WEEKEND THOUGHTS JULY 2nd

Markets were volume-less as I suggested on getaway Friday, markets in the US will be closed on July 4th Monday. (Creed "Weathered" playing as I post)

Complacency markers screaming at extreme readings, the market IMHO has VERY upside potential for the remainder of 2005, the year ending in FIVE at risk for posting its first historical yearly loss.

As I have pointed out on several occasions the SPX/VIX Ratio remains at historic highs, ABOVE previous levels only seen at 1999-2000 BUBBLE extremes.........shouldn't we conclude that is reason for EXTREME caution? SHould we conclude this is meanignless? Or should we have our SPidey sense TINGLING with CAUTION, DANGER Will RObinson.........something wicked this way comes? Or should an investor just "let it ride" with LTBH mentality?

WE BUY and HOLD during GREAT BUYING OPPS, when stocks are found at GREAT BARGAINS. One of those times (though SPX PE was near 30) was end of 2002 after 3 years of selling and several selling climaxes found with VIX NORTH of 40. THEN we additional data a change was coming and SECULAR BEAR was going to hibernate when 50 SMA's moved above the 200 SMA's then BOTH TURNED UP, these were not found present during ALL of ugly bear.......but with FEAR HIGH (even though typical exit volume not found nor 90% selling climaxes) MOST couldn't pull the trigger.

Unfortunately, neither PE ratio's or (Now have playing Death Cab "Tiny Vessels") dividend yields matched ANY prior Bear MArket lows.....so we MUST conclude rise from 2002-2003 was/is a Cyclical Bull market correction of the entire Prior Bear MArket.

Its job was to seperate PHASE ONE from PHASE TWO of perhaps a HISTORICAL SECULAR BEAR MARKET thathas much work to do. You DO NOT want to be holding stocks in general IMHO should this be true and accurate conclusion.

GOLD fell HARD FRIDAY, it has been clear to me that with SILVER declining there was NO upside confirmation for this move in gold, NO GOLD BUG, Russell nor anyone I read bothered to mention this fact. Nor did they mention the declining tops and lower lows in bell weather NEMONT MINING, and weak and non confirming MACD and RSI readings.....though there asessment regarding the printing of money is correct, other things more powerful are at work here.

My previous posts from Privateer were meant to show how it takes INCREASINGLY MORE money printed to get even far lesser results, so ......it is like a BLACK HOLE.....the gravity of deflationary tendencies are too great to escape I am afraid.

Friday showed unusual strength in GOLD SHARES VS physical gold, IMHO this was a bearish divergence only showing the extent gold bugs are ignoring the trendd, and the shares are soon to follow the metals DOWN. WHEN the next phase in the gold BULL (still not sure if there is one) begins, it will have begun without many current holders holding. (ColdPLay "Warning Sign" now playing seems appropriate)

Those with large cash holdings and little or NO debt will be survivors with few nicks, but we shall all lsoe something should history be indeed be ready to repeat itself.....g-d help us all.

1929 seems like FOREVER AGO! can't happen again? BS

The 70 YEAR cycle of the Kondratief WINTER has been DELAYED by reckless and feckless FED action to try and CHEAT the BEAR, it has only made the BEAR more hungry.

We have seen EXTREMES in SO MANY AREAS!!!!!! 5 year highs one after another in housing. PARABOLIC in SALES and PRICING. PARABOLIC moves in commodities and certain stocks. A move to $300 by GOOG an $84 B company? It appears the top is in on GOOG, it has reversed IMHO.

Credit expansion and debt is above any other known extreme. (Now Echo and Bunneymen "Flowers" SOOOO GOOOOOOD) DO we want to invest LTBH when so many extremes seem to have topped or at least are above any other know extreme?

I have been waiting patiently, stepping aside near 100% cash....wondering if I have been right all these years.

I DO know this, I OWN my opinion, I have researched and spend countless hours thinking about it, and I end with same conclusion.......the Bear MArket which began in 2000 is FAR from over.

WHY?

because it hasn't achieved anything close to prior 3 bear markets, and I don't like the odds of this bear diverging from the path any of the prior bear markets have taken to reach a LASTING SOLID BOTTOM.

My attempts will be to not be taken under before that day comes andnot to be in a state of shock and bewildered to the point I CANNOT recognize a historic buying opportunity that may never come along again in my lifetime.

Lows below any known values seen in recent history or last seen at prior bear mkt bottoms. NEAR SINGLE DIGIT SPX PE RATIO AND DIVIDEND YIELDS APPROACHING OR EXCEEDING 6%.

TRADING SHORT TERM TRENDS for those nimble are fine, otherwise caution is word of the day.

I am attempting to time next high in yields, and hope to enter 10 year treasuries near their highs in yield, as INCOME becomes the next extreme to hit the streets or the desire for it. BONDS have been in 20 year plus bull market, it doesn't appear over yet, but a correction is under way.

We could also spread out cash between short term notes 30, 60 and 90 day etc to always have something coming due and perhaps roll it over. This comes without risk and provides SOME yield. IMHO

Possible short term rally attempt next week.......I will be looking for another triple digit decline as a signal business as usual is over. A drop below 10K psych level could be significant.

We have significantly borrorwed against future growth in Housing and Auto's (now offering prices at EMPLOYEE DISCOUNTS) to make a sustainable economy going forward very difficult IMHO. .....especially if the GOV begins to cut spending. We have potential trade war with CHina looming with subsequent protectionist policies possible. (oil takeover attempt by Chinese GOV front)

Duratek