Thursday, August 19, 2004

A recent market perspective letter from Shenkman Capital (www.shenkmancapital.com) cited "seven major uncertainties" as "adversley affecting market psychology:

- high oil prices
- the Iraqi conflict
- the threat of domestic terrorism
- rising interest rates
- inflation
- the sustainability of corporate profits
- the outcome of the Presidential election"

While I agree with all of these factors, sadly, only one will really be decided in the near term (election). Oil prices and interest rates are somewhat controlled by OPEC and the FED. Inflation to a very low degree can be curbed by FED policy, but I think it is really more a function of consumer spending and attitudes, which raises the question "Which came first, the chicken or the egg?" Only time will tell if corporations can sustain their profits, but I think we will see a slow down coming soon as efficiencies top out.

Finally, no one has control nor can anyone reasonably predict the outcome of the Iraqi conflict or if we will be attacted again. I think the US got the ball rolling in the Middle East, but the hatred is so ingrained in people's mind over there, I think sometimes they might even forget why they hate each other. As far as terrorism I wish others would realize we Americans really aren't all that bad. I know the US has done some bad things to people before, and we continue to do so... but we're only human. And I certainly did not harm anyone, so stay away from me.

Anyway, that's my take on the market and world right now. Google starts trading today after a day delay from the SEC. Should be interesting to watch its effect on the markets. I still believe we are due for one final impulse down before we reverse trend and head into YTD highs.

Tuesday, August 17, 2004

Email excurpt to fellow Elliott fan,

I think Jerry (Favors) is right on here.I'm still wary of two things however.

Yesterday's rise could be the start of the fifth wave of a largerimpluse that began somewhere around October 2002. That would makesense since wave 2 was sharp between Nov & Mar and the 4th wave took alooooooooong time between Jan/Feb and Aug (last Friday). And thisentire rise (according to Wavespeak) is A of B of the really largecorrection that has been on since the beginning of 2000.

However, on more intermediate terms, the fall-off from the beginningof Aug 04 may be extending into a giant 3rd wave. I hope this is notthe case, but you never know. I think the correction from thebeginning of the year has lasted longer than a lot of people expected.Although I think Woody Dorsey up in VT may have got it correct.

Anyway, I'm expecting a nice little correction today (Tuesday 08/17). Hopefully just a 2nd wave and not heading further down. Perhaps theGoogle IPO and AMAT earning on Weds (09/18) as we discussed last night will be enough to finally lift this market and get it going again uptowards rally highs.

That would be a relief and confirmation to trustcertain newsletters (a la WS [wavespeak] and Favors).

Friday, August 13, 2004

Just read this on Marketocracy.com and thought it was interesting.

(by fmoslehi 8/21/01)

There are several mega trends that are working their way through the system. Over the next decade about 10 trillion dollars will be passed in the form of inheritance from the "greatest generation" to the "instant gratification generation". Now those older folks in their 70s and 80s do not have their assets in MSFT, CSCO and JNPR! Most of that money is in cash, bonds, real estate, art, collectables, etc. The generation that is receiving the money is crazy about equities (even people like you who are anticipating the coming deep recession are still invested in the market!) so as these trillions change hands, a good chunk of it will find its way to the markets.

The other huge mega trend is the shift from "defined benefits" to "defined contributions" type of pension/retirement plans. The real driver behind the DOW going from 700 to 11,700 was the advent of the switch from defined benefit to defined contribution plans (IRA, 401k, 403b, etc.) That tsunami hasn't stopped yet, in fact there are still plenty of corporations that haven't switched over, and even the ones that have, are working through the older workers who were close to retirement and didn't make the switch, and as those people retire and new people come on board the number of people in the defined contribution plans grow every year.

I know plenty of people who are completely turned off by the markets and have closed their brokerage accounts, and yet they have not made any changes in their 401k allocation!! So every 2 weeks they are throwing money at the very markets they are not supposed to be playing any more!!!! As you know, the IRA contributions are about to be raised from $2000 to $5000 per person.

But the real big change in this area is coming from the global impact. Most of the rest of the world (Japan, Europe and all the rest) haven't even begun to switch to defined contributions. Europeans (Germany and Britain are about to do this) are starting to make the legal changes necessary to allow their pension and retirement systems to offer defined contribution options.

Once that comes, there will be huge sums of money headed for the global equity markets (remember some of those countries have income taxes as high as 60% or more with a huge portion of it going toward their retirement pools)! And as more and more companies get cross listed on all the major exchanges around the world, the American companies will be clearly the beneficiaries of these great rivers of money headed for the equity markets.

So it has been quite some time since I posted anything. I won't appologize as I've been very busy. New job, summer, etc... but I'm going to get back on the horse and start posting again.

My very last blog said that the FED was going to wait to raise rates. Well, since that time Greenspan et al have raised the FED Funds rate .50% (.25% twice). I think this was expected. A few/many thought the FED was going to move faster, but anyone at all who is on a budget knows that the US still isn't roaring.

For this reason I'm going to go out on a limb and say the FED will continue to raise rates .25% per quarter. They will not raise rate .50% at one time and they might even hold off a quarter or two here at there until a "neutral" policy (~4%) is reached. That would put us sometime around the beginning of 2007. I think this is totally reasonable.

The Elliot Show!
Well, the wave patterns have been terribly difficult to decipher this year. Wavespeak thinks we are in a large scale 4th wave (which would make sense) but Pretcher & Co. still contend we're headed down, down, down. Who's correct??? Well, I'm still waiting to see. A bunch of others are still saying we'll get a rally into year end. This was my origianl thought at the beginning of the year, and I hope it still plays out, but I am starting to wonder if it will happen.

We are at market lows for the year (yesterday) and things are looking bleak. I guess this is the time to actually invest and double down it possible. But...if and when the rally occurs it will be a great time to exit, especially higher beta bets, and hold some cash or bonds for a while.

Note: Today is Friday the 13th and the Athens Olympics start today.
Michael Phelps is going for 8 gold medals and the road cycling course has been discribed by George Hincapie as "Dangerous".

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