a closing basis and 9200 on a closing basis with huge volume. I just don't see it. We should continue in the 7200 to 9000 trading range until we finally break through 7200.

The Dollar declined by 18% during 2002. We should experience more of the same in 2003, which should cause Gold to rise in 2003. Gold is now over $370 per ounce.

We (the U.S.) are faced with rising deflation and rising inflation simultaneously. The rising deflation is being imported from China and Japan. The inflation from commodities. From my research, I have not found an era within 100 years where we experienced this phenomenon. How this plays out should not be pretty. Again, I use Japan post 1990 as the rough model since Japan is essentially experiencing the same situation as we are today.

There are significant differences:

- Japan has a very high savings rate - the U.S. savings rate was negative, now barely positive.
- Japanese banks are essentially insolvent, and are not being permitted to fail - in the U.S. we close insolvent banks, liquidate them to strengthen existing banks.
- Japan has a current account surplus - The U.S. has a huge deficit.
- Japan has a budget deficit which is (by GDP%) several times the U.S.

Go figure.

In terms of real estate pricing, I still feel that the top is in - or will be in by Spring 2003 - followed by lower real estate prices.

Copyright 2003 Arnold's Ramblings Inc., All Rights Reserved.
- posted by Arnold @ Monday, January 27, 2003