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Strategies & Market Trends : Booms, Busts, and Recoveries -- Ignore unavailable to you. Want to Upgrade?

To: Box-By-The-Riviera™ who wrote (20414)	6/27/2002 9:37:36 PM
From: Muthusamy SELVARAJU	Read Replies (1) \| Respond to of 74559

Folks, Another mail I was forwarded by a local (KL) stock brokerage. The U.S. Dollar And Stocks: Buying Opportunity or Downward Spiral? Thursday, June 27, 2002 - The U.S. equity market and the dollar are caught in a self-reinforcing slide. The fundamentals that drove both up reversed in 2000-2001 and investors, at home and abroad, are only now waking up to the downside risks. One example of the collapsing support under the dollar is shown in the chart below. The trend in U.S. public sector finances has taken a decisive turn for the worse. Government spending caps in the early 1990s and the prolonged economic expansion (and resulting equity market boom) helped reverse the rise in the government debt-to-GDP ratio (D/G). The D/G ratio has now resumed climbing, because the era of budget surpluses is over. Importantly, the secular downtrend in defense spending has also reversed. The slide in the D/G ratio during the second half of the 1990s coincided with a rising tide of optimism towards the dollar, and now this positive influence is over. The retreat from the dollar is expediting the slide in stock prices, aided by yet more revelations of major corporate shenanigans in the past 24 hours. While the U.S. equity market may be oversold, corporate insiders are not impressed. Insiders have failed to accelerate their buying of company stock, despite the sizable market decline this year (as shown in the chart below). The insider sell/buy ratio remains too high to support a rally. This poor response to "cheaper prices" is in marked contrast with the period near the 1998 market low (and also at the 1990 trough). The message is that stock prices still do not offer good value and/or profit prospects are not bullish enough to entice insiders. Implication: lower prices loom, and investors should stay patient and maintain high cash reserves. These charts were sent to BCA Daily Insights' clients early yesterday and we have passed them on to you in order to give you a taste of this unique service. Since 1949, BCA has provided clients with provocative, authoritative research and investment advice. As the markets collapse, most investors will panic and miss out on the next rally. Nevertheless, timing such a turn is critical, as the buy-on-dips crowd has painfully discovered in recent weeks. Will you have the objective, market-timing advice to both preserve your capital and take advantage of opportunities ahead? BCA Daily Insights clients will.