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Pastimes : MELT-UP or MELT-DOWN: Cast your Vote -- Ignore unavailable to you. Want to Upgrade?

To: J.T. who wrote (97)	4/27/2002 9:17:31 PM
From: TREND1	Read Replies (1) \| Respond to of 361

I predict I'll come in second place. Larry Dudash

To: J.T. who wrote (97)	4/27/2002 9:17:56 PM
From: Secret_Agent_Man	Read Replies (1) \| Respond to of 361

The double dip recession has already begun and besides us the only other group we see heralding such an event is Morgan Stanley’s Stephen Roach their chief economist. The American consumer has run out of credit and buying power. The debt levels are stultifying. The shoes will then drop in this order. A fall in the market, real estate, credit and a derivative debacle. The vaunted S&P earnings of $49.50 are not going to be there at 35 times 2002 earnings. They’ll be $40 to $42.50. A preview of things to come was displayed last week by miserable earnings results from icons GE & IBM, both, of which we are short. Cost cutting, short hours, unpaid vacations and unemployment are taking their toll. A jab in the pocket book has been delivered at the worst possible time by higher oil prices. We predicted there would be little or no recovery and we stick with that opinion. If over $2 trillion in fresh money can’t do it nothing can. The depression has to be allowed to run its course. The supposed in-crowd just doesn’t get it. They think interest rates are as high as they are in the real market because Alan Greenspan won’t raise interest rates and that would be inflationary. Wrong, rates are up because many see the US economy still in trouble with little chance of real recovery, which means a falling dollar, which leads to loss of yield that’s why. Treasury yields have moved up and stayed up. Today’s inflation is being neutralized by deflation. Inflation could go slightly higher if the FED and Fannie and Freddie pour in another trillion dollars. We are well aware that the spread between 10-year Treasury yields and comparable TIPS yields, a proxy for inflation expectations, has widened by 1/2% over the last four months. We don’t find that significant. We also do not believe that gold is higher because of eminent inflation. It’s higher due to several other reasons. It’s the dollar. Other major countries are raising rates and the FED can’t. If it does we go straight back into inflation so the dollar will drop 5-15% this year, yields will climb due to less payout and gold will move higher. If gold breaks over $330 - $340 and ounce there is nothing to stop it until it hits $512 an ounce. We believe this will happen. We are still in stage two with two or three more stages to go. Soon large amounts of foreign capital in the US will move to other currencies and gold. When that move picks up steam the FED will raise rates. The recovery will officially abort and gold will rocket. How long did the experts think the investing world would tolerate a current-account deficit of 5% of GDP? The falling dollar also has the ability to crack the US residential real estate market. If 10-year Treasury rates moved up 1/2% to 5.70%, mortgage rates would move to 7 5/8% for the 30-year and that would stop both buying activity and refinancing dead in its tracks. That would put jumbos at 8 1/8% and with today’s home prices the median priced home is almost in jumbo territory. This is where we are headed whether we like it or not. How can one be bullish on the stock market as earnings decline and P/E ratios average 35 times earnings? Worse yet, how can the stock market go up when our “president” tells us he’s going to have perpetual war for perpetual peace? We recommended the short sale of DELL Computer at $24.92 with a cover of $16.01. It trades around $27. a share. We believe corporate spending on information technology will remain weak and there is no big comeback in view. Personal computer sales remain very weak and we see them weaker, perhaps 10% weaker over just the near term. Also remember DELL is a low margin player and desktop PC’s make up over 50% of profits and notebooks 28% for a total of 78 to 80%. Layoffs and lower incomes will eventually hit this market hard. Operating margins are already at 7.3% this year down from 11.2% in 1999. The stock is 36 times fiscal 2003 earnings. That is double what it should be, thus we see Dell at $16.01. This is still a good short. A Chilean judge has requested that extradition of Henry Kissinger, infamous US Secretary of State, to Chile for his crimes against the State in collusion with former dictator Augusto Pinochet. The State Department has refused to answer Judge Juan Guzman’s request. Fat Henry fled Paris last year in a hurry rather than submit to a summons to appear before a judge, who was looking into the disappearance of five French citizens in Chile during the Pinochet years. The Director of Medicare and Medicaid is Thomas Scully and he refuses to testify before the Small Business Committee. Due to the recent surge in the cost of health care he has run out of money. The reason is tax cuts plus the war on terrorism equals less for Medicare and Medicaid. Last year the administration claimed that it could easily cut taxes without tapping the Social Security surplus. Then came 9/11, which provided cover. We predicted looting and that’s what happened. $665 billion for perpetual war for perpetual peace. Unfortunately, $2 trillion is being diverted. Medicare’s payment rates are increasingly inadequate so many physicians now turn away Medicare patients and service providers are going out of business. By walking out Mr. Scully is breaking the law. The Administration, in order to keep the economy afloat and to form a police state, has to sacrifice Medicare and Medicaid. If you are wondering why strong housing was important, for every 10% gain in prices, there is a resultant 0.62% increase in consumer consumption, whereas a 10% gain in stock market values results in a 0.2 to 0.3% increase. This means the rise in the housing market is much more responsible for the wealth effect than the stock market. Even more disappointing is that homes are more overpriced now than they were in 1990 and in 1990 you had to put 10-20% down to buy a home. Today 50% put down less than 10%. Prices are coming down it’s just a question of when. Since the beginning of the year monetary aggregates have expanded only slowly as interest rates have been held in place. Imports continue to climb due to re-expansion of inventory putting the current account deficit into 4.5 – 5% bracket. As repatriation of foreign capital grows the dollar will continue to weaken probably for the remainder of the year. Interest rates as we said some months ago can’t be raised over the near term. The ace Alan Greenspan is holding to ward off recession at least temporarily is another 20-30% increase in monetary aggregates. Having been only about 5% so far this year we expect once it’s evident that the mini-recovery is over he’ll again pour money and credit into the system. He can do this because inflation is negligible. This would again prolong the recession until he is forced to raise rates. Once rates go up he will again increase aggregates, but at that point both fiscal and monetary policy will be out of aces to play. The prolongation of these problems will inevitably lead to deflation and depression. While all this transpires it is inevitable that the dollar will sink 5-20% against various currencies. It’s our guess the appreciation versus the Euro, Pound and Swiss Franc will be 10 to 20%. A lower dollar means higher costs for foreign goods and services, but we believe that the deflationary drag is so strong that inflation won’t become a problem. As you know companies have little pricing power now and they’ll have even less in the future, which means even lower profits and an ever-lower stock market. The weaker dollar will impede imports and increase exports, which will help cap the current account deficit at 5%, although a spike to 6% is possible. As you can see the very best we can hope for is stagflation in a recessionary atmosphere. All bets are off if the housing and credit bubbles break and that’s a distinct possibility. In regard to interest rates, it is very difficult for the Fed to raise rates when corporations, through interest rate swaps, have themselves in short term paper. That’s to keep profits up. If rates rise profits will drop like a stone. A 1% rise in rates would increase corporate interest costs by 35%. A bitter pill to swallow. Even using government figures unemployment should soon be 6-6 1/4%, that’s 11-11 1/4% on our scale. The budget deficit should be $250 – 300 billion this year as tax receipts fall, hardly inducive to a strong dollar.

To: J.T. who wrote (97)	4/27/2002 9:19:35 PM
From: Softechie	Read Replies (2) \| Respond to of 361

LOWER! Why? 2 things I've been harping on for months: Telecom capex and IT budget. Market keeps beating on the cash cows (telecom) and expect networkers and semis to do well? Forget it. They're dreaming. IT budget is getting very tight since 2001. Why? They're looking for ROI now more than ever before. After that spending for Y2K and Internet projects, companies are asking what have you done for me lately. I'm going to add one more key point to the confusion: Consumers budget. This time, it ain't there. More layoffs from old economy companies and that ain't good at all. The're killing another cash cow. We're going back to 70's time my friend. Prepare for it. I have Dow 7000 and Nasdaq 1100...