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Strategies & Market Trends : Waiting for the big Kahuna

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To: Haim R. Branisteanu who wrote (6123)	10/10/1997 6:41:00 PM
From: IQBAL LATIF	of 94695

A challenge to bears- Markets cannot be stolen- you will need to pay for them! An open challenge to 87' comparison maker- Put up your case now.. For me S&P market cap is.much much higher...... and I can make my case in this august forum with following submissions: This what I wrote yesterday when markets were down and I conceeded that .4 will be a good number for bears and market on this number could slip thru the 20-50 days MA- for me acid test of analysis is with the benefit of hindsight- first re-read my post and we will see if we are justifying our position rightly or have changed goal post since the number which I would consider would be a unpardonable offence- overlooking dangeris like giving genuine profits by avoiding looking at a hurtling truck towards you if there is one- I for one will try my best to avoid- however, I don't see things the way you define them- To: +Mohan (6071 ) From: +IQBAL LATIF Oct 9 1997 10:34AM EST Reply #6076 of 6123 Europe and US are on two different points on economic cycles- Japan Nekkei bear market was down 200 and change testing new lows -should that mean we have global markets going down the drain- please don't compare European hi drama with that of US- they are trying to make an economic union 200 years after US with out a political union- imagine lone star Texas NY and California today trying to reach an agreement of econimc and political unity- the problems in Europe are quite different and complicated - we in US markets have a distinctive separatrion in maturity of economic cycles. Please check out the fundamentals INTC and MSFT are up on a down day- they have just rattled 114,24 and stopped out every one bringing the bond back upto 115,06- they will now go up and try to test 978- one more test of 970 and that's the end of your todays bear market- volatility brings 'confidence'- you have 20 days MA and 50 days MA sitting right up there wanting to test the guts of anyone who has b---- to test the resolve of these markets- SOXx is up and Naz has roared back up- I think this is a legitimate test of supports from new highs of 118,16 on bonds- as far as S&P is concerned it will only give up 948 on a very ugly number tomorrow- leave orders to short at 942 so that you may not be a victim of whipsaw- beware of Pits- they devour people and especially bears- they maul them mince them- look at fundamentals- tomorrows PPI is the key- if you have a number around .4 you guys have case otherwise bear will need to go in a slumber until 28th Oct. With benefit of hindsight-today's post- Yesterday market did test 981 and closed at 977-8 and change- we also know that bonds closed at 115,25- the only thing which did not happen as predicted in my yesterday's post was that despite of a 'bear friendly numbe' market was not able to test even the 20 days MA not lest the 50 or pierce thru that to close below 940 on SPZ as I expected should have happened - my initial reaction when I saw the twin numbers before anything else was 'holy me' this is bad- but since myjudgement is not clouded or have gotten involved with 87 like flirtation scenerio- I look at every release pragmatically and in seconds seeing further into PPI ex-autos and tobacco decided that underlying inflation remains very benign- MO price rises and some gasoline rises based on ME rumours have extended thru to these numbers- now if you take out two non-staple factor of the number and try to see what you find is re-confirmation of a psttern established by NAPM- it was onthis number that your thread posted Gilders famous article on "deflation' the confusion is on this thread on the direstion of the hit- short of Maritians attacking the earth every human disaster is angled and viewed as a potential downer of markets. For me this is a number perfectly in line with market expectations - take tabacco out and you find the prices are dropping man- may be your deflation is going to be more effective an argument then inflation. Your thread needs to define the angle of hit first- where the big one is going to come from- it was once far-east then commodity price rise in Bangladesh then European markets falling then NEkkei weakness but the big one is not going to come from any of these situations- mark my word the big one if any will come from sharp drop in corporate earnings- go look at first calls revisions for Sept earnings- I assure you I have not in my investetment career spanning over 20 years seen so many upwards revisions- how you expect markets to go down when WDC ASND from beaten down sectors beat market lowered expectations and declare a turn around and strong demand. Why don't you guys look at something called as 'capacity utilisation' running at 83.9% and 'factory orders' where just electronics and Jet orders are increasing at momentous pace- both these phenomenon are result of 'new globalisation' as my friend K1bo says 'distance is dead' and IT is leading economy to new frontiers of global economy- those who want to make comparison to 87 should know that 87 IT based cap was mere 240 billion $ today it is 35% of total S&P cap of 7 trillion $'s. Now this 7 trillion $ is not gold- a non-performing asset it is performing asset and a prime one too. Let me explain you why the steal of century is out of the control of S&P pits- if these guys had their way you could see S&P 25% down in a week- don't you see how they run the stops- mincing the stops is no problem- the pits are friendly to idea of voatilty and fall- for them this is thier bread and butter- if even with nicest of intention they cannot bring the markets down -you should really ask why? The reason is 'not enough sellers of actual stock around'- you can speculatively trade the futures but you must be aware if futures are not backed by actual sale there rise the opportunity of 'arbitrage' and these guys in pits run for the cover because if after running the stops they don't cover as anticipated selling does not matrialise -someone can killl them by making an arbitrage trade-futures cannnot trade at a discount to cash, it is for this single reason you see it coming and and see it disaappearing. The fall of market is like a mirage or a desert traveller like me will tell you 'sun shining on desert sand making it shine like a water' but these markets provide seem to no water for thirsty bears. The reach of US corporation in 87 was 10% of what is now legitimate share of global trade- do you know what is the percentage of global trade manged by OECD countries- OECD owns 78% of global trade directly and indirectly-out of 39-40 trillion $'s of total global trade the US corporate share is huge 30-35%- now this is a new situation we are facing upto- never before mankind has seen so much of peaceful domination of global trade by a single geographical entity- this is history in making it is not about DOW at 8000 or 6000 it is about new frontiers of US corporates- I feel saddened that with little understanding this giant leap forward in annals of human history is being brutally unappreciated as some could not see it coming. Lets for a moment look at S&P 500 cap of 7 trillion $ what is the profit being thrown out from this huge 'juggernaut' consider for argument sake S&P as a single company- now even at 22 times earnings this thing makes 340 billion $'s in profits- there is nothing in the world with its new found prosperity which can preserve the wealth of rich and famous and retirees- if you need to invest your funds the choices are limited either US bonds or US equities or Monte Carlo now this new global wealth needs a safe home- if you search for an asset for global savings of in excess of 50 trillion $'s you need to find an asset yielding 340 billion in profits and average forward growth rate of 10-15% with total proprietry rights of products. I have my reasons to believe that premium assets are sold at a premium like good assets should-apartment on east side are 20-25 times rental whereas Harlem properties can be obtained for 3 times rentals- it is security of income which leads an investor to pay for an asset 22 times higher- you guys miss this point- you should capitalise the earning potential of S&P at 25 times earnings and add a 15% premium and that is the realistic value of S&P- based on above going forward 98 profits should give S&P a cap of 9 trilion $ add on some premium and you will find what are you up to. This is whats going to happen- we will see 7200 or 8000 or 9000 immaterial if one does not have a piece of action from this one is an unfortunate loser. For me S&P 890 was an opportunity and if it ever goes there again by default it is going to be an opportunity again- we may see lower S&P but if you want preservation of wealth you cannot expect S&P down 25% in one day or a week- 25% off S&P cap translates to 1.75 trillion loss of cap- that means total cap of 5.25 trilllion$- an asset yielding 400 billion or around (assuming this fall comes for the heck of it) is nearly 13 times the earnings- and 13 times the earnings are properties in China Town not on East side- S&P companies are world blue eyed assets- lets treat them witrh little respect they deserve -if you cannot value them don't destroy them.

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