Thanks for your opinion. I think you did a great job explaining Mr. Hay’s theory.
As I said several days ago I have been hired by a small company as a consultant to develop them a plan for growth in this weird economic climate we are living in.
This is a small mortgage company with offices in 5 states. They are taking the company public, and trading should begin in about 3 weeks. The major stockholder is a 25-year friend.
I have been hired to develop them a new growth business model that will hopefully keep them out of trouble. I have been working on the report for weeks and it is already 150 pages long.
Here are a few high lights, I invite all of you to pick it apart since we are having a meeting in Phoenix this next week and after that the plan goes into effect. Below are some thing I am going to tell them. Let me also say that a mortgage business is not an area that I would be looking at as a startup at this time, but this is what they have.
1. I am going to tell them not to count on millions of baby boomers all moving south from the rust belt, as many are now afraid to up root.
2. I am going to tell them that in my opinion the majority of well healed American investors are tied of gambling in the stock markets, and even though there is lots of money on the side lines that money is going to be looking for a home in investments that make sense.
3. I am going to tell them that investors the next decade “ are going to be more concerned about the return of their investment than the return on their investment”
4. I am going to tell them we are headed for some serious inflation, and if they want a strong stock price they need to build assets in the company as well as earnings.
5. I will advice them that because they are going to be dealing in paper that will most likely depreciate, that they need to build an internal inflation hedge in the company. I picked silver for the reasons I stated earlier.
6. My advice to them on offerings will be NOT to do common stock offerings, but to do units that have some shares as well as part of a mortgage pool that pays immediate interest dividends higher than the average of most NYSE companies.
7. I am going to tell them to rate every loan that comes in and not to buy for their mortgage banking division ,or their investors, any subprime loans that are ARMS, INTEREST only loans, 120% of VALUE loans, or any loans in one of a dozen cites that currently have bubbles waiting to pop i.e. most of CA. and others. They can broker these loans but not buy them.
These are just a few highlights what do you think? >>
All perfectly valid observations. Don Hays investment advice goes back 35 years. I just followed him for 20. It got him thru Carter inflation, Vietnam, the oil embargo, the Kennedy assassination, and was valid during the Cuban Missile Crisis. He is hopeful that smarter heads will prevail in the current social security mess. But the model works and will work. There are problems. There have always been problems. Serious problems. But the model forecasts the stock market, and it is suggesting a higher stock market in the next few years. The model in 2000 told him to head for the hills. 60% overvalued on the value leg and optimism was rampant on the psychology leg. With only 2 legs on the ground, he took his most defensive position he could, and got right back in at the bottom. Send your email address and I'll be happy to include you to get his comments.
<< <i>Clad King, maybe I'll see you out there. I'll be at the Auburn Kruse auction Labor day week. Any good coin shows out there? >>
I'll be better by then, it's not impossible. Auburn isn't too far from Winchester where Silvertowne is but coin shows in this state tend to be mediocre at best except when central states is held here. South Bend is one of the better small shows but not worth much of a drive.
Auburn is a nice little town that used to be an economic powerhouse many years ago. Today it is forgotten since it was bypassed by time and the major highways. Really nice people there and if it were built people would come.
As for the stock market doubling, it was purely a guess based on some technical analysis, looking at the S AND P earnings over decades. It the stock market gets back to fairly valued, and earnings continue to expand, a double is a reasonable expectation
The is only 1 thing that drives stock prices. DEMAND. Where is the demand going to come from?
1. The already retired folks arent going to buy more stocks as they have already been through 2 major declines in the last 18 years and dont want more risk.
2. Baby boomer generation. Their portfolios are less than they were 5 years ago and think real estate is the place to be.
3. Baby boomer's kids. They are too consumed with interest only mortgages and are also disenchanted with stocks.
And I dont think you are doing any technical analysis. There is absolutely nothing in this chart of the S&P that precludes any prediction of a double. I certainly hope you are not telling your client that their money will double over the next 3 years. Thats 20% per year. IT AINT GONNA HAPPEN!!!
If stocks can double in the next 3 years, then by implication the Treasury and FED will be working overtime printing money and borrowing foreign funds to prime the pump to obscene heights. Now if you think borrowing $2 Billion a day is going to continue, and then increase towards 2008, then I suppose anything is possible. That would also imply that housing prices will continue to escalate as well as that is the first bubble of choice that boomers are dumping their money into.
Does anyone really think that any stock broker is going to predict 6000 DOW by 2008 and kill his chances of selling anything? Of course not. 20000 sounds a lot better. No different than crying $1000 gold too.
In 2008, the Dow will be between 10,000 and 11,000 - just like it has for the past five years and just like it will be for the five years following 2008.
Actually, going back over the data, you could say we may stay in the 60's and 70's. The stock market did little but cycle back and forth between 550 and 1000. Most of the time was spent from 650-950. Personally, I think a major league correction is still coming to burn off the excesses of the 20 year bull run.
Currently the average price/earnings ratio of the S&P is floating around 20. For comparisson the top of the 1929 stock market saw an average PE of 21, and the pre-crash top in 1987 was 23.
By any historical measurment, the stock market continues to be priced absurdly high. The world's most successful investor, Warren Buffett, is HEAVILY in cash (to the tune of 43 BILLION dollars according to his Dec 2004 letter to investors) and actually appologized to shareholders for not finding anything to buy.
Based on this, I don't think we're in a 1960's 1970's style market. The present economic conditions have never existed before in history making a very unique situation. Debt has reached impossible levels, baby boomers are relying on the stock market to retire on, and our trade deficit has no parallel since the time of ancient Rome. People who are saying the stock market will double by 2008 (therefore predicting a market PE of about 40) are not credible and should be ignored. However the stock market losing 50% of its value in the next 3 years is VERY likely and has tons of historical support if you're looking at how prices are a reflection of earnings.
There is one last senario that actually could result in a market double by 2008. Hyper-inflation and the devaluation of the dollar could easily cause this to happen although it would require that the government has been lying to us about the money supply. Of course we all know how absurd a lying federal government is.........
"...reality has a well-known liberal bias." -- Stephen Colbert
The dow first hit 1000 in 1966. It was 1982 when it was finally able to convincingly break through that barrier. Thats 16 years of nothing, unless you were a trader and made good on the six or seven 40% up and down swings. Mutual fund investors will be a disappointed bunch.
The next run will not occur until a new generation of investors come into the markets. I just hope their return is not delayed because they are burried in their mortgage payments.
The next run will not occur until a new generation of investors come into the markets. I just hope their return is not delayed because they are burried in their mortgage payments. >>
Nah I wouldn't worry about that. My bet is a lot of them will be walking away from them.
Argentina has seen what happened when the excess debt eroded their economy since the 1980's. It is a look into the future of the USA. The middle class in Argentina has been decimated, institutions of government likewise has lost respect and the country as a whole is suffering quite badly.
The same model of Rome in 170 AD after 50 years of deficit spending, Marcus Aurelius, Emperor of Rome saw the future of Rome and was very alarmed. While he engineered the deficit spending under the previous Emperor, he did not realize that he did the wrong thing until the last 5-10 years of his rule. He realized that bringing back the Roman Republic and a true system of checks and balances was the only way to save the Empire. He was right.
We have dismantled much of the firewalls created from the Great Depression such as preventing banks from also acting as stock brokers on the "floor" and playing the stock market game for themselves. We have seen the alarming amount of demutualization of savings banks and S&L since the mid 1980's. Sure we had the S&L scandals of the 1980's but the vast majority of them werfe mich more financially healthy than their stock owned banks.
This country has lost its way and will follow the path of England when England passed the mantle of largest economy to the US in 1907 with losing the prestige of their stock market as being #1 in the world. The world is waiting to see who will replace us. It was thought that Japan might have eclipsed us 10 years ago but I still think China is going to do it.
History does repeat itself over and over again.
Another food for thought? How many Americans 18 to 30 years of age have created tremendous new real wealth in the past 5 years?
How can you tell when a county is in economic decline? Easy!
Rome spent more money on spectator sports stadiums after 100 AD than on their infrastructure of water, roads and waste removal. Take a look at the USA. New York City for instance, has not renovated their water supply system in over 50 years and it is not far from collapse. Indeed, in our area outside of New York City, many areas of New York City water supply lines are leaking like rivers into the ground. The City no longer has the ability to repair these lines without an complete redoing of their pipelines into the City. Just my own honest opinion.
Look at our rail system. It has fallen into disrepair. The airline industry is no longer the envy of the world and in fact NONE of the US airports even made the top 10 airports of the world. The interstate and local road system is ever expanding but are no longer keeping up with growth in population.
The US is where Rome was in AD 170. Still the #1 superpower but its finances in shambles and overtaxing its outer provinces to a breaking point. We are also at the point Argentina was in 1990 and the British Empire in 1900 just before the passing of Queen Victoria.
<< <i>Rome spent more money on spectator sports stadiums after 100 AD than on their infrastructure of water, roads and waste removal >>
Don't forget, however, that a big reason for this was to desensitize the public so that they could continue to fight their bloody wars. This "entertainment" actually served the purpose of state pretty well.
<< <i>Don’t pay any attention to ddink he thinks this is a weather thread. >>
When I hear doom-and-gloom-the-world-is-ending-the-sky-is-falling theories I just can't help think of Malthus. At any rate, I'm glad I entertain you so much
BTW, that's not to say I don't think there are some prescient things in this thread, but I think predicting all-out collapse is just slightly premature.
I heard they were making a French version of Medal of Honor. I wonder how many hotkeys it'll have for "surrender."
Thanks for the listings WOW $600 to $650 per Sq. Ft. for log homes !
76 $2,950,000 Available Custom Home : 4576 SF home being built/ golf course frontage / Great views overlooking the golf course and the lake. Download a PDF Information Flyer.
"1. I am going to tell them not to count on millions of baby boomers all moving south from the rust belt, as many are now afraid to up root."
Well, I guess that makes me the odd man out as my wife and I are currently building our retirement home on a piece of lakefront property in South Carolina. We will be there by September. No more upstate New York winters. No more New York State taxes!!
Not that we're going to sit around on the dock all day. We've already got jobs lined up - got to pay for the hobby somehow!
Hays Morning Market Comment If the Rhyme Stays in Tune, 4 More Days to Bottom April 18, 2005 Tell Me about Those Years Ending in “5” One More Time
by Don R. Hays
Summary: What does it take to turn perma-bulls nervous? Something historic!! In Friday’s move, even though it comes only a few weeks after a bull market peak, the bearish sentiment has quickly resurfaced in sentiment surveys such as the A.A.I.I. bears-to-bulls ratio. I am being blown away by how quick some of the bulls of six weeks ago are now fleeing with fear and trembling. This is the typical action when the S&P 500 breaks its 200-day moving average.
I am amazed how few are picking up on the similarity of today’s market with that 1994 example we have been showing since December 17 of last year. If the “rhyme” continues so perfectly, today’s market will try to rally back intermittently, but fail to produce an up-day by a small margin, but then the sharp decline will return for two more days on Tuesday and Wednesday. Then on Thursday, a very sharp down-move in the morning with a 1-day reversal that will put in the low for this year for the S&P 500, and a trading rally for the NASDAQ, et. al.
We started buying with our last 10% cash on Friday, and believe it or not found it was not that easy to pick up stock of the good acting stocks we’ve been selecting for purchase. This is one reason that the 10-day Arms index has not noted a climax panic selling spree. By the way, the 10-day Arms signal didn’t activate in 1994 either. The peak in the 10-day Arms index only moved above 1.10 on two days in that rhyming year.
I am going to continue to show this graph for you every day in these reports as long as today’s rhyme with 1994 continues. Since I want to include not only this 1994 graph, but also the current one to help you visualize the similarity, I am going to skip to the next page.
That graph is of the S&P 500 and is up to April 15, 1994. The ending date for the sharp decline was on March 31, 1994. Now here’s this year’s rhyme. I’m probably getting too cute making the “exact” correlation to that prior decline, but there is no better clue that I have found. Remember, our asset allocation matrix is the center-piece of our recommendations, and it started to tell us last week that we should start to get ready to put all our cash back into the market. We are in the process of doing that now, and have been surprised how hard it is to buy the stocks that we have selected as our latest additions to our portfolios. I’ll get back to that in a minute, but I have inserted arrows at the day in 1994 when the S&P 500 broke under its 200-day moving average in almost a perfect rhyme with what happened on Friday.
So if this rhyme continues to be so perfect, today’s market will try to rally a couple of times, but at the close will still be in the negative column. But after that, Tuesday and Wednesday will really put some more panic into the pits, and Thursday would be a sharp down and sharp up one-day reversal that would be the bottom day for the S&P 500 for this year. It would also set up a nice trading rally for all sectors of the market, with possibly the energy and material sector being the sole hold-out.
Our asset allocation matrix did not change at all—even after Friday’s decline. We have a proprietary rating system that encompasses what we believe is the most reliable predictive indicators in the three composites of psychology, monetary and relative valuation. Each day, and especially each Friday after the close, we re-compute our asset allocation matrix.
In mid-December 2004, the matrix had moved to a P5, M2 condition, meaning that on our proprietary scale from 1 to 6, psychology had dropped to its next to worse state, while monetary was still at a very healthy M2, the next to strongest state. This condition, when combined with the relative valuation of stocks in the extremely under-valued zone, said to raise 10% cash. I know I’ve worn some of you out with this much repeated explanation but for you new readers, we raised our additional allowed qualitative-judged 10% cash based on the overbought condition of the market on the prior rallies. It is extremely important as you follow this system to know that our asset allocation is based on studies that very effectively locate points that will produce a certain amount of risk/reward over the next 6-30 months. Our qualitative-allowed judgment is based more on the short-term, but we are a little more aggressive in using up our “allowed” 10% cash limit when the asset allocation matrix is also flashing any kind of a caution light.
We put that “allowed-qualitative” extra 10% back into stocks on the last decline four weeks ago when our 21-day oscillators reached extreme over-sold conditions. On Friday, April 8, 2005, the asset allocation matrix moved to P3, M2. That condition tells us to use the next few weeks to move back to a fully invested posture. We have been fine-tuning that step, since the 1994 rhyme told us that IF the market was about to have a second wave of weakness it should come in the next few days. By the way, it will take very little to move the Psychology up one more notch to P2, which I would expect as any additional weakness occurs.
With that explanation, we started to buy on Friday, and will be using these next three days to become fully invested. We have our stocks selected and orders in, but have been amazed that the purchase process has not been easier in light of the market weakness.
That could very easily explain the reason that we have not received any indication yet from the 10-day Arms index of a climactic panic sell-off. Let me show you this graph.
Our minimum requirement on this indicator is a move up to 1.30. That has caused us a little heart-burn, but since the other indicators are showing enough improvement, this “failure” was not sufficient to keep us in an all-cash position. It is encouraging that the data from 9 and 10 days ago, that this 10-day moving average will be removing today and tomorrow will be two lower numbers, which will help the upward possibility, but when Mark reviewed 1994 for me, he found that during those panic sell-offs in March and April of 1994, the 10-day Arms did not even get above 1.10.
My logic, especially when encompassed with our experience of buying on Friday, would seem to say while investors are scrambling out of some stocks, there is still strong buying in those stocks that have good supporting cases.
I have had a sneaking suspicion for several months that a falling oil price would be a negative for stocks. My logic was that the S&P 500’s recent move up has been almost a perfect reflection of increased earnings expectations, and that much of that increased expectations have been a result of booming profits from energy and material prices. Since such a high percentage of those recent earnings upgrades have come from those companies capitalizing on that “bubble” of oil and material prices, a down-draft would also impact the market.
And not only that, have you heard a Strategist in the last three months that has not been extolling the great potential in energy and material stocks? After all China and India were eating and drinking so much of that stuff that it was going to perpetually exceed demand…..or so they said.
Oh well, there we go again.
I’m going to stop here so you can get this before the market opens.
If we’re right…..and of course remember, these “wiggle” are rarely “exactly” right, but if by some miracle it is, the next few days could continue to be a little scary, and a great buying opportunity.
We will be buying and stepping up our aggressiveness a little. The 6-30 month outlook is getting better and better as opposed to what you are hearing.
I will be traveling on Wednesday to Sarasota to do a seminar for our good friends who have a lot of their clients’ money invested in our discipline, but should be able to get this report out to you in plenty of time. I’ll see you then.
Yes, it is tiring but that is the nice thing about this thread...everybody has an opinion and some of the opinions are from pretty astute guys so you just wade through the detritus till you find a gem.
<< <i>Can I copy and paste my newsletter here too?
Tom >>
Question to goldsaint: I thought I'd send an occasional Hays comment to this thread. I pay $1000/year to subcribe and it allows me to send his comments out once per week. If you'd prefer that I don't send comments, I won't. Let me know.
<< <i>Can I copy and paste my newsletter here too?
Tom >>
Question to goldsaint: I thought I'd send an occasional Hays comment to this thread. I pay $1000/year to subcribe and it allows me to send his comments out once per week. If you'd prefer that I don't send comments, I won't. Let me know. >>
I'm not Goldsaint, I'm Tom Pilitowski. Why would you copy and paste my question and not address ?
I guess we could all copy and paste our various newsletters don't you think? Would need some extra bandwidth though.
I meant no harm in copying your message. I only wanted clarification for the do's and don'ts of the thread. I didn't think about it, but if everyone posted a newsletter, that may not what this is all about. Also, maybe it is. But I only send the text version without charts to avoid clogging the system. Thanks.
I for one prefer that the text of the newsletters be posted right here so I do not have to click and click away again again again and again just to find those darned newsletters! Just make sure that you have permission from the publisher to post them. Most of them probably should not mind since it gives them free marketing exposure).
2nd Charter I think it is great that you are going to be able to move South and many others will also, in fact millions will, but the new AARP study says that 80% will stay where they are.
“Question to goldsaint: I thought I'd send an occasional Hays comment to this thread. I pay $1000/year to subcribe and it allows me to send his comments out once per week. If you'd prefer that I don't send comments, I won't. Let me know.”
Kaytsok,
We need you my friend, we do not want this thread to get to one sided. I think it helps all of us to know what the established guys on the paper side of the isle are thinking, and why they come to certain conclusions. Please feel free to post any of this info. you like.
Buying a 1 bedroom condominum in Maui Hawaii on the ocean.
Lest anyone think I am rich or something it is only a two week fee simple timeshare just north of Lahaina and the price was $4500 per week. But I did pick up week #51 and #52 (end of the year into New Years)
Every year around April 15th, I do this sort of thing.
There is one last senario that actually could result in a market double by 2008. Hyper-inflation and the devaluation of the dollar could easily cause this to happen although it would require that the government has been lying to us about the money supply. Of course we all know how absurd a lying federal government is.........
This may be a first for me, but I agree with everything Iwog said in his post. There is one way the market can double to 2000 in 3 years. It's similar to how it went up so much the past few years - print money. While the index may reach 20000, you can bet that all that will be due to dollar deflation so you're net increase would still be zero. If the stock market doubles because of hyper-printing of money, you need to find something that goes up a lot more than that to keep ahead.
Tom, the govt is already one step ahead of you on "walking away" from one's ARM if (or should I say when) one ends up on the wrong end of their housing valuation. This new bankruptcy law will in essence lock all the credit happy people that have been entrapped with the easy credit gambit. The majority will not be allowed to escape and leave the poor bankers and mortgage companies holding the bag. The same people who helped to put you there. The govt sees the writing on the wall and furiously passed this bill to ensure we all pay and pay and pay until the grave. Ironic isn't it? The massive spending and entitlements that the congress has authorized has gotten us to this point. They are the ones responsible. But they are going to ensure that the little guy pays for it, rather than themselves.
Tom, the govt is already one step ahead of you on "walking away" from one's ARM if (or should I say when) one ends up on the wrong end of their housing valuation. This new bankruptcy law will in essence lock all the credit happy people that have been entrapped with the easy credit gambit. The majority will not be allowed to escape and leave the poor bankers and mortgage companies holding the bag. The same people who helped to put you there. The govt sees the writing on the wall and furiously passed this bill to ensure we all pay and pay and pay until the grave. Ironic isn't it? The massive spending and entitlements that the congress has authorized has gotten us to this point. They are the ones responsible. But they are going to ensure that the little guy pays for it, rather than themselves.
roadrunner
Right I didn't think of that. And here., just to make sure everyone has enough time to pay up before they bite the dust:
Bush Says Raising Retirement Age a Possibility
1 hour, 47 minutes ago U.S. National - Reuters
By Steve Holland
COLUMBIA, S.C. (Reuters) - President Bush said on Monday proposals to raise the retirement age for Social Security benefits and restructuring those benefits to be more generous to low-income workers are among possibilities for overhauling the country's largest entitlement program.
Bush mentioned the possible ways to preserve Social Security's solvency and called for Congress to come together to make the tough choices in an address before a joint session of South Carolina's Republican-controlled legislature.
At the same time, he painted a dire picture of Social Security's future if nothing is done, saying problems would start in three years when the first baby-boomers retire.
"By 2034 the annual shortfall will be more than $300 billion and by the year 2041 the entire system will be bankrupt," he said.
He appealed directly to younger workers in his uphill battle to convince Americans of the need for private retirement accounts as part of the Social Security system.
Bush said younger Americans are comfortable with investing in stocks and bonds and the system would be set up so the money would not be wasted at the racetrack or in a lottery.
"Telling younger workers they have to save money in a 1930s retirement system is like telling them they have to use a cell phone with a rotary dial," Bush said.
He hailed various experts and Republican and Democratic lawmakers for offering proposals for changing the system. He praised in particular South Carolina Republican Sen. Lindsey Graham (news, bio, voting record) for a proposal to raise the cap on Social Security taxes paid by high-income earners. Conservatives have called that a tax increase.
Graham has been pushing Bush to offer more details about how to fix the program's financial problems and insist on a vote in the U.S. Congress in coming months. Bush has spent more than two months pushing for an overhaul but has not offered a detailed proposal while calling for action this year.
Bush also cited a proposal to further raise the retirement age, which is currently 65 and already being increased so that people born in 1960 or after will be able to receive full benefits at 67.
Later, in an interview with CNBC, Bush was asked whether the retirement age should be raised to about 70. "Certainly one of the options. As I recall, President (Bill) Clinton, my predecessor, suggested that might be a good part of the fix," Bush said. "There's a variety of things on the table."
In his South Carolina speech, Bush mentioned proposals to tie Social Security benefits to prices rather than wages to slow their growth, and to have a progressive way of structuring benefits that will be more generous to low-income workers.
"In other words, all these ideas are on the table, but they have one thing in common, they all require us to act now," Bush said.
The only option Bush ruled out is raising the payroll tax, which is currently 12.4 percent. "That'll hurt the economy and cost jobs," he said. (Additional reporting by Adam Entous)
I WILL be back on the white sand beach that I was at in SE Asia.
Hays Morning Market Comment In Last Phase of Becoming Fully Invested April 20, 2005 Still A Lot of Work to Do Before Roaring Bull Market Returns
by Don R. Hays
Summary: We’ve spent a lot of ink in the last two weeks trying to convince you that a significant bottom is being forged, probably the low of the year for the S&P 500, but at the same time please remember we’re not promising you a “rose garden” for 2005 as the old country music song coined. We think that this year will have to experience some more “sweating” before the bull market is ready to roar again.
We have been dribbling back into the fully invested position and as of this instant still have about 3% more cash to put into stocks. With the Rydex Asset Ratio hitting our expected target, and with the extreme oversold condition of the oversold oscillators, we expect a period of better stock market action, maybe even a new high in the S&P 500. But our position is that most of this year should be used to get ready for 2006-2008 which we expect to be “gang-busters” for the return of the BULL.
The sector Rydex assets has told us that the technology sector has very low assets, which typically only happens when a sector has been wrung out and ready for a return to the upside. We also think this is a bet on a big technology upgrade beginning in 2006-2008.
It is very early, and I have to be out of here on the road to Sarasota in one hour, so this is going to be very abbreviated. The C.P.I. comes out this morning, and it might have the potential of causing one more decline, but I am now guessing that the lows of two days ago will not be violated. As investors, you simply don’t have the luxury of waiting until the news comes out. The stock market reads tomorrow’s headlines, not today’s, so if you wait you are only piling on too late.
As noted repeatedly, we have been dribbling back fully into stocks, with our long-term growth portfolio now having only 4% cash left, and if the market cooperates that will be reduced to our minimum 0-2% this morning.
That is the way we expect to operate our portfolio this year. We will be watching our asset allocation matrix closely, which as of the last two weeks has been telling us that there was very little risk left in the market and that this period should be used to put our cash back to work.
I don’t think any portion of our asset allocation 3-pronged approach tells the story better than the Relative Valuation model that compares earnings yield of stocks based on the next 12-month forward earnings, to the yield of the 10-year T-Note. You can see in this graph the historical similarity of these two market instruments.
With the decline in the S&P 500 index the earnings yield of stocks has moved up to 6.63%. You can see that investors are being offered the highest earnings yield of any time since 1996. At the same time, the bond yield has dropped back to 4.21%, making bonds even less attractive. That produces a huge gap between the two, and when you equate the earnings yield of stocks to bonds, you see the following results.
As of this morning, stock investors are being offered a 36.5% premium over bond yields. If you look up to the top chart, you will see that for the last 25 years these two variables ALWAYS have come back to parity. That either means bond yields are going to scream upward, or that stocks are going to move up. This disparity in favor of stocks is a major shock absorber that will buffer any downside in stocks. You can see that since July 2002 when that reverse head-and-shoulder bottom to the bear market was being forged, this “shock absorber” reached this extreme level, and it has been a big reason that the downside risk in this market has been very little on any of the market “soft spots.”
I have to scoot out of here, but first let me say that the oscillator charts are acting very normal, with the higher low in the oversold condition on the very weak market of last week. I now would expect the rally to continue at the very least until the 21-day oscillator moves back up above the +5000 level.
We’re not playing red light/green light at this juncture. With the stock market so undervalued in relation to bonds, and with the yield curve still in a very healthy status, all we are doing is playing different shades of green. As of late December we said WOW, slow down, and now we’re saying you should pick up your speed a little, but don’t go barreling down the road so fast that you can’t stop if some impediment darts out in front of you. We expect in the next few months it will more than likely be time to slow back down to idling speed once again, but in the meantime you can milk a few percentage points of performance out of stocks.
The missing link here comes from the put/call data. If you look at today’s update of the charts, you will see that they have not come to levels we would ultimately expect. Obviously, however, we couldn’t be happier with the action of the Rydex asset ratio that is almost perfectly mocking the action it achieved on the other side of this mirror image of emotions that bottomed out in February 2002. Let’s take another look at the www.decisionpoint.com chart of the Rydex asset ratio. Yes, it could drop a little more in order to exactly hit the level reached in late March 2001, but it is close enough for us, especially since the relative valuation model is so positive for stocks.
That’s it, I’ve got to go. There will not be a market letter on Friday unless something very unexpected occurs. We are changing our company’s server out, and my computer will be in the process of being reconfigured. The charts will be updated, however, so make sure you take a look at the progression.
Of course, if some major event occurs, we’ll find a way to get you a message.
If you can tell us, I for one would be interested in reasoning behind Mr. Hays following assumptions, or statements.
“It is very early, and I have to be out of here on the road to Sarasota in one hour”
Is he going to NGC to pick up his coins, just a small joke!
“But our position is that most of this year should be used to get ready for 2006-2008 which we expect to be “gang-busters” for the return of the BULL.”
It seems that many of these analysts keep harping on the fact the stock investments need to be LONG TERM. Does he not realize that the folks with the majority of the investment capital no longer have LONG TERM left? That they are older folks that are now facing an inflation period where everything goes up but their income which goes down as they head for retirement.
“The C.P.I. comes out this morning, and it might have the potential of causing one more decline.”
Do you think Mr. Hays believes that this is last rise in the CPI we are going to see, and therefore the market will start correcting to the upside?
“With the decline in the S&P 500 index the earnings yield of stocks has moved up to 6.63%.”
I am not sure where Mr. Hays is getting those numbers but below is a list of the top paying companies in the S&P 500 and they are no where near his numbers, in addition the ones paying the highest rates are some of the companies in trouble like GM, who might pay nothing next year.
Sorry this chart did not copy well but the last number in the line is the yield.
Highest-Yielding S&P 500 Stocks First Quarter 2005 Symbol Company Name Previous Day's Closing Price Membership Current Dividend Yield GM General Motors Corporation 26.66 14.47 Bil AutoManu S&P Industrial 7.80 AIV Apartment Investment and Management Co. 36.61 3.467 Bil REITResid S&P Industrial 6.60 EOP Equity Office Properties Trust 30.92 12.45 Bil REITOffice S&P Industrial 6.50 PGN Progress Energy, Inc. 41.49 10.22 Bil ElectricUt S&P Industrial 5.70 SBC SBC Communications Inc. 23.65 75.98 Bil TelecomDom S&P Industrial 5.60 PGL Peoples Energy Corp. 41.24 1.511 Bil GasUtility S&P Industrial 5.50 ED Consolidated Edison, Inc. 42.75 10.24 Bil DiversUt S&P Industrial 5.40 EQR Equity Residential 32.05 9.142 Bil REITResid S&P Industrial 5.40 AEE Ameren Corporation 50.69 9.73 Bil DiversUt S&P Industrial 5.10 GAS Nicor Inc. 36.90 1.597 Bil GasUtility S&P Industrial 5.10 T AT&T Corp. 18.98 14.77 Bil Longdistan S&P Industrial 5.10 VC Visteon Corporation 5.00 609.9 Mil AutoPart S&P Industrial 5.10 ASN Archstone-Smith Trust 34.46 6.883 Bil REITResid S&P Industrial 5.00 MYG Maytag Corporation 14.39 1.135 Bil Appliances S&P Industrial 5.00 CIN Cinergy Corp. 39.90 7.549 Bil DiversUt S&P Industrial 4.90 RAI Reynolds American, Inc. 78.99 11.44 Bil Cigarettes S&P Industrial 4.90 WM Washington Mutual Inc. 38.50 33.22 Bil SavingLoan S&P Industrial 4.90 XEL Xcel Energy Inc. 17.08 6.787 Bil ElectricUt S&P Industrial 4.90 KSE KeySpan Corporation 38.54 6.076 Bil GasUtility S&P Industrial 4.80 TE TECO Energy, Inc. 16.10 3.261 Bil ElectricUt S&P Industrial 4.80 VZ Verizon Communications 34.89 94.59 Bil TelecomDom S&P Industrial 4.70 DTE DTE Energy Company 45.72 7.825 Bil ElectricUt S&P Industrial 4.60 MO Altria Group, Inc. 65.49 133.8 Bil Cigarettes S&P Industrial 4.50 PNW Pinnacle West Capital 43.39 3.923 Bil ElectricUt S&P Industrial 4.50 SO The Southern Company 32.22 23.64 Bil ElectricUt S&P Industrial 4.50 DCN Dana Corporation 11.53 1.646 Bil AutoPart S&P Industrial 4.40 FHN First Horizon National Corporation 39.18 4.789 Bil StheastBnk S&P Industrial 4.40 MRK Merck & Co., Inc. 34.78 76.86 Bil MjrDrgManu S&P Industrial 4.40 BMY Bristol Myers Squibb Co. 25.82 50.63 Bil MjrDrgManu S&P Industrial 4.30 NCC National City Corporation 32.97 21.22 Bil MidwestBnk S&P Industrial 4.30 PCL Plum Creek Timber Co. Inc. 35.74 6.496 Bil propmanage S&P Industrial 4.30 SPG Simon Property Group, Inc 61.74 13.73 Bil REITRetail S&P Industrial 4.30 USB U.S. Bancorp 28.07 51.96 Bil MidwestBnk S&P Industrial 4.30 BLS BellSouth Corporation 26.26 46.76 Bil TelecomDom S&P Industrial 4.20 F Ford Motor Company 9.75 17.39 Bil AutoManu S&P Industrial 4.20 PEG Public Service Enterprise Group Inc. 54.87 12.8 Bil DiversUt S&P Industrial 4.20 RF Regions Financial Corp. 31.59 15.15 Bil StheastBnk S&P Industrial 4.20 UST UST Inc. 52.89 8.727 Bil TobaccoPrd S&P Industrial 4.20 AEP American Electric Power 34.72 13.53 Bil ElectricUt S&P Industrial 4.10 BAC Bank of America Corporation 44.68 179.2 Bil MonCentBnk S&P Industrial 4.10 CAG ConAgra Foods, Inc. 26.69 13.66 Bil Fooddivers S&P Industrial 4.10 CMA Comerica Incorporated 53.70 9.099 Bil MidwestBnk S&P Industrial 4.10 CZN Citizens Communications 12.46 4.188 Bil TelecomDom S&P Industrial 4.10 NI NiSource Inc. 22.87 6.049 Bil DiversUt S&P Industrial 4.10 PNC PNC Financial Services 50.48 13.97 Bil MonCentBnk S&P Industrial 4.10 ASO AmSouth Bancorporation 25.33 8.864 Bil StheastBnk S&P Industrial 4.00 FE FirstEnergy Corp. 42.00 13.6 Bil ElectricUt S&P Industrial 4.00 JPM JPMorgan Chase & Co. 34.19 86.73 Bil MonCentBnk S&P Industrial 4.00 KEY KeyCorp 31.52 13.11 Bil MonCentBnk S&P Industrial 4.00 DUK Duke Energy Corporation 28.26 26.71 Bil ElectricUt S&P Industrial 3.90
1) his model forecasts the stock market 6 to 30 months out. Not 3 months and not 5 years. Based on the 6 to 30 month forecast, he calls his model "highly reliable". I would go so far as to say I have never know it to be wrong. The was the biggest bear in the world in 2000, and he is the biggest bull in the world today.
2) Inflation: he believes that inflation will be low single digits for a long, long time. With the excess supply of goods and services around the world. there is a lid on inflation. The ideal inflation scenario for the stock market is "a little inflation". That is exactly what he believes will be the case
3) I don't know the answer to you last question on yield, but I will get it.
Hayes was on CNBC yesterday. Basically said the same as this letter. He said he doesnt expect anything this year. Well then that gives him only 2 years for the market to double. That translates in to 35-40% returns in 2006 and 2007.
I hate to disparage Mr.Hayes but I would really like to know what he is smoking.
which as of the last two weeks has been telling us that there was very little risk left in the market and that this period should be used to put our cash back to work.
If he said that 2 weeks ago then he just lost 5%. And that takes the market back to last summer highs. So basically 1yr of investing was lost. That sounds like risk to me.
<< <i>Hayes was on CNBC yesterday. Basically said the same as this letter. He said he doesnt expect anything this year. Well then that gives him only 2 years for the market to double. That translates in to 35-40% returns in 2006 and 2007.
I hate to disparage Mr.Hayes but I would really like to know what he is smoking. >>
Perhaps chopped up dollars? They're getting pretty cheap.
“Hayes was on CNBC yesterday. Basically said the same as this letter. He said he doesnt expect anything this year. Well then that gives him only 2 years for the market to double. That translates in to 35-40% returns in 2006 and 2007.”
“I hate to disparage Mr. Hayes but I would really like to know what he is smoking.”
I agree, lets say you are an early Baby boomer age 59, as I am, you go all in hoping to start riding the Bull in two plus years so when the “ up trend” starts you are 62, as I said many no longer have long term.
The CPI numbers today were about 6 to 7% per year, and most likely sugar coated, so lets say 8 to 9%. If we just stay at that rate for the next 3 years what are corporate earnings going to look like?
How many of the 300 companies on the S&P with pension and medical short falls can go through an extended period of inflation without falling in the hole along with GM?
As Roadrunner and many others here said nearly 2 years ago, what we have coming is stagflation and that means earnings are going in the toilet. Personally I think the stock market players will be lucky to hang on to a 10,000 Dow the next 3 years.
I had mentioned in a thread 18 months ago that when the press, who is the last to know, started reporting on the nightly news that inflation had arrived, the game would get very interesting. That time has arrived!
To be fair, news of rising rates panicked the bond investors at least twice in the last couple years. Once was last June, and I recall it because I took my cash accounts into 10 and 30 year bonds. Picked off about 10% in capital gain, plus there were dividends. The time before that, I bought a slug of long bonds via TLT. Made well over 10% on that one, too. I guess I like it when the news scares investors!
Where is the outrage on this kind of thing or are people really that ignorant?
Tom
Commission Says Too Many Tax Breaks Exist
52 minutes ago Business - AP
By MARY DALRYMPLE, AP Tax Writer
Three credits and a deduction help taxpayers cut college costs. Special urban and rural tax zones encourage investment and job creation. Dozens of other tax benefits help families raise children and save for retirement, encourage adoption, nudge drivers toward hybrid cars and push businesses to invest in new equipment.
"We have lost sight of the fact that the fundamental purpose of our tax system is to raise revenues to fund government,"
according to President Bush's Advisory Panel on Federal Tax Reform.
The commission's chairman, former Florida Sen. Connie Mack, said its nine members have been surprised at the number of tax deductions and credits.
"It wasn't until we really had the opportunity to listen to so many different people talk about so many different aspects of the code that it really sunk in about how much and how often the code is being used these days to either create incentives or disincentives for either investment or behavior," Mack said in an interview with The Associated Press.
The White House budget office ranks the cost of a deduction for businesses that provide health insurance to employees as the top tax break, worth $126 billion next year. Also high on the list are the popular mortgage interest deduction, a capital gains break for home sales, a deduction for charitable contributions and the child tax credit.
The list includes many tiny tax breaks. Among them are ones that encourage biodiesel fuel, help the elderly and disabled, make interest on educational bonds tax-free and allow teachers to deduct the cost of school supplies.
The problem comes when taxpayers try to decipher the rules that govern those credits and deductions. The tax breaks often overlap and typically come with pages of instructions and qualifications.
"It was clearly stated that the level of complication has become so great that in many cases it ends up deterring the activity that you're trying to encourage," Mack said.
Bush has asked the panel to preserve tax breaks that promote homeownership and charitable giving.
Tax breaks started proliferating in the 1990s for two reasons, said Eugene Steuerle, a former Treasury Department official and co-director of the Urban-Brookings Tax Policy Center.
"There's always been this political reward for claiming to do something new rather than merely cleaning up or slightly expanding something that already exists," Steuerle said.
Lawmakers want to brand their own education tax breaks, for example, which means there are multiple deductions, credits and special savings accounts instead of one tax break everyone can use.
Tax breaks also provide benefits without creating a government spending program. But the proliferation of tax breaks end up costing the public because they mean lawmakers cannot lower income tax rates, Steuerle said.
"They make it look like smaller government, when in fact it's actually bigger government," he said.
The tax breaks amount to billions of dollars.
Tax benefits that provide indirect subsidies to homeowners add up to more than the entire budget of the Housing and Urban Development Department.
The earned income tax credit for low wage workers is bigger than any welfare program, including food stamps.
The tax break for businesses that provide health insurance is growing faster than almost all other domestic programs.
Some critics say no one tracks the tax breaks to find out if they succeed in promoting the behavior lawmakers want to encourage. Limitations often mean that some breaks are not available to wealthier taxpayers or poorer ones.
"It is worth noting that the deductions are of little or no benefit to the 40 percent of taxpayers who don't owe taxes," Fred Goldberg Jr., a former Internal Revenue Service commissioner, told the presidential panel.
Would taxpayers give up some of those deductions and credits to make the whole system simpler? Not likely.
"Anytime you've got a benefit, wherever it happens to be, whether it's spending or taxes, people don't want to give them up," Mack said.
This summer, the panel plans to recommend ways to make the tax laws simpler and fairer.
___
On the Net:
President's Advisory Panel on Federal Tax Reform: www.taxreformpanel.gov
topstuf: An interesting comment about shipment of purchases to business buyers.
All of the business and business schools have been touting just-in-time inventory. This now comes into conflict with grossly increasing cost of transportation of goods. That COULD GET REAL INTERESTING!
I wonder how the WALMARTS and retail stores will handle this problem?
That was great stuff Topstuff. Right smack on the money.
The article above from 321gold.com gives some interesting insights to where oil is going and by the historical gold/oil ratio, where gold must eventually end up. Interesting reading and not technical. The premise of the article is that US production peaked in 1970 (it did) and now foreign oil is peaking (Saudi Arabia in particular). The final result is more costly oil down the road....albeit with the whipsaw pricing back and forth as the market makers trade and manipulate. Inflation won't be far behind. And in the end, recession follows. The FED has no more ammo to bump interest rates like Volker did in 1980 because it would dump the current economy into a major recession...fast. We just sort of have to sit here and take it with both barrells as the FED continues to inflate...the only option they have left in the bag of tricks. Stand by more lots more stagflation. Good reading.
There is another alternative to the fed raising rates and I think this is a much more plausible scenerio. However the outcome is the same.
The U.S. has been applying a lot of pressure on the Chinese to let the yuan rise in order to ease our trade deficit and produce more manufacturing jobs in the U.S. There are some potential negative side-effects, however, if the Chinese do what we want them to do. For one thing, a rising yuan would weaken the dollar. A falling dollar boosts commodity prices and U.S. inflation. One of the factors keeping U.S. rates low has been buying by the Chinese central bank in order to keep the yuan from rising. [The Chinese buy dollars and invest them in U.S. debt]. If the Chinese stop buying dollars, they may also stop buying U.S. bonds. The result could be higher interest rates. One of the factors keeping U.S. consumer inflation relatively low has been competition from cheap Chinese imports. A strong yuan would increase import prices from China which would result in higher U.S. inflation. So the consequences from a rising yuan could be a falling dollar, higher commodity prices, higher U.S. inflation, higher U.S. interest rates, and a lower U.S. stock market
Let's not forget all of this good news about the direction this place has taken. Remember the guy who spoke this in Congress? What ever happened to him? Know too much?
Good link Tom. The biggest blight on the 20th century was the creation of the Federal Reserve (the source of all inflation and dollar devaluation) and then repealing the gold standard. Excellent reading. But you are preaching to the choir. Maybe 99 out of 100 Americans believes that our FRN has real value, and that a small amount of inflation is a "good" thing and the backbone of economic growth.
Roadrunner, far as preaching to the choir, you are certainly part of the choir as are a large percentage of coin people.
But the rest of the ignoramouses are in control so I keep on posting the free market propaganda. Just in case a bull market in Freedom thinking ever starts.
Hmmmm, meanwhile, here's another one which is a great great area of research material and connections
"China will surpass the US economically and militarily eventually"
This is certainly a real possibility, but it is by no means inevitable. Remember, we are only thirty years beyond the economically productive cultural revolution.
In order to pass us, Chinese leadership will need to gradually build democratic institutions, while dealing with many ethnic and demographic challenges. If it happens, it will be a tremendous achievement.
<< <i>cohodk... The Chinese are far too smart to do what the US "wants" them to do. China, while well on its way to becoming self sufficient, at this time NEEDS more US consumer spending. They have a "jobs" problem and don't want to deal with an unruly populace.
China will surpass the US economically and militarily eventually. After all, we're giving it to em.
Wonder what's on sale at WalMart today?
>>
It's certainly a likely scenario if there is no drastic change in doing business ( ie: cost of doing business including taxes, regulations ) in the USA. Flying into HK, Inchon, almost anywhere in China is an eye openner for sure. It should be on the strongly advised list of things to study in any contemporary business school along with maybe Henry Grady Weavers "Mainsping of human progress".
But with a virtual 8 trillion dollar debt and a direction which indicated growth of that debt it appears unlikely that doing business , manufacturing and even the so called service sector would be a growth area here. And the ponzi in the housing market which is one of the last areas of real growth seems to be coming to an end. The best thing would be to STOP backing any politician who grows the government larger i any way shape or form. That would be a start at least in changing the direction we're headed in.
I visited Shanghai last year, and it is a spectacular city. My business does an enormous amount of work with China, and there is a push to do more. I tend to agree that the current taxation system in the US has something to do with it and things need to change (and I am a tax lawyer).
Always took candy from strangers Didn't wanna get me no trade Never want to be like papa Working for the boss every night and day --"Happy", by the Rolling Stones (1972)
Comments
<< <i>Kaytsok
Thanks for your opinion. I think you did a great job explaining Mr. Hay’s theory.
As I said several days ago I have been hired by a small company as a consultant to develop them a plan for growth in this weird economic climate we are living in.
This is a small mortgage company with offices in 5 states. They are taking the company public, and trading should begin in about 3 weeks. The major stockholder is a 25-year friend.
I have been hired to develop them a new growth business model that will hopefully keep them out of trouble. I have been working on the report for weeks and it is already 150 pages long.
Here are a few high lights, I invite all of you to pick it apart since we are having a meeting in Phoenix this next week and after that the plan goes into effect. Below are some thing I am going to tell them. Let me also say that a mortgage business is not an area that I would be looking at as a startup at this time, but this is what they have.
1. I am going to tell them not to count on millions of baby boomers all moving south from the rust belt, as many are now afraid to up root.
2. I am going to tell them that in my opinion the majority of well healed American investors are tied of gambling in the stock markets, and even though there is lots of money on the side lines that money is going to be looking for a home in investments that make sense.
3. I am going to tell them that investors the next decade “ are going to be more concerned about the return of their investment than the return on their investment”
4. I am going to tell them we are headed for some serious inflation, and if they want a strong stock price they need to build assets in the company as well as earnings.
5. I will advice them that because they are going to be dealing in paper that will most likely depreciate, that they need to build an internal inflation hedge in the company. I picked silver for the reasons I stated earlier.
6. My advice to them on offerings will be NOT to do common stock offerings, but to do units that have some shares as well as part of a mortgage pool that pays immediate interest dividends higher than the average of most NYSE companies.
7. I am going to tell them to rate every loan that comes in and not to buy for their mortgage banking division ,or their investors, any subprime loans that are ARMS, INTEREST only loans, 120% of VALUE loans, or any loans in one of a dozen cites that currently have bubbles waiting to pop i.e. most of CA. and others. They can broker these loans but not buy them.
These are just a few highlights what do you think? >>
All perfectly valid observations. Don Hays investment advice goes back 35 years. I just followed him for 20. It got him thru Carter inflation, Vietnam, the oil embargo, the Kennedy assassination, and was valid during the Cuban Missile Crisis. He is hopeful that smarter heads will prevail in the current social security mess. But the model works and will work. There are problems. There have always been problems. Serious problems. But the model forecasts the stock market, and it is suggesting a higher stock market in the next few years. The model in 2000 told him to head for the hills. 60% overvalued on the value leg and optimism was rampant on the psychology leg. With only 2 legs on the ground, he took his most defensive position he could, and got right back in at the bottom. Send your email address and I'll be happy to include you to get his comments.
<< <i>Clad King, maybe I'll see you out there. I'll be at the Auburn Kruse auction Labor day week. Any good coin shows out there? >>
I'll be better by then, it's not impossible.
Silvertowne is but coin shows in this state tend to be mediocre at best except when
central states is held here. South Bend is one of the better small shows but not worth
much of a drive.
Auburn is a nice little town that used to be an economic powerhouse many years ago.
Today it is forgotten since it was bypassed by time and the major highways. Really nice
people there and if it were built people would come.
The more the Nation Owes the more we should cut taxes.
When we eliminate all taxes, then all debt should be gone.
Camelot
The is only 1 thing that drives stock prices. DEMAND. Where is the demand going to come from?
1. The already retired folks arent going to buy more stocks as they have already been through 2 major declines in the last 18 years and dont want more risk.
2. Baby boomer generation. Their portfolios are less than they were 5 years ago and think real estate is the place to be.
3. Baby boomer's kids. They are too consumed with interest only mortgages and are also disenchanted with stocks.
And I dont think you are doing any technical analysis. There is absolutely nothing in this chart of the S&P that precludes any prediction of a double. I certainly hope you are not telling your client that their money will double over the next 3 years. Thats 20% per year. IT AINT GONNA HAPPEN!!!
Knowledge is the enemy of fear
Now if you think borrowing $2 Billion a day is going to continue, and then increase towards 2008, then I suppose anything is possible.
That would also imply that housing prices will continue to escalate as well as that is the first bubble of choice that boomers are dumping their money into.
Does anyone really think that any stock broker is going to predict 6000 DOW by 2008 and kill his chances of selling anything? Of course not. 20000 sounds a lot better. No different than crying $1000 gold too.
roadrunner
It's the 1960's all over again.
Actually, going back over the data, you could say we may stay in the 60's and 70's. The stock market did little but cycle back and forth between 550 and 1000. Most of the time was spent from 650-950.
Personally, I think a major league correction is still coming to burn off the excesses of the 20 year bull run.
Daily Dow link for past 70 years
By any historical measurment, the stock market continues to be priced absurdly high. The world's most successful investor, Warren Buffett, is HEAVILY in cash (to the tune of 43 BILLION dollars according to his Dec 2004 letter to investors) and actually appologized to shareholders for not finding anything to buy.
Based on this, I don't think we're in a 1960's 1970's style market. The present economic conditions have never existed before in history making a very unique situation. Debt has reached impossible levels, baby boomers are relying on the stock market to retire on, and our trade deficit has no parallel since the time of ancient Rome. People who are saying the stock market will double by 2008 (therefore predicting a market PE of about 40) are not credible and should be ignored. However the stock market losing 50% of its value in the next 3 years is VERY likely and has tons of historical support if you're looking at how prices are a reflection of earnings.
There is one last senario that actually could result in a market double by 2008. Hyper-inflation and the devaluation of the dollar could easily cause this to happen although it would require that the government has been lying to us about the money supply. Of course we all know how absurd a lying federal government is.........
It's become almost stupid in South Florida.
Tom
Coin's for sale/trade.
Tom Pilitowski
US Rare Coin Investments
800-624-1870
The dow first hit 1000 in 1966. It was 1982 when it was finally able to convincingly break through that barrier. Thats 16 years of nothing, unless you were a trader and made good on the six or seven 40% up and down swings. Mutual fund investors will be a disappointed bunch.
The next run will not occur until a new generation of investors come into the markets. I just hope their return is not delayed because they are burried in their mortgage payments.
Knowledge is the enemy of fear
Nah I wouldn't worry about that. My bet is a lot of them will be walking away from them.
Tom
Coin's for sale/trade.
Tom Pilitowski
US Rare Coin Investments
800-624-1870
The same model of Rome in 170 AD after 50 years of deficit spending, Marcus Aurelius, Emperor of Rome saw the future of Rome and was very alarmed. While he engineered the deficit spending under the previous Emperor, he did not realize that he did the wrong thing until the last 5-10 years of his rule. He realized that bringing back the Roman Republic and a true system of checks and balances was the only way to save the Empire. He was right.
We have dismantled much of the firewalls created from the Great Depression such as preventing banks from also acting as stock brokers on the "floor" and playing the stock market game for themselves. We have seen the alarming amount of demutualization of savings banks and S&L since the mid 1980's. Sure we had the S&L scandals of the 1980's but the vast majority of them werfe mich more financially healthy than their stock owned banks.
This country has lost its way and will follow the path of England when England passed the mantle of largest economy to the US in 1907 with losing the prestige of their stock market as being #1 in the world. The world is waiting to see who will replace us. It was thought that Japan might have eclipsed us 10 years ago but I still think China is going to do it.
History does repeat itself over and over again.
Another food for thought? How many Americans 18 to 30 years of age have created tremendous new real wealth in the past 5 years?
How can you tell when a county is in economic decline? Easy!
Rome spent more money on spectator sports stadiums after 100 AD than on their infrastructure of water, roads and waste removal. Take a look at the USA. New York City for instance, has not renovated their water supply system in over 50 years and it is not far from collapse. Indeed, in our area outside of New York City, many areas of New York City water supply lines are leaking like rivers into the ground. The City no longer has the ability to repair these lines without an complete redoing of their pipelines into the City. Just my own honest opinion.
Look at our rail system. It has fallen into disrepair. The airline industry is no longer the envy of the world and in fact NONE of the US airports even made the top 10 airports of the world. The interstate and local road system is ever expanding but are no longer keeping up with growth in population.
The US is where Rome was in AD 170. Still the #1 superpower but its finances in shambles and overtaxing its outer provinces to a breaking point. We are also at the point Argentina was in 1990 and the British Empire in 1900 just before the passing of Queen Victoria.
<< <i>Rome spent more money on spectator sports stadiums after 100 AD than on their infrastructure of water, roads and waste removal >>
Don't forget, however, that a big reason for this was to desensitize the public so that they could continue to fight their bloody wars. This "entertainment" actually served the purpose of state pretty well.
<< <i>Don’t pay any attention to ddink he thinks this is a weather thread. >>
When I hear doom-and-gloom-the-world-is-ending-the-sky-is-falling theories I just can't help think of Malthus. At any rate, I'm glad I entertain you so much
BTW, that's not to say I don't think there are some prescient things in this thread, but I think predicting all-out collapse is just slightly premature.
Podunk Idaho
<< <i>Real estate is going to be something to watch.
It's become almost stupid in South Florida.
Tom >>
Thanks for the listings WOW $600 to $650 per Sq. Ft. for log homes !
76 $2,950,000 Available
Custom Home : 4576 SF home being built/ golf course frontage / Great views overlooking the golf course and the lake. Download a PDF Information Flyer.
Well, I guess that makes me the odd man out as my wife and I are currently building our retirement home on a piece of lakefront property in South Carolina. We will be there by September. No more upstate New York winters. No more New York State taxes!!
Not that we're going to sit around on the dock all day. We've already got jobs lined up - got to pay for the hobby somehow!
Member ANA, SPMC, SCNA, FUN, CONECA
FYI
Hays Morning Market Comment
If the Rhyme Stays in Tune, 4 More Days to Bottom
April 18, 2005
Tell Me about Those Years Ending in “5” One More Time
by Don R. Hays
Summary: What does it take to turn perma-bulls nervous? Something historic!! In Friday’s move, even though it comes only a few weeks after a bull market peak, the bearish sentiment has quickly resurfaced in sentiment surveys such as the A.A.I.I. bears-to-bulls ratio. I am being blown away by how quick some of the bulls of six weeks ago are now fleeing with fear and trembling. This is the typical action when the S&P 500 breaks its 200-day moving average.
I am amazed how few are picking up on the similarity of today’s market with that 1994 example we have been showing since December 17 of last year. If the “rhyme” continues so perfectly, today’s market will try to rally back intermittently, but fail to produce an up-day by a small margin, but then the sharp decline will return for two more days on Tuesday and Wednesday. Then on Thursday, a very sharp down-move in the morning with a 1-day reversal that will put in the low for this year for the S&P 500, and a trading rally for the NASDAQ, et. al.
We started buying with our last 10% cash on Friday, and believe it or not found it was not that easy to pick up stock of the good acting stocks we’ve been selecting for purchase. This is one reason that the 10-day Arms index has not noted a climax panic selling spree. By the way, the 10-day Arms signal didn’t activate in 1994 either. The peak in the 10-day Arms index only moved above 1.10 on two days in that rhyming year.
I am going to continue to show this graph for you every day in these reports as long as today’s rhyme with 1994 continues. Since I want to include not only this 1994 graph, but also the current one to help you visualize the similarity, I am going to skip to the next page.
That graph is of the S&P 500 and is up to April 15, 1994. The ending date for the sharp decline was on March 31, 1994. Now here’s this year’s rhyme.
I’m probably getting too cute making the “exact” correlation to that prior decline, but there is no better clue that I have found. Remember, our asset allocation matrix is the center-piece of our recommendations, and it started to tell us last week that we should start to get ready to put all our cash back into the market. We are in the process of doing that now, and have been surprised how hard it is to buy the stocks that we have selected as our latest additions to our portfolios. I’ll get back to that in a minute, but I have inserted arrows at the day in 1994 when the S&P 500 broke under its 200-day moving average in almost a perfect rhyme with what happened on Friday.
So if this rhyme continues to be so perfect, today’s market will try to rally a couple of times, but at the close will still be in the negative column. But after that, Tuesday and Wednesday will really put some more panic into the pits, and Thursday would be a sharp down and sharp up one-day reversal that would be the bottom day for the S&P 500 for this year. It would also set up a nice trading rally for all sectors of the market, with possibly the energy and material sector being the sole hold-out.
Our asset allocation matrix did not change at all—even after Friday’s decline. We have a proprietary rating system that encompasses what we believe is the most reliable predictive indicators in the three composites of psychology, monetary and relative valuation. Each day, and especially each Friday after the close, we re-compute our asset allocation matrix.
In mid-December 2004, the matrix had moved to a P5, M2 condition, meaning that on our proprietary scale from 1 to 6, psychology had dropped to its next to worse state, while monetary was still at a very healthy M2, the next to strongest state. This condition, when combined with the relative valuation of stocks in the extremely under-valued zone, said to raise 10% cash. I know I’ve worn some of you out with this much repeated explanation but for you new readers, we raised our additional allowed qualitative-judged 10% cash based on the overbought condition of the market on the prior rallies. It is extremely important as you follow this system to know that our asset allocation is based on studies that very effectively locate points that will produce a certain amount of risk/reward over the next 6-30 months. Our qualitative-allowed judgment is based more on the short-term, but we are a little more aggressive in using up our “allowed” 10% cash limit when the asset allocation matrix is also flashing any kind of a caution light.
We put that “allowed-qualitative” extra 10% back into stocks on the last decline four weeks ago when our 21-day oscillators reached extreme over-sold conditions. On Friday, April 8, 2005, the asset allocation matrix moved to P3, M2. That condition tells us to use the next few weeks to move back to a fully invested posture. We have been fine-tuning that step, since the 1994 rhyme told us that IF the market was about to have a second wave of weakness it should come in the next few days. By the way, it will take very little to move the Psychology up one more notch to P2, which I would expect as any additional weakness occurs.
With that explanation, we started to buy on Friday, and will be using these next three days to become fully invested. We have our stocks selected and orders in, but have been amazed that the purchase process has not been easier in light of the market weakness.
That could very easily explain the reason that we have not received any indication yet from the 10-day Arms index of a climactic panic sell-off. Let me show you this graph.
Our minimum requirement on this indicator is a move up to 1.30. That has caused us a little heart-burn, but since the other indicators are showing enough improvement, this “failure” was not sufficient to keep us in an all-cash position. It is encouraging that the data from 9 and 10 days ago, that this 10-day moving average will be removing today and tomorrow will be two lower numbers, which will help the upward possibility, but when Mark reviewed 1994 for me, he found that during those panic sell-offs in March and April of 1994, the 10-day Arms did not even get above 1.10.
My logic, especially when encompassed with our experience of buying on Friday, would seem to say while investors are scrambling out of some stocks, there is still strong buying in those stocks that have good supporting cases.
I have had a sneaking suspicion for several months that a falling oil price would be a negative for stocks. My logic was that the S&P 500’s recent move up has been almost a perfect reflection of increased earnings expectations, and that much of that increased expectations have been a result of booming profits from energy and material prices. Since such a high percentage of those recent earnings upgrades have come from those companies capitalizing on that “bubble” of oil and material prices, a down-draft would also impact the market.
And not only that, have you heard a Strategist in the last three months that has not been extolling the great potential in energy and material stocks? After all China and India were eating and drinking so much of that stuff that it was going to perpetually exceed demand…..or so they said.
Oh well, there we go again.
I’m going to stop here so you can get this before the market opens.
If we’re right…..and of course remember, these “wiggle” are rarely “exactly” right, but if by some miracle it is, the next few days could continue to be a little scary, and a great buying opportunity.
We will be buying and stepping up our aggressiveness a little. The 6-30 month outlook is getting better and better as opposed to what you are hearing.
I will be traveling on Wednesday to Sarasota to do a seminar for our good friends who have a lot of their clients’ money invested in our discipline, but should be able to get this report out to you in plenty of time. I’ll see you then.
Tom
Coin's for sale/trade.
Tom Pilitowski
US Rare Coin Investments
800-624-1870
<< <i>Can I copy and paste my newsletter here too?
Tom >>
Question to goldsaint: I thought I'd send an occasional Hays comment to this thread. I pay $1000/year to subcribe and it allows me to send his comments out once per week. If you'd prefer that I don't send comments, I won't. Let me know.
<< <i>
<< <i>Can I copy and paste my newsletter here too?
Tom >>
Question to goldsaint: I thought I'd send an occasional Hays comment to this thread. I pay $1000/year to subcribe and it allows me to send his comments out once per week. If you'd prefer that I don't send comments, I won't. Let me know. >>
I'm not Goldsaint, I'm Tom Pilitowski. Why would you copy and paste my question and not address ?
I guess we could all copy and paste our various newsletters don't you think? Would need some extra bandwidth though.
Coin's for sale/trade.
Tom Pilitowski
US Rare Coin Investments
800-624-1870
Just make sure that you have permission from the publisher to post them. Most of them probably should not mind since it gives them free marketing exposure).
2nd Charter
I think it is great that you are going to be able to move South and many others will also, in fact millions will, but the new AARP study says that 80% will stay where they are.
“Question to goldsaint: I thought I'd send an occasional Hays comment to this thread. I pay $1000/year to subcribe and it allows me to send his comments out once per week. If you'd prefer that I don't send comments, I won't. Let me know.”
Kaytsok,
We need you my friend, we do not want this thread to get to one sided. I think it helps all of us to know what the established guys on the paper side of the isle are thinking, and why they come to certain conclusions. Please feel free to post any of this info. you like.
Terry
Lest anyone think I am rich or something it is only a two week fee simple timeshare just north of Lahaina and the price was $4500 per week. But I did pick up week #51 and #52 (end of the year into New Years)
Every year around April 15th, I do this sort of thing.
This may be a first for me, but I agree with everything Iwog said in his post. There is one way the market can double to 2000 in 3 years. It's similar to how it went up so much the past few years - print money. While the index may reach 20000, you can bet that all that will be due to dollar deflation so you're net increase would still be zero. If the stock market doubles because of hyper-printing of money, you need to find something that goes up a lot more than that to keep ahead.
Tom, the govt is already one step ahead of you on "walking away" from one's ARM if (or should I say when) one ends up on the wrong end of their housing valuation. This new bankruptcy law will in essence lock all the credit happy people that have been entrapped with the easy credit gambit. The majority will not be allowed to escape and leave the poor bankers and mortgage companies holding the bag. The same people who helped to put you there.
The govt sees the writing on the wall and furiously passed this bill
to ensure we all pay and pay and pay until the grave. Ironic isn't it?
The massive spending and entitlements that the congress has authorized has gotten us to this point. They are the ones responsible. But they are going to ensure that the little guy pays for it, rather than themselves.
roadrunner
Tom, the govt is already one step ahead of you on "walking away" from one's ARM if (or should I say when) one ends up on the wrong end of their housing valuation. This new bankruptcy law will in essence lock all the credit happy people that have been entrapped with the easy credit gambit. The majority will not be allowed to escape and leave the poor bankers and mortgage companies holding the bag. The same people who helped to put you there.
The govt sees the writing on the wall and furiously passed this bill
to ensure we all pay and pay and pay until the grave. Ironic isn't it?
The massive spending and entitlements that the congress has authorized has gotten us to this point. They are the ones responsible. But they are going to ensure that the little guy pays for it, rather than themselves.
roadrunner
Right I didn't think of that. And here., just to make sure everyone has enough time to pay up before they bite the dust:
Bush Says Raising Retirement Age a Possibility
1 hour, 47 minutes ago U.S. National - Reuters
By Steve Holland
COLUMBIA, S.C. (Reuters) - President Bush said on Monday proposals to raise the retirement age for Social Security benefits and restructuring those benefits to be more generous to low-income workers are among possibilities for overhauling the country's largest entitlement program.
Bush mentioned the possible ways to preserve Social Security's solvency and called for Congress to come together to make the tough choices in an address before a joint session of South Carolina's Republican-controlled legislature.
At the same time, he painted a dire picture of Social Security's future if nothing is done, saying problems would start in three years when the first baby-boomers retire.
"By 2034 the annual shortfall will be more than $300 billion and by the year 2041 the entire system will be bankrupt," he said.
He appealed directly to younger workers in his uphill battle to convince Americans of the need for private retirement accounts as part of the Social Security system.
Bush said younger Americans are comfortable with investing in stocks and bonds and the system would be set up so the money would not be wasted at the racetrack or in a lottery.
"Telling younger workers they have to save money in a 1930s retirement system is like telling them they have to use a cell phone with a rotary dial," Bush said.
He hailed various experts and Republican and Democratic lawmakers for offering proposals for changing the system. He praised in particular South Carolina Republican Sen. Lindsey Graham (news, bio, voting record) for a proposal to raise the cap on Social Security taxes paid by high-income earners. Conservatives have called that a tax increase.
Graham has been pushing Bush to offer more details about how to fix the program's financial problems and insist on a vote in the U.S. Congress in coming months. Bush has spent more than two months pushing for an overhaul but has not offered a detailed proposal while calling for action this year.
Bush also cited a proposal to further raise the retirement age, which is currently 65 and already being increased so that people born in 1960 or after will be able to receive full benefits at 67.
Later, in an interview with CNBC, Bush was asked whether the retirement age should be raised to about 70. "Certainly one of the options. As I recall, President (Bill) Clinton, my predecessor, suggested that might be a good part of the fix," Bush said. "There's a variety of things on the table."
In his South Carolina speech, Bush mentioned proposals to tie Social Security benefits to prices rather than wages to slow their growth, and to have a progressive way of structuring benefits that will be more generous to low-income workers.
"In other words, all these ideas are on the table, but they have one thing in common, they all require us to act now," Bush said.
The only option Bush ruled out is raising the payroll tax, which is currently 12.4 percent. "That'll hurt the economy and cost jobs," he said. (Additional reporting by Adam Entous)
I WILL be back on the white sand beach that I was at in SE Asia.
Tom
Coin's for sale/trade.
Tom Pilitowski
US Rare Coin Investments
800-624-1870
In Last Phase of Becoming Fully Invested
April 20, 2005
Still A Lot of Work to Do Before Roaring Bull Market Returns
by Don R. Hays
Summary: We’ve spent a lot of ink in the last two weeks trying to convince you that a significant bottom is being forged, probably the low of the year for the S&P 500, but at the same time please remember we’re not promising you a “rose garden” for 2005 as the old country music song coined. We think that this year will have to experience some more “sweating” before the bull market is ready to roar again.
We have been dribbling back into the fully invested position and as of this instant still have about 3% more cash to put into stocks. With the Rydex Asset Ratio hitting our expected target, and with the extreme oversold condition of the oversold oscillators, we expect a period of better stock market action, maybe even a new high in the S&P 500. But our position is that most of this year should be used to get ready for 2006-2008 which we expect to be “gang-busters” for the return of the BULL.
The sector Rydex assets has told us that the technology sector has very low assets, which typically only happens when a sector has been wrung out and ready for a return to the upside. We also think this is a bet on a big technology upgrade beginning in 2006-2008.
It is very early, and I have to be out of here on the road to Sarasota in one hour, so this is going to be very abbreviated. The C.P.I. comes out this morning, and it might have the potential of causing one more decline, but I am now guessing that the lows of two days ago will not be violated. As investors, you simply don’t have the luxury of waiting until the news comes out. The stock market reads tomorrow’s headlines, not today’s, so if you wait you are only piling on too late.
As noted repeatedly, we have been dribbling back fully into stocks, with our long-term growth portfolio now having only 4% cash left, and if the market cooperates that will be reduced to our minimum 0-2% this morning.
That is the way we expect to operate our portfolio this year. We will be watching our asset allocation matrix closely, which as of the last two weeks has been telling us that there was very little risk left in the market and that this period should be used to put our cash back to work.
I don’t think any portion of our asset allocation 3-pronged approach tells the story better than the Relative Valuation model that compares earnings yield of stocks based on the next 12-month forward earnings, to the yield of the 10-year T-Note. You can see in this graph the historical similarity of these two market instruments.
With the decline in the S&P 500 index the earnings yield of stocks has moved up to 6.63%. You can see that investors are being offered the highest earnings yield of any time since 1996. At the same time, the bond yield has dropped back to 4.21%, making bonds even less attractive. That produces a huge gap between the two, and when you equate the earnings yield of stocks to bonds, you see the following results.
As of this morning, stock investors are being offered a 36.5% premium over bond yields. If you look up to the top chart, you will see that for the last 25 years these two variables ALWAYS have come back to parity. That either means bond yields are going to scream upward, or that stocks are going to move up. This disparity in favor of stocks is a major shock absorber that will buffer any downside in stocks. You can see that since July 2002 when that reverse head-and-shoulder bottom to the bear market was being forged, this “shock absorber” reached this extreme level, and it has been a big reason that the downside risk in this market has been very little on any of the market “soft spots.”
I have to scoot out of here, but first let me say that the oscillator charts are acting very normal, with the higher low in the oversold condition on the very weak market of last week. I now would expect the rally to continue at the very least until the 21-day oscillator moves back up above the +5000 level.
We’re not playing red light/green light at this juncture. With the stock market so undervalued in relation to bonds, and with the yield curve still in a very healthy status, all we are doing is playing different shades of green. As of late December we said WOW, slow down, and now we’re saying you should pick up your speed a little, but don’t go barreling down the road so fast that you can’t stop if some impediment darts out in front of you. We expect in the next few months it will more than likely be time to slow back down to idling speed once again, but in the meantime you can milk a few percentage points of performance out of stocks.
The missing link here comes from the put/call data. If you look at today’s update of the charts, you will see that they have not come to levels we would ultimately expect. Obviously, however, we couldn’t be happier with the action of the Rydex asset ratio that is almost perfectly mocking the action it achieved on the other side of this mirror image of emotions that bottomed out in February 2002. Let’s take another look at the www.decisionpoint.com chart of the Rydex asset ratio.
Yes, it could drop a little more in order to exactly hit the level reached in late March 2001, but it is close enough for us, especially since the relative valuation model is so positive for stocks.
That’s it, I’ve got to go. There will not be a market letter on Friday unless something very unexpected occurs. We are changing our company’s server out, and my computer will be in the process of being reconfigured. The charts will be updated, however, so make sure you take a look at the progression.
Of course, if some major event occurs, we’ll find a way to get you a message.
See you on Monday my friends.
If you can tell us, I for one would be interested in reasoning behind Mr. Hays following assumptions, or statements.
“It is very early, and I have to be out of here on the road to Sarasota in one hour”
Is he going to NGC to pick up his coins, just a small joke!
“But our position is that most of this year should be used to get ready for 2006-2008 which we expect to be “gang-busters” for the return of the BULL.”
It seems that many of these analysts keep harping on the fact the stock investments need to be LONG TERM. Does he not realize that the folks with the majority of the investment capital no longer have LONG TERM left? That they are older folks that are now facing an inflation period where everything goes up but their income which goes down as they head for retirement.
“The C.P.I. comes out this morning, and it might have the potential of causing one more decline.”
Do you think Mr. Hays believes that this is last rise in the CPI we are going to see, and therefore the market will start correcting to the upside?
“With the decline in the S&P 500 index the earnings yield of stocks has moved up to 6.63%.”
I am not sure where Mr. Hays is getting those numbers but below is a list of the top paying companies in the S&P 500 and they are no where near his numbers, in addition the ones paying the highest rates are some of the companies in trouble like GM, who might pay nothing next year.
Sorry this chart did not copy well but the last number in the line is the yield.
Highest-Yielding S&P 500 Stocks First Quarter 2005
Symbol Company Name Previous Day's Closing Price Membership Current Dividend Yield
GM General Motors Corporation 26.66 14.47 Bil AutoManu S&P Industrial 7.80
AIV Apartment Investment and Management Co. 36.61 3.467 Bil REITResid S&P Industrial 6.60
EOP Equity Office Properties Trust 30.92 12.45 Bil REITOffice S&P Industrial 6.50
PGN Progress Energy, Inc. 41.49 10.22 Bil ElectricUt S&P Industrial 5.70
SBC SBC Communications Inc. 23.65 75.98 Bil TelecomDom S&P Industrial 5.60
PGL Peoples Energy Corp. 41.24 1.511 Bil GasUtility S&P Industrial 5.50
ED Consolidated Edison, Inc. 42.75 10.24 Bil DiversUt S&P Industrial 5.40
EQR Equity Residential 32.05 9.142 Bil REITResid S&P Industrial 5.40
AEE Ameren Corporation 50.69 9.73 Bil DiversUt S&P Industrial 5.10
GAS Nicor Inc. 36.90 1.597 Bil GasUtility S&P Industrial 5.10
T AT&T Corp. 18.98 14.77 Bil Longdistan S&P Industrial 5.10
VC Visteon Corporation 5.00 609.9 Mil AutoPart S&P Industrial 5.10
ASN Archstone-Smith Trust 34.46 6.883 Bil REITResid S&P Industrial 5.00
MYG Maytag Corporation 14.39 1.135 Bil Appliances S&P Industrial 5.00
CIN Cinergy Corp. 39.90 7.549 Bil DiversUt S&P Industrial 4.90
RAI Reynolds American, Inc. 78.99 11.44 Bil Cigarettes S&P Industrial 4.90
WM Washington Mutual Inc. 38.50 33.22 Bil SavingLoan S&P Industrial 4.90
XEL Xcel Energy Inc. 17.08 6.787 Bil ElectricUt S&P Industrial 4.90
KSE KeySpan Corporation 38.54 6.076 Bil GasUtility S&P Industrial 4.80
TE TECO Energy, Inc. 16.10 3.261 Bil ElectricUt S&P Industrial 4.80
VZ Verizon Communications 34.89 94.59 Bil TelecomDom S&P Industrial 4.70
DTE DTE Energy Company 45.72 7.825 Bil ElectricUt S&P Industrial 4.60
MO Altria Group, Inc. 65.49 133.8 Bil Cigarettes S&P Industrial 4.50
PNW Pinnacle West Capital 43.39 3.923 Bil ElectricUt S&P Industrial 4.50
SO The Southern Company 32.22 23.64 Bil ElectricUt S&P Industrial 4.50
DCN Dana Corporation 11.53 1.646 Bil AutoPart S&P Industrial 4.40
FHN First Horizon National Corporation 39.18 4.789 Bil StheastBnk S&P Industrial 4.40
MRK Merck & Co., Inc. 34.78 76.86 Bil MjrDrgManu S&P Industrial 4.40
BMY Bristol Myers Squibb Co. 25.82 50.63 Bil MjrDrgManu S&P Industrial 4.30
NCC National City Corporation 32.97 21.22 Bil MidwestBnk S&P Industrial 4.30
PCL Plum Creek Timber Co. Inc. 35.74 6.496 Bil propmanage S&P Industrial 4.30
SPG Simon Property Group, Inc 61.74 13.73 Bil REITRetail S&P Industrial 4.30
USB U.S. Bancorp 28.07 51.96 Bil MidwestBnk S&P Industrial 4.30
BLS BellSouth Corporation 26.26 46.76 Bil TelecomDom S&P Industrial 4.20
F Ford Motor Company 9.75 17.39 Bil AutoManu S&P Industrial 4.20
PEG Public Service Enterprise Group Inc. 54.87 12.8 Bil DiversUt S&P Industrial 4.20
RF Regions Financial Corp. 31.59 15.15 Bil StheastBnk S&P Industrial 4.20
UST UST Inc. 52.89 8.727 Bil TobaccoPrd S&P Industrial 4.20
AEP American Electric Power 34.72 13.53 Bil ElectricUt S&P Industrial 4.10
BAC Bank of America Corporation 44.68 179.2 Bil MonCentBnk S&P Industrial 4.10
CAG ConAgra Foods, Inc. 26.69 13.66 Bil Fooddivers S&P Industrial 4.10
CMA Comerica Incorporated 53.70 9.099 Bil MidwestBnk S&P Industrial 4.10
CZN Citizens Communications 12.46 4.188 Bil TelecomDom S&P Industrial 4.10
NI NiSource Inc. 22.87 6.049 Bil DiversUt S&P Industrial 4.10
PNC PNC Financial Services 50.48 13.97 Bil MonCentBnk S&P Industrial 4.10
ASO AmSouth Bancorporation 25.33 8.864 Bil StheastBnk S&P Industrial 4.00
FE FirstEnergy Corp. 42.00 13.6 Bil ElectricUt S&P Industrial 4.00
JPM JPMorgan Chase & Co. 34.19 86.73 Bil MonCentBnk S&P Industrial 4.00
KEY KeyCorp 31.52 13.11 Bil MonCentBnk S&P Industrial 4.00
DUK Duke Energy Corporation 28.26 26.71 Bil ElectricUt S&P Industrial 3.90
1) his model forecasts the stock market 6 to 30 months out. Not 3 months and not 5 years. Based on the 6 to 30 month forecast, he calls his model "highly reliable". I would go so far as to say I have never know it to be wrong. The was the biggest bear in the world in 2000, and he is the biggest bull in the world today.
2) Inflation: he believes that inflation will be low single digits for a long, long time. With the excess supply of goods and services around the world. there is a lid on inflation. The ideal inflation scenario for the stock market is "a little inflation". That is exactly what he believes will be the case
3) I don't know the answer to you last question on yield, but I will get it.
I hate to disparage Mr.Hayes but I would really like to know what he is smoking.
which as of the last two weeks has been telling us that there was very little risk left in the market and that this period should be used to put our cash back to work.
If he said that 2 weeks ago then he just lost 5%. And that takes the market back to last summer highs. So basically 1yr of investing was lost. That sounds like risk to me.
Knowledge is the enemy of fear
<< <i>Hayes was on CNBC yesterday. Basically said the same as this letter. He said he doesnt expect anything this year. Well then that gives him only 2 years for the market to double. That translates in to 35-40% returns in 2006 and 2007.
I hate to disparage Mr.Hayes but I would really like to know what he is smoking. >>
Perhaps chopped up dollars? They're getting pretty cheap.
Might get even cheaper too.
Tom
Coin's for sale/trade.
Tom Pilitowski
US Rare Coin Investments
800-624-1870
“I hate to disparage Mr. Hayes but I would really like to know what he is smoking.”
I agree, lets say you are an early Baby boomer age 59, as I am, you go all in hoping to start riding the Bull in two plus years so when the “ up trend” starts you are 62, as I said many no longer have long term.
The CPI numbers today were about 6 to 7% per year, and most likely sugar coated, so lets say 8 to 9%. If we just stay at that rate for the next 3 years what are corporate earnings going to look like?
How many of the 300 companies on the S&P with pension and medical short falls can go through an extended period of inflation without falling in the hole along with GM?
As Roadrunner and many others here said nearly 2 years ago, what we have coming is stagflation and that means earnings are going in the toilet. Personally I think the stock market players will be lucky to hang on to a 10,000 Dow the next 3 years.
I had mentioned in a thread 18 months ago that when the press, who is the last to know, started reporting on the nightly news that inflation had arrived, the game would get very interesting. That time has arrived!
To be fair, news of rising rates panicked the bond investors at least twice in the last couple years. Once was last June, and I recall it because I took my cash accounts into 10 and 30 year bonds. Picked off about 10% in capital gain, plus there were dividends. The time before that, I bought a slug of long bonds via TLT. Made well over 10% on that one, too. I guess I like it when the news scares investors!
Tom
Commission Says Too Many Tax Breaks Exist
52 minutes ago Business - AP
By MARY DALRYMPLE, AP Tax Writer
Three credits and a deduction help taxpayers cut college costs. Special urban and rural tax zones encourage investment and job creation. Dozens of other tax benefits help families raise children and save for retirement, encourage adoption, nudge drivers toward hybrid cars and push businesses to invest in new equipment.
"We have lost sight of the fact that the fundamental purpose of our tax system is to raise revenues to fund government,"
according to President Bush's Advisory Panel on Federal Tax Reform.
The commission's chairman, former Florida Sen. Connie Mack, said its nine members have been surprised at the number of tax deductions and credits.
"It wasn't until we really had the opportunity to listen to so many different people talk about so many different aspects of the code that it really sunk in about how much and how often the code is being used these days to either create incentives or disincentives for either investment or behavior," Mack said in an interview with The Associated Press.
The White House budget office ranks the cost of a deduction for businesses that provide health insurance to employees as the top tax break, worth $126 billion next year. Also high on the list are the popular mortgage interest deduction, a capital gains break for home sales, a deduction for charitable contributions and the child tax credit.
The list includes many tiny tax breaks. Among them are ones that encourage biodiesel fuel, help the elderly and disabled, make interest on educational bonds tax-free and allow teachers to deduct the cost of school supplies.
The problem comes when taxpayers try to decipher the rules that govern those credits and deductions. The tax breaks often overlap and typically come with pages of instructions and qualifications.
"It was clearly stated that the level of complication has become so great that in many cases it ends up deterring the activity that you're trying to encourage," Mack said.
Bush has asked the panel to preserve tax breaks that promote homeownership and charitable giving.
Tax breaks started proliferating in the 1990s for two reasons, said Eugene Steuerle, a former Treasury Department official and co-director of the Urban-Brookings Tax Policy Center.
"There's always been this political reward for claiming to do something new rather than merely cleaning up or slightly expanding something that already exists," Steuerle said.
Lawmakers want to brand their own education tax breaks, for example, which means there are multiple deductions, credits and special savings accounts instead of one tax break everyone can use.
Tax breaks also provide benefits without creating a government spending program. But the proliferation of tax breaks end up costing the public because they mean lawmakers cannot lower income tax rates, Steuerle said.
"They make it look like smaller government, when in fact it's actually bigger government," he said.
The tax breaks amount to billions of dollars.
Tax benefits that provide indirect subsidies to homeowners add up to more than the entire budget of the Housing and Urban Development Department.
The earned income tax credit for low wage workers is bigger than any welfare program, including food stamps.
The tax break for businesses that provide health insurance is growing faster than almost all other domestic programs.
Some critics say no one tracks the tax breaks to find out if they succeed in promoting the behavior lawmakers want to encourage. Limitations often mean that some breaks are not available to wealthier taxpayers or poorer ones.
"It is worth noting that the deductions are of little or no benefit to the 40 percent of taxpayers who don't owe taxes," Fred Goldberg Jr., a former Internal Revenue Service commissioner, told the presidential panel.
Would taxpayers give up some of those deductions and credits to make the whole system simpler? Not likely.
"Anytime you've got a benefit, wherever it happens to be, whether it's spending or taxes, people don't want to give them up," Mack said.
This summer, the panel plans to recommend ways to make the tax laws simpler and fairer.
___
On the Net:
President's Advisory Panel on Federal Tax Reform: www.taxreformpanel.gov
Coin's for sale/trade.
Tom Pilitowski
US Rare Coin Investments
800-624-1870
All of the business and business schools have been touting just-in-time inventory. This now comes into conflict with grossly increasing cost of transportation of goods. That COULD GET REAL INTERESTING!
I wonder how the WALMARTS and retail stores will handle this problem?
That was great stuff Topstuff. Right smack on the money.
The article above from 321gold.com gives some interesting insights to where oil is going and by the historical gold/oil ratio, where gold must eventually end up. Interesting reading and not technical.
The premise of the article is that US production peaked in 1970 (it did) and now foreign oil is peaking (Saudi Arabia in particular). The final result is more costly oil down the road....albeit with the whipsaw pricing back and forth as the market makers trade and manipulate. Inflation won't be far behind. And in the end, recession follows. The FED has no more ammo to bump interest rates like Volker did in 1980 because it would dump the current economy into a major recession...fast. We just sort of have to sit here and take it with both barrells as the FED continues to inflate...the only option they have left in the bag of tricks. Stand by more lots more stagflation. Good reading.
roadrunner
The U.S. has been applying a lot of pressure on the Chinese to let the yuan rise in order to ease our trade deficit and produce more manufacturing jobs in the U.S. There are some potential negative side-effects, however, if the Chinese do what we want them to do. For one thing, a rising yuan would weaken the dollar. A falling dollar boosts commodity prices and U.S. inflation. One of the factors keeping U.S. rates low has been buying by the Chinese central bank in order to keep the yuan from rising. [The Chinese buy dollars and invest them in U.S. debt]. If the Chinese stop buying dollars, they may also stop buying U.S. bonds. The result could be higher interest rates. One of the factors keeping U.S. consumer inflation relatively low has been competition from cheap Chinese imports. A strong yuan would increase import prices from China which would result in higher U.S. inflation. So the consequences from a rising yuan could be a falling dollar, higher commodity prices, higher U.S. inflation, higher U.S. interest rates, and a lower U.S. stock market
Knowledge is the enemy of fear
What really happened and the history the government doesn't want you to learn.
Tom
Coin's for sale/trade.
Tom Pilitowski
US Rare Coin Investments
800-624-1870
roadrunner
But the rest of the ignoramouses are in control so I keep on posting the free market propaganda. Just in case a bull market in Freedom thinking ever starts.
Hmmmm, meanwhile, here's another one which is a great great area of research material and connections
Free Market News
Tom
Coin's for sale/trade.
Tom Pilitowski
US Rare Coin Investments
800-624-1870
This is certainly a real possibility, but it is by no means inevitable. Remember, we are only thirty years beyond the economically productive cultural revolution.
In order to pass us, Chinese leadership will need to gradually build democratic institutions, while dealing with many ethnic and demographic challenges. If it happens, it will be a tremendous achievement.
<< <i>cohodk... The Chinese are far too smart to do what the US "wants" them to do. China, while well on its way to becoming self sufficient, at this time NEEDS more US consumer spending. They have a "jobs" problem and don't want to deal with an unruly populace.
China will surpass the US economically and militarily eventually. After all, we're giving it to em.
Wonder what's on sale at WalMart today?
It's certainly a likely scenario if there is no drastic change in doing business ( ie: cost of doing business including taxes, regulations ) in the USA. Flying into HK, Inchon, almost anywhere in China is an eye openner for sure. It should be on the strongly advised list of things to study in any contemporary business school along with maybe Henry Grady Weavers "Mainsping of human progress".
But with a virtual 8 trillion dollar debt and a direction which indicated growth of that debt it appears unlikely that doing business , manufacturing and even the so called service sector would be a growth area here. And the ponzi in the housing market which is one of the last areas of real growth seems to be coming to an end. The best thing would be to STOP backing any politician who grows the government larger i any way shape or form. That would be a start at least in changing the direction we're headed in.
But the piper is still going to get paid.
Tom
Coin's for sale/trade.
Tom Pilitowski
US Rare Coin Investments
800-624-1870
Didn't wanna get me no trade
Never want to be like papa
Working for the boss every night and day
--"Happy", by the Rolling Stones (1972)