http://www.safehaven.com/showarticle.cfm?id=2170&pv=1
DOug NOland's weekly Credit Watch is a long read, but a good one.
D
Saturday, November 06, 2004
Friday, November 05, 2004
Late night market thoughts
SUre it's late! LOL A quick note as I share my thoughts.It appears PFE is next over Celebrex, I saw a blurb ticker that Canadians have started a class action law suit
UPDATE 1-Pfizer faces Canadian suit over drug Celebrex Fri Nov 5, 2004 01:56 PM ET(Adds Pfizer providing data, Canadian government being sued, stockprice, paragraphs 6-11)OTTAWA, Nov 5 (Reuters) - A Canadian class-action lawsuit has beenlaunched against Pfizer Inc. (PFE.N: Quote, Profile, Research)alleging that its arthritis drug Celebrex caused cardiovascular side effects, the law firm launching the suit said on Friday.
FNM, AIG, MRK, SGU and many more have bitten the dust HARD....justice comes SWIFT and HARSH when dissapointments surface.I have not read FRI EWT update, I will share anything worthwhile whenI can.Don't be afraid to share any BULLISH thoughts here, we are better offif there is broad views shared...but don;t force yourself! LOL Don't ask me to put on my bull hat if no one else wants it....I am sure I can be good at it.
CPC has fallen like a meteor during this rise, so I don;t think there can be an argument for DISBELIEF from any Bears still alive andmoving around.That and the 13 VIX reading....and the plummeting TRIN......and the TRIN might be close to some kind of BEWARE signal?ALL amazing stuff, very emotional....no selling yet into face of VERYoverbought readings....almost across the board....I WANT good for goodness sake....I want a SOUND economy that I KNOW is sound not one I only wish it was....and in business I know how tosurvive....but of course I prefer wish desire good times...happytimes....sound economic times.
DID this economy CURE itself?DID this economy rid itself of the mal adjustments from prior periodor did we HEAP more upon it?AREN'T WEE between a rock and a hard place NOT a sweet spot ofinterest rates and the dollar and the NEED for the FED to keepraising short term rates?I saw blurb 48 month car loans now above 6%....have rates come down on credit cards?
DO we have savings to fall back on? If savings is near record low orbasically ZERO %.....and DEBT is alltime highs as % of everythingdisposable income GDP etc......ARE WE HEALED, and READY for takeoffto somewhere blue? without care ?Where are we in CYCLE of credit expansion? How much further can wetake it?SHOULD DOLLAR weaken in the face of near zero dollar bulls.....whatwill happen to interest rates then? THEY will skyrocket.WHEN manipulating rates SO lOW for SO LONG the FED has throwneverything out of whack!.....and like a COILED spring, and with nearrecord bond bulls.....and with ILLUSION of a strong job creatingeconomy.....rates have LOTS of room to move higher, IMHO
We have come to this place.....where the heart wants to behappy......believe a new beginning is here, a new expansion.But I am sorry try as I might, against this sea of bullish emotionthis rip tide....the FUNDAMENTALS are not here, and they never were.Where is the edge we are getting to be creating these so-called jobs?or are they again a fiction story....of adjustments...guesses?
I see SBC is laying off 10,000 workers by end of 2005.
IS depending on GOV spending a judicous use of funds....isn't thebang for the buck rather pitiful when government spends our money?Isn;t it Conservative politics to CUT spending? controlgovernment?..but under BUSH ADM it has grown like a hungry beast?....and there are NO spending cuts.
The reality is PRESSURE to interest rates should be coming from theburdon of debt in the private sector and the GOV deficits?IF necessary, what is it that stimulates the economy from here, doesanyone believe it's on auto pilot now?Take away 70,000 FLA workers (temp help to rebuild from disasters)and the 98,000 PART TIMERS....and the number today of sustainable FULL TIME workers in the BIG number comes down to size.....asmanufacturing STILL lost some jobs!!! does this all sound right toyou?....did you buy what THEY were selling you?
WHAT happened in OCT that didn;t happen in the last 36 months!!????THEY are selling this hard....but it will all get sorted out.BUSINESSES cant afford NEW WORKERS...I KNOW! I can't afford to hireanyone!MY expenses have skyrocketed...I see lots of dry cleaners and Chinese take outs opening up.....I see a NEW HUMMER dealership going up, those big taxdeductable....sensable cars.Americans don;t buy sensable cars....
Chinese raise interest rates. Russians sign KYOTO treaty....Russiansdon;t have free press anymore....under Putin, they STILL supplyNUclear know how to Iran.....Putin is our Friend!..been down to theranch...helped chop some wood.....
Only safe place for returns is the stock market right?The values are there? Doesn't the argument for higher PE ratios goMUTE because NOW we are in environment of RISING rates......isn;tthat right? The "FED" model is pure BS.....Does themarket like rising rates? does it like inflation? (see gold price) does it like deflation?
I hear a lot about (we always do)..."the money on the SIDELINES"....going to come into market....tired of just sitting around...SAFE>I do not know if bullish momentum is going to fizzle....I really don;t know.....why don't I just stop worrying.....and buy like everyone else.....do I need more reason to buy then justknowing..."stocks are going up" with or without you.
Was it sane in 1998? or early 1999...(see google dropping likestone).....so this can last as long as it wants to....as it can find willing buyers to pay more than yesterday....I don;t know.I read one poster saying...."many here (there)like to go on andon....keep it simple, it;s real simple".....I am who I am and I write like I write....if he was talking to me then....from the looks ofthis post.....
Duratek....now I can sleep (but will I be counting sheep, bulls or bears??)
UPDATE 1-Pfizer faces Canadian suit over drug Celebrex Fri Nov 5, 2004 01:56 PM ET(Adds Pfizer providing data, Canadian government being sued, stockprice, paragraphs 6-11)OTTAWA, Nov 5 (Reuters) - A Canadian class-action lawsuit has beenlaunched against Pfizer Inc. (PFE.N: Quote, Profile, Research)alleging that its arthritis drug Celebrex caused cardiovascular side effects, the law firm launching the suit said on Friday.
FNM, AIG, MRK, SGU and many more have bitten the dust HARD....justice comes SWIFT and HARSH when dissapointments surface.I have not read FRI EWT update, I will share anything worthwhile whenI can.Don't be afraid to share any BULLISH thoughts here, we are better offif there is broad views shared...but don;t force yourself! LOL Don't ask me to put on my bull hat if no one else wants it....I am sure I can be good at it.
CPC has fallen like a meteor during this rise, so I don;t think there can be an argument for DISBELIEF from any Bears still alive andmoving around.That and the 13 VIX reading....and the plummeting TRIN......and the TRIN might be close to some kind of BEWARE signal?ALL amazing stuff, very emotional....no selling yet into face of VERYoverbought readings....almost across the board....I WANT good for goodness sake....I want a SOUND economy that I KNOW is sound not one I only wish it was....and in business I know how tosurvive....but of course I prefer wish desire good times...happytimes....sound economic times.
DID this economy CURE itself?DID this economy rid itself of the mal adjustments from prior periodor did we HEAP more upon it?AREN'T WEE between a rock and a hard place NOT a sweet spot ofinterest rates and the dollar and the NEED for the FED to keepraising short term rates?I saw blurb 48 month car loans now above 6%....have rates come down on credit cards?
DO we have savings to fall back on? If savings is near record low orbasically ZERO %.....and DEBT is alltime highs as % of everythingdisposable income GDP etc......ARE WE HEALED, and READY for takeoffto somewhere blue? without care ?Where are we in CYCLE of credit expansion? How much further can wetake it?SHOULD DOLLAR weaken in the face of near zero dollar bulls.....whatwill happen to interest rates then? THEY will skyrocket.WHEN manipulating rates SO lOW for SO LONG the FED has throwneverything out of whack!.....and like a COILED spring, and with nearrecord bond bulls.....and with ILLUSION of a strong job creatingeconomy.....rates have LOTS of room to move higher, IMHO
We have come to this place.....where the heart wants to behappy......believe a new beginning is here, a new expansion.But I am sorry try as I might, against this sea of bullish emotionthis rip tide....the FUNDAMENTALS are not here, and they never were.Where is the edge we are getting to be creating these so-called jobs?or are they again a fiction story....of adjustments...guesses?
I see SBC is laying off 10,000 workers by end of 2005.
IS depending on GOV spending a judicous use of funds....isn't thebang for the buck rather pitiful when government spends our money?Isn;t it Conservative politics to CUT spending? controlgovernment?..but under BUSH ADM it has grown like a hungry beast?....and there are NO spending cuts.
The reality is PRESSURE to interest rates should be coming from theburdon of debt in the private sector and the GOV deficits?IF necessary, what is it that stimulates the economy from here, doesanyone believe it's on auto pilot now?Take away 70,000 FLA workers (temp help to rebuild from disasters)and the 98,000 PART TIMERS....and the number today of sustainable FULL TIME workers in the BIG number comes down to size.....asmanufacturing STILL lost some jobs!!! does this all sound right toyou?....did you buy what THEY were selling you?
WHAT happened in OCT that didn;t happen in the last 36 months!!????THEY are selling this hard....but it will all get sorted out.BUSINESSES cant afford NEW WORKERS...I KNOW! I can't afford to hireanyone!MY expenses have skyrocketed...I see lots of dry cleaners and Chinese take outs opening up.....I see a NEW HUMMER dealership going up, those big taxdeductable....sensable cars.Americans don;t buy sensable cars....
Chinese raise interest rates. Russians sign KYOTO treaty....Russiansdon;t have free press anymore....under Putin, they STILL supplyNUclear know how to Iran.....Putin is our Friend!..been down to theranch...helped chop some wood.....
Only safe place for returns is the stock market right?The values are there? Doesn't the argument for higher PE ratios goMUTE because NOW we are in environment of RISING rates......isn;tthat right? The "FED" model is pure BS.....Does themarket like rising rates? does it like inflation? (see gold price) does it like deflation?
I hear a lot about (we always do)..."the money on the SIDELINES"....going to come into market....tired of just sitting around...SAFE>I do not know if bullish momentum is going to fizzle....I really don;t know.....why don't I just stop worrying.....and buy like everyone else.....do I need more reason to buy then justknowing..."stocks are going up" with or without you.
Was it sane in 1998? or early 1999...(see google dropping likestone).....so this can last as long as it wants to....as it can find willing buyers to pay more than yesterday....I don;t know.I read one poster saying...."many here (there)like to go on andon....keep it simple, it;s real simple".....I am who I am and I write like I write....if he was talking to me then....from the looks ofthis post.....
Duratek....now I can sleep (but will I be counting sheep, bulls or bears??)
Thursday, November 04, 2004
Consumer DEBT an alarming problem
http://www.washingtonpost.com/ac2/wp-dyn/A10011-2004Jan12?language=printer
Surely the hole has been DUG deeper, this was written in JAN 2004.
Debt floats all boats, until it doesn't. My answer as to why or who is KEEPING rates unaturely LOW is here.
Duratek
Surely the hole has been DUG deeper, this was written in JAN 2004.
Debt floats all boats, until it doesn't. My answer as to why or who is KEEPING rates unaturely LOW is here.
Duratek
Musical Chairs
As I sit here posting, I am also searching for the vision I NEED to survive, to prosper in this most difficult, IMHO market.
4 more years of BUsh, 4 more years of what? Will the money supply be continually ramped up? (look for report dueout tomorrow for a clue, has been FLAT for 3 months, was up $20 Blast week, down $80 Billion prior 2 weeks.....Interest rates? Today not much change? Am I the only one finding that strange? In fact rates have fallen during this recent splurge...WHYwould Bonds be strong, in a rising market based on I assume good times ahead?
The one holdout to yeehaa times is the bond market? What does it see? or WHO is holding them down?In a rising tide market, why wouldn't other assets especially BONDS be sold and that put into equities?
JOBS REPORT tommorrow, hell I don't know what it will be, a miss or ahuge upside surprise...an upside surprise of oodles of jobs (even if seasonally and death birth adjusted reality) would surely throwmarket into a FRENZY?The market is not in any shape to accept any kind of UGLYnews.....the market as been rising on sniffing glue....no more worries, we have BUsh....the big corporations have BUsh....bigtobacco and asbestos claim companies have BUsh (MO up bigtoday).......financials have BUsh.....load the truck up....big pappyis here for 4 more years...NO worries.OIL is dropping....no more worries.....but the market never caresabout high oil, and rising oil mirrors rising stocks....especially ifthere is demand for energy to produce.But we don't produce much, but Transports are now close to 1998 highs.RSI on the daily for all indexes breaking above 70 and near termoverbougt, the Trannies weekly above 70 and VERY overbought. SO maybe it gets very very overbought, but a substantial trannie high appears near, IMHO....if so, do the other indexes head higher withoutit?NOT likely as it has led all indexes....watch the TRAN closely.LOTS of Gov.spending right? Bush got our back.....GOV spending hassupported our economy....well it's OUR money they are spending.
CAN the GOV keep IGNORING the deficit and stimulate the economy,doall the things it promised during the campaign....and not worry aboutcontrolling spending?WHat are the realities we face going into 2005? Could end to election worry BOOST consumer confidence to giveretailers huge Xmas?LOOK to JOB report tomorrow for some clue.Our economy seems strong, but it is not the good strong...where capital investment and then depreciation and savings are inplay....no it is consumption/debt and no savings and littleinvestment, you NEED savings for investment.ONE month during this recovery where 300,000 jobs were created...BYANY MEASURE we STILL are MIRED in the WEAKEST recovery from ANYrecession.(jobs,factory capacity,help wanted index, money velocityand more)And I worry about the levels of debt in all sectors of ourcountry....I HARP about the total credit market debt as % of GDP, andit really does not matter what majes it up, it is above any historichigh, yes above the one in 1930.What this symbolizes is the TOP of the credit expansion cycle....wellit has already topped any previous...so I cannot say it has toppeduntil it begins to decline....watch money supply figures....it at least tells me we are near an end in that area.
A PHASE of contraction would begin and so would our economy, theworlds economy.I fail to understand why globalization is so good when you LOSE a job paying $40K plus in manufacturing to a person in CHina making $3 aday? or is that $3 a week? NO HEALTH CARE, NO SS, NO Medicaid.....no environemntal concerns?The rise in housing prices from manipulated historic lows in intrates have fueled our economy......what JUICE should we expect leftin that lemmon?
We KNOW stock market is ponzi scheme, so it is unsafe to play when valuations no longer matter.NO, it's NOT safe to SHORT,but buying and holding equities without abear market bottom in place, though no it seems a silly notion, canonly bring pain.Sure you find a stock here and there of interest worth a shot....butputting in 60% of your cash seems foolish to me.The majority of the stimulus and incentive to buy forward ends thisyear.At some point the cheering will stop, the music will slow and thenstop, and investors will be forced to see who they brought to the
dance....who the last one left in the bar really looks like.A PANIC seems so far from any real possibility...and I hope itis....but never rule it out...just because you don;t know where or what it is or when it might occur...or why.
D
4 more years of BUsh, 4 more years of what? Will the money supply be continually ramped up? (look for report dueout tomorrow for a clue, has been FLAT for 3 months, was up $20 Blast week, down $80 Billion prior 2 weeks.....Interest rates? Today not much change? Am I the only one finding that strange? In fact rates have fallen during this recent splurge...WHYwould Bonds be strong, in a rising market based on I assume good times ahead?
The one holdout to yeehaa times is the bond market? What does it see? or WHO is holding them down?In a rising tide market, why wouldn't other assets especially BONDS be sold and that put into equities?
JOBS REPORT tommorrow, hell I don't know what it will be, a miss or ahuge upside surprise...an upside surprise of oodles of jobs (even if seasonally and death birth adjusted reality) would surely throwmarket into a FRENZY?The market is not in any shape to accept any kind of UGLYnews.....the market as been rising on sniffing glue....no more worries, we have BUsh....the big corporations have BUsh....bigtobacco and asbestos claim companies have BUsh (MO up bigtoday).......financials have BUsh.....load the truck up....big pappyis here for 4 more years...NO worries.OIL is dropping....no more worries.....but the market never caresabout high oil, and rising oil mirrors rising stocks....especially ifthere is demand for energy to produce.But we don't produce much, but Transports are now close to 1998 highs.RSI on the daily for all indexes breaking above 70 and near termoverbougt, the Trannies weekly above 70 and VERY overbought. SO maybe it gets very very overbought, but a substantial trannie high appears near, IMHO....if so, do the other indexes head higher withoutit?NOT likely as it has led all indexes....watch the TRAN closely.LOTS of Gov.spending right? Bush got our back.....GOV spending hassupported our economy....well it's OUR money they are spending.
CAN the GOV keep IGNORING the deficit and stimulate the economy,doall the things it promised during the campaign....and not worry aboutcontrolling spending?WHat are the realities we face going into 2005? Could end to election worry BOOST consumer confidence to giveretailers huge Xmas?LOOK to JOB report tomorrow for some clue.Our economy seems strong, but it is not the good strong...where capital investment and then depreciation and savings are inplay....no it is consumption/debt and no savings and littleinvestment, you NEED savings for investment.ONE month during this recovery where 300,000 jobs were created...BYANY MEASURE we STILL are MIRED in the WEAKEST recovery from ANYrecession.(jobs,factory capacity,help wanted index, money velocityand more)And I worry about the levels of debt in all sectors of ourcountry....I HARP about the total credit market debt as % of GDP, andit really does not matter what majes it up, it is above any historichigh, yes above the one in 1930.What this symbolizes is the TOP of the credit expansion cycle....wellit has already topped any previous...so I cannot say it has toppeduntil it begins to decline....watch money supply figures....it at least tells me we are near an end in that area.
A PHASE of contraction would begin and so would our economy, theworlds economy.I fail to understand why globalization is so good when you LOSE a job paying $40K plus in manufacturing to a person in CHina making $3 aday? or is that $3 a week? NO HEALTH CARE, NO SS, NO Medicaid.....no environemntal concerns?The rise in housing prices from manipulated historic lows in intrates have fueled our economy......what JUICE should we expect leftin that lemmon?
We KNOW stock market is ponzi scheme, so it is unsafe to play when valuations no longer matter.NO, it's NOT safe to SHORT,but buying and holding equities without abear market bottom in place, though no it seems a silly notion, canonly bring pain.Sure you find a stock here and there of interest worth a shot....butputting in 60% of your cash seems foolish to me.The majority of the stimulus and incentive to buy forward ends thisyear.At some point the cheering will stop, the music will slow and thenstop, and investors will be forced to see who they brought to the
dance....who the last one left in the bar really looks like.A PANIC seems so far from any real possibility...and I hope itis....but never rule it out...just because you don;t know where or what it is or when it might occur...or why.
D
Dow Chart to Ponder
http://stockcharts.com/def/servlet/SC.web?c=$INDU,uu[w,a]daclyiay[dd][pd20,2!c5!f][vc60][iut!Lb14!Lh14,3]&pref=G
Sometime in next few weeks or so, I will add STock Charts premium service so I can annotate my charts.
We are AT the top of downtrend channel. A breakout beyond here would HURT the bearish cause IMHO. EVEN if all the other things we can look at SCREAM TOP. I am monitoring closely.
RSI nearing oversold and we are also hitting upper BB< so there is good chance for a small pullback if not much more. IMHO
Put call ratio's have plummeted and VIX has fallen hard.
Duratek
Sometime in next few weeks or so, I will add STock Charts premium service so I can annotate my charts.
We are AT the top of downtrend channel. A breakout beyond here would HURT the bearish cause IMHO. EVEN if all the other things we can look at SCREAM TOP. I am monitoring closely.
RSI nearing oversold and we are also hitting upper BB< so there is good chance for a small pullback if not much more. IMHO
Put call ratio's have plummeted and VIX has fallen hard.
Duratek
SPX/VIX RATIO
http://stockcharts.com/def/servlet/SC.web?c=$SPX:$VIX,uu[w,a]wallyiay[pb50!d20,2!f][vc60][iut!Ub14!La12,26,9]&pref=G
This is ONE tool I like to use to guage sentiment. AFter declining th si ratio is right back into area of the highest readings I have seen recorded, even during 20 year Bull Market. And I choose to find that significant!
WHat I Observe during the preceding Bull market is that this ratio was showing a FAIR amount of "PESSIMISM" (the lower the number the higher the relative VIX is as compared to price of stocks).....and stocks TOPPED, MAJOR top in 2000 with a LOWER reading than we have seen here recently.
I don't see how another MAJOR advance in stocks can occur if this relationship persists.
Today the VIX droped like a stone back to a reading of around 13 !! NO FEAR, clear sailing ahead?
NO ONE expects a serious decline anywhere in our immediate to near term future, IMHO
D
This is ONE tool I like to use to guage sentiment. AFter declining th si ratio is right back into area of the highest readings I have seen recorded, even during 20 year Bull Market. And I choose to find that significant!
WHat I Observe during the preceding Bull market is that this ratio was showing a FAIR amount of "PESSIMISM" (the lower the number the higher the relative VIX is as compared to price of stocks).....and stocks TOPPED, MAJOR top in 2000 with a LOWER reading than we have seen here recently.
I don't see how another MAJOR advance in stocks can occur if this relationship persists.
Today the VIX droped like a stone back to a reading of around 13 !! NO FEAR, clear sailing ahead?
NO ONE expects a serious decline anywhere in our immediate to near term future, IMHO
D
Andre Gratian's Morning call
Thursday 11/4 - Morning Comment
Looks like more consolidation of recent gains ahead. To make communication clearer, I am going to define a couple of terms. Consolidation is basically a sideways movement. A correction is a deeper retracement of the prevailing trend. Neither is a reversal of the existing trend. However, they could lead to a reversal of the trend if they are not followed by a continuation of the trend in fairly short order.
The QQQ is not participating as much in the rally as is the SPX and Dow. This is not a concern at this point. I mentioned earlier that the Dow and the SPX were playing catch up. Now they have caught up. If the divergence persists, it would become a concern.
After some consolidation/correction we should have another stab at the overhead resistance mentioned yesterday. This is when we will be able to tell if the short term uptrend can continue or needs a deeper correction.
Andre
Looks like more consolidation of recent gains ahead. To make communication clearer, I am going to define a couple of terms. Consolidation is basically a sideways movement. A correction is a deeper retracement of the prevailing trend. Neither is a reversal of the existing trend. However, they could lead to a reversal of the trend if they are not followed by a continuation of the trend in fairly short order.
The QQQ is not participating as much in the rally as is the SPX and Dow. This is not a concern at this point. I mentioned earlier that the Dow and the SPX were playing catch up. Now they have caught up. If the divergence persists, it would become a concern.
After some consolidation/correction we should have another stab at the overhead resistance mentioned yesterday. This is when we will be able to tell if the short term uptrend can continue or needs a deeper correction.
Andre
Wednesday, November 03, 2004
A BULLISH 2005?
http://news.goldseek.com/ClifDroke/1099510651.php
AM I out of my mind you ask? NO, but I think it always WISE to read the view from both sides of the fence.
And when you look at where you stand and why, you will either change your view or be more committed than before, more solid in how you feel.
And NOBODY knows what tomorrow brings, NOBODY.
a STRONG 2005 means another year of cyclical bull in a secular? bear which NEVER bottomed.
D
AM I out of my mind you ask? NO, but I think it always WISE to read the view from both sides of the fence.
And when you look at where you stand and why, you will either change your view or be more committed than before, more solid in how you feel.
And NOBODY knows what tomorrow brings, NOBODY.
a STRONG 2005 means another year of cyclical bull in a secular? bear which NEVER bottomed.
D
UN-PLUGGED
http://www.fool.com/News/mft/2004/mft04110113.htm?source=eptyholnk303100&logvisit=y&npu=y
IF indeed fuel cell economy WILL be reality, one thing MANY agree upon, these companies will "BURN" through their cash and need additional financing, which usually leads to investor equity dilution. Something to consider.
D
IF indeed fuel cell economy WILL be reality, one thing MANY agree upon, these companies will "BURN" through their cash and need additional financing, which usually leads to investor equity dilution. Something to consider.
D
Stephen Roach "The Day After Tomorrow" READ THIS!
**(This is one of the most respected economic writers of our time, and most read, he is a fellow Contrarian. POWERFUL are the points he makes about what lies ahead for all of us, in an imbalanced world, and economy. Lie to us, push back the future is NO longer an option, we have reached the END of our tether in many ways! Roach speaks to me on MANY levels. I believe as wonderful as WALL STREET would have you beleive a BUsh victory is, in the end, his style of leadership and inability to compromise, the direction we are being led.....this is ALL coming to a head) Duratek
"The Day After Tomorrow" Stephen Roach
Unlike most of my fellow citizens, November 3 will not find me waking up at home to “morning in America.” Instead, I’ll be spending a sleepless night on yet another airplane, full of apprehension over the outcome of a bitterly contested presidential election. Hopefully, the morning after will bring a clear-cut verdict. Whatever your preference, another cloud of ambiguity is the last thing the world’s greatest democracy needs. Yet with Wednesday morning also comes the proverbial cold shower -- a wake-up call that cuts through the fiction of campaign rhetoric and focuses on the heavy lifting that now lies ahead. My concern is that whoever wins, the next four years are going to be unusually challenging from the standpoint of America’s economic stewardship. We can only hope that the victor is up to the task.
In the financial markets, we endlessly debate the prognosis for next quarter’s numbers -- GDP, earnings, inflation, and the like. Our fixation on the here and now reflects both the difficulties of longer-term forecasting as well as the short-termism of the investment community. Each quarter that we escape a problem, the greater the comfort level as to what lies ahead. Such myopic risk assessment misses the forest for the trees. In my view, the US economy is an accident waiting to happen. That’s the message to be taken from a record shortfall in national saving, a record current-account deficit, record levels of household indebtedness, a record deficiency of personal saving, and outsize government budget deficits. The emphasis is on the word “record.” Never before has the United States pushed the envelope to this degree on such a wide array of economic imbalances.
The politicians haven’t touched these issues in Campaign 2004. That’s hardly surprising. After all, the resolution of imbalances may actually imply some personal economic sacrifice -- not exactly the approach that attracts votes. Just ask Jimmy Carter or Walter Mondale. But the campaign is now over. The rhetorical flourishes hopefully will subside. And America will wake up the day after tomorrow with the most daunting economic agenda it has faced in a generation. Then, the real debate can begin.
I continue to believe that the national saving construct offers the most comprehensive framework to understand many of America’s toughest economic challenges. I focus, in particular, on the net national saving rate -- the combined saving of households, businesses, and the government sector. For, macro purposes, such saving is best viewed in “net” terms -- that is, after subtracting out that portion of gross saving that goes toward depreciation, or the replacement of worn-out or obsolete capital stock. It is a basic accounting rule of economics that saving must always equal investment. The net national saving rate provides a clear sense of how much society is setting aside out of current income generation in order to fund the net growth in new productive capacity -- the sustenance of future economic growth.
The verdict from America’s net national saving rate is nothing short of frightening: It fell to a record low of 0.4% in early 2003 and has since rebounded to just 1.9% as of mid-2004. While official 3Q04 estimates are not yet available, a sharp plunge in the personal saving rate to 0.4% (from 1.2% in the second quarter), in conjunction with diminished corporate profits growth and outsize government budget deficits, points to a further decline in overall national saving. These trends leave America’s net national saving rate in the 1-2% range over the 2003-04 period -- all-time lows by any standard. Such anemic saving speaks of a nation that is living well beyond its means, as those means are defined by America’s domestic income generating capacity. A record-low saving rate also ties together many of America’s other economic problems:
* Current-account gap. Lacking in domestic saving, America imports foreign saving to fund economic growth. The US must run massive current account deficits to attract that capital. With the external deficit having risen to 5.7% of GDP, the US is now absorbing over 80% of the world’s surplus saving -- requiring $2.6 billion of capital inflows each business day to fund its domestic saving shortfall.
* Budget deficit. Budget deficits matter much more when the private sector doesn’t save. Lacking in private saving -- especially personal saving -- the unprecedented shift in the Federal budget deficit has accounted for the bulk of the recent shortfall in national saving. Unlike the late 1990s, when “good” current account deficits were needed to fund a US investment boom, today’s “bad” external deficits arise out of a need to fund both government and personal profligacy.
* The asset economy. Private saving rates are down, in large part, because households and businesses view asset appreciation as a proxy for long term saving. Yet the fragility of asset markets draws this key presumption into question. That was certainly the lesson of the equity bubble of the late 1990s and could well be the case if the current property bubble bursts.
* Household debt. Asset appreciation has been diverted away from saving and increasingly used as a means to fund current consumption. Yet such purchasing power can only be extracted from property by debt accumulation. This has taken household indebtedness to record highs; over the past four years, the expansion of household liabilities has been fully 65% larger than the growth in America’s overall GDP.
* Productivity risks. With outsize government budget deficits and no personal saving, there is little net saving left over to finance productivity-enhancing business capital spending. This has already taken a worrisome toll. Stripping out depreciation of obsolete capacity, net investment in the business sector in 2003 was 60% below levels prevailing in 2000 -- a serious warning flag on the productivity front.
* Trade frictions and protectionism. As stressed above, rock-bottom national saving spells massive current-account deficits. Not surprisingly, a record trade deficit accounted for fully 92% of America’s current account deficit. Consequently, courtesy of America’s fiscal profligacy, trade deficits, for all practical purposes, are made in Washington. And so, too, is the heightened import penetration that puts pressure on domestic job creation and spawns protectionist risks.
* Demographic perils. Savings imperatives are all the more urgent as America’s aging generation of baby-boomers now nears retirement. In 2000, 12.4% of the total US population was 65 years and older. Over the next 25 years, this ratio is projected to explode by nearly 50% to 18.2%. The implications of a record shortfall of domestic saving are all the more vexing in the context of this demographic time bomb.
The task ahead is not to bemoan the past but to address what needs to be done to face a very challenging and risky future. The national saving framework provides some obvious and important answers. First, fix the budget deficit. This has been the major swing factor in the stunning erosion of US domestic saving over the past four years. Political posturing on matters of tax reform or entitlements expansion must now be put aside in the post-election period; tax increases and expenditure cuts -- however unpopular -- are the only way out. Politicians, of course, don’t want to tell you that. Yet a saving short- US economy is utterly incapable of growing its way of a deep budget hole. The heavy lifting of deficit reduction is an urgent imperative -- especially in the early months of any political cycle.
Second, let the dollar go. For an unbalanced world, rebalancing can only occur through a change in relative prices. The dollar is the world’s most important relative price, and, in my view, it has nowhere to go but down. Dollar depreciation is also part and parcel of a classic current account adjustment. A weaker dollar will inevitably lead to higher US real interest rates -- providing long overdue restraint to interest-rate sensitive and asset-driven spending of American consumers and businesses. That will then lead to a rebuilding of national saving, thereby lessening the need to run large current-account and trade deficits that have, in turn, led to heightened protectionist risks. A weaker dollar will also put long overdue pressure on the rest of the world to stimulate its own domestic demand -- both by embracing structural reforms and by backing away from the increasingly reckless and destabilizing recycling of foreign exchange reserves into dollar-denominated assets.
There are no quick fixes for America. Yet political campaigns are designed to give voters just such an impression. The day after tomorrow, this charade should come to an end. And just in time, I might add. In my view, 2005 could well be a year when many of America’s imbalances reach their tipping point. A failure to act would be the greatest tragedy of all. Looking at America’s problems through the lens of subpar saving suggests that deficit reduction and a weaker dollar should be at the top of the list of potential remedies -- remedies that, by the way, will have critical implications for world financial markets. Certainly, more can be done. But I can’t think of a better place to start.
On a personal note, I have to add that I have found this election campaign deeply disturbing. The tone of the debate is what troubles me the most. It has fanned a polarization in America and around the world that is right out of some of the darkest pages of history. It didn’t have to be that way. Out of the devastating tragedy of September 11 came a remarkable spirit of bipartisan solidarity. America was united and the world came together -- not just in grief and sorrow but also in hope for collective renewal. I remember being stuck in Europe in the days immediately after the attack on America, unable to return home at a time when I wanted nothing more. I was warmly embraced by our long steadfast allies, with a compassion and sincerity that deeply touched me. Their hearts were open and caring. Their home was my home.
That spirit has been squandered. Americans are at odds with one another, with a deep and worrisome intensity. And the world sees us in a stark, adversarial light. The cynics say this is just politics -- that such divisiveness is the norm, especially during times of war. I beg to differ. Today, polarization is playing on the character of America -- in the end, any nation’s most precious asset. Sadly, that character is now at risk, both at home and abroad. As dawn breaks the day after tomorrow, that will be the first thing on my mind.
"The Day After Tomorrow" Stephen Roach
Unlike most of my fellow citizens, November 3 will not find me waking up at home to “morning in America.” Instead, I’ll be spending a sleepless night on yet another airplane, full of apprehension over the outcome of a bitterly contested presidential election. Hopefully, the morning after will bring a clear-cut verdict. Whatever your preference, another cloud of ambiguity is the last thing the world’s greatest democracy needs. Yet with Wednesday morning also comes the proverbial cold shower -- a wake-up call that cuts through the fiction of campaign rhetoric and focuses on the heavy lifting that now lies ahead. My concern is that whoever wins, the next four years are going to be unusually challenging from the standpoint of America’s economic stewardship. We can only hope that the victor is up to the task.
In the financial markets, we endlessly debate the prognosis for next quarter’s numbers -- GDP, earnings, inflation, and the like. Our fixation on the here and now reflects both the difficulties of longer-term forecasting as well as the short-termism of the investment community. Each quarter that we escape a problem, the greater the comfort level as to what lies ahead. Such myopic risk assessment misses the forest for the trees. In my view, the US economy is an accident waiting to happen. That’s the message to be taken from a record shortfall in national saving, a record current-account deficit, record levels of household indebtedness, a record deficiency of personal saving, and outsize government budget deficits. The emphasis is on the word “record.” Never before has the United States pushed the envelope to this degree on such a wide array of economic imbalances.
The politicians haven’t touched these issues in Campaign 2004. That’s hardly surprising. After all, the resolution of imbalances may actually imply some personal economic sacrifice -- not exactly the approach that attracts votes. Just ask Jimmy Carter or Walter Mondale. But the campaign is now over. The rhetorical flourishes hopefully will subside. And America will wake up the day after tomorrow with the most daunting economic agenda it has faced in a generation. Then, the real debate can begin.
I continue to believe that the national saving construct offers the most comprehensive framework to understand many of America’s toughest economic challenges. I focus, in particular, on the net national saving rate -- the combined saving of households, businesses, and the government sector. For, macro purposes, such saving is best viewed in “net” terms -- that is, after subtracting out that portion of gross saving that goes toward depreciation, or the replacement of worn-out or obsolete capital stock. It is a basic accounting rule of economics that saving must always equal investment. The net national saving rate provides a clear sense of how much society is setting aside out of current income generation in order to fund the net growth in new productive capacity -- the sustenance of future economic growth.
The verdict from America’s net national saving rate is nothing short of frightening: It fell to a record low of 0.4% in early 2003 and has since rebounded to just 1.9% as of mid-2004. While official 3Q04 estimates are not yet available, a sharp plunge in the personal saving rate to 0.4% (from 1.2% in the second quarter), in conjunction with diminished corporate profits growth and outsize government budget deficits, points to a further decline in overall national saving. These trends leave America’s net national saving rate in the 1-2% range over the 2003-04 period -- all-time lows by any standard. Such anemic saving speaks of a nation that is living well beyond its means, as those means are defined by America’s domestic income generating capacity. A record-low saving rate also ties together many of America’s other economic problems:
* Current-account gap. Lacking in domestic saving, America imports foreign saving to fund economic growth. The US must run massive current account deficits to attract that capital. With the external deficit having risen to 5.7% of GDP, the US is now absorbing over 80% of the world’s surplus saving -- requiring $2.6 billion of capital inflows each business day to fund its domestic saving shortfall.
* Budget deficit. Budget deficits matter much more when the private sector doesn’t save. Lacking in private saving -- especially personal saving -- the unprecedented shift in the Federal budget deficit has accounted for the bulk of the recent shortfall in national saving. Unlike the late 1990s, when “good” current account deficits were needed to fund a US investment boom, today’s “bad” external deficits arise out of a need to fund both government and personal profligacy.
* The asset economy. Private saving rates are down, in large part, because households and businesses view asset appreciation as a proxy for long term saving. Yet the fragility of asset markets draws this key presumption into question. That was certainly the lesson of the equity bubble of the late 1990s and could well be the case if the current property bubble bursts.
* Household debt. Asset appreciation has been diverted away from saving and increasingly used as a means to fund current consumption. Yet such purchasing power can only be extracted from property by debt accumulation. This has taken household indebtedness to record highs; over the past four years, the expansion of household liabilities has been fully 65% larger than the growth in America’s overall GDP.
* Productivity risks. With outsize government budget deficits and no personal saving, there is little net saving left over to finance productivity-enhancing business capital spending. This has already taken a worrisome toll. Stripping out depreciation of obsolete capacity, net investment in the business sector in 2003 was 60% below levels prevailing in 2000 -- a serious warning flag on the productivity front.
* Trade frictions and protectionism. As stressed above, rock-bottom national saving spells massive current-account deficits. Not surprisingly, a record trade deficit accounted for fully 92% of America’s current account deficit. Consequently, courtesy of America’s fiscal profligacy, trade deficits, for all practical purposes, are made in Washington. And so, too, is the heightened import penetration that puts pressure on domestic job creation and spawns protectionist risks.
* Demographic perils. Savings imperatives are all the more urgent as America’s aging generation of baby-boomers now nears retirement. In 2000, 12.4% of the total US population was 65 years and older. Over the next 25 years, this ratio is projected to explode by nearly 50% to 18.2%. The implications of a record shortfall of domestic saving are all the more vexing in the context of this demographic time bomb.
The task ahead is not to bemoan the past but to address what needs to be done to face a very challenging and risky future. The national saving framework provides some obvious and important answers. First, fix the budget deficit. This has been the major swing factor in the stunning erosion of US domestic saving over the past four years. Political posturing on matters of tax reform or entitlements expansion must now be put aside in the post-election period; tax increases and expenditure cuts -- however unpopular -- are the only way out. Politicians, of course, don’t want to tell you that. Yet a saving short- US economy is utterly incapable of growing its way of a deep budget hole. The heavy lifting of deficit reduction is an urgent imperative -- especially in the early months of any political cycle.
Second, let the dollar go. For an unbalanced world, rebalancing can only occur through a change in relative prices. The dollar is the world’s most important relative price, and, in my view, it has nowhere to go but down. Dollar depreciation is also part and parcel of a classic current account adjustment. A weaker dollar will inevitably lead to higher US real interest rates -- providing long overdue restraint to interest-rate sensitive and asset-driven spending of American consumers and businesses. That will then lead to a rebuilding of national saving, thereby lessening the need to run large current-account and trade deficits that have, in turn, led to heightened protectionist risks. A weaker dollar will also put long overdue pressure on the rest of the world to stimulate its own domestic demand -- both by embracing structural reforms and by backing away from the increasingly reckless and destabilizing recycling of foreign exchange reserves into dollar-denominated assets.
There are no quick fixes for America. Yet political campaigns are designed to give voters just such an impression. The day after tomorrow, this charade should come to an end. And just in time, I might add. In my view, 2005 could well be a year when many of America’s imbalances reach their tipping point. A failure to act would be the greatest tragedy of all. Looking at America’s problems through the lens of subpar saving suggests that deficit reduction and a weaker dollar should be at the top of the list of potential remedies -- remedies that, by the way, will have critical implications for world financial markets. Certainly, more can be done. But I can’t think of a better place to start.
On a personal note, I have to add that I have found this election campaign deeply disturbing. The tone of the debate is what troubles me the most. It has fanned a polarization in America and around the world that is right out of some of the darkest pages of history. It didn’t have to be that way. Out of the devastating tragedy of September 11 came a remarkable spirit of bipartisan solidarity. America was united and the world came together -- not just in grief and sorrow but also in hope for collective renewal. I remember being stuck in Europe in the days immediately after the attack on America, unable to return home at a time when I wanted nothing more. I was warmly embraced by our long steadfast allies, with a compassion and sincerity that deeply touched me. Their hearts were open and caring. Their home was my home.
That spirit has been squandered. Americans are at odds with one another, with a deep and worrisome intensity. And the world sees us in a stark, adversarial light. The cynics say this is just politics -- that such divisiveness is the norm, especially during times of war. I beg to differ. Today, polarization is playing on the character of America -- in the end, any nation’s most precious asset. Sadly, that character is now at risk, both at home and abroad. As dawn breaks the day after tomorrow, that will be the first thing on my mind.
Scaeffer on SHORT Interest PLUNGE
http://www.schaeffersresearch.com/commentary/bernie_observations.aspx?ID=11622
Is this MORE fuel to consider even with futures SPIKE 1142 will hold?
Is this MORE fuel to consider even with futures SPIKE 1142 will hold?
Tuesday, November 02, 2004
My AM Market call from another board
From: "duratek" <duratek@y...> Date: Tue Nov 2, 2004 11:05 am Subject: LOOK for trend reversal by tomorrow
http://tinyurl.com/3o2hs Transports are now diverging from theothers rise, down about 60 pts. and the TRAN is OVERBOUGHT on theWEEKLY.The OBVIOUS is the rally, the underbelly is the 1142 SPX reistance....and the wrong bet that a clear election winner makes for clear sailing in this troubled unbalanced debt laden non job growing, wage stagnant, rising costs economy.
D
http://tinyurl.com/3o2hs Transports are now diverging from theothers rise, down about 60 pts. and the TRAN is OVERBOUGHT on theWEEKLY.The OBVIOUS is the rally, the underbelly is the 1142 SPX reistance....and the wrong bet that a clear election winner makes for clear sailing in this troubled unbalanced debt laden non job growing, wage stagnant, rising costs economy.
D
10 YEAR VIEW of PREVIOUS CHART
http://tinyurl.com/4f9qk
We hit levels in this chart NOT even seen in over 10 years! Is this where we should LOOK to start a serious BULL MARKET?
Observe where it was in the 90's.
D
We hit levels in this chart NOT even seen in over 10 years! Is this where we should LOOK to start a serious BULL MARKET?
Observe where it was in the 90's.
D
A RATIO Worth Watching
http://tinyurl.com/6peaj
ABove ratio correctly called the MArch 2003 bottom, and you can see the 50 SMA crossover up through the 200 SMA (simple moving avg).
And the current reading has come from an area where PAST TOPS have been, it has been as high as 90 and is now consolidating here.
IMHO, we can call a near term top in this market with "some" degree of confidence, when we get a DECISIVE break of the 50 SMA BELOW the 200 SMA.
WHat this will reflect would be a falling market and a rise in volatility, perhaps reflecting a more defensive posture especially by the options writers.
For now that is uncertain, but at least we are honing in on a few things that will help us determine market direction and risk. Stay tuned.
AT this point, MOST are positioned for market rise this time of year. If one sided enough, the COntrarian position like has been taken by Commercial traders on gold and the dollar could be the correct one.
Duratek
ABove ratio correctly called the MArch 2003 bottom, and you can see the 50 SMA crossover up through the 200 SMA (simple moving avg).
And the current reading has come from an area where PAST TOPS have been, it has been as high as 90 and is now consolidating here.
IMHO, we can call a near term top in this market with "some" degree of confidence, when we get a DECISIVE break of the 50 SMA BELOW the 200 SMA.
WHat this will reflect would be a falling market and a rise in volatility, perhaps reflecting a more defensive posture especially by the options writers.
For now that is uncertain, but at least we are honing in on a few things that will help us determine market direction and risk. Stay tuned.
AT this point, MOST are positioned for market rise this time of year. If one sided enough, the COntrarian position like has been taken by Commercial traders on gold and the dollar could be the correct one.
Duratek
Monday, November 01, 2004
FUEL CELL ECONOMY
**I think one of the greatest potential investment areas will be Fuel Cells. ANyone interested in my list please email me and I will happily send it to you. Of course this is JUST my opinion, and I am not offering advice, but if interested in seeing the companies involved in this area I have found, let me know, Duratek
Fuel cell sales up 41% in 2002-03 span Investments in R&D climb 13%, eclipsing industry sales
By Stephanie I. Cohen, CBS MarketWatchLast Update: 11:36 AM ET Nov. 1, 2004
WASHINGTON (CBS.MW) -- Companies involved in the development and manufacture of fuel cells reported a jump in sales of 41 percent, to $338 million, in 2003, according to an industry analysis by PricewaterhouseCoopers.
The increase compared to $240 million in sales in 2002, the analysis said.
Automotive manufacturers believe that vehicles powered by fuel cells -- which are more efficient than those that run on gasoline -- could become a commercial reality over the next two decades.
Fuel cells work by using hydrogen and oxygen to create a chemical reaction that produces electricity, rather than burning fossil fuels.
Investments in research and development for the 170 companies participating in the study increased by 13 percent to $859 million in 2003 from $764 million in 2002.
The boon in sales hasn't, however, lead to a surge in hiring, the report said. Industry employees remained relatively constant at 7,748 in 2003 compared with 7,750 in 2002.
Participants in the survey included both publicly held and privately owned companies located in North America, Europe and Asia. Fuel cell businesses are prominent in the United States, Canada, Japan and Germany, the report noted.
Two-thirds of the companies surveyed said they have been involved in the fuel cell industry for at least 10 years.
U.S.-based companies in the survey reported an increase in sales of 36 percent to $119 million between 2002 and 2003, along with a 62 percent jump in R&D spending to $460 million.
U.S. fuel cell companies include ChevronTexaco Technology Ventures (CVX: news, chart, profile), ConocoPhillips (COP: news, chart, profile), DaimlerChrysler (DCX: news, chart, profile), General Motors Corp. (GM: news, chart, profile), DuPont Fuel Cells (DD: news, chart, profile), and Dow Corning, the joint venture between Dow Chemical (DOW: news, chart, profile) and Corning (GLW: news, chart, profile).
A recent report by ABI Research indicates that the global fuel cell market, which will likely be "nominal" in 2004, could reach $35 billion by 2013.
Stephanie I. Cohen is a reporter for CBS MarketWatch in Washington.
Fuel cell sales up 41% in 2002-03 span Investments in R&D climb 13%, eclipsing industry sales
By Stephanie I. Cohen, CBS MarketWatchLast Update: 11:36 AM ET Nov. 1, 2004
WASHINGTON (CBS.MW) -- Companies involved in the development and manufacture of fuel cells reported a jump in sales of 41 percent, to $338 million, in 2003, according to an industry analysis by PricewaterhouseCoopers.
The increase compared to $240 million in sales in 2002, the analysis said.
Automotive manufacturers believe that vehicles powered by fuel cells -- which are more efficient than those that run on gasoline -- could become a commercial reality over the next two decades.
Fuel cells work by using hydrogen and oxygen to create a chemical reaction that produces electricity, rather than burning fossil fuels.
Investments in research and development for the 170 companies participating in the study increased by 13 percent to $859 million in 2003 from $764 million in 2002.
The boon in sales hasn't, however, lead to a surge in hiring, the report said. Industry employees remained relatively constant at 7,748 in 2003 compared with 7,750 in 2002.
Participants in the survey included both publicly held and privately owned companies located in North America, Europe and Asia. Fuel cell businesses are prominent in the United States, Canada, Japan and Germany, the report noted.
Two-thirds of the companies surveyed said they have been involved in the fuel cell industry for at least 10 years.
U.S.-based companies in the survey reported an increase in sales of 36 percent to $119 million between 2002 and 2003, along with a 62 percent jump in R&D spending to $460 million.
U.S. fuel cell companies include ChevronTexaco Technology Ventures (CVX: news, chart, profile), ConocoPhillips (COP: news, chart, profile), DaimlerChrysler (DCX: news, chart, profile), General Motors Corp. (GM: news, chart, profile), DuPont Fuel Cells (DD: news, chart, profile), and Dow Corning, the joint venture between Dow Chemical (DOW: news, chart, profile) and Corning (GLW: news, chart, profile).
A recent report by ABI Research indicates that the global fuel cell market, which will likely be "nominal" in 2004, could reach $35 billion by 2013.
Stephanie I. Cohen is a reporter for CBS MarketWatch in Washington.
"The Moment of Truth for Productivity"
http://www.contraryinvestor.com/mo.htm November Contrary Investor. ALWAYS a good read, and great charts.
Duratek
Duratek
Nothing PERSONAL in this AM'S Data
http://www.briefing.com/Silver/Calendars/EconomicReleases/income.htm
Note the direction of spending and income,where spending/consumption tends to follow income,Y/Y showing declining trend. Data revised DOWNWARD previous report.
Also note the historical LOWS in SAVINGS RATE, this I find VERY disturbing but telling. Can we then conclude the economy is being supported by nothingmore than credit/debt?
POWERFUL is an economy supported by strong savings and investment based of such.
D
Note the direction of spending and income,where spending/consumption tends to follow income,Y/Y showing declining trend. Data revised DOWNWARD previous report.
Also note the historical LOWS in SAVINGS RATE, this I find VERY disturbing but telling. Can we then conclude the economy is being supported by nothingmore than credit/debt?
POWERFUL is an economy supported by strong savings and investment based of such.
D
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