AXXel's Estimates for the Dow & Rationales-The Update
August 24, 2000
AXXel's Estimates for the Dow,
the Timeframes and the Economic Rationales
["Estimates" - what word did you not understand?]
Using, AXXel Knutson's
VTAR™
["Volume Trade Analysis Research"™
"Manage the risk…the profits will take care of themselves"
"In this business, being right is not as important as making money…consistently, and one of primary tenets of the quest is the avoidance of the 'obvious risk'"
Securities offered through
First Allied Securities, Inc.
Member NASD & SIPC
197 Mountainview Road - Warren - NJ - 07059
Email: axxel@blast.net or tradingweapon@aol.com
Telephone: 908.647.5750 FAX: 708.585.6185
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"TradingWeapon.com" is the business name for AXXel Knutson, who is a Registered Principal of an independently owned office of Supervisory Jurisdiction [OSJ] with First Allied Securities, Inc. TradingWeapon.com offers all of its securities business through First Allied Securities, Inc., a member of the NASD/SIPC. Bear Stearns Securities Corp. is the clearing agent for First Allied. Securities. Inc.
[Special note: This opinion may not be that of First Allied Securities, Inc. and is solely the opinion of the writer, AXXel Knutson and
Tradingweapon.com]
DOW 25,000 by 2005, 50,000 by 2010 & 100,000 by . . .
[Time Frame: 2 years either side of 2005 for Dow 25k]
The writer appeared on CNN television in the spring [Spring of 1998] and many have asked for a re-iteration of our rationales as to why we are expecting a 25,000 Dow by 2005 +/- two years. The rationales are really not that much different than our rationales in 1981 when the Dow was at 888 as to why we thought the DOW was on its way to 3,000. And THAT was a MINORITY opinion in August 1981. So here are those basic reasons for our roughly the same percentage accomplishment from here…Our updated commentary is in BOLD.
FUNDAMENTAL REASONS & ESTIMATES:
1. Interest rate collapse to under 4% for the ten-year treasury note [now about 5 ½%]. We are not there yet but still likely to make the cut.
2. Mortgage rates to 3 ¾% to 4 ½% . Still very much a minority opinion.
3. The beginnings of absolute budget surpluses reduces total overall U.S. debt Update that to the elimination of all debt and a Federal "Savings Account" for rainy weather.
4. Exploding international trade and new markets and those markets demand U.S. goods & expertise. The only bothersome thing is that we drive gas-guzzlers and that impacts balance of payments negatively and all we get is increased environmental hazard.
5. The abdication of Japan as the export engine of the world. We are-it is our job.
6. Accelerating corporate takeovers and stock repurchase plans severely limit the availability of stock. And this will accelerate in my opinion.
7. Gold under $200/oz. as inflation hedges are thrown overboard. Sellers flee to U.S. stocks. United States begins to understand that the building of a bomb and throwing it in a jungle is a waste of national treasure and damages long-term defense. Patience…if you must own something precious, try diamonds or 1957 Cadillac soft tops.
8. Continued pressure to expand IRA's and other pension vehicles as generation X's demand stability in their retirement years and refuse to depend upon Social Security. No change.
9. The decline of the importance of government to solve ills and the reduction in the budget available to government. Has happened and even the Democrats believe it.
10. Reduction in capital gains taxes will loosen up additional capital for re-investment in more efficient companies. In time-patience and now throw in the estate tax.
11. Reduction in personal income taxes will generate additional demand for investments. Again…in time.
12. A reduction in corporate taxation will lead to greater earnings and will propel corporate earnings and will increase multiples higher as the risks of corporate taxation are diminished. Ditto above.
13. International investors will increase investments in U.S. [and European] securities as investments in Japanese & Hong Kong paper and real estate sour and the relative importance of the scope of the American product line flexes its muscle. No opinion change whatever.
14. General stability allows corporations to make better long-term decisions and this improves intermediate term earnings and multiples. Here is where the real efficiency comes from…real increases in productivity because of STABILITY.
15. U.S. exports tend not to compete based on price and currency translations-a plus in terms of long-term stability as U.S. lead in information technology accelerates. No change.
16. Higher share prices make it more efficient for companies to raise money, i.e., costs of raising capital subsides. A very non-vicious circle and positive in turn for the index itself. And we have seen it and we will likely see some more.
17. Productivity will explode and bring about increased wages but without co-incident negative moves on the inflation front. Increasingly, the basic needs of consumers are being met because of rising absolute wages, resultantly; more savings develop and further reduce the cost of capital thus propelling the economic to even greater levels of attainment and efficiencies. That appears all we read about lately is the increases in productivity. And all because of email [slight exaggeration].
18. The possibility, however remote, that we may pass a gas-guzzler tax at the pump to eliminate oil imports and at the same time eliminate our negative balance of payments track thereby reducing interest rates to historically low levels. If your car/truck [and it's not commercial] gets under 20MPG, add on another $5.00/gallon at the pump. Now what do you think of your Lincoln Nav? It will get me out of my Mitsi Montero for sure! Wasting capital damages our competitive position, makes funding for important governmental programs more costly [like defense]. It is a CONSERVATIVE point of view that suggests we do not need Ford Expedition's to go to the Piggly Wiggly. The Europeans have laughed at us for years at our ability to throw away capital. I don't like Europeans laughing at us. Still want Ford Excursions like the one John McCain drives to pay $8.00/gal.
19. THE INTERNET…the power of the 'net" to increase productivity, increase communication, provide seed capital and transference of technology and INCREASE THE USEFULLNESS OF CAPITAL because of increases in velocity of capital is probably THE MOST IMPORTANT single reason for long-term bullishness. Still a "happening."
20. NASDAQ INDEX to surpass the Dow Jones Industrial Average eventually but the DJIA will add more high growth stocks into the DOW 30. Getting there.
DISCLAIMER
Investment decisions should not be based solely on our proprietary indicators, which are intended as an adjunct to your additional analysis. Please accept these comments as market commentary. We do not intend these comments to replace detailed fundamental analysis. We urge you to accomplish that additional research via your contacts on the Internet or through a trusted financial advisor. If you want additional information on any of the securities discussed within, we will give it upon your request.
This report has been prepared from original sources and company data we believe to be reliable, but we make no representation as to its accuracy or completeness. This report is published solely for information purposes. It is not to be construed either as an offer to buy or sell or the solicitation of an offer to buy or sell any security or the provision of or an offer to provide investment services in any state where such an offer, solicitation or provision would be illegal. Any opinions expressed herein are statements of our judgment on this date and are subject to change without notice and we may not update that change to you. The opinions expressed are that of AXXel Knutson and are not necessarily representative of First Allied. First Allied Securities, Inc., its affiliates and subsidiaries and/or their officers and employees may from time to time acquire, hold, or sell a position in the securities mentioned herein.
The author of this report, Axxel Knutson, does not invest in any of the securities mentioned in this report nor does his immediate family unless such securities are included in mutual funds or index options. Equity investment involves risk of capital loss. We recommend that your portfolio be diversified by company size, industry group, and geographic region and by currency.
It should not be assumed that future selections will be profitable or will equal the performance of past selections. Securities listed herein illustrate selections made using proprietary indicators known as VTAR™ [Volume Trade Analysis Research™]. These names, VTAR™, Tradingweapon, www.TradingWeapon.com TradingEngine™, www.tradingengine.com ™, Volume Trade Analysis Research™, are servicemarks/trademarks of AXXel Knutson.
All recommendations and commentary are directed toward sophisticated, aggressive traders who have significant experience trading in a volatile market and who possess the financial resources to risk a loss of some or all of their invested funds. Commissions and, if you use margin, interest charges will lessen any return on investment. VTAR [Volume Trade Analysis Research] centers around the proprietary analysis of trading volume, price, general fundamental analysis, beta concerns, group rotation and detailed analysis of risk as it relates to entry and exit points in highly liquid stocks.
Axxel Knutson, President
axxel@blast.net
www.TradingWeapon.com a premium investor service
VTAR [Volume Trade Analysis Research] ™
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Telephone: 908-647-5750; FAX 708-585-6185
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Email: axxel@blast.net or tradingweapon@aol.com
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