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Thursday, 26 October 2006 00:00 |
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On Thursday the Dow Industrials closed above 12,000 for the first time in history. Even though the S&P500 and the NASDAQ are still below their highs of 2000, they have both been doing relatively well. So what’s behind this recent stellar performance? Last week I received the October issue of The Richebacher Letter. , Dr. Richebacher is the epitome of an Austrian School economist. He is world renowned for his insights into the world currency and credit markets. Here is a sampling of what he offered in his latest letter : Finally, the greatest boom in American housing history is going bust. The impact on the economy has just begun to be felt. Demand for homes is sharply down, while the number of vacant dwellings is ballooning-up more than 40% for existing homes and more than 20% for new homes year over year. At issue now is the severity of the impending bubble aftermath. It does not seem, though, that there is a lot of worrying around. There appears to be a widespread belief that the U.S. economy is now out of trouble because the Fed decided not to raise interest rates. |
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Wednesday, 18 October 2006 00:00 |
This week the market has continued to climb and our clients have enjoyed some of the fruits of our labor. Not all markets have done the same and some sectors have actually lost money. I am still concerned about a potential recession in 2007 but for now we will continue to strive to capture profits. (Remember we are still in a secular bear market where what goes up will likely go down later. In the 1930s these were called sucker’s rally's. The markets rose lulling investors into thinking all was well again and then “POW” the markets dropped with a vengeance. ) With changes available to us this year we have invested in rotating sectors. That IS paying off. Excerpts from Chris Mayer in the Daily Reckoning seemed to capture our methods.
"The supermarket of dreams." That's what Max Gunther calls the stock market in The Zurich Axioms. Indeed it is. Especially when the market is going up - but there's more to the story when you start to look at it a little closer.
As we make new highs on the Dow, people start to dream again. Early retirement. Little house by the sea. Chilled wine in slender glasses and warm sunshine in a bright blue sky. Nice cigar. Leisurely meals. No financial worries.
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Thursday, 12 October 2006 00:00 |
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The stock market continues to increase in value. The Dow Jones hit new highs. The other indices did not. Is it a flight to quality? Only time will tell. Investors seem to be oblivious to all the significant and serious shortcomings in our economy. How much longer can this charade continue? Over 70% of our economy is driven by retail spending. Now that gasoline prices have fallen some people have continued their spending spree. But our nation’s debt and the debt of our citizens eventually will have a significant and long lasting effect on our standard of living. Some may think that I am a pessimist. I see myself as a realist. The total debt of this country and its citizens now far exceeds any time in history. This week I selected excerpts from an article by Dr. Kurt Richebacher entitled “Rude Awakening Ahead”. If you would like a complete copy of the article please e-mail or call our office.
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Thursday, 07 September 2006 00:00 |
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According to statistics we have seen, 30% of our economy revolves around construction. If that is so, then our economy can be harmed if construction were to slow down. As I mentioned in a previous letter a local builder shared with me that they need new business by June, 2007 to avoid a slowdown.
Just as there are seasons in the year most things run in cycles. This first chart shows the national statistics on building permits and residential investment to GDP or gross domestic product. GDP is all the goods and services produced in the U.S. in any one year. As you can see we are at the top of a very long cycle. It would appear that we have nowhere to go but down from here. If you look closely at or increase the size of the chart you will see a significant drop beginning.
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