Zum Lesen unter dem Sonnen-Schirm

verfasst von Emerald, 11.06.2003, 07:08

-->mit viel Text: dafür inhaltlich sehr gut und mit viel Weitsicht.
Richard Russel's Comment:

"wirksam wie immer und zutreffend auch für unsere Breiten-Grade, dank internat.
Vernetzung".
-------------------------------------------------------------------------------

June 10, 2003 -- You have to wonder -- some of the smartest and most experienced market men, economists, thinkers, in the nation are warning about the direction this country is going. Example from a piece in today's Financial Times by Felix Rohatyn,"the man who saved New York."

"In the long run, the picture is dismal. Instead of the $5 to $6 trillion surplus once estimated for the decade ending in 2013, the present outlook is for a $1.8 trillion deficit, according to the Congressional Budget Office. Estimates of economists outside the government reach as high as $4 trillion.... It is time for the US to stop and think about the contradictory nature of its economic policies and its new international doctrine. It cannot, over time, finance its domestic needs while bankrolling the spiralling costs of America's global dominance. Something will have to give."

Glickenhaus, Rohatyn, Peterson, some of the smartest and most experienced financial men of our times issuing warning about where the US is heading. These aren't ivory tower professors, these are market men, experienced men, men who have seen the good and the bad, men who have successfully handled money.

So what's been the stock market's reaction to these warnings? So far -- nothing. The market has moved steadily higher. However, I find it fascinating to see whether the market can continue to ignore the warnings, longer-term warnings, to be sure -- but dire warnings of things to come if this nation continues on its current path.

It's obvious that the Bush administration, aided by the Fed, hopes to get by any trouble that might arise between now and the 2004 election. How will they do it?

I just received the latest statistics from the St. Louis Fed. MZM or money of zero maturity (literally cash) is accelerating to an annualized rising rate of 7.5%. The Adjusted Monetary Base is rising at an annualized rate of 9.5%. Adjusted reserves are surging at a recent 31.7%. The Fed has opened the spigots wide. The Fed is almost promising another.25% cut in short term rates. Greenspan is intent on"floating" the US economy higher, and as far as the deflation"threat," it's not going to happen, at least not between now and election time 2004.

As I see it, the stock market has been taking the short view. It's responding to the"open spigot" policy of the Fed. If there's trouble in six months, a year, a few years from now -- well, the market will deal with that as we get closer. But right now the stock market is floating on a sea of Fed-created liquidity. It's a case of"What, me worry?" Not now, boys and girls, no worries now.

But that doesn't mean that we should ignore the stock market's price action.

The test of the strength or weakness of the market is what it does following a correction.

Some"minor corrective action" started a few days ago. Here's the story --

The Transports closed at a high of 2556.40 on June 4. The Industrials pushed on to a high of 9062.79 a few days later on June 6.

In the meantime, on June 5 the Transports started down and by June 9 the Transports closed at a low of 2447.48. On the same day the Industrials closed at a low of 8980.00.

The test now is whether the two Averages can recover to new highs. If they can do that, the advance should continue. But if ONE or BOTH Averages fail to rally to new highs, this could mark the beginning of trouble.

So the two highs we are watching now are --

Industrials 9062.79. Transports 2556.40.

On yesterday's action, Lowry's statistics show that the decline was mainly due to a drop in the Buying Power Index. The Selling Pressure Index rose just slightly.

But remember, it take risings selling pressure to generate an important decline. Yesterday, there was no important rise in selling pressure. Therefore, it will be most important to see --

(1) Whether BOTH the D-J Industrials and the Transports can rally to new highs.

(2) Whether Selling Pressure increases IF this decline continues.


Bonds -- In the meantime, as I write this morning both the 30 year T-bond and the 10 year T-note are at NEW HIGHS.

Furthermore, the gauge I use to monitor inflation is not moving higher. The yield on the 10 year T-note stands today at 3.23%. The yield on the 10-year TIPS stands at 1.55%. The differential in the two yields is at 1.68, roughly at its low for the year. The bond market doesn't see any inflation ahead, despite the Fed's pumping.

And if the bond market doesn't see inflation, if gold isn't surging, if the dollar isn't collapsing -- then the Fed feels perfectly safe in opening up the monetary floodgates, which is exactly what it's doing.

I've said recently that probably the most important single stock on the board at this time is Fannie Mae, the nation's giant buyer of mortgages. Yesterday Fannie's"brother," Freddie Mac got hit hard, but this was a result of internal problems, evidently accounting problems.

But today, with Freddie actually up, Fannie Mae plunged. Fannie was at a high of 75.56 on June 4. But on June 9 FNM gapped down to close at 71.31. Then today with Freddie Mac actually higher, Fannie Mae plunged to low of just over 68, And I have to wonder what's going on here. It could be important.

Gold is doing what the Commercials have wanted it to do. How do the Commercials work? They like to make money like anyone else. The Commercials sense that a market (gold) is overbought and that the gold buyers have taken their stand and have bought all the gold they want, at least for the moment. Sensing growing technical weakness, the Commerecials start building a short position against the gold buyers and gold holders.

At the same time, the large speculators recently built a very large long position in gold The large specs are hedge funds, big operators, some dealers. When the large specs"run out of gas," the Commercials take over and with their huge short position (shorts = supply), and they knock down the item, in this case gold.

When the large specs see that they are beaten, they will often reverse their positions and join the shorts. Thus, pressure will increase and"down she goes." Which is what happened today.

A friend (actually my broker) during the '70s reminded me that during the huge bull run by gold in the late '70s, he counted more days when gold was down than when it was up.

I continue to warn subscribers that we are in the first or early phase of gold accumulation. This is always a difficult time for the accumulators, and this time is no exception. The market (in this case, the gold market) will do everything in its power to keep you out or take you out of the item under accumulation.

Dollar -- Treasury Secretary Snow"suggested" that the dollar might go lower, and if it does, the US will do nothing to intervene or support the dollar. Then taking the other side, yesterday President Bush reiterated that he favored"a strong dollar."

Reading between the lines I come out with the thesis that the administration (Snow) really wants a lower dollar, but at the same time the administration doesn't want the dollar (Bush) to decline too rapidly.

Actually, the most recent decline in the dollar started in April and ended on June 5. The Dollar may now be forming a base preparatory to a rally. This alone represents a minus for gold (a higher dollar = lower gold). I don't expect a big rally in the dollar, but the dollar was severely oversold, and I would be surprised if the dollar couldn't mount some kind of a rally over the next few days or so.

TODAY'S MARKET ACTION -- Looked good, all except for the lagging Transports and volume. My PTI was up a full 8 to 5308 with the moving average at 5260. PTI remains bullish.

The Dow was up 74.89 to 9054.49.

July crude up.26 to 31.73, mmmm, let's keep an eye on the"black gold."

Transports up only 10.95 to 2450.43.

Utilities were up 1.30 to 246.95.

There were 2315 advances and 981 declines. Up volume was 72% of up + down volume.

There were 324 new highs and 3 new lows. My High-Low Index was up 321 to plus 1264.

Total NYSE volume was a contracting 1.25 billion shares.

S&P was up 9.81 to 984.84.

Nasdaq was up 23.70 to 1627.67 on a contracting 1.76 billion shares.

My Big Money Breadth Index was up 6 to 708, highest since December 16, and this is impressive.

Sept. Dollar Index was up.14 to 93.94. Sept. euro was down.58 to 118.51. Sept. yen was up.26 to 85.20.

German DAX was up 45 to 3140. Sept. Nikkei was up 90 to 8860.

Bonds were are new highs -- Sept. 30 year T-bond was up 110 ticks to 121.13 to yield 4.25%. Sept. 10 year T-note was up 23 ticks to 119.22 to yield a lowly 3.19%.

The experts keep calling a top for bonds, but the bonds don't want to listen. It's still up, up and away. Where will it stop? Dunno. Bond reacting to liquidity, interest rate cuts and perhaps thoughts of deflation or at least no inflation. Things change -- but not yet.

Gold got whacked, and the Commercials are having their fun. August gold was down 9.80 to 352.80. July silver was down 4 to 4.47. July platinum was up.50 to 654.00. Sept. palladium was up 5.35 to 178.00.

Gold/Dollar Index ratio was down 11.50 to 315.40.

Gold advance-decline line was down 19 to 1122.

One share of the Dow buys 25.66 ounces of gold

XAU was down 1.04 to 75.68. HUI was down 2.26 to 143.62 -- gold averages didn't give up much.

ABX down.21, ASA down 1.12, GG down.21, GLG unch., GSS down.09, HMY down.20, MDG down.16, NEM down 1.10, RGLD down.62.

Right shoulder on gold broke down -- more building is needed. It ain't easy in this business, but then -- nobody ever claimed it was.

STOCKS -- My Most Active Stock Index was up 5 to 242.

The 15 most active stocks on the NYSE were -- LU up.01, FRE up 1.36, MIR down.27, NT up.04, FNM down 1.76, PFE up.07, MU up.88, GE up.30, EMC down.23, MOT down.12, NOK down.40, AOL up.15, C up.16, PCS up.19, MCD up.75.

VIX was down 1.58 to 22.13 as option-writers gain confidence.

McClellan Oscillator was up 42 to plus 47.

CONCLUSION -- I'm watching to see whether the Dow and the Transports can bounce back to new recovery highs. Dow looked good today, but let's keep our eye on the lagging Transports.

Remember, the KEY to this market is whether the Dow can close above 9062.79 confirmed with a Transport close above 2556.40. The Dow is only 8 points from its high -- but the Transports are 106 points from their high.

See you Wednesday, and it should be an interesting show --

Russell

..................................................................................................................................................

Just a statistic -- The Social Security Administration now makes direct deposits to 271,000 recipients living overseas in about 40 countries, including Canada, most European nations -- But Brazil, Mexico and many other nations are not yet signed up with Uncle Sam to handle direct deposits. SS will mail checks just about anywhere.

.....................................................................................................................................
Britain will have to decide fairly soon whether to dump the pound and accept the euro. In Britain unemployment has dropped to a record low, consumer spending is big-time, house prices are going through the roof, and government spending is rising. With all that happy stuff going on, will Britain want to make the move? We'll find out within the next year or so.

....................................................................................................................................

It's cheaper to rent than to buy a house. Here are the statistics, showing how much more expensive it is to buy a house over renting. And wouldn't you know it, San Diego is the most expensive in the nation in housing over renting --

San Diego 129%
Honolulu 127%.
LA 114%.
New York 112%.
Boston 107%
Seattle 106%
San Fran 100
Chicago 92
Miami 91
Wash. DC 82
Minneap. 77
Cinci. 75
Salt Lake 74
New Orl. 67
Phoenix 67
St. Louis 66
Philly 66
Houston 65
Orlando 64
Dallas 59
Atlanta 59

Conclusion -- rent in San Diego, buy a house in Atlanta or Dallas.

...................................................................................................................................

Dear Richard,

Today I was reading “The Art of Contrary Thinking,” by Humphrey B. Neill when I sat bolt upright, and dashed off this email to you. On page 39 he discusses a paper called “Fiat Money Inflation in France: How It Came, What It Brought, and How It Ended,” published in 1912 I believe by Andrew D. White. It has some interesting parallels to today. I guess some things never change. Thanks to the wonders of the Internet, you can read the entire text at ftp://ftp.cdrom.com/pub/gutenberg/etext04/fiatm10.txt. Here is an excerpt to tempt you:

Early in the year 1789 the French nation found itself in deep
financial embarrassment: there was a heavy debt and a serious deficit.

The vast reforms of that period, though a lasting blessing
politically, were a temporary evil financially. There was a general
want of confidence in business circles; capital had shown its
proverbial timidity by retiring out of sight as far as possible;
throughout the land was stagnation.

Statesmanlike measures, careful watching and wise management would,
doubtless, have ere long led to a return of confidence, a reappearance
of money and a resumption of business; but these involved patience and
self-denial, and, thus far in human history, these are the rarest
products of political wisdom. Few nations have ever been able to
exercise these virtues; and France was not then one of these few.[2]

There was a general search for some short road to prosperity: ere long
the idea was set afloat that the great want of the country was more of
the circulating medium; and this was speedily followed by calls for an
issue of paper money.

Kim Berggren

............................................................................................................................................

Mr Russell,

I had a burst of inspiration this morning as I was reading and re-reading
your March and April monthly letters. Reading your stuff always stimulates
me and makes me feel like I'm back in Berkeley!

First, concerning WOMEN.

Ever since the Martha Stewart story broke I've been wondering what it all
means. Really, why such a big fuss over such a seemingly small affair? And
my opinion is that the Martha Stewart story is a"gender" thing. Do I have
inside knowlege of this? Nope. No insider info, just common sense and
recognizing that she's trying to compete in a man's world.

Think about what Martha Stewart represents. First, she is smart as heck.
She is talented and and financially prosperous, who just happens to be
FEMALE. Did you know Martha Stewart was a model in her younger days? In my
opinion she was a real beauty.

And the problem is that being a powerful Female in the ny world is as
threatening as hell to these guys like dick grasso whose egos are so fragile
they can't say her name without shaking. The new york boys are sorry
excuses and I can't help it but I'm getting mad. Their egos can't stand
the the idea of a woman who's more intelligent than they are, prettier than
they are, and certainly better in the kitchen than they are. Italian men
you know pride themselves on being great chefs.

And what is the message the new york boys sending to women? I believe it
is"you play on our field and we will trample you.. Play in our game and we
will make your life miserable and you will lose even though you may win."
Instead of remember the Alamo the reminder is,"Remember Oprah." But aah,
Ophrah had the last laugh, she won her case but not before they'd scared her
half to death. And I believe that Martha Stewart will win her case as well.
As one pundit said,"Martha is smarter than all the NY attorneys
combined." And I believe it. And she also doesn't scare easily. She's
"tough as nails."

Now my second idea which came to me this morning.

This is something you've suggested or alluded to repeatedly. TRUTH. One of
the reasons why this country is not doing well, and will continue not to do
well, is because we have lost our moral compass. The generation of men and
women which you and my parents are a part of, who fought in WWII and Korea -
this is the Great Generation of Americans. They are dying at the rate of
3000 per day. In a few years they will all be gone.

What about this Great generation? Well, they were and still are for the
most part decent, carring honest,hard-working and kind. They are devoted to
country, to the point of dying in wars. They understand real adversity and
they've relied on each other more than my generation. And they are
thankful and appreciative of what they have. Aah contentment.

The worst devastation of this current bear market will arrive when the last
of this Great Generation dies. The Great generation will be spared the
worst of the coming disaster. Why? Because of the qualities I mentioned
above.

The Baby Boom generation will not escape however. They will have to suffer
through the wreckage and the hard consequences of their recklessness and
poor decisions and looseness with the truth. Night is not day and day is
not night, as they will discover. The bear market in equities and bonds and
real estate will leave them destitute in this land which their fathers
fought and died for.

So I'd like to add a couple items to your list of"how will we know we're at
a bear market bottom."
How will we know when we've hit rock bottom and it's time to buy stocks
again?

1/ America will once again be committed to truth and honesty - eg. no
pro-forma earnings. We will have real earnings and not fantasy numbers.

2/ All debts will be completely washed away. Debt will be a dirty word. I
believe that our debt problem is part of the bigger picture of what's wrong
with America. At the core it's really a moral issue. The idea that one can
not work for their keep. Something for nothing. The Apostle Paul wrote,"If
a man will not work, he won't eat." Will Americans work? I think many
willl but right now we'd rather consume and have things for free. Until
this thinking changes the bear market will continue to maul away. Actions
have consequences.


Charlie Ruland, President
Stan Ruland Insurance Services, Inc.
23275 South Pointe Drive, Suite 100
Laguna Hills, CA 92653

..........................................................................................................................................

CRAZY HORSE
By Doug Noland

Well, Critical Issues become clearer in the data by the week, although one must disregard the ‘aggregates” and focus on the detail. Critical Issues conspicuously appeared in the detail of friday's employment data and in the Fed’s “flow of funds” Credit report. A dysfunctional Credit system has created and now exacerbates a severely unbalanced economy. Abundant liquidity flows to the Mortgage arena and “services,” sectors demonstrating a continued inflationary bias. With “easy money” stoking easy financial profits, the broader financial sector boom runs unabated. In stark contrast, challenging economic profits (the consequence of Credit-induced sectoral over-expansion and price distortions) has liquidity avoiding manufacturing and “goods-producing” for the lovely green pastures of financial speculation. More Liquidity Equals Further Imbalances.
<?xml:namespace prefix = o ns ="urn:schemas-microsoft-com:office:office" />
Critical Issues also emerge more clearly by the day throughout the financial markets. The Fed has succeeded in inciting a major destabilizing short-squeeze throughout the stock market, and I will assume something similar has unfolded in corporate bonds and Credit default swaps. If our Fed governors actually believe they can subtly manipulate today’s unruly markets they are in the process of learning a lesson. The Treasury market has gone into melt-up mode dislocation, with negative effects on the soundness of the mortgage-back and derivatives markets. Market melt-ups are nonetheless exciting and stoke the optimistic imagination, but the resulting distortions always come back to haunt. Let there be no doubt, the seeds for future acute financial crisis have been fastidiously sown. “Buyers’ panics” do juice confidence and enliven animal spirits. They are not, however, known for allocating liquidity or resources effectively or in moderation. Let’s not forget the destruction wrought by the previous speculative melt-ups in telecom debt or technology stocks. More Liquidity Equals Further Imbalances. And it should be recognized that the confederated Credit and Mortgage Finance Bubbles are more systemic than anything previously experienced.

I recently wrote that we have today “an energized financial sphere face to face with a despondent economic sphere.” Well, the more I ponder this most extraordinary environment the more I believe this line of analysis has some merit. More than ever before, the Credit system is today the Horse pulling the economic cart. Yet the analytical and policy focus remains fixated on the cart. How is everyone missing the reality that the Horse has gone nuts, and that administering mega-doses of stimulants is not going to work out in the best interest of those riding the wavering carriage?

Over the years, our contemporary (structured finance-driven) Credit system has drifted to an overwhelming emphasis on volume, asset-based lending and leveraged speculation. It long ago lost its “reins” to prudent, economic profits-driven lending. Unharnessed and lacking any discipline or direction, the Credit system mindlessly wanders only farther from familiar and protected terrain. The financial system becomes only further distorted by the month to the point of losing the capacity to effectively allocate a reasonable quantity of financial resources to the real economy. It instead inundates destabilizing speculative finance excessively to hot sectors, especially the asset markets. (Can there be a more compelling example than the past few weeks in the stock market?) In short, the (Credit) mechanism for creating and allocating liquidity (purchasing power) has become completely dysfunctional. But this Critical Issue is lost with the Fed and others’ focus on the maladjusted and despondent economy, the very economic system that is the creation of our deranged Credit system (Crazy Horse).

The nexus of the Great Credit Bubble is, in reality, its capacity to extend enormous Credit and incite unprecedented speculation, yet do it in such an atypically unsound and uneven manner. The Bubble is sustained by its “dysfunctionality.” After all, a less unsound financial system disbursing today’s volume of Credit/liquidity effectively (To a non-bubble/non-maladjusted economy) would surely fuel a traditional recovery. The Credit market would then necessarily anticipate heightened borrowing demands, higher market rates, and eventual Fed monetary restraint. Lending excesses and wild stock market speculation would be expected to alarm our central bankers, and the thought of an alarmed Fed would induce considerable consternation (and restraint!) for aggressive lenders and leveraged speculators. Such typical market dynamics would provide a crucial regulating/self-adjusting mechanism. But today is another world. Quite mistakenly, the Fed has virtually taken fear out of the equation, and we are witnessing the consequences.

The maladjusted U.S. Bubble economy - fashioned and sustained by a hopelessly dysfunctional financial system - specifically will not demonstrate the type of traditional responses to monetary stimulus that would be expected to engender a movement back toward monetary balance (or restraint). And that is damn good news for those so aggressively feasting on financial excess; but only for them. It is also specifically why this is such an extraordinarily dangerous Bubble.

Pondering the current environment, the stock market has quickly returned to a wildly speculative, unstable environment. Junk bonds, convertible securities, and the emerging markets are all demonstrating unmistakable signs of excessive liquidity and speculation. Gross financial excess is also corroding the value of the dollar and fostering erratic global currency markets. Meanwhile, the Credit market is in a destabilizing melt-up, inciting unprecedented lending and speculating excesses. The Mortgage Finance Bubble has been prodded into its terminal stage of parabolic excess. And, guess what? Job growth is sufficiently lifeless and corporate pricing power notably tepid throughout the distorted real economy, that the Credit market has the enviable luxury of anticipating yet another rate cut. The Horse becomes only more obnoxious and disobedient by the week.

I found it rather interesting that Pimco’s Paul McCulley ended his June article with “Good Lord willing, things’ll work out.” Well, things are not going to “work out”. And I hope when this Mother of All Reliquefications inevitably blows up, The Inflationists Greenspan, Bernanke, McCulley, Kudlow, McTeer and others will admit where they went wrong. The public will deserve an honest explanation, and future generations should have the benefit afforded a forthright and accurate historical record.

Thread gesperrt

 

gesamter Thread:

• Zum Lesen unter dem Sonnen-Schirm - Emerald, 11.06.2003, 07:08
  • thnx - Harry Popper, 11.06.2003, 15:41