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Gold/Mining/Energy : Gold Price Monitor -- Ignore unavailable to you. Want to Upgrade?

To: John Hunt who wrote (46579)	1/3/2000 9:59:00 AM
From: Enigma	Respond to of 116759

The first candidate for Gata membership in the new millenium? BTW - ABX doesn't need members - only friends!

To: John Hunt who wrote (46579)	1/3/2000 12:14:00 PM
From: Alex	Read Replies (1) \| Respond to of 116759

Russian Roulette with Five Bullets That?s what the average investor is doing these days. They are playing Russian Roulette with 5 bullets, and winning. Yes, winning. They are beating incredible odds. But for how long? Would you play Russian Roulette with 5 bullets? 3 bullets? How about just 1 bullet? No? Me neither, I wouldn?t play with even 1 bullet. But investors have throw caution to the wind and are risking everything for the thrill of winning big. Risk, it seems, is for old ladies to worry about. The bullets don?t matter if you keep coming up with the empty chamber ? right? But the bullets are real and deadly. Taken by themselves they are lethal, but when you put them all together, they are a fatal arsenal waiting for a mistake. As long as the empty chamber keeps coming up though, who cares? You should. Good luck doesn?t last forever. Below is a list of the 5 bullets that are already loaded into the gun. A sixth bullet is waiting in the wings, if you don?t stop playing the game now, it will be too late. 1st Bullet ? Debt. Debt has financed this economy and market advance. Individuals have run up personal debt to the highest level ever. The growth of corporate debt doubled last year. It is choking individuals and corporations to death. The debt to income ratio is the highest it has ever been for individuals and some corporations need to borrow more just to make interest payments. Debt is growing so fast that it is actually growing faster than the earnings of many companies and it is so high that the average family has a negative savings rate and a negative net worth. This after the greatest bull market in history. Debt syphons earnings away from a company and limits their flexibility to compete. But as long as the Fed keeps extending more and more credit, who cares? At some point, this "liquidity" dries up and the remaining debt breaks the back of the economy. The only answer is to pay down the debt or default. Both are bad for the market. Paying down debt takes money away from the stock market and economy and default is obviously destructive to the markets. 2nd Bullet ? Valuations. The market valuations are the highest ever. Higher than the peak in 1929 and 1972. Both markets were followed by horrific bear markets that wiped out 50% or more of shareholder value. Valuations tend to have a very predictable cycle. After being very high, they tend to swing to extreme lows. Currently the market is trading at about 35x earnings. Historically it trades about 13x, with the lows around 5x. To go from 35 times earnings to even 13x means a decline of over 60%. But that is not the end of it. The recoveries can take years, even decades. Even the best of names get caught up in these declines and suffer with the market. 3rd Bullet ? Mania. Everybody loves a winner. So investors concentrate on stocks that are already up. But in the market, you are supposed to search for undervalued stocks. Not in the current mania. Investor excitement is being whipped up by the cheerleaders on CNBC and CNN and they pounce on worthless securities which skyrocket on all the enthusiasm. Whether there is any chance for earnings, it seems, is somebody else?s problem. Stocks themselves are the reason to invest and investors want certain names. The week before Christmas, with the market hitting new highs, there were only about 180 new highs with almost 1400 new lows. On one day recently, of the 13 most active stocks on the NASDAQ, only 6 had any earnings and they traded at an average p/e multiple of 196! Fundamental research is ignored as investors concentrate their buying on a select few and drive them to astronomical heights. IPO?s with no earnings jump 5, 6, 7 times in value on the first day?s trading. This mania is clearly out of control when Stuart (the face-photocopying fool) from the AmeriTrade ad is doling out investment advice! 4th Bullet ? Deflation. Yes, deflation. Not inflation. Thanks to the soaring trade deficit and the impact of the internet, deflation will be the major economic theme for the next few years. The flood of cheap imports has put pressure on US businesses to hold prices down. The internet has made comparison shopping as easy as point and click. Just to survive, many on-line companies even offer free shipping. But the evil side of all these lower prices goes back to the first bullet. The growth of debt has limited many company?s ability to compete. They have to borrow more and more just to survive. Companies like Amazon.com are losing more and more money per item they sell each year. This is the "new era" economy some analysts talk about. There is nothing new about it, it is a repeat of the US in the 1920?s and Japan in the 1980?s. Both ended very badly. 5th Bullet ? The "New Era". The claim of a "New Era" is a hollow-point bullet. Hollow because the claims of a "new Era are just that ? hollow, without merit. But it is also the most destructive bullet. Thanks to the new era, we have such creative accounting practices as payrolls being financed through stock options and banks? heavy use of derivatives. The reason these are used so liberally is because they aren?t listed anywhere. That?s right. Banks don?t have to show the actual value of their billions of dollars invested in derivatives. This makes bank assets look stronger than they actually are. Also, companies don?t charge stock option compensation plans against earnings, even though it is an actual expense. This makes earnings appear higher than they actually are. These are just 2 examples of potentially devastating accounting practices of the new era. When you can?t trust the numbers a company puts out, it is time to leave the party. 6th Bullet - Unknown. It is out there. We know what some of the possibilities are: Russia? China? Currencies? Fed policy? Inflation? Recession? Interest rates? Are you going to risk waiting to see what the last bullet will be? By then it will be too late. Hear that sound? It is the hammer being pulled back.... Click! Your turn.... cornerstoneri.com