Tuesday, 7/9, Market WrapUp (This is not your ordinary market)

Financial Sense Online ^ | 7/9/2002 | James J. Puplava

[rohry]

"Very few analysts, advisors, and anchors even recognize the problem. After all, these are the same people still reporting pro forma profits as real numbers. The standard advice is to "invest for the long-term, there will be a second half recovery, ABC company beat estimates by a penny more, buy on dips, dollar-cost-average, and stock returns are superior over the long run." When was the last time you heard an anchor, analyst, or advisor recommend going short the market, buying gold, oil, Euro-denominated government bonds, water or raw materials? You simply don’t hear it, or if you do, it is rare."

[rohry]

Market WrapUp is delivered...

[Southack]

I've been making good money on my dividend stocks and on my Put contracts (my Merk Puts are looking rather timely right now).

It's the poor fools who are buying into the no-dividend, so-called "growth" stocks who are going to get fleeced. If a company doesn't pay you a dividend, then why own it, after all?!

[rohry]

I hate that stupid bull logo of yours but I congratulate you on your Merck puts. Good call!

[DarkWaters]

Merck Delays $1 Bln Medco IPO a Third Time After Price Cuts

Just saw this out on www.prudentbear.com

[grania]

CDs at a little over 2%.

Good evening, rohry. Thanks for posting the stock market wrap up.

The quote here is really misleading concerning bank CD rates. I'm getting this from the August 2002 copy of MONEY magazine, page 139:

6 Month CDs Average 1.82% Highest 3.25%

One-year CDs Average 2.25% Highest 3.30%

Five-year CDs Average 4.41% Highest 5.45%

There are banks with money-market accounts at 3%. Yet nobody is saying the prudent thing. For people nearing retirement, the money they will absolutely need is best off in bank-insured CDs. That's what I do with my Roth and SEP, and I don't have to pay taxes on the interest, and I don't risk a down year where I'm sheltering a loss...there will be a lot of that going around this year.

I really think it's unethical that brokers aren't telling people on the cusp that they really should have that 100% necessary money be 100% safe. When I signed up for my trading account last year, I got lectured and treated like an idiot because I explained my real money was bank accouts, and I was using my brokerage account for knowledge. I can't imagine the effect this attitude has on people who aren't, well, smarter in Math that fools like this broker. (yes, I complained)

On another note. For the last two weeks, I did a lot of research and kept up on prices and made some moves that I'm pleased with. I caught two stocks that were simply undersold...there just weren't buyers out there. I bought a few hundred shares of each, but I held back. Why...in the back of my mind I was thinking "Maybe there's a scandal that insiders know about". They are both up this week...but I don't like the feeling that I'm at a disadvantage because of dishonest practices.

(If anyone wants the names of those banks from Money, I'll send them via mailbox...they're as of June 4)

[Dec31,1999]

I think the stock market is going to stagnate for a long time, but what do I know? P/E's have been too high for too long. The market is clearly cyclical and stocks are out, real estate is in, but it may be too late already to make profits. I expect our markets to mimic the Japanese markets for about 10 years. But, like they say, ya never know.

The immigration boom is putting incredible pressure on the property markets.

[DarkWaters]

European Economies: German Unemployment Rises, Output Slides

Is this a good sign for PIMCO and its foreign bonds in Germany? Serious question since my knowledge of the bond market is rather limited to say the least. This may then help to determine what exactly they are up to.

[JimSEA]

What worries me the most is the performance of so called "safe" stocks. They don't seem to have any more bottom than do the others. CL, GM and JNJ have weaknesses but should be attracting som interest. Well, they are not.

I have been and remain on the sideline watching. The muni's and CD's are low but seem the only game and they are not safe from some senarios. There are other corporate frauds awaiting, Chaney's problems with Judicial Watch will hurt and another major terrorist strike here will generate vastly inflated losses.

[rohry]

What a perfectly timed post! I just got off the phone with my dear mother (she is 70 and very active and very savy) and we were discussing money market accounts.

"When I signed up for my trading account last year, I got lectured and treated like an idiot because I explained my real money was bank accounts, and I was using my brokerage account for knowledge. I can't imagine the effect this attitude has on people who aren't, well, smarter in Math that fools like this broker."

Keep doing what you are doing! Don't trust anyone else to tell you what to do with your hard earned money. I tried to tell my mom to go a differnt way with her funds, and she was uncomfortable. I said, it's your money do what you think is best for you. Don't let the "wet-behind-the-ears" stock advisors belittle you. Ask them if they have ever been in a bear market, and I don't mean that little blip in 1987. Tell them that the market went nowhere from 1966 to 1882! That can and will happen again.

[arete]

"Very few analysts, advisors, and anchors even recognize the problem."

Although I agree with most of what Puplava says, I don't agree with this. I believe that they do recognize the problem, but they sure as heck aren't going to say so. Can you imagine a large cap mutual fund portfolio manager going on TV and telling everyone to buy gold, German bonds or raising cash. Kind of like a used car salesman telling you that the piece of junk you about to buy really is a piece of junk. How are all those guys going to make their million dollar bonuses and be able to afford the summer Hampton home if they don't have other people's money to "manage"?

Richard W.

[esopman]

Thank you for the post!

'Very few analysts, anchors...even recognize the problem.'

Not a problem: A shake-out. I posted the following on another thread, but it is relevant here.

Please, Freepers, take a look at AAA corporate bond rates for the last, get this, 100 years. The pattern tells the tale. Then, please plot the S&P500, DJIA or any other major equity index since 1970. The retreat from the major market top starting in 1999 is abundantly clear. The phenomenon currently transpiring is largely driven by the massive secular retreat of interest rates since 1981. We have a classic 'head-and-shoulders' pattern of those rates extending over four decades. The two decades of declining rates had two primary effects:

1. Declining coupons on interest bearing instruments caused investors to migrate to equities looking for returns. The 401(k) effect and interest driven migration represented an influx of capital which generated great equity growth.

2. Declining interest rates also lowered the cost of borrowed capital. Again, companies could grow.

Now, the rates are bottoming. All of the 'energy' derived from declining rates is dissipating and the broad equity indices are responding appropriately. I am advising clients not to expect a return to the 1990's bull market...that really was the perfect (positive) equity storm. It is over.

Blessings to Freepers Everywhere.

[Gritty]

This is an ugly market and is only going to get much uglier before it turns around. Just look at the graphs at the top. Is there anything to give anybody hope there (except those shorting the markets)?

Puplava is right. It's capital preservation time, unless one wants to chance investing in precious metals, mining stocks or commodities. Apparently, much of the big money has exited this bear market.

[rohry]

Good post. Next time provide us a chart (for the word-impaired; like me)...

Do you want me to add you to the ping list, or can you find your way here every night without it?

[arete]

S&P 500 is going All American.

S&P Takes Overseas Firms Out of S&P 500

Richard W.

[Dec31,1999]

Please add me to the ping list.

[d4now]

rohry - do you think it's possible they're (the Bush Administration) intentionally trying to deflate the dollar?

[rohry]

You have been added...

[rohry]

"do you think it's possible they're (the Bush Administration) intentionally trying to deflate the dollar?"

I honestly don't know. They have been giving mixed messages. They are in the same position that Hoover was in in 1930. The bubble is deflating and they cannot control it (the market is bigger than government intervention). Deflating the dollar causes problems and propping it up causes problems. This is a loose-loose proposition.

[cgbg]

Good report.

Did you see the press report on Morgan Stanley where they said the lowest rating the analysts were allowed to give any stock was "neutral"?

The senior managers of that firm should go directly to jail and not collect their $ 200!