From this week's commentary :
Russell Cox
selectinvestor.com
The Good News
The good news is that in spite of all of the
volatility and nervousness building over
the global economy, the markets are still quite
strong. Even with a 200 point drop in the NASDAQ
Friday morning, money did not flow out of the
markets. The NASDAQ ended the week down only - 0.8%
while our Technology Portfolio gained 1.18%
Unless there is new bad news about the Euro and
energy prices, the NASDAQ has built a solid base at
the 3700 level, signaling the bottom of this
correction and prices should not fall much below
Friday's close.
Prices will probably not shoot up on Monday, but
some time in the next two to three weeks ( probably
after Thursday's Danish vote on the Euro ),
analysts will wake up one morning, realize that
the world is not coming to an end, and start a
strong sustained buying binge.
The Bad News
The global economy is inching closer to a potential
crisis. There are three main issues keeping
analysts awake at night these days : the weak Euro,
tight energy supply, and Saddam Hussein.
If there is new bad news on all three of these
fronts, then we could see a quick market crash. If
there is bad news on only one of these fronts : a
refinery fire, the Danes vote against the Euro, or
Saddam tries to start a war, then we will only see
a short term market hiccup that will be forgotten
in a few days or weeks.
Even a major crisis would only produce a quick
crash, like the 1997 Asia crisis, which was
forgotten by the stronger sectors in the US stock
markets in a month or two.
One last thing, the Natural Gas fund plunged this
week, losing - 8.0%. While this is unsettling and
the cause of the losses in the Investor's and
Security portfolios this week, the market
fundamentals have not changed. Natural gas supplies
are very tight and prices are very high and this
will take one or two years to change. Thus, we
expect Natural Gas to be an integral part of our
portfolios in the months to come and this week's
losses will be quickly made up. |
