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.

Copyright 2003 Arnold's Ramblings Inc., All Rights Reserved.

- posted by Arnold @ Monday, May 19, 2003

 
5/5/03
With the Friday May 2nd close in the Dow at over 8500, the technicals of the market suggest we may get a further rise to 9000, but I do not see a rise breaking 9200. The Nasdaq could go to 1550, but I just don't see the Nasdaq breaking through 1800 anytime soon.

Why are the markets bullish? And should the markets be bullish? The bullishness is unbelievable (I watched the 2 hour block of business shows on Foxnews Saturday, May 3, 10am to noon and for the first time ever, every single talking head - some of whom I respect - all were bullish short term and only one saw this rise as a bear market rally), with the war over and a tax cut coming goes the talk the markets have bottomed in October at 7198 and a new bull market is beginning right now. Consumer confidence rose 20 points last month, the largest rise ever, GDP will soar, the job market will pick up - within 6 months new claims for joblessness will drop to 300 thousand or less, unemployment rate to 5% or less and GDP 4th quarter 2003 would be 4-5%, earnings will continue to soar as they have in the first quarter of 2003.

Of course pigs can fly, and they can - but only when shot out of cannons.

I really don't want to appear negative, but there are a few problems the talking heads are ignoring. Let me attempt to list them in no particular order:

First quarter earnings were great. Compared to expectations earnings were "great," but the expectations were generally ridiculously low. Further, the quality of the earnings is very suspect: Finance companies and banks increased earnings by reducing bad debt reserves, how was that in a poor economy? Retailers increased earnings by increased gross margin and lower costs, again - how? Etc... Most large companies showed pension gains (in earnings) like GE (pension earnings are projected) of over $1 billion, when in fact in 2002 the pension lost $6.3 Billion and had losses in 2002, 2001 and 2000, yet in each year GE earnings increased due to pension projections.

In order for the markets to really rally, we need new accounting regulations which are black and white and easy for anybody to understand. Obviously when a pension loses of $6 billion in value it should not be increasing earnings for that corporation. Actually, why should a pension's increased value even increase earnings at all? The corporation cannot take out the money - yes, the corporation can reduce contributions but underfunded pensions do not reduce earnings, otherwise half of the Fortune 500 would be losing big (like GM, underfunded over $10 billion, Ford underfunded by $5 billion, IBM underfunded by about $1 billion, Boeing underfunded by $2 billion, etc...)

There is a fundamental problem in a rally in the bear market, no there are many problems: P/Es are 30 - 32, debt levels are enormous, every ratio is completely out of whack, speculation as measured by penny stock interest is huge, the put to call ratio is way too low, bullishness is near the top at 2000, March. This is just nonsense.

Let us review the Arnold's Ramblings Inc. position:

a) Dow may hit 9000+/-, but before November 2003 should break down below 7198 to or towards 6000 or less.
b) Nasdaq may hit 1750 to 1800, but before November 2003 should break down below 1100 to below 1000.
c) The Dollar shold continue its colossal decline.
d) Gold will rally above the recent price of $389 and break through $400/ounce.
e) Long-Term Yields on 30 year Treasuries presently at 3.90% should start to rise above 5% by year-end.

Many of you have taken enormous losses in your stock portfolios since 1999 and 2000. Should you be one of these people, and most especially you dealt with one of the ten firms settling with the SEC for $1.4 billion - you need to hire an attorney to get back some (or all) of your losses. It is highly unlikely you will get back all of your losses - but you should be able to stake your claim to some of that $1.4 billion.

If you already have an attorney who specializes in brokerage/client investment issues, great, go and file! If not, please contact me at once so that we can find you an attorney who will get you what is rightfully yours!

Do not delay, the sooner you file, the sooner you will get what is yours and the money will still be available.

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.

Copyright 2003 Arnold's Ramblings Inc., All Rights Reserved.
- posted by Arnold @ Monday, May 05, 2003

 
3/5/03
Technically the Dow gave a short-term sell signal Tuesday at the close (March 4, 2003). If the DJIA does not start rising soon, then 7197 is the next stop, breaking 7197 we're heading for lows in the 6600 range, then 6000 (or less).

Economic stagnation continues. The dollar keeps falling. This is the reason that we are looking to purchase precious metal (gold) stocks (NEM, AU, ABX, BGO, etc.) While the dollar continues to fall, gold has held in the 340s and is now back to the mid 350s. This is the last opportunity to buy gold stocks at these values.

With the declining dollar, it is unbelievable that we are still at or near record lows in 30 and 10 year Treasury Bonds. Soon this will change.

Last month's PPI indicated a potential raging inflation, though the CPI was .3. With the Fed(eral Reserve) throwing money into the system, the risk of inflation continues.

There are essentially two models for future economic activity: The Japanese model - which so far I have followed. The other choice is the Argentinian model - high inflation and large drop in GDP. The Japanese model drags out the inevetable recession over 15+ years. In the Argentinian model basically it is over in 2 to 4 really bad years.

I still believe the Japanese model is more likely, but effectively it will be one or the other.

Real estate prices are clearly moving lower in Manhattan, Fairfield County (CT), Southern Florida and California. If you plan to sell within the next 3 years, I urge you to sell this spring (2003).

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. The information to get onto our email list is there. Also, our permanent home, http://www.arnoldsramblings.com is up and running, stop by and take a look!


Copyright 2003 Arnold's Ramblings Inc., All Rights Reserved.
- posted by Arnold @ Monday, May 05, 2003