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Politics : Stockman Scott's Political Debate Porch -- Ignore unavailable to you. Want to Upgrade?

To: mt_mike who wrote (2674)	7/19/2002 5:36:54 PM
From: habitrail	Respond to of 89467

Hear Hear!

To: mt_mike who wrote (2674)	7/19/2002 8:31:22 PM
From: stockman_scott	Respond to of 89467

A patient bear sits on his cash Paul Desmond says there's still time to sell By William Hanley National Post Thursday, July 18, 2002 There's no way we can stand next to a bunch of insane people, Paul Desmond says, and tell when they're going to begin acting rationally. "But we can watch and when they stop acting acting irrationally, we can identify that." Desmond, a technical analyst and president of Lowry's Reports Inc., was on the phone from North Palm Beach, Fla., as the stock market was yet again doing its level best to drive investors mad with another tantalizing performance. The Nasdaq technology stocks led investors on a merry chase after soaring prices at the open in what we reckon was a minor episode of irrational exuberance followed by a bout of rationalism that drove prices into negative territory before they recovered somewhat to close 1.6% higher. Investor sentiment is Desmond's specialty, measuring as he does the supply and demand that reflects the buying and selling of investors. Many people who follow technical analysis have recently been keeping track of Desmond's research into identifying bear market bottoms and new bull markets to see if his conditions for a major turning point have been met. The quick answer, even with all this month's volatility, is no. Lowry's research has shown that almost all periods of significant market decline in the past 69 years have contained at least one, and usually more than one, day of panic selling in which downside trading volume equalled 90% or more of the total of upside volume plus downside volume, and points lost equalled 90% or more of the total of points gained plus points lost. Space does not permit a detailed review of this methodology, but suffice to say such 90% days represent irrational behaviour that occurs when investors are basically willing to get rid of stocks at any price just to be rid of them. Desmond says the market has come close to giving a 90% capitulation signal based on closing data. But not quite. Meantime, "the chance of making money in the market between now and the final bottom is low," even though there could be a rally in the fall before that low is ultimately reached. So what's an investor to do? "Investors need to look forward. Declines eventually offer investors the opportunity of a lifetime. "You must be prepared ... and have cash available when the bottom finally occurs. If you're nursing a badly beaten-up portfolio, you're not well prepared." So for Desmond, the answer is to sell, however painful that might be at this stage, get the cash and wait patiently. "You must get the psychology straight. Investors spend a lot time trying to get even. If they don't sell out, it could take 10 years." So what does someone with such a philosophy make of the "buy-and-hold" philosophy that became a mantra in the 1990s and still has adherents today? "Buy and hold is a fraud," Desmond says, "a concept perpetrated by mutual funds and brokers." It makes as much sense, he adds, as a Canadian saying he's going to wear a bathing suit every single day in the summer. Meantime, Desmond says summer rallies are really difficult to identify on a historical basis, being "more of a theory than a reality." Some rally is bound to occur in June, July or August, but it's more a case of statistical probability than clearly identifiable as seasonal. Even if one were to occur, he can't see the absolute low happening till price-earnings levels fall to where they've been at previous major market bottoms. The S&P is still trading at a trailing P/E ratio of well over 20:1, when the average major bear market low has been 10.5:1. Desmond, wearing his fundamental analysis hat, concludes that prices must fall and/or earnings rise substantially till stocks are priced attractively enough to trigger a new bull market. But he'll be ready when that does happen. © Copyright 2002 National Post nationalpost.com{41DC86D0-003F-431F-8CEF-C1AA08428F7F}

To: mt_mike who wrote (2674)	7/20/2002 5:48:39 AM
From: stockman_scott	Respond to of 89467

7/19/02: Market Monitor-James Stack, President of Investech Research PAUL KANGAS: My guest Market Monitor is James Stack, President of Investech Research based in Whitefish, Montana. Welcome back, Jim. JAMES STACK, PRESIDENT, INVESTECH RESEARCH: Thank you, Paul. It's great to be talking to you again. KANGAS: You were one of the few market letter writers who warned over two years ago the market was a huge bubble about to burst and when it did the aftermath would be painful. Here we are. STACK: Well -- KANGAS: But -- STACK: That's right. In a way I regret being right because the pain out there has been far more serious than anyone anticipated. KANGAS: Well, it shows you have empathy. But I must say, on your last visit with us in early February, you said you saw some of the building blocks of a new bull market being put into place. I think those blocks are probably just dust now. STACK: Well, they certainly are. We've began to seeing the crumbling about two months ago. And there's a serious question whether or not the Federal Reserve is losing control. When you pop a valuation bubble in a stock market, it carries long-term repercussions. And we've wiped out $6.5 trillion on Wall Street. That's more than the entire U.S. stock market was worth just six years ago. So I think the Federal Reserve is making a mistake of underestimating that impact. KANGAS: Would you recommend they lower rates further? STACK: I think that's certainly in the cards. If I were Alan Greenspan, the first thing I would do is sit down, realize that I made a mistake back in the late '90s but not addressing the bubble, even though it was openly debated in Federal Reserve meetings, and I'd realize today that we're really in uncharted territory. Never before has the bear market continued to hit new lows after the end of a recession. And yet that's exactly what's happening today. I think it really raises a question whether the recession is over. In addition, if you look at consumer sentiment numbers, which were released last week, it shows the consumers' plans looking six months down the road just took the tenth biggest drop in 50 years. KANGAS: So you're saying -- STACK: And that has us worried. KANGAS: You're saying we're going to have a double dip recession, in essence. STACK: Well, the evidence from Wall Street, from consumer confidence, has us worried, and it should have Alan Greenspan more worried. KANGAS: And the market could be a partial cause of that, the way it's going. Do you see any signs of a bottom here? STACK: From a short-term standpoint, we're extremely oversold. There's a lot of pessimism out there. But unfortunately when you, as I said, when you pop a bubble, it's hard to predict where the bottom is. And this has gone on a lot longer than we expected. This is already the longest bear market in the past 60 years. In fact, the loss year to date for the S&P 500 Index is the worst since 1932. KANGAS: Have we ever had a bear market going on when economic recovery is supposedly going on? STACK: Not immediately after a recession. KANGAS: OK. STACK: And I think that's the message that Alan Greenspan has to focus on. KANGAS: When you were with us February you gave us DENTSPLY (XRAY), Washington Mutual (WM) and EnCana (ECA). And those stocks as a total are up about two percent, which is really terrific compared to what the general market has done. Are you still with any of those stocks? STACK: Well, you're right. It's a rarity to find any stocks that have gone up. It's basically value and cash out there right now. We're still holding Washington Mutual in our managed accounts. But we're not doing… KANGAS: Any new recommendations here? STACK: Yes, on our shopping list right now, WPS Resources (WPS), a conservative utility. Also, Dole Foods (DOL). We're not buying them now. Our managed accounts, we have moved back to over 60 percent cash. KANGAS: And those stocks that you mentioned on your shopping list, do you or our company own any of these? STACK: No, not at this time. KANGAS: OK. So, you said we could have a short-term bottom. Would it be a worthwhile rally to participate in or just another basically bull trap? STACK: I don't think I would be bottom fishing out there, not until we have firm evidence that a bottom's in place. Watch the number of stocks hitting new nearly lows. It should drop to fewer than 12 on a daily basis. Right now, preservation comes first. KANGAS: All right. So you're 60 percent in cash at this time? STACK: That's right. KANGAS: With a shopping list, but not taking action as yet. STACK: A growing shopping list as the values appear. KANGAS: OK, Jim, thanks very much for being with us again. STACK: Always my pleasure, Paul. KANGAS: My guest Market Monitor, Jim Stack, President of Investech Research.