Investing and Stock Market
Special Reports

      
 

Bubbles Again? - December 27 - 2004
Internet stocks are once again in vogue and the leading Nasdaq stocks are selling at huge P/E ratios. We are ...

Gold and Dollar - November 29 - 2004
The US/Euro rate moves and in seconds, you see the adjustment follow through on the gold price. This should be the set pattern in the gold market for the next few years, not because gold is tied to the Euro, no, but because gold is a currency, not a commodity, per se! Gold moved out of the above role at the end of last year and has been taking back the currency mantle, it once held, firmly, throughout this year.

THURSDAY, November 4 - 2004

The Elections in the U.S.A.

Regardless of claims to the contrary, securities markets are non-partisan!

What impact is the outcome of the presidential election likely to have on your investment portfolio?

In the short run, you'll probably be hard pressed to tell. There's no evidence to back up the claims that markets are stronger when one party controls the White House and weaker when the other does - no matter which side is making that claim.

Generally speaking, the markets prefer certainty to uncertainty. So once the ballots are counted and the decision is final, election speculation will no longer be a factor in whether to buy or sell. Investors will be reacting to other forces, and whether markets go up or down will depend on the same influences that affect them in non-election years.

In the long run, though, the agenda that the president brings to office can have a major impact on a broad range of issues that can affect investors directly and indirectly - regulation, budget priorities, international trade, energy, and tax policies, to name a few.

Success in translating many of those goals to action, of course, is linked directly to whether or not the House and Senate are controlled by the president's party. When one party is in control, sweeping changes can typically be made more quickly than if the balance of power is divided between the executive and legislative branches.

Increasing Debt - September 20 - 2004

MONDAY, August 9 - 2004

The Fed and the Dollar

Traders will start this week with eroding confidence in the U.S. currency and even less faith in Fed Chairman Greenspan after last Friday's shockingly dismal July U.S. employment payrolls, which came in 8 times less than expectations at a 32,000 jobs, the lowest of the year.

Analysts, traders and fund managers have looked for signs of "the expansion, which has become more broad-based and has produced notable gains in employment" as described by Greenspan's testimony 3 weeks ago, but have found little in the way recently. Despite the high certainty priced by Fed funds futures signaling a 25-bp rate hike on Tuesday, there is little certainty over the impact of the rate hike on the U.S. Dollar. Yet, such a decision will do very little in altering the current Dollar weakness, which is set to extend into Tuesday's decision.

Unlike the June rate hike, which was believed to be the first of several gradual, evenly interspaced rate hikes, Tuesday's rate hike could well be the last of the quarter if not the year, considering the receding signs of the U.S. recovery.

The FOMC statement will be key to suggest the Fed would require fresh evidence of further expansion for additional tightening, rather than tightening preemptively to avert the mounting upside price risks.

THURSDAY, August 5 - 2004

Terrorists?

Terrorism still remains a significant risk for the stock markets and has crept further and further out of the consciousness of investors as time has passed since September 11, 2001. Yet, no one would dispute that the terrorists remain determined to strike again.

Though the law enforcement community has done an excellent job preventing further attacks so far, we do have to always be reminded that terrorists need only succeed once.

It appears that the terrorists are using tactics for two purposes: A. Alienating western allies and B. Targeting western oil interests.

Given that i.e. Spain has pulled its troops out of Iraq and that oil prices are over $40 per barrel, it appears that these tactics are succeeding in impacting both western alliances and their economies.

TUESDAY, MAY 25 - 2004

Fear Factors (?)

Geo-political risks are very high and economic and earnings growth numbers are questionable as to their sustainability and reliability.

Risks of an exogenous shock in the financial system and through terrorist activity are high due to extreme financial leverage and incompetent foreign policy.

The majority of sectors and their stocks are over-valued and investor sentiment is complacent, despite the risky environment.

Crude oil over $41 per barrel, but still in an uptrend and the US Dollar down again.

Gold had an upward bounce to just over $385 per ounce and the Bond market experienced an upward bounce with declining interest rates.

The "real estate bubble" will get its chance for a bursting, but cheap mortagages are likely to keep this sector going for a few more months.

All of the above favor higher odds of declining prices. Moreover, in order to "play" with your fears... read below:

FRIDAY, MAY 21 - 2004

Precious Metals and Oil!

A five-week correction in silver has been one of the most historic in the last twenty years. The market has taken back over 70% of the upside move, which began all the way back in June of 2003. Silver closed the week at $5.73, rebounding from the recent low of $5.50, which represents the first time in the last six weeks that the market closed above the previous week's close. This could be an important signal that the correction is over.

The recent geopolitical developments in India have encouraged citizens from that country to continue their recent buying spree in both silver and gold. If the current ruling party is pushed out, as recent polls predict, demand may continue to increase. Indian demand has a tendency to dry up when silver trades above $6 and gold above $400, but now that prices have corrected below these levels, demand is strong.

Gold traders typically follow the price of crude oil, with the 25-year mean gold/oil ratio sitting at 14.5 to 1. With oil now trading at over $41 per barrel and the current ratio at 9-to-1, gold would need to rise above $590 in order to revert to the mean. When you consider that oil is typically a significant inflation barometer, it's easy to understand why many analysts are calling for much higher gold prices in the not-so-distant future.

TUESDAY, MAY 18 - 2004

Commodities and the US Dollar

A key factor worth noting is the falling US dollar and the effect it has on commodities pricing. If the US dollar continues to weaken, prices will keep rising to compensate since many of the worlds commodities are traded in dollar denominated terms.

Inflationary forces resulting from a weaker dollar are already at work. A May rally in crude oil and gasoline futures, has driven prices to record highs.

Dollar denominated gasoline prices are up 11% on a year-on-year basis and the summer driving season has yet to start.

This same dollar effect is spreading across all market sectors. Combining rising global demand for limited resources with a declining dollar is the link that adds the fuel to the fire for commodity prices.

WEDNESDAY, MARCH 24 - 2004

The Asian Juggernauts!

Deflation at the retail level driven by intense global competition from low-wage nations like China and India and technology-driven productivity gains from factors such as B-2-B online auctions, and out-sourcing have all destroyed the pricing power of corporations.

Without their pricing power, there can be no robust earnings and stock prices will suffer accordingly!

At he same time there is a great inflationary force at the wholesale level across all sorts of commodities -- from oil and copper to corn and soy beans -- driven by the "Asian Juggernauts."

These supply side shocks are contractionary. That's why we should be expecting an economy and market that looks a lot more like the 1970s stagflationary bust than the 1990s inflation-less boom.

With oil prices hitting historical highs and the recently released hostage PPI indicator flashing yellow warning lights we do have to know how to hedge and also be able to "play" the short side.

Let's see how this duelflation puppy develops as the earnings season starts to get under way.

WEDNESDAY, MARCH 3 - 2004

U.S. Trade Deficit?

The U.S. continues to run massive monthly trade deficits - over $40 billion a month - and dollars continue to pile up in the vaults of goods exporters like China and Japan, services exporters like India, petroleum exporters like Saudi Arabia, and, to a much lesser extent, European exporters.

This surplus puts tremendous downward pressure on the dollar. In the short run, this is supposed to boost the U.S. exports, make imports more expensive, and bring the U.S. trade deficit back into balance. So far this hasn't happened, in large part because the massive fiscal stimulus of the U.S. coupled with the easy money policy of the Fed continues to make it easy for U.S. consumers to gorge on foreign goods.

In the long run, a weakening dollar is inflationary as it raises the costs of imports - and its just one reason why gasoline is above two dollars now. Ultimately, this weak dollar stalls consumption by reducing purchasing power and the economy must stall with it.

You should now see why, a dollar that continues to weaken combined with both trade and budget deficits that continue to accumulate are nothing more... than ticking economic mega bombs that may well blow up after (and perhaps even before) the November U.S. Presidential elections!

The Most Recent Special Reports
Special Reports from January 4 to May 16, 2005