5/19/03
The economic data coming out of Washington is just awful. PPI down 1.9% (worst on record dating back to 1947), CPI down .3%, retail sales numbers, industrail production, new homes, etc., each one worse than the other.

This suggests one of two contradictory possibilities:
1.) This is the bottom for which we will climb out of slowly towards 4-5% growth in GDP by the 4th quarter 2003, with the 1st quarter profit numbers as the early indication since a large number of 1st quarter results were better than expected.
2.) This is the continuation of the same, the economy will vaccilate back and forth within plus or minus 2% GDP growth for a long time (5-7 years). The positive earnings were based on comparisons to estimates, not the prior year, which comparisons were still generally awful.

Unfortunately, I believe the latter, while virtually every talking head believes the former. We'll see - nothing seems to be better. I would love to believe the economy was soaring, but I just don't see it.

I also still believe the Dow will not exceed 9200, probably not even 9000 and the Nasdaq will not exceed 1800 or probably even 1750. As a matter of fact, the rise should end within two weeks, if not already - the lows should be in place either in late October/early November, or in February/March, 2004.

Buy Gold. Gold (the metal) has been rising while the stocks have not moved yet. I still believe the trade is in the stock. Buy ABX, NEM & BGO. I still consider this the trade of a lifetime.

If you haven't refinanced your mortgage and you intend to do so (a present mortgage rate of 7%), time is running out. Long term rates should start to rise, while short term rates will remain low - maybe even lower.

Housing prices in the "million and up" category appear to have peaked in virtually every market. The lower and middle ends are still holding up, but by winter these markets should be heading lower, much lower as well.

As a reminder: For all of you who are passing Arnold's Ramblings on to friends, family members, enemies - whoever, now you can provide them a fresh copy, direct from the source! Ask them to go to http://www.arnoldsramblings.com/NavLinks/Subscribe.html.

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- posted by Arnold @ Monday, May 19, 2003